Case Analysis

Running head: Case Analysis

Case Analysis: Baker v Osborne Development Corp

Chris Comberrel

Kaplan University

LS311: Business Law I

Instructor Nivea Castro Figueroa

February 15, 2011

BAKER v OSBORNE DEVELOPMENT CORP.

California Court of Appeals,

4th Division, 2008

Cal.Rptr.3d 854 (2008)

Facts

Thomas Baker and others who bought new homes from Osborne Development Corp. sued for multiple defects in the houses they purchased. When Osborne sold the homes, it paid for them to be in a new home warranty program administered by Home Buyers Warranty (HBW). When the company enrolled a home with HBW, it paid a fee and filled out a form that stated the following: “By signing below, you acknowledge that you… CONSENT TO THE TERMS OF THESE DOCUMENTS INCLUDING THE BINDING ARBITRATION PROVISION contained therein.” HBW then issued warranty booklets to the new homeowners that stated: “Any and all claims disputes and controversies by or between the Homeowner, the Builder, the Warrant Insurer and/or HBW…shall be submitted to arbitration.”

Issue

Would the new homeowners be bound by the arbitration agreement, or could they sue the builder, Osborne, in court?

Decision

The California Appeals Court concluded the trial court correctly ruled that the arbitration agreement was both procedurally and substantively unconscionable and therefore unenforceable. The homeowners could sue the builder, Osborne in court.

Reason

When Osborne sold the homes to Thomas Baker and others he paid for and administered the Home Buyers Warranty in which Thomas Baker and Others were required to sign that they "you acknowledge that you… CONSENT TO THE TERMS OF THESE DOCUMENTS INCLUDING THE BINDING ARBITRATION PROVISION". By signing this clause and accepting the warranty booklets from HBW Thomas Baker and others are bound submit themselves to arbitration.

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