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Do we stand a chance in an arbitration hearing over a dispute with our home builder?

South CarolinaChange Orders Construction Contract

We are going into our 9th month of a custom home build. Our contractor put a combined cabinet/countertop allowance in the contract. He sent us to his cabinet maker to design the cabinets. Throughout our build, we’ve inquired several times about the budget and the answer is always “if you’re going to go over, I’ll let you know”. We never saw a cabinet quote and they were installed without our approval of anything. They are beautiful and we’re pleased with the quality. Now that the invoice is in and we’ve learned we are over by thousands, our contractor is saying it was our job to make sure we were within the allowance. The cabinet maker says he would never discuss pricing with the customer and only does so with the contractor. He says he’s been working with our contractor 30 years and the contractor knows exactly what the prices are which is the cabinet man’s reason for not providing a quote. He also said he can’t even buy the materials for the allowance the contractor gave us. We believe the contractor accidentally made a mistake in his calculation of the allowance, but he won’t admit it. He says this has never happened before. He also says it doesn’t matter anyway since there is an allowance. I should also mention that we haven’t been involved with any approvals, quotes, purchases, bills, etc. of any part of the build until this cabinet problem happened and the contractor sent us a copy of the bill. We have offered to pay for any “extras” that could not have been contemplated by our contractor when he was calculating the allowance. The cabinet maker gave us a ballpark number for what basic “no frills” cabinets would cost. That number is thousands higher than the allowance our contractor gave us. We feel he should pay for his oversight/miscalculation and we should pay for the “extras” we added, but the contractor says he is not responsible for anything. If the allowance is blatantly too low, and we aren’t presented with a quote, and had no opportunity to disapprove the installation, do we have any chance of winning an arbitration hearing? Our contract says disputes will be resolved by binding arbitration. Thank you.

1 reply

Dec 4, 2019

Ultimately, whether or not an argument will hold up in arbitration is hard to predict. That could vary greatly depending on the arbitrator, the contract, and the other communications and documentation involved. But if a contractor was contractually obligated to notify their customer about going over budget and failed to notify, then it would make sense that the contractor may be responsible for shouldering some of that cost. Even if the contractor weren't contractually obligated, they should typically be responsible for providing a quote to their customer - especially upon request. Further, if there were any assurances in writing stating that the customer would be notified upon going overbudget, that might also work into the calculation of an arbitrator. Though, if the contract runs counter to communications that come after it, then the terms of the contract would generally be binding.

Bottom line

There are a multitude of factors that will come into play when an arbitrator is making their determination. It's possible that verbal assurances could be taken into account, but by and large, the terms of the contract will be binding and communications made in writing will be given greater importance. While it's hard to predict how the dispute may turn (one way or the other), there's always a chance that an arbitrator may find in your favor. For additional clarity on your situation, it'd be wise to consult a local construction attorney. They'd be able to review your agreement, the relevant documentation, and any other relevant circumstances then advise on how best to move forward.

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