Mandatory arbitration: the clause that signs away your courtroom
Buried near the back of most construction contracts is a paragraph that decides where you’re allowed to argue if the project goes wrong. Here’s how to spot it — and what to negotiate.
A mandatory binding arbitration clause says that if you and your builder end up in a dispute, you can’t take them to court. Instead, a private arbitrator — often chosen under rules the builder picked — hears the case and makes a decision that’s nearly impossible to appeal.
These clauses are everywhere. Most of the sample contracts we’ve reviewed include one, and many pair it with a class-action waiver — meaning you also can’t join other homeowners with the same complaint.
What it actually means for you
Arbitration isn’t automatically unfair, but it shifts the ground. Filing fees can run higher than small-claims court, there’s no jury, discovery is limited, and the outcome is private — so a builder’s record stays invisible to the next homeowner.
Utah courts generally enforce these clauses as written. If you sign it, you’re very likely bound by it.
What to ask for instead
Ask for the clause to be struck, or softened to “mediation first, courts allowed.” A builder who refuses to discuss it is telling you something about how they expect disputes to go.
Before you sign
- Search the contract for “arbitration” and “waiver” before you sign.
- Ask who pays arbitration filing fees — they can exceed $2,000.
- Propose mediation-first language; most fair builders accept it.