Arbitration or going to court? The consumer decides!

Most general terms and conditions used in construction stipulate that any disputes will be settled by the Construction Arbitration Council (COA). If the client is a consumer, the general terms and conditions may not stipulate this. According to the law and case law, strict conditions apply.

Dispute resolution and consumers: legal conditions

The legislator wanted to prevent a consumer from being deprived of the way to the "ordinary" (civil) court via the general terms and conditions. Therefore, an arbitration clause in general terms and conditions is only permitted by law if the following two conditions are met:

Condition 1 : Choice clause

The arbitration clause must give the consumer the choice to submit the dispute to the said arbitration institute or to the civil court. Standard contracts such as Woningborg, Bouwgarant, COVO therefore provide such a choice clause in favor of the client (consumer).

Condition 2: Term of one month

The arbitration clause should provide that the consumer be given at least one month to choose between arbitration and court proceedings.

If both conditions are not met, then the clause is voidable. That is, the arbitrator will declare himself incompetent to take cognizance of the dispute. In practice, the lack of a term in the arbitration clause cannot be repaired by still offering the consumer at least one month of choice in writing. The Supreme Court has ruled that an arbitration clause without a term is always voidable, even if the consumer is subsequently offered a term. It is therefore important to include a correctly worded arbitration clause when entering into a contract with a consumer.

Additional condition based on case law: disclosure of information

Even if the arbitration clause meets the legal requirements, the arbitration clause can be nullified. When assessing an arbitration clause, all the circumstances of the case, as they existed at the time the contract was concluded, are taken into account. Here, according to the recent Supreme Court ruling, an important factor is whether the contractor provided information to the consumer about the differences between arbitration and court proceedings. The purpose of the provision of information is that the consumer (demonstrably) made an informed choice based on complete information. A third condition can thus be inferred from case law:

Condition 3: Disclosure

The contractor shall provide transparent, clear information on the differences between arbitration and court proceedings. The specific implementation of the disclosure is up to the contractor. One example is to include a flyer highlighting the pros and cons of both procedures. For practical purposes, it may be practical(er) to provide a link to the websites of the courts and the arbitration institute. Whether this is sufficient is not certain. The provision of information takes place prior to the conclusion of the agreement or - if this will be too heavy an administrative burden - at the time the one-month deadline is set. In the latter case, the arbitration clause should state that the information will be provided when the deadline is set.

After deadline: ball in consumer's court

When the above three conditions are met, the ball is in the consumer's court. The consumer chooses whether to submit the dispute to the court or the competent arbitration body. If no choice is made by the consumer, the contractor would be wise - in view of the Supreme Court's ruling - to turn to the ordinary court. The (allowing) expiration of the choice period does not mean that the consumer has waived his right to bring proceedings before the civil court. The consumer's right to legal proceedings therefore remains.

Summary

To get it right as a contractor (and thus be safe ), it is advisable to take the following steps:

1. Make sure you have a correctly worded arbitration clause that includes a choice clause and at least one month's reflection time;
2. Provide proper disclosure of the differences between arbitration and court proceedings at the time of contracting, or at the time of deadline setting; and
3. If the consumer does not make a choice, the dispute should be brought before the ordinary courts.