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Zwang v. Sauer

A-2398-03T2 (N.J. Super. App. Div. 2005) (Unpublished)

ARBITRATION—Even if never raised as an affirmative defense, the defense that a contract requires disputes to be resolved by arbitration can be raised at any time until a judgment is awarded .

A homeowner sued its contractor for breach of a contract for the construction of an addition to his home. The homeowner also sued the contractor’s insurance agent for representing that the contractor’s insurance coverage covered the contractor against claims for shoddy workmanship and defective materials. The lower court ruled against the homeowner on both claims. The Appellate Division affirmed. With respect to the claims against the contractor, the Court found that the contract had a provision that required all disputes to be resolved through binding arbitration. The homeowner claimed that by answering the complaint and not raising the arbitration issue as an affirmative defense, the contractor had waived that defense. The Court found that the right to raise the arbitration defense is not waived until a judgment is awarded. With respect to the claim against the insurance agency, the homeowner did not state that he would not have proceeded with the contract if he had known that the contractor’s insurance coverage did not cover against shoddy workmanship. Consequently, the Court found that the homeowner’s testimony established that he did not rely on the insurance agency’s representations of coverage. Therefore, his suit was properly dismissed.

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