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The Supreme Court of Alabama, stating that it must give all contract terms "meaningful operation," gave a narrow reading to a pre-construction contract arbitration clause and refused to order arbitration in a dispute over earnest money.
In The Dunes of GP, L.L.C. v. Bradford, No. 1051501, 2007 WL 1098545 (Ala. April 13, 2007), Bradford contracted with The Dunes to build a condominium and paid $31,500 in earnest money. When the deal never closed, Bradford sued The Dunes, seeking specific performance and/or return of the earnest money.
The Dunes sought to compel arbitration. Bradford argued that the language of the agreement, which called for arbitration of "disputes which arise or remain unresolved after the closing," put the current dispute beyond its scope. The Dunes argued that the "practical interpretation" of the agreement was that all disputes were arbitrable.
While noting that "[n]ormally, doubt regarding the scope of an arbitration provision would require [construing] the provision in favor of arbitration," the Court nevertheless refused to make such a ruling.
The Court found that The Dunes' reading of the agreement rendered the second phrase regarding "disputes with arise or remain unresolved after the closing" superfluous. Given that it must "give all terms meaningful operation," the Court determined that arbitration applied only to post-closing disputes.
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