Article 1. Invalid Agreements.
§ 22B-1. Certain indemnity and defend agreements invalid.
- Provisions in, or in connection with, a construction agreement or design professional agreement purporting to require a promisor to indemnify or hold harmless the promisee, the promisee’s independent contractors, agents, employees, or indemnitees against liability for damages arising out of bodily injury to persons or damage to property proximately caused by or resulting from the negligence, in whole or in part, of the promisee, its independent contractors, agents, employees, or indemnitees, is against public policy, void and unenforceable. Nothing contained in this subsection shall prevent or prohibit a contract, promise or agreement whereby a promisor shall indemnify or hold harmless any promisee or the promisee’s independent contractors, agents, employees or indemnitees against liability for damages resulting from the sole negligence of the promisor, its agents or employees.
- Provisions in, or in connection with, a construction agreement or design professional agreement purporting to require a promisor to indemnify or hold harmless the promisee, the promisee’s independent contractors, agents, employees, indemnitees, or any other person or entity against losses, damages, or expenses are against public policy, void, and unenforceable unless the the fault of the promisor or its derivative parties is a proximate cause of the loss, damage, or expense indemnified.
- Provisions in, or in connection with, a construction agreement that includes design professional services or a design professional agreement purporting to require a design professional to defend a promisee, the promisee’s independent contractors, agents, or employees, the promisee’s indemnitees, or any other person or entity against liability or claims for damages or expenses, including attorney’s fees, proximately caused or allegedly caused by the professional negligence, in whole or in part, of the promisor, the promisee, or their derivative parties, whether the claim is alleged or brought in tort or contract, is against public policy, void, and unenforceable.
- Nothing in this section shall be interpreted to exclude from any indemnity or hold harmless provisions enforceable under subsections (a) and (b) of this section attorneys’ fees, litigation or arbitration expenses, or court costs actually incurred by the promisee to defend against third party claims alleged in any court, tribunal, or alternative dispute resolution procedure required of the promisee by law or by contract, if the fault of the promisor or its derivative parties is a proximate cause of the attorney’s fees litigation or arbitration expenses, or court costs to be indemnified.
- This section shall not affect an insurance contract, workers’ compensation, or any other agreement issued by an insurer. This section shall not apply to lien or bond claims asserted under Chapter 44A of the General Statutes.
For purposes of this section, the following definitions shall apply:
- Construction agreement. — Any promise or agreement in, or in connection with, a contract or agreement relative to the design, planning, construction, alteration, repair, or maintenance of a building, structure, highway, road, appurtenance, or appliance, including moving, demolition, and excavating connected therewith.
- Defend. — Any obligation to pay for or furnish counsel at the expense of the promisor to defend a promisee, the promisee’s independent contractors, agents, employees, or indemnitees against claims alleged or brought against the promisee, the promisee’s independent contractors, agents, employees, or indemnitees by a third party alleged or brought in any court or other tribunal, including forms of alternative dispute resolution required by law or contract, before the court or tribunal has reached a final determination of fault.
- Derivative parties. — With respect to a party, any of that party’s subcontractors, agents, employees, or other persons or entities for which the party may be liable or responsible as a result of any statutory, tort, or contractual duty.
- Design professional. — A person or entity who is licensed under and provides professional services regulated by Chapters 83A, 89A, 89C, 89E, or 89F of the General Statutes.
- Design professional agreement. — Any promise or agreement in, or in connection with, a contract or agreement with a design professional to provide design professional services.
- Design professional services. — A service or work performed by a design professional for which licensure is required under Chapters 83A, 89A, 89C, 89E, or 89F of the General Statutes.
- Fault. — A breach of contract; negligent, reckless, or intentional act or omission constituting a tort under applicable statutes or common law; or violations of applicable statutes or regulations.
- Subcontractor. — Any person or entity, of any tier, providing labor or material through the promisor for use on the project at issue in the applicable construction agreement or design professional agreement.
History. 1979, c. 597, s. 1; 1991, c. 636, s. 3; 1993, c. 553, s. 12; 2019-92, s. 1.
Session Laws 1993, c. 436, s. 1, amended the title of this Article effective October 1, 1993, and applicable to any contract entered into on or after that date.
Session Laws 2019-92, s. 2 made the amendments to this section by Session Laws 2019-92, s. 1, effective August 1, 2019, and applicable to contracts entered into, amended, or renewed on or after that date.
Effect of Amendments.
Session Laws 2019-92, s. 1, effective August 1, 2019, rewrote this section. For effective date and applicability, see editor’s note.
Legislature intended, by exempting insurance contracts or other agreements issued by an insurer, to prevent insurance policies which name the buyer of construction services as an insured from being invalidated. Miller Brewing Co. v. Morgan Mechanical Contractors, 90 N.C. App. 310, 368 S.E.2d 438, 1988 N.C. App. LEXIS 528 (1988).
Terms “insurance contract . . . Or any other agreement issued by an insurer” in this section refer to contracts of insurance and insurers as defined, authorized, and regulated by Chapter 58. Miller Brewing Co. v. Morgan Mechanical Contractors, 90 N.C. App. 310, 368 S.E.2d 438, 1988 N.C. App. LEXIS 528 (1988).
“Indemnity and Hold Harmless” Provision Held Void. —
“Indemnity and hold harmless” provision printed on the back of a purchase order did not fall within the exception for contracts of insurance found in Chapter 58, and thus, the provision was void under this section. Miller Brewing Co. v. Morgan Mechanical Contractors, 90 N.C. App. 310, 368 S.E.2d 438, 1988 N.C. App. LEXIS 528 (1988).
“Wholly Responsible”. —
Subcontractor was granted summary judgment on an indemnity claim insofar as it related to damages caused by defective design as the contractor did not assert and could not establish that the subcontractor was wholly responsible for those damages. However, insofar as the indemnity claim related to defective installation, summary judgment was denied as the contractor asserted claims only against the subcontractor. New Bern Riverfront Dev., LLC v. Weaver Cooke Constr., LLC, 2014 Bankr. LEXIS 4158 (Bankr. E.D.N.C. Sept. 30, 2014), aff'd, 2016 U.S. Dist. LEXIS 26254 (E.D.N.C. Feb. 25, 2016).
Agreement Did Not Violate This Section. —
Language in indemnity agreement that did not explicitly provide that plaintiff would be insulated from its own negligence, but provided only that defendant would hold plaintiff harmless for all damages resulting from defendant’s operation of a gas system, was not prohibited by this section. City of Wilmington v. North Carolina Natural Gas Corp., 117 N.C. App. 244, 450 S.E.2d 573, 1994 N.C. App. LEXIS 1197 (1994).
Construction indemnity provisions that the plaintiff plant owner had in its contracts with defendant maintenance company and security company were valid pursuant to G.S. 22B-1 as such provisions sought to allow plaintiff to be indemnified by defendants due to defendants’ negligence and not because of plaintiff’s own negligence. Bridgestone/Firestone, Inc. v. Ogden Plant Maint. Co., 144 N.C. App. 503, 548 S.E.2d 807, 2001 N.C. App. LEXIS 530 (2001), aff'd, 355 N.C. 274 , 559 S.E.2d 786, 2002 N.C. LEXIS 188 (2002).
Applicability to Franchise Agreement. —
This section applied to a franchise agreement whereby defendant could construct, operate and maintain a gas system in the city granting the franchise. City of Wilmington v. North Carolina Natural Gas Corp., 117 N.C. App. 244, 450 S.E.2d 573, 1994 N.C. App. LEXIS 1197 (1994).
Where an agreement involved both the construction of a new appliance and the alteration of an existing appliance within the meaning of this section, any promise on the part of defendant to indemnify or hold plaintiff harmless made in or in connection with the agreement to perform was invalid unless the agreement fell under an exception stated in this section. Miller Brewing Co. v. Morgan Mechanical Contractors, 90 N.C. App. 310, 368 S.E.2d 438, 1988 N.C. App. LEXIS 528 (1988).
Installation of Machine. —
A Pennsylvania court applying North Carolina contract law held that the work actually performed by the seller of a machine to “install” the machine did not constitute the construction, alteration, or repair required to void the indemnity provision in a purchase order under G.S. 22B-1 . Albright v. Michael Weinig, Inc., 16 Pa. D. & C.5th 516, 2010 Phila. Ct. Com. Pl. LEXIS 249 (Pa. C.P. Aug. 16, 2010), aff'd, 31 A.3d 733, 2011 Pa. Super. LEXIS 2816 (Pa. Super. Ct. 2011).
Illegal Provision Held Severable. —
Although clause in contract violated provisions of this section, the illegal provision was severable from an otherwise valid indemnity provision. International Paper Co. v. Corporex Constructors, Inc., 96 N.C. App. 312, 385 S.E.2d 553, 1989 N.C. App. LEXIS 1010 (1989).
Even assuming an indemnification clause violated G.S. 22B-1 because a portion of it served to indemnify a contractor against its own negligence, the problem could be solved by simply removing the offending phrase; the indemnification clause, on its face, was self-limiting as indemnification was restricted to damages: (1) that arose or resulted from performance of a subcontractor’s work; and (2) that were “permitted by law.” Vecellio & Grogan, Inc. v. Piedmont Drilling & Blasting, Inc., 183 N.C. App. 66, 644 S.E.2d 16, 2007 N.C. App. LEXIS 837 (2007).
Illegal Provision Held Not Severable. —
Trial court correctly granted the subcontractor’s motion for judgment on the pleadings because the indemnification provisions in its construction contract with the supplier violated G.S. 22B-1 and were not severable; therefore, the entire contract was void and there could be no breach of contract. Jackson v. Associated Scaffolders & Equip. Co., 152 N.C. App. 687, 568 S.E.2d 666, 2002 N.C. App. LEXIS 961 (2002).
No Liability When Several Contractors Contributed to the Defect. —
Subcontractor that sold windows and doors to a general contractor and hired a third party to install its products in condominiums the contractor constructed was not liable for damages units sustained because water leaked through the windows and doors; even assuming that a provision in a construction contract the parties signed could be modified so it did not violate G.S. 22B-1 , the subcontractor was subject to liability only if it was solely responsible for the damage, and evidence which showed, inter alia, that another company did not pour concrete balconies so they sloped away from the units showed that the subcontractor was not totally responsible for the damages. New Bern Riverfront Dev., LLC v. Weaver Cooke Constr., LLC, 515 B.R. 230, 2014 Bankr. LEXIS 3564 (Bankr. E.D.N.C. 2014), aff'd in part and rev'd in part, 2016 U.S. Dist. LEXIS 109490 (E.D.N.C. Aug. 12, 2016).
No Liability When Another Contractor Was Contributorily Negligent. —
Subcontractor was entitled to summary judgment on prime contractor’s indemnity claim as prime contractor’s contributory negligence in connection with the sequencing that was necessary to achieve waterproofing of the exterior balcony doors precluded it from seeking indemnity from the subcontractor. New Bern Riverfront Dev., LLC v. Weaver Cooke Constr., LLC, 2018 Bankr. LEXIS 3999 (Bankr. E.D.N.C. Dec. 19, 2018).
Subcontractor Not Required to Indemnify General Contractor Because Others Shared Responsibility. —
Subcontractor that was hired by a general contractor to apply building wrap during construction of condominiums the general contractor built was not liable for damages units sustained because water leaked through windows and doors; even assuming that a provision in a construction contract the parties signed could be modified so it did not violate G.S. 22B-1 , the subcontractor was subject to liability only if it was solely responsible for the damage, and evidence that the general contractor was responsible for a sequencing error which allowed another subcontractor to install sliding glass doors before traffic coating was applied to balconies showed that the subcontractor was not solely responsible for the damages. New Bern Riverfront Dev., LLC v. Weaver Cooke Constr., 2014 Bankr. LEXIS 4117 (Bankr. E.D.N.C. Sept. 26, 2014).
Indemnity Provision Ran Afoul of Statutory Law. —
Indemnity provision ran afoul of North Carolina statutory law as it required a subcontractor to indemnify the contractor for the contractor’s own negligent acts, which was against public policy. Even if the indemnity provision was blue-penciled by the court so that it did not violate the statute and provided that the subcontractor would only have to indemnify the contractor for damages caused “wholly” by the subcontractor, the subcontractor was entitled to summary judgment as no genuine issue of material fact existed as to whether it was solely responsible for the damages. New Bern Riverfront Dev., LLC v. Weaver Cooke Constr., LLC, 516 B.R. 810, 2014 Bankr. LEXIS 4115 (Bankr. E.D.N.C. 2014), amended, 2015 Bankr. LEXIS 787 (Bankr. E.D.N.C. Mar. 13, 2015).
§ 22B-2. Contracts to improve real property.
A provision in any contract, subcontract, or purchase order for the improvement of real property in this State, or the providing of materials therefor, is void and against public policy if it makes the contract, subcontract, or purchase order subject to the laws of another state, or provides that the exclusive forum for any litigation, arbitration, or other dispute resolution process is located in another state.
History. 1993, c. 294, s. 2.
For provisions concerning limitations on the power of parties to consumer leases to choose applicable law and judicial forum, see G.S. 25-2A-106.
Federal Arbitration Act Preempted G.S. 22B-2 . —
G.S. 22B-2 could not be used to void the arbitration agreements contained with the limited warranties provided by a roofing system company to a board of education even though the agreements required arbitration outside of North Carolina because, with regard to arbitration agreements, G.S. 22B-2 was preempted by 9 U.S.C.S. § 2. Wake County Bd. of Educ. v. Dow Roofing Sys., LLC, 792 F. Supp. 2d 897, 2011 U.S. Dist. LEXIS 64148 (E.D.N.C. 2011).
Federal Arbitration Act preempted statute that provided that contract provisions in construction contracts requiring arbitration in another state were void as against public policy. United States ex rel. TGK Enters. v. Clayco, Inc., 978 F. Supp. 2d 540, 2013 U.S. Dist. LEXIS 136721 (E.D.N.C. 2013).
Choice of Law and Forum Selection Clauses Invalid. —
Superior court erred in dismissing a subcontractor’s breach of contract claim for improper venue since the contract pertained to the improvement of real property located in North Carolina and was for labor and materials, and thus, the contract’s choice of law and forum selection clauses were invalid under G.S. 22B-2 . Price & Price Mech. of N.C. Inc. v. Miken Corp., 191 N.C. App. 177, 661 S.E.2d 775, 2008 N.C. App. LEXIS 1130 (2008).
Arbitration Agreements Were Not Voided. —
G.S. 22B-2 was not clearly implicated in a case involving limited warranties given by a roofing system company after the roofing system had been incorporated into various school buildings, and therefore, G.S. 22B-2 did not void the arbitration agreements contained within the limited warranties. Wake County Bd. of Educ. v. Dow Roofing Sys., LLC, 792 F. Supp. 2d 897, 2011 U.S. Dist. LEXIS 64148 (E.D.N.C. 2011).
§ 22B-3. Contracts with forum selection provisions.
Except as otherwise provided in this section, any provision in a contract entered into in North Carolina that requires the prosecution of any action or the arbitration of any dispute that arises from the contract to be instituted or heard in another state is against public policy and is void and unenforceable. This prohibition shall not apply to non-consumer loan transactions or to any action or arbitration of a dispute that is commenced in another state pursuant to a forum selection provision with the consent of all parties to the contract at the time that the dispute arises.
History. 1993, c. 436, s. 2; 1995, c. 100, s. 1.
For provisions concerning limitations on the power of parties to consumer leases to choose applicable law and judicial forum, see G.S. 25-2A-106.
The number of this section was assigned by the Revisor of Statutes, the number in Session Laws 1993, c. 436, s. 2 having been G.S. 22B-10 .
For note, “Civil Procedure — Forum Selection — N.C. Gen. Stat. G.S. 22B-3 (1994),” see 72 N.C.L. Rev. 1608 (1994).
For note and comment, “FAA and Arbitration Clauses—How Far Can It Reach? The Effect of Allied-Bruce Terminix, Inc. v. Dobson,” see 19 Campbell L. Rev. 607 (1997).
For article, “Foreign Law Between Domestic Commercial Parties: A Party Autonomy Approach with Particular Emphasis on North Carolina Law,” see 30 Campbell L. Rev. 437 (2008).
Non-consumer Loan Defined. —
Under this section a “non-consumer” loan is one that is not extended to a natural person and not used for family, household, personal, or agricultural purposes. L.C. Williams Oil Co. v. NAFCO Capital Corp., 130 N.C. App. 286, 502 S.E.2d 415, 1998 N.C. App. LEXIS 918 (1998).
Contracts “Entered Into.” —
A contract which was negotiated in North Carolina for several weeks, but which was ultimately signed by defendants in their Connecticut office was properly considered to have been “entered into” outside the State and did not contravene the public policy enunciated in this section. Key Motorsports, Inc. v. Speedvision Network, 40 F. Supp. 2d 344, 1999 U.S. Dist. LEXIS 3078 (M.D.N.C. 1999).
Federal district court held that a forum selection clause was not contrary to North Carolina public policy as set forth in G.S. 22B-3 because that section applied only to contracts entered into in North Carolina and the contract at issue was entered into in Massachusetts. Price v. Leasecomm Corp., 2004 U.S. Dist. LEXIS 5467 (M.D.N.C. Mar. 31, 2004).
Since a franchise agreement between North Carolina franchisees and a Florida franchiser was not finalized until it was signed by the franchiser in its Florida offices, that signing was the last act done by either of the parties that was essential to a meeting of minds meaning that the contract legally was entered into in Florida; consequently, G.S. 22B-3 did not apply to the franchise agreement and a forum selection clause mandating arbitration in Florida was enforceable. Szymczyk v. Signs Now Corp., 168 N.C. App. 182, 606 S.E.2d 728, 2005 N.C. App. LEXIS 162 (2005).
General contractor’s claim that letters evidencing alleged debt that the general contractor owed to the judgment creditor should have been excluded from the trial court’s consideration as unenforceable under G.S. 22B-3 could not be considered on appeal; the state of the record, without any findings of fact or conclusions of law by the trial court, was such that the argument was not supported by evidence in the record. Quantum Corp. Funding, Ltd. v. B.H. Bryan Bldg. Co., 175 N.C. App. 483, 623 S.E.2d 793, 2006 N.C. App. LEXIS 187 (2006).
One Party in Dire Straits. —
Enforcement of a forum selection clause in agreement to procure and sell aircraft was unreasonable because the individual was in desperate financial condition and the owner of the aviation company insisted both on the agreement and ultimate control over the venture. Dove Air, Inc. v. Bennett, 226 F. Supp. 2d 771, 2002 U.S. Dist. LEXIS 18529 (W.D.N.C. 2002).
Preemption by Federal Law. —
Trial court committed error by not dismissing a civil action as to one defendant that had executed an agreement with plaintiff that included an arbitration and forum selection clause requiring out-of-state arbitration; since the agreement involved interstate commerce, the Federal Arbitration Act preempted the North Carolina Uniform Arbitration Act’s provision that voided any provision, regarding contracts entered into in North Carolina, that required prosecution or arbitration of any dispute arising from the contract to be instituted or heard in another state. Boynton v. ESC Med. Sys., 152 N.C. App. 103, 566 S.E.2d 730, 2002 N.C. App. LEXIS 873 (2002).
Forum selection clause in an agreement that was the subject of a district court action was not voided by G.S. 22B-3 because forum and venue issues were governed by federal law. Rice v. BellSouth Adver. & Publ. Corp, 240 F. Supp. 2d 526, 2002 U.S. Dist. LEXIS 24230 (W.D.N.C. 2002).
Contacts were sufficient to establish that the parties’ franchise agreement was interstate commerce where Florida franchiser provided support to North Carolina franchisees in the form of manuals, training, advice via telephone, and the use of a specific name and trademark, and where the franchisees routinely transmitted payments from North Carolina to Florida and attended the franchiser’s annual convention in Florida; therefore, the Federal Arbitration Act preempted G.S. 22B-3 and allowed enforcement of a forum selection clause that mandated arbitration in Florida. Szymczyk v. Signs Now Corp., 168 N.C. App. 182, 606 S.E.2d 728, 2005 N.C. App. LEXIS 162 (2005).
Although North Carolina statutory law and public policy appeared to bar the arbitration clause contained in the contract executed by the seller and buyer because the clause selected the out-of-state site of Fargo, North Dakota, as the place that arbitration was to take place, the Federal Arbitration Act, 9 U.S.C.S. § 1 et seq., applied, permitted the parties’ arbitration, and preempted North Carolina provisions to the contrary. Goldstein v. Am. Steel Span, Inc., 181 N.C. App. 534, 640 S.E.2d 740, 2007 N.C. App. LEXIS 248 (2007).
Federal Arbitration Act preempted statute that provided that contract provisions requiring arbitration in another state were void as against public policy. United States ex rel. TGK Enters. v. Clayco, Inc., 978 F. Supp. 2d 540, 2013 U.S. Dist. LEXIS 136721 (E.D.N.C. 2013).
Forum Selection Clause Held Reasonable. —
Forum selection clause in defendant’s lease was upheld where (1) there was no fraud involved in including the forum selection clause, (2) plaintiff’s travel to the selected forum, Massachusetts, may have been inconvenient, but not extraordinarily so, (3) Massachusetts law would have applied, even if the matter were not transferred, based on North Carolina’s choice of law rules, and (4) the clause did not violate public policy; accordingly, the district court granted the motion to transfer. Price v. Leasecomm Corp., 2004 U.S. Dist. LEXIS 5467 (M.D.N.C. Mar. 31, 2004).
In this usury action, the order finding that enforcing the forum selection clause would be unreasonable and unfair was reversed because neither the trial court’s order nor plaintiff’s arguments on appeal provided a basis for the determination that the amount to be litigated was too small an amount to litigate in Cook County, Illinois. Parson v. Oasis Legal Fin., LLC, 214 N.C. App. 125, 715 S.E.2d 240, 2011 N.C. App. LEXIS 1642 (2011).
Forum Selection Clause Held Unreasonable and Unjust. —
Defendants’ motion to transfer venue to Texas was denied because application of the forum-selection clause would have been unreasonable and unjust; the case involved a contract between North Carolina corporations for the sale of an ongoing business in North Carolina, the contract was entered into in North Carolina and had been performed in North Carolina, almost all of the witnesses were located in North Carolina, and the State of North Carolina had expressed a strong interest in having local controversies settled at home. Curtis B. Pearson Music Co. v. McFadyen Music, Inc., 2005 U.S. Dist. LEXIS 11196 (M.D.N.C. June 3, 2005).
Texas forum selection clause that defendants sought to enforce was unenforceable in Texas; given this and plaintiff’s showing of fraud in its verified complaint, the trial court abused its discretion by refusing to enforce the forum selection clause, and denying defendants’ motion to dismiss. SED Holding, LLC v. 3 Star Props., LLC, 246 N.C. App. 632, 784 S.E.2d 627, 2016 N.C. App. LEXIS 366 (2016).
Forum Selection Clause Void. —
Last act necessary to the formation of the employment agreement was plaintiff’s signature and delivery in North Carolina rather than defendant’s signature in Texas, which was the consummation of the employment relationship, given that defendant’s manifestation of assent was found in its proposal of the agreement to plaintiff that became binding upon both parties upon acceptance; as the contract was entered into in North Carolina, the Minnesota forum-selection clause was void and unenforceable. Schwarz v. St. Jude Med., Inc., 254 N.C. App. 747, 802 S.E.2d 783, 2017 N.C. App. LEXIS 615 (2017).
§ 22B-4. Prohibition on contract provisions restricting whistle-blowing related to State Health Plan.
A provision in any contract is void and against public policy if it prohibits an employee’s or contractor’s ability to report wrongdoing under G.S. 135-48.15 related to the State Health Plan.
History. 2012-192, s. 2.
As to whistle-blower protections related to the State Health Plan, see G.S. 135-48.15 .
Session Laws 2012-192, s. 4, made this section effective October 1, 2012, and applicable to causes of action arising on or after that date.
§ 22B-5. Waiver of liens or claims as a condition of progress payment invalid.
- Provisions in lien waivers, releases, construction agreements as defined in G.S. 22B-1(f)(1), or design professional agreements as defined in G.S. 22B-1(f)(5) purporting to require a promisor to submit a waiver or release of liens or claims as a condition of receiving interim or progress payments due from a promisee under a construction agreement or design professional agreement are void and unenforceable unless limited to the specific interim or progress payment actually received by the promisor in exchange for the lien waiver.
This section does not apply to the following:
- Lien waivers or releases for final payments.
- Agreements to settle and compromise disputed claims after the claim has been identified by the claimant in writing regardless of whether the promisor has initiated a civil action or arbitration proceeding.
History. 2022-1, s. 3(a).
Session Laws 2022-1, s. 3(b), made this section, as added by Session Laws 2022-1, s. 3(a), effective March 1, 2022, and applicable to liens attached on or after that date.
§§ 22B-6 through 22B-9.
Reserved for future codification purposes.
Article 2. Jury Trial Waivers Unenforceable.
§ 22B-10. Contract provisions waiving jury trial unenforceable.
Any provision in a contract requiring a party to the contract to waive his right to a jury trial is unconscionable as a matter of law and the provision shall be unenforceable. This section does not prohibit parties from entering into agreements to arbitrate or engage in other forms of alternative dispute resolution.
History. 1993, c. 463, s. 5; 1993 (Reg. Sess., 1994), c. 763, s. 2.
The number of this section was assigned by the Revisor of Statutes, the number in Session Laws 1993, c. 463, s. 5 having been G.S. 22B-2 .
Statute Permits Parties to Enter Into Arbitration Agreements. —
Statute expressly permits parties to enter into arbitration agreements; the statute cannot be read as equating contracts with an arbitration clause to those contracts that do not contain an arbitration clause, and the language of this section could not be clearer: the proscription against contractual waivers of jury trials does not prohibit parties from entering into agreements to arbitrate or engage in other forms of alternative dispute resolution. Wygand v. Deutsche Bank Trust Co. Ams., 265 N.C. App. 681, 829 S.E.2d 681, 2019 N.C. App. LEXIS 493 (2019).
An agreement to arbitrate a dispute is not an unenforceable contract requiring waiver of a jury; thus, the trial court erred in concluding that because arbitration provision did not provide for trial of facts by a jury that it was unconscionable and unenforceable under this section, and in violation of N.C. Const., Art. I, § 18 and 25. Miller v. Two State Constr. Co., 118 N.C. App. 412, 455 S.E.2d 678, 1995 N.C. App. LEXIS 233 (1995).
Arbitration Agreement Not Unconscionable. —
Trial court erred when it concluded that an arbitration rider was unconscionable because the notice provision simply explained that by agreeing to arbitration, any disputes would be settled without a jury, and such contractual provisions that defined or explained arbitration did not run afoul of the statute; including an explanation of what a party forfeited when it agreed to arbitrate any disputes in an arbitration agreement does not render the arbitration agreement unenforceable. Wygand v. Deutsche Bank Trust Co. Ams., 265 N.C. App. 681, 829 S.E.2d 681, 2019 N.C. App. LEXIS 493 (2019).
Because the Federal Arbitration Act (FAA) preempted state statutes that rendered arbitration agreements unenforceable, the statute could not be interpreted or used to set aside an arbitration rider, and the trial court erred when it purported to interpret the statute to render the arbitration rider unconscionable; the contract dictated that FAA governed review of the arbitration rider. Wygand v. Deutsche Bank Trust Co. Ams., 265 N.C. App. 681, 829 S.E.2d 681, 2019 N.C. App. LEXIS 493 (2019).
Severability of Provision. —
Federal district court held that a forum selection clause was not contrary to North Carolina public policy as set forth in G.S. 22B-10 where, although the agreement purported to waive plaintiff’s right to a jury trial, even if this provision were unconscionable, the court would not have had to strike the entire forum selection clause in order to strike the jury waiver provision. Price v. Leasecomm Corp., 2004 U.S. Dist. LEXIS 5467 (M.D.N.C. Mar. 31, 2004).
Bylaw Requirement Requiring Vote Before Bringing Suit. —
Trial court properly dismissed a property owners association’s suit against its developer, which asserted claims of constructive fraud and unfair and deceptive trade practices, for lack of standing on the part of the association, because the association failed to obtain a two-thirds vote of its membership authorizing the suit, as was required by its bylaws; as a result, the trial court lacked subject matter jurisdiction and properly granted the developer’s motion to dismiss and motion for summary judgment. Peninsula Prop. Owners Ass'n v. Crescent Res., LLC, 171 N.C. App. 89, 614 S.E.2d 351, 2005 N.C. App. LEXIS 1165 (2005).
§§ 22B-11 through 22B-19.
Reserved for future codification purposes.
Article 3. Deed Restrictions, Covenants, and Other Agreements Prohibiting Solar Collectors.
§ 22B-20. Deed restrictions and other agreements prohibiting solar collectors.
- The intent of the General Assembly is to protect the public health, safety, and welfare by encouraging the development and use of solar resources and by prohibiting deed restrictions, covenants, and other similar agreements that could have the ultimate effect of driving the costs of owning and maintaining a residence beyond the financial means of most owners.
- Except as provided in subsection (d) of this section, any deed restriction, covenant, or similar binding agreement that runs with the land that would prohibit, or have the effect of prohibiting, the installation of a solar collector that gathers solar radiation as a substitute for traditional energy for water heating, active space heating and cooling, passive heating, or generating electricity for a residential property on land subject to the deed restriction, covenant, or agreement is void and unenforceable. As used in this section, the term “residential property” means property where the predominant use is for residential purposes. The term “residential property” does not include any condominium created under Chapter 47A or 47C of the General Statutes located in a multi-story building containing units having horizontal boundaries described in the declaration. As used in this section, the term “declaration” has the same meaning as in G.S. 47A-3 or G.S. 47C-1-103 , depending on the chapter of the General Statutes under which the condominium was created.
- This section does not prohibit a deed restriction, covenant, or similar binding agreement that runs with the land that would regulate the location or screening of solar collectors as described in subsection (b) of this section, provided the deed restriction, covenant, or similar binding agreement does not have the effect of preventing the reasonable use of a solar collector for a residential property. If an owners’ association is responsible for exterior maintenance of a structure containing individual residences, a deed restriction, covenant, or similar binding agreement that runs with the land may provide that (i) the title owner of the residence shall be responsible for all damages caused by the installation, existence, or removal of solar collectors; (ii) the title owner of the residence shall hold harmless and indemnify the owners’ association for any damages caused by the installation, existence, or removal of solar collectors; and (iii) the owners’ association shall not be responsible for maintenance, repair, replacement, or removal of solar collectors unless expressly agreed in a written agreement that is recorded in the office of the register of deeds in the county or counties in which the property is situated. As used in this section, “owners’ association” has the same meaning as in G.S. 47F-1-103 .
This section does not prohibit a deed restriction, covenant, or similar binding agreement that runs with the land that would prohibit the location of solar collectors as described in subsection (b) of this section that are visible by a person on the ground:
- On the fagade of a structure that faces areas open to common or public access;
- On a roof surface that slopes downward toward the same areas open to common or public access that the fagade of the structure faces; or
- Within the area set off by a line running across the fagade of the structure extending to the property boundaries on either side of the fagade, and those areas of common or public access faced by the structure.
- In any civil action arising under this section, the court may award costs and reasonable attorneys’ fees to the prevailing party.
History. 2007-279, s. 3; 2009-553, s. 3.
Town of Carrboro: 1987, c. 476, as added by 2009-427, s. 1.
Session Laws 2007-279, s. 4, made this Article effective October 1, 2007, and applicable to deed restrictions, covenants, or similar binding agreements that run with the land recorded on or after that date.
Subsections (b) and (c), as amended by Session Laws 2009-553, s. 3, effective December 1, 2009, are applicable to deed restrictions, covenants, or similar binding agreements that run with the land and that are recorded on or after that date.
Trial court properly granted summary judgment to an HOA in its action against the owners for violation of a deed restriction because, while the subdivision declaration did not expressly address solar panels, they were an “improvement” within the meaning of the declaration, the declaration had the effect of statutorily prohibiting the installation of solar panels, and owners failed to apply and receive written approval from the architectural review committee before installing them. Belmont Ass'n v. Farwig, 2021 N.C. App. LEXIS 228 (May 18, 2021).