Consumers' "addendum" voiding service contract's mandatory arbitration clause was countreroffer accepted by service provider

Law Reporter, Apr 2003

Cook's Pest Control, Inc. v. Rebar, - So. 2d -, No. 1010897, 2002 WL 31780946 (Ala. Dec. 13, 2002).

The Alabama Supreme Court held that an addendum purporting to void a service contract's mandatory arbitration provision was a counteroffer by service consumers that the service provider accepted when it deposited the consumers' check and continued to service their account.

Here, Cook's Pest Control (Cook's) entered into a oneyear renewable termite control agreement with the Rebars. Under the agreement, Cook's was obligated to continue treating and inspecting the Rebars' home for termites during the term of the agreement, which, with certain limited exceptions, continued so long as the Rebars continued to pay the annual renewal fee. The agreement contained a mandatory, binding arbitration provision.

When the initial term of the agreement was about to expire, the Rebars submitted a payment with an insert entitled "Addendum to Customer Agreement." That addendum provided that the Rebars' right to seek court enforcement and trial by jury would not be abrogated. The addendum further provided: "Continued honoring of this account by you acknowledges agreement to these terms." Cook's accepted the payment and continued to perform termite inspections and services at the Rebars' home.

The Rebars sued Cook's for fraud and negligence, among other claims, based on an alleged failure to treat and control a termite infestation in plaintiffs' home, and to repair damage caused by the termites. Defendant moved to compel arbitration of plaintiffs' claims, but the trial court denied the motion.

Affirming, the state high court rejected defendant's argument that plaintiffs were attempting unilaterally to modify an existing contract. The court found that plaintiffs did not accept the terms proposed by defendant for renewal of the agreement, but instead proposed terms for the renewal of that contract that were materially different from the terms of the agreement-in effect making a counteroffer. By accepting payment and continuing the service, defendant accepted the counteroffer, the court said.

The court also rejected defendant's contention that none of the employees in the office where plaintiffs' payment was processed had the authority to enter into a contract. The court noted that if defendant wished to limit the authority of its employees to enter into contracts on its behalf, defendant, as the drafter of the original agreement, could have included such limiting language in the contract, but did not do so.

Plaintiffs' Counsel

Allen Sharp, Birmingham, Ala.