The Hembrees purchased a home. The purchase contract included the following clause: “Any controversy or claim arising out of or relating to this contract, or the breach thereof, shall be settled by arbitration in the city of contract origin, in accordance with the rules of the American Arbitration Association.” A claim that the home they purchased had a defective roof was arbitrated and the arbitrator found for the Hembrees on the theory of implied warranty. An implied warranty is a guarantee imposed by law that the seller will stand behind the item even though the contract is silent with respect to warranties. The seller and seller’s real estate agent challenged the arbitrator’s award in state court. They claimed the arbitrator exceeded his authority because the contract did not expressly provide for a remedy based on warranty. They argued the arbitrator’s finding was a clear error of law. Is the arbitrator’s authority strictly limited to the terms of the contract? If the arbitrator is clearly wrong as to the application of law, will the award be overturned by the court?


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