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Why Am I Required To Go To Arbitration ?

January 21, 2024 3:07 am

Why Am I Required To Go To Arbitration ?

All kinds of people enter into contracts every day without ever reading the paperwork they are signing. This is especially true with purchases. You sign on the dotted line (or click “Accept”) to buy a cell phone, sign up for a new internet service, download a new app or obtain a loan. (Don’t forget terms and conditions on the back of a purchase order!) 

All these transactions come with printed terms and conditions to which you must agree. But very few people actually take the time to review the fine print. It is only when a problem arises that most people think to dig out the contract they signed or review the terms and conditions on which they clicked “Agree” to determine what steps they must take. And, that is when they realize that “any dispute arising out of or relating to” the transaction must be settled in arbitration. After their initial shock to learn this subsides, most people then wonder, “What the heck is arbitration anyway?” [For the answer to that question, read my blog, “Arbitration: the Right Path to Resolution of Employment Disputes”]. Is there a way to get out of arbitration?

Unfortunately, the law is not on the side of someone who signs a contract without first reading it. The rule in Florida and elsewhere is that one who signs a contract is presumed to know and understand its contents. This rule has been applied even to contracts entered into by people who never learned to read. The reasoning goes that if such persons are unable to read, they are negligent if they fail to have the contract read to them. If a person cannot read the terms or conditions, the law holds it is his duty to find some reliable person to read and explain it to him, before he signs it.   

 The same holds true for persons who do not read or understand the agreement they signed because it is written in English and they do not speak, read or understand English. This rule also has been applied to people with little formal education or who are considered elderly. Of course, there are exceptions to this rule where a person has been actively mislead about what is or is not in a contract or terms and conditions, or the person has been actively prevented in some way from reading a contract or terms and conditions. If either of these are the case, then the person should consult an attorney.

Attorneys who draft contracts know that persons bound by mandatory arbitration clause in a contract will likely try and get out of it. It is for this reason that most contracts or terms or conditions make sure the reader is put on notice of the provision by either bolding that language in the document, placing it in a separate paragraph or requiring the person who will be bound by the contract to initial or check a box next to the provision. These make it very difficult for a person to try and claim they were not aware of the provision or did not think it was an important part of the bargain.   

Most contracts that contain a mandatory arbitration provision also include a provision waiving the right to a jury trial. These provisions are known as “jury trial waivers.” A jury trial waiver usually is prominently highlighted in the text of the contract.   While the right to a jury trial is preserved in the U.S. Constitution (and in many state constitutions and laws), many legal decisions hold jury trial waivers are valid and can be enforced. Jury trial waivers have been found valid in leases, business transactions and even in some civil rights matters like employment law disputes and fair housing cases.   In employment law cases, courts have ruled that an arbitration proceeding is just a change in the forum in which the case will be decided. That means arbitrators must apply the same legal principles and protections afforded to parties in federal court. But, this is not the case for every type of dispute.

Of course, a person who signed a contract or terms and conditions provision that provides for arbitration can argue that its dispute is not covered by the clause or provision because it does not arise “out of or relate to” the contract in which it is contained. This argument has been successful in certain circumstances, including when the issue or dispute arises from a personal injury. The facts of each case will determine whether the party who signed the contract or clicked “Agree” to terms and conditions calling for arbitration is bound by the provision. Indeed, commerce is so accepting of arbitration these days that even parking lots and garages now have erected signs at the entrance stating that if you park there, you are deemed to submit to arbitration of all disputes. 

If you signed a contract or terms and conditions that calls for arbitration as the dispute resolution method and you do not fully understand the legal consequences of this choice, you should consult an attorney who is familiar with both litigation and arbitration and find out whether it is worth the cost to challenge it.