Am I bound by an arbitration clause in a preprinted contract?

Usually, you are going to be bound by an arbitration clause, even if the agreement or the clause itself wasn’t expressly negotiated. Arbitration clauses have become very common and courts, on the whole, will tend to enforce one except in rare cases.

When You Might See an Arbitration Clause

An arbitration clause mandates that you submit a dispute to an arbitrator, instead of to the courts. When you buy a new car, health insurance or any other product that you have to sign a contract to buy, there is a good chance it has an arbitration clause included. This is the case because companies believe arbitration can protect them from large jury verdicts and that it often results in lower legal fees.

If a Dispute Arises

If a dispute does arise when you’ve signed an arbitration clause, it will then have to be submitted to a third party arbitrator who will make a decision that is binding on you and the other party. If you attempted to file a lawsuit based on the issue, then the other party would point to the arbitration clause and the court would usually require the dispute be arbitrated and would refuse to hear the case.

Exceptions

The only exception occurs when the terms are unconscionable and the contract was an adhesion contract. This means that the contract must have been one you had no opportunity to negotiate, and that the actual terms and requirements of the contract and arbitration are grossly biased and unfair. It will generally be your burden to prove these points if you want the court to decide not to enforce an arbitration clause that you’ve signed.

Case Studies: Am I bound by an arbitration clause in a preprinted contract?

Case Study 1: Consumer Product Purchase

A consumer purchased a new car that came with a preprinted contract containing an arbitration clause. After experiencing issues with the car’s performance and attempted to take legal action against the manufacturer, they were informed that their dispute must be resolved through arbitration. The consumer questions the enforceability of the arbitration clause and seeks legal advice.

Case Study 2: Employment Contract

An employee signed an employment contract that included an arbitration clause. After being wrongfully terminated, the employee wished to file a lawsuit against their former employer for wrongful termination. However, the employer insisted that the dispute must go through arbitration as specified in the employment contract. The employee seeks clarification on the enforceability of the arbitration clause.

Case Study 3: Health Insurance Coverage

A policyholder with health insurance encounters a dispute regarding coverage for a specific medical procedure. The insurance policy contains an arbitration clause that the insurer relies on to avoid litigation. The policyholder questions whether they can challenge the enforceability of the arbitration clause and pursue legal action.