It’s Time the Law Begins to Protect Consumers from Significantly One-Sided Arbitration Clauses within Contracts of Adhesion
Posted: 14 Mar 2012 Last revised: 14 May 2014
Date Written: March 13, 2012
To pretend that arbitration has not evolved into differing animals of the same species is to not fully appreciate the nuances that exist within the system. To date, most of the US cases surrounding arbitration agreements and enforcement are resolved within and under the Federal Arbitration Act. While this makes sense in many instances, the simple fact is that arbitration has grown – with the support of the courts- into areas of law and life never intended by the drafters of the FAA. Pretending that the FAA provides adequate protections for parties in a significantly weaker bargaining position when faced with a contract of adhesion is to demonstrate a lack of understanding to the realities that these situations present. The American public, a section of Congress and the arbitration community are all responding, but their efforts are being thwarted by out of date law and surrounding recent case decisions. It is simply time for Congress to act, but in doing so Congress must recognize that old biases will not move the discussion forward. Congress must seek to address the issue, without over capturing other individuals and other areas of arbitration, while still rejecting the tendency to over regulate. Recognition of these facts will allow Congress to draft a narrowly focused, minimally regulatory law that cuts to the heart of the issue: the protection of a specific group of weaker parties entering into contracts of adhesion that contain arbitration clauses, when the arbitration clause is significantly one sided.
This paper will seek to address these issues by first, identifying the issues in relation to the Federal Arbitration Act, the surrounding case law and the alternative readings of Section 2 of the FAA. The paper will then examine and reject some of the early attempts at addressing those issues, while then considering current attempts by both academics and industry to address the issue of contracts of adhesion and arbitration clauses. The paper will conclude, in Part II, by considering who should be protected, identifying what they should be protected from and how those protections can be accomplished. In the end suggesting that Congress must seek to protect a narrow class of individuals from significantly disadvantageous arbitration clauses within contracts of adhesion.
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