Nonmutual Agreements to Arbitrate

29 Pages Posted: 17 May 2003

Abstract

An increasing number of courts, albeit still a minority, refuse to enforce nonmutual arbitration clauses (clauses that require one party but not the other to arbitrate, in whole or in part) in consumer and employment contracts. Critics take the view that such clauses are unfair to consumers and employees, who must arbitrate their claims while the business avoids arbitration of at least some of its own claims. This article challenges the view that nonmutual arbitration clauses necessarily are unfair. Certainly to the extent market forces constrain business (mis)behavior, nonmutual arbitration clauses may make consumers better off. Commentators who criticize (and courts that invalidate) nonmutual arbitration clauses, however, are skeptical of markets and question the effectiveness of market constraints. This article shows that even accepting - for the sake of argument - the skeptical view of markets and business behavior held by critics of pre-dispute consumer arbitration clauses, a requirement that arbitration clauses contain mutual promises to arbitrate may actually make consumers worse off, not better off. Moreover, such a mutuality requirement may result in arbitration proceedings that are less fair, rather than more fair, to consumers. Thus, while a poorly functioning market is a necessary condition for a mutuality requirement to make sense as a policy matter, it is not a sufficient condition. Courts that refuse to enforce nonmutual agreements to arbitrate may be harming consumers rather than helping them.

Keywords: Arbitration, mutuality, contracts

Suggested Citation

Drahozal, Christopher R., Nonmutual Agreements to Arbitrate. Journal of Corporation Law, Vol. 27, 2002. Available at SSRN: https://ssrn.com/abstract=380040

Christopher R. Drahozal (Contact Author)

University of Kansas School of Law ( email )

Green Hall
1535 W. 15th Street
Lawrence, KS 66045-7577
United States
785-864-9239 (Phone)
785-864-5054 (Fax)

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