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Gaines Drago
Gaines Drago
Contributor •

Arbitration Clauses and Consumers

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Arbitration clauses are a huge aspect of many of our largest purchasers as consumers. Whether it is a mobile home, a car, or an entertainment center, many companies now have customers sign a contract that will require them to arbitrate any controversies that may arise from the purchase of a product. The Supreme Court has indicated a strong presumption of favor towards arbitration, so the following are just a few key pointers to realize about arbitration when deciding whether to make the final purchase. While, arbitration, is in no way all bad just please make sure you read thoroughly all the way through a contract you sign. The following just offers a few key points that consumers may not be aware of:

  • · Arbitration agreements are sometimes contained in ancillary agreements, or in small print in other agreements, and consumers and employees sometimes do not know in advance that they have agreed to mandatory binding pre-dispute arbitration by purchasing a product or taking a job
  • · If the arbitration is mandatory and binding, the parties waive their rights to access the courts and have a judge or jury decide the case
  • · In some arbitration agreements, the parties are required to pay for the arbitrators, which adds an additional layer of legal cost that can be prohibitive, especially in small consumer disputes
  • · In some arbitration agreements and systems, the recovery of attorneys’ fees is unavailable, making it difficult or impossible for consumers or employees to get legal representation; however most arbitration codes and agreements provide for the same relief that could be granted in court
  • · If the arbitrator or the arbitration forum depends on the corporation for repeat business, there may be an inherent incentive to rule against the consumer or employee
  • · There are very limited avenues for appeal, which means that an erroneous decision cannot be easily overturned
  • · Although usually thought to be speedier, when there are multiple arbitrators on the panel, juggling their schedules for hearing dates in long cases can lead to delays
  • · In some legal systems, arbitral awards have fewer enforcement remedies than judgments; although in the United States, arbitration awards are enforced in the same manner as court judgments and have the same effect
  • · Arbitrators are generally unable to enforce interlocutory measures against a party, making it easier for a party to take steps to avoid enforcement of an award, such as the relocation of assets offshore
  • · Rule of applicable law is not necessarily binding on the arbitrators, although they cannot disregard the law.
  • · Discovery may be more limited in arbitration
  • · The potential to generate billings by attorneys may be less than pursuing the dispute through trial
  • · Unlike court judgments, arbitration awards themselves are not directly enforceable. A party seeking to enforce an arbitration award must resort to judicial remedies, called an action to "confirm" an award
  • · Although grounds for attacking an arbitration award in court are limited, efforts to confirm the award can be fiercely fought, thus necessitating huge legal expenses that negate the perceived economic incentive to arbitrate the dispute in the first place.