Arbitration Clauses in Adhesion Contracts
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Arbitration has long been valued as a voluntary process. Under ideal circumstances, two parties of relatively equal bargaining power agree to arbitrate as an alternative to litigation. A major exception to this rule occurs in the area of adhesion contracts. Standard form contracts reduce the time and cost involved in bargaining individual agreements. Yet, in using such a contract, a weaker party must agree--without any real choice--to arbitrate disputes in order to obtain goods or services it requires. Courts have often refused to enforce adhesion contracts or any of its terms when they have concluded that the stronger bargaining party has abused its dominant position. The author reviews the factors the courts weigh in making that decision.