Mandatory Consumer Arbitration

Abstract

Arbitration clauses in consumer contracts are ubiquitous. Typically, it is the party selling the good or providing the service that will present a contract to the prospective buyer as part of a printed form which is pre-drafted by the seller and used by it in numerous transactions. The buyer or the ultimate consumer rarely has the ability to negotiate substantive terms present in these contracts and will either have to take it or leave it, as the terms exist. One of the several clauses in the form will be a provision for the resolution of dispute exclusively through arbitration and the waiver of the right to litigate by the consumer. This paper proposes that it is required to be recognized that mandatory arbitration provisions in consumer contracts are inherently unfair, and are distinct from agreements made by parties of equal bargaining power with a free will to pursue alternate dispute resolution. Pre-dispute arbitration clauses in consumer contracts, need to be placed under a separate legal category and should not be given the same deference as other agreements to arbitrate. The first section of the paper will look at the position in United States and the grounds that exist to challenge pre-dispute clauses. The subsequent section will discuss how the problem of mandatory arbitration is dealt with in the European Union.