What if there is a signed arbitration agreement but one side decides it does not want to arbitrate?

If a signed arbitration agreement is in place, one side may not unilaterally decide that it does not want to arbitrate. In all but a few very limited cases, courts will refuse to hear the case and compel the parties involved to decide the dispute according to the terms of the arbitration outlined in their contract.

Enforcement of an Arbitration Agreement

There is a very limited array of exceptions in which a court will not enforce an arbitration agreement. The major exception is something called “unconscionable adhesion contracts.” If a party does not wish to arbitrate and wants to convince the court that he shouldn’t have to because the contract and/or arbitration clause was an unconscionable adhesion contract, there are a few key things he has to prove:

• He must prove there was no reasonable opportunity for any sort of negotiation, and that the contract was presented to him on a take-it-or-leave it basis. This is the essential definition of an adhesion contract. Many contracts are adhesion contracts, like those for the purchase or use of airline tickets, insurance, cars, credit cards, cell phones, or any other consumer goods where you may sign a contract or agreement.
• He must prove the terms were extremely unfair/unreasonable/advantageous to the party offering the contract. Essentially, this is what it takes to prove the terms are “unconscionable.”

If the court doesn’t find that a contract was an unconscionable adhesion contract, they will enforce the arbitration clause, and the two parties will have no choice but to handle their issue in arbitration. Further, whatever decision the arbitrator makes will be binding on both parties, unlike in other types of alternative dispute resolution (ADR) like mediation.

Case Studies: Arbitration Agreements

Case Study 1: Business Contract Dispute

The “TechSolutions,” a software development firm, enters into a business contract with “DigitalMarketing Co.,” a marketing agency, to collaborate on a new digital marketing platform. The contract includes an arbitration agreement that stipulates any disputes must be resolved through arbitration. During the project, a disagreement arises regarding the ownership of intellectual property rights, leading “DigitalMarketing Co.” to refuse arbitration and file a lawsuit in court.

Despite “DigitalMarketing Co.’s” resistance, the court upholds the arbitration agreement, explaining that the contract clearly outlined the dispute resolution method. “DigitalMarketing Co.” is compelled to participate in arbitration, and a neutral arbitrator is appointed to hear the case. The dispute is eventually settled through arbitration, avoiding lengthy court proceedings and preserving the business relationship between “TechSolutions” and “DigitalMarketing Co.”

Case Study 2: Employment Contract Dispute

John Smith signs an employment contract with “GlobalCorp,” a multinational corporation, which includes an arbitration clause for resolving any employment-related disputes. After a few months of employment, John alleges workplace discrimination and harassment, demanding a resolution through the court system rather than arbitration.

The “GlobalCorp” insists on enforcing the arbitration agreement, citing the signed contract and its dispute resolution clause. They argue that arbitration provides a fair and efficient way to address employment disputes. The court acknowledges the validity of the arbitration agreement and dismisses John’s lawsuit, directing him to initiate the dispute through arbitration instead. Both parties engage in arbitration, and an arbitrator issues a legally binding decision, resolving John’s employment dispute with “GlobalCorp.”

Case Study 3: Consumer Dispute With a Service Provider

Sarah Johnson signs a service agreement with “Home Revive Inc.,” a home renovation company, for a major renovation project. The agreement contains an arbitration clause, which Sarah does not notice before signing. After the renovation begins, Sarah experiences significant delays and poor workmanship, leading her to seek compensation through a lawsuit.

The “Home Revive Inc.,” upon discovering the arbitration clause in the signed agreement, files a motion to dismiss the court case and enforce arbitration. Sarah argues that she was unaware of the arbitration clause’s existence and believes it is unfair to her rights as a consumer. The court analyzes the circumstances surrounding the contract’s signing and concludes that the arbitration clause was not intentionally hidden or deceptive. As a result, the court upholds the arbitration agreement, requiring Sarah to pursue her claim through arbitration as per the contract terms.

Getting Help

If you are involved in a dispute and you believe you may need to arbitrate the case, consult with a lawyer to find out if you have any options for voiding the arbitration clause. If you do not, your lawyer should still be able to help you throughout the arbitration process to ensure your rights are protected.