"Volunteering" to Arbitrate through Predispute Arbitration Clauses

The Average Consumer's Experience

by Linda J. Demaine, Deborah R. Hensler

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Although private arbitration has long been used in commercial transactions and labor-management relations, specifying arbitration for disputes arising from consumer contracts is relatively recent. Many are concerned that consumers do not fully understand the "small print" in such agreements, which are offered on a take-it-or-leave-it basis. The authors found that although businesses seem to be placing consumers on equal footing with themselves in resolving future disputes, appearances may be deceptive. More than one-third of the clauses do not inform consumers that they are waiving their right to litigate disputes in court; many do not tell consumers what their expenses might be in an arbitration, that the outcome is final and binding, or what the key aspects of the arbitration process are. Additionally, the nature of any interim relief provided is more suited to the business than to the consumer. In short, given the lack of available information for consumers in these arbitration clauses and the difficulty of obtaining and deciphering them, most consumers only become aware of what rights they retain and what rights they have waived after disputes arise. There are thus grounds for concern about how consumers actually fare in arbitration.

Originally published in: Law and Contemporary Problems, v. 67, Winter/Spring 2001, nos. 1 & 2, pp. 55-74.

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