Arbitration Clauses and Litigation

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Arbitration Clauses and Litigation

More and more companies are including arbitrational clauses in their contracts. Whether it is in an employee application or an online selling website, arbitrational clauses are becoming abundant. But do these clauses hold up in the legal system? In the recent Paypal Corporation case, the arbitration clause was not enforced due to miniscule details such as clicking a mouse. The overruling of these clauses is becoming the norm as people are beginning to realize what they have gotten themselves into.

The same type of arbitrational clause dispute as the Paypal Corporation occurred in the case of BellSouth Mobility LLC v. Christopher. BellSouth institutionalized an arbitrational clause in its service agreement that states that “instead of suing in court, company and customer agree to arbitrate any and all dispute”. In the event that the disagreement goes through arbitration, the arbitrator can not give punitive damages to the plaintiff as well as only receive a limited amount of recovery money. When Christopher brought the case before an appellate court, the court sided in his favor claiming that the contract was “substantively unconscionable” due to the fact that BellSouth still had the right to bring Christopher to court over different legal matters, giving them an “unfair advantage.” The case continued to go to trial court to see if the contract was “procedurally unconscionable” because of the small print of the arbitrational clause. Because Christopher was not fully forewarned about the arbitrational clause, and the fact that BellSouth took advantage of a client, BellSouth was found guilty (Hackbarth).

A similar situation occurs in the case of Toppings v. Meritech Mortgage Services (MMS). An elderly couple, Margaret and Roger Toppings received a loan from Meritech Mortgage Services for thirty-seven thousand dollars with a monthly payment plan which would last for fifteen years, along with thirty-six thousand dollars in interest. Before signing the loan, the couple asked for the document to be explained. At the time, the MMS lawyer was not coherent with the document but told the couple to read it at home after signing the document. Upon reading the contract, the Toppings came across the amount to be repaid in interest and tried to bring MSS to court for trying to take advantage of the elderly.

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