That “Forced Arbitration Agreement” May Not Be Enforceable

Almost nobody reads the Terms and Conditions for online purchases. But buried in that fine print may be language that affects an important legal right: your ability to have a dispute heard by a jury.

Oftentimes, the fine print contains a forced arbitration clause requiring disputes to be resolved through arbitration, sometimes in a county selected by the company. Arbitration is a form of alternative dispute resolution in which an arbiter acts much like a judge.

However, simply placing an arbitration provision in Terms and Conditions does not necessarily make it enforceable. Courts may refuse to compel arbitration when the process used to obtain a consumer’s agreement does not comply with governing law.

When Can Arbitration Be Required?

When determining whether arbitration can be compelled, courts generally consider a two-part test:

1. Whether a valid agreement to arbitrate exists; and
2. Whether the underlying dispute falls within the scope of that agreement.

The existence of a valid and binding agreement is especially important when the agreement arises from an online transaction.

Courts may refuse to enforce an arbitration agreement related to an online purchase if the consumer was not adequately informed that agreeing to the Terms and Conditions meant waiving the Seventh Amendment right to a jury trial.

Consumers Must Receive Clear Notice of a Jury Trial Waiver

In practical terms, an appropriate waiver of the right to a jury trial requires clear notice.

According to the court decision discussed in this article, two elements are particularly important:

1. The registration or application screen should explicitly notify the consumer that the Terms and Conditions contain a jury trial waiver.
2. Within the Terms and Conditions themselves, the jury trial waiver should appear prominently, such as through bold and capitalized text.

Companies therefore may need to do more than simply place an arbitration clause deep within a lengthy set of online Terms and Conditions. Consumers should be clearly informed from the outset that agreeing to those terms includes giving up the right to have certain disputes decided by a jury.

Why Clear Disclosure Matters

Most consumers do not closely review online privacy policies or Terms and Conditions before agreeing to them.

A 2019 Pew Research Center survey found that 97% of Americans had been asked to agree to a company’s privacy policy, yet only 9% of adults said they “always read” those policies.

When arbitration provisions and jury trial waivers are placed inside similar online agreements, the manner in which those provisions are presented can become an important issue when a court determines whether the agreement should be enforced.

Questions About an Arbitration Agreement?

If you are involved in a legal dispute and have been told that an arbitration agreement prevents you from pursuing your claim in court, the enforceability of that agreement may depend on how it was presented and whether you knowingly agreed to waive your rights.