The Federal Arbitration Act was enacted in 1925 in order to allow businesses to settle disputes between themselves in arbitration, rather than in the courts. Arbitration is generally cheaper, faster, and easier, than filing a lawsuit, but businesses have expanded what they consider to be business disputes and now use mandatroy arbitration to settle disputes with their employees and even their customers.

It has become increasingly common for businesses to include arbitration clauses in all their employment contracts, as well as contracts with their consumers for everything from car loans to leases to credit cards. Because contracts are so long, many people don’t read them thoroughly before signing and aren’t even aware they’re signing away their right to sue the company in court in the event of a dispute.  With small purchases such as cell phones or rental cars, the provisions are clearly take it or leave and consumers really have no choice.  But with large purchase such as a car, the consumer has the option if careful to cross out the provision.  Many car dealers may not want to lose the deal over arbitration and are relying on the consumer not reading the contract or knowing the consequence of agreeing to arbitration is giving up the right to go to court.  Arbitrators are often more overly attentive to large corporations and even if they rule in the consumers favor “split the baby” and don’t provide a truly just result that is a more likely outcome if the case had been heard in court. Continue reading ›