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Forced arbitration becomes more widespread

On Behalf of | Mar 30, 2021 | Mediation and Arbitration, ADR |

With increasing regularity, individuals and businesses in New Jersey are finding themselves having no real alternative but to enter into a contract which includes a provision for forced arbitration should a dispute of some sort arise. Indeed, the widespread use of forced arbitration has become a national concern.

Definition of arbitration

Many people understandably confuse arbitration with mediation. Mediation usually is voluntary process in which parties to a dispute attempt to reach a settlement of issues between them with the assistance of, but not directives from, a neutral third party. Arbitration often is a requirement in a contract if a dispute arises. Parties to an arbitration do not settle a matter between themselves. Rather, an arbitrator reaches a decision and imposes it on the parties, somewhat like a judge in a court setting.

Contracts of adhesion

Mandatory arbitration clauses often are found in what can be called “contracts of adhesion.” These are what essentially are take it or leave it agreements and one of the parties simply is not in a position to negotiate the terms of the contract. For example, if a person wants to transact business with or through a mammoth online sales platform, that individual must accept the terms and conditions of the contract provided by the online venue provider itself. These contracts will nearly always contain a clause requiring mandatory arbitration rather than civil litigation should a dispute arise.

Public officials, including some members of Congress, have begun examining forced arbitration. There is a growing sentiment that forced arbitration may be inherently unfair to certain groups. Additionally, some argue that forced arbitration improperly impairs competition, particularly in an e-commerce setting.