If you have ever read a contract closely, there is frequently a clause included that compels the parties signing the contract to arbitrate, rather than litigate, if a dispute arises. These clauses are most commonly known as arbitration clauses and are often included in all kinds of contracts because arbitration is often less costly and more expedient than a traditional lawsuit when it comes to dispute resolution. The inclusion of an arbitration clause in a contract, however, does not automatically mean it is valid and enforceable. In fact, sometimes, if the terms of the arbitration clause are particularly unfair, the court could determine that the arbitration agreement is unenforceable and invalid.
According to a recent state court opinion, some arbitration clauses contained in nursing home residency agreements may be unenforceable because of unfair terms. The court noted, however, that if the unfair terms are severable, or removable, from the agreement, the arbitration clause could still be enforced. To succeed on a claim that an agreement is unconscionable, or unfair, there must be a showing that the contract was made under deceptive or confusing circumstances for one party so that bargaining power was limited, and if the terms of the contract itself are significantly unfair to one party.
In the case at hand, several terms in the arbitration agreement were deemed “undoubtedly unconscionable” by the court. The unjust terms included a waiver of attorneys’ fees and costs, an inability to appeal, a limitation on discovery, a one-sided arbitration obligation, and a confidentiality provision.