Consumer Contracts and Arbitration Clauses: As Usual, the Devil is in the Details

Some time ago, I wrote a blog post about contracts that include arbitration clauses that make it a practical impossibility for a complainant to assert his or her rights. For example, when the arbitration clause specifies that the arbitration will take place in some far away country.

In consumer contracts, such clauses are often included in the vendor’s terms and conditions. While I have never done a survey, I am fairly confident in saying that the vast majority of consumers never read a vendor’s terms and conditions, even though they are available to be read. Most consumers simply click on the box that confirms that they are prepared to proceed with the transaction under those terms and conditions without a second thought. If those terms include an arbitration clause, which in turn provides for something that makes it a practical impossibility for the consumer to press forward with a complaint, the consumer will be left without a remedy unless the Court can be convinced to ignore the arbitration clause.

In the recent decision of a US Court in Nicosia v. Amazon.com, Inc., a United States Court of Appeals considered an appeal from a lower court judgment requiring a consumer with a complaint against Amazon to proceed by way of arbitration rather than through the court system. The Court of Appeal affirmed that decision.

In this case, Amazon’s conditions of use included an arbitration clause. The question before the Court was whether or not the plaintiff was bound by it in the face of his evidence that he had never read the clause, received notice of it, or demonstrated through his conduct that he agreed to it.

The Court ruled that the fact that the plaintiff denied ever reading the terms and conditions, including the arbitration clause by making his purchases, was irrelevant. The Court ruled that as in the case of paper contracts, to be bound to an arbitration clause, an internet user does not actually have to read the terms and conditions or click on a hyperlink that makes them available as long as the consumer has notice of the existence of the terms and conditions.

From the perspective of a consumer, this decision makes clear that there is a risk involved in simply ignoring the terms and conditions put forward by a seller in any transaction of any materiality.

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