Arbitration: Looking Like a Good Thing for Consumers

Arbitration is looking better and better everyday to consumers. Though it may not seem to have a major impact on the construction industry yet - arbitration agreements are commonplace in your agreements. It doesn't matter whether you are a general contractor, subcontractor, supplier, renter, or consumer - the fact is you will likely run into a binding arbitration clause that will require you to bring your claims for product liability, design liability, delivery or installation before a private neutral. But is this good for you as claimant, or is this one big bad frightening risk of loss? Recent legislation has been proposed by the federal legislature which would seek to limit arbitration "coercion." The bill is entitled the Arbitration Fairness Act and has been presented by Congressmen Durbin and Feingold. The bill's supporters believe that U.S. consumers have been harmed by being forced to appear before hand-selected arbitration forums caused when vendors place binding clauses in their sales contracts, slips and invoices.The general belief, as put forth by Mr. Nathan Koppel of the Wall Street Journal's Law Blog, is that arbitration outfits tend to side with corporate defendants in order to shore up continual and future use of their venues. But a new study by Northwestern Law School suggests that consumers generally come out on top and that their claims are heard in under seven months, far shorter than a state or federal court disposition, which may take up to two years. The study included an examination of a relatively small sample of over 300 cases, and it is uncertain how cases were selected. The study does show that there is not such a wide discrepancy in rulings, as was once thought to be. You can read about the study on their website, and follow updates of commenting correspondents.

4 comments on “Arbitration: Looking Like a Good Thing for Consumers”

  • I would be interested to see if the arbitrations are in construction. I have not had much success with arbitrations being shorter or less costly in most situations. Contractors need to try and build in the possibility of arbitration, but should not get overly locked in.

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  • Hi Chris – I agree with your comments. I find that the success of arbitration, when compared with litigation, is really hit or miss. Oftentimes, a client will spend just as much – or more – on an arbitration.
    We have drafted a few contracts lately that gives our clients the option of arbitrating or litigating in the event of a dispute. Haven’t had to litigate that particular provision yet…but I think it’s very difficult to predict that arbitration is the right fit for a dispute…without knowing about the dispute.

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