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Are arbitration clauses good for businesses?

On Behalf of | Jul 1, 2018 | Contract Disputes

Like most Florida businesses, you have contracts for your employees and clients, as well as terms of service for your customers to read and agree to before doing business. You may be aware that many companies include arbitration clauses in their terms of service, and you might be considering adding that to your own policies.

As Consumer Reports explains, arbitration usually works out in the best interest of companies. A clause enforcing mandatory arbitration in a dispute waives a customer’s right to sue. As you can imagine, this might save your company a great deal of money and wasted time. You would usually pick the arbitrator, the results of the dispute would remain private and consumers are restricted in their ability to appeal the arbitrator’s decision. A win for your company, right?

Not always, as you might be surprised to learn. Recently, General Mills added a mandatory arbitration clause to their terms of service, and customers complained. It may make consumers uneasy to learn they don’t have the right to sue or participate in a class-action lawsuit if they are harmed by a faulty product or disreputable business practice. Customers may also be upset to learn they unwittingly agreed to arbitration by agreeing to the terms of service, inside which arbitration clauses are often hidden. Officials from GM listened to customers and legal advocates and removed the arbitration clause from their terms.

Many businesses use arbitration clauses, from online stores to banks and credit card companies. You might find that this option would benefit your company. However, client satisfaction is also important. You would want to weigh the potential benefits from both sides before adding new clauses to your terms of service. This information should not replace the advice of a lawyer.