CONSUMER: Can You Avoid Arbitration In a Consumer Contract?

On January 10, 2019 the New Jersey Supreme Court held an arbitration clause in a home warranty contract unenforceable.  Arbitration is a non-judicial process to resolve disputes with very different rules and protections than a case filed in a court.  The Court focused on whether there was mutual assent between the parties to agree to arbitrate any dispute.  Without mutual assent, there can be no meeting-of-the-minds sufficient to create a contract.

The Court found there was no mutual assent because: 1) the agreement to arbitrate was inconspicuously located in a section labeled mediation; 2) the small print violated the New Jersey Plain Language Act; and 3) and the contradictory nature of arbitration, mediation, and the agreement’s reference to “Commercial Mediation Rules”.   See Kernahan v. Home Warranty Administrator of Florida, Inc.

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