Arbitration Clause Deemed Unconscionable on Appeal Enforceability Overturned by Mississippi Supreme Court
Find Out Why…
Many times, in an effort to afford ourselves the maximum protection permitted by contract law, inspectors include everything but the “kitchen sink” in their inspection agreements. In this particular case, and in addition to some unforeseen consequences in the follow-on processes associated with the arbitration clause, one inspector found himself forced back into court.
Arbitration clauses are generally thought of as enforceable within common contracts. Many contracts contain arbitration clauses, and most folks don’t give them a second glance. Such was the case of a Mississippi inspector and his client in 2003. In the case at hand, the inspector spoke to his clients via telephone, discussed the inspection process and services offered, and agreed on a price. A time and date was set to perform the inspection. After the inspection, and prior to the delivery of the inspection report, the inspector asked the clients to sign an inspection agreement. Contained within the agreement was an arbitration clause. The clause compelled the client to utilize the services of the American Arbitration Association in the event the client brought an action against the inspector. The agreement was signed and the report delivered. As with many inspection-related disputes, defects were discovered several months later. The clients sued the inspector, and the inspector moved for summary judgment against the clients, as the inspection agreement compelled them to binding arbitration. The courts initially upheld the enforceability of the arbitration clause. However, the story did not end there, as the clients appealed the lower court decision, and eventually had the judgment overturned in 2005. That’s two-year worth of litigation and legal expenses. How could this happen? Well, there were several reasons.