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  • Writer's pictureKyle Persaud

How to Get Out of an Arbitration Clause

This year, when I was doing business with a major corporation, I noticed that the contract I signed with this corporation had an “arbitration clause.” This meant that if I had any disagreement with the corporation, I had to take my case to an arbitrator, rather than go to court. An arbitrator is a “private judge”; he has a private business, where people pay him and take their disputes to him. He makes a ruling, and the parties agree to abide by his ruling, and not take his ruling to any other court.

Many corporations put language in their arbitration clauses, saying that people have to go to an arbitrator of the corporation’s choosing. The corporation will choose an arbitrator who relies on the corporation for his business, and so the arbitrator will rule in favor of the corporation.

How do you get out of an arbitration clause?

First, read the contract thoroughly before you sign it. If you see an arbitration clause, see if there is any way to opt out of the clause.

The arbitration clause I signed with the corporation had a provision that said I could opt out of the arbitration clause by going to the corporation’s website within 30 days after signing, and clicking on “opt out.” I did opt out, but I’m guessing a lot of people don’t read the “opt out” clause. The opt-out clause makes the arbitration clause have more teeth, because then, if someone tries to take the corporation to court, the corporation will say to the judge, “He could have opted out of the arbitration clause, but he didn’t.” The judge will then likely order the parties to abide by the arbitration clause.

So, if you see anything in the contract that provides a way to opt out of the arbitration clause, take advantage of that and opt out. If you do opt out, see if you can get a copy of the document showing that you opted out. Then, in the future, if the company you’re doing business with tries to force you to arbitration, you’ll have documentation that you opted out. When I opted out of my arbitration agreement by going to the corporation’s website, I made sure that I saved a copy of the online “opt-out” document that contained my digital signature.

If the contract doesn’t provide a way to opt out of the arbitration agreement, then tell the other party you don’t want to agree to the arbitration clause. Ask them if they will allow you to sign the contract without the arbitration clause. If they say yes, then take advantage of this, and opt out of the arbitration clause.

One step you can take, is simply, to take your pen and cross out all of the languages that mention arbitration. Then, if you do go to court against the corporation, and the corporation tries to force you to arbitrate, they likely won’t get very far if they use a contract that has arbitration language crossed out. If you do cross language out, see if you can get a copy of the document with the crossed-out language.

But what if they still insist on the arbitration clause?

Of course, the business might refuse to accept a contract where you have crossed out language. Or, they may insist that you sign the arbitration agreement, or they won’t do business with you at all. Then, you will have to decide: Would you rather not do business with this company altogether, or sign an arbitration clause?

That’s a decision for you to make. Use your best judgment and see whether you think the company is being honest with you or if they are trying to cheat you. If the business is honest, you may not have a dispute with them anyway, which means the arbitration clause will never come into effect. (But, if the business is trying to cheat you, you won’t want to do business with them at all, even without an arbitration clause.)

Also, the arbitration clause may not be entirely nefarious. Although I’ve painted a negative picture of arbitration in this post, other attorneys view arbitration positively. For example, in their article, “The Current State of Consumer Arbitration”, Sarah Rudolph Cole and Theodore Frank examine statistics on arbitrations conducted throughout the U.S., and they argue that arbitration is often quite beneficial for the consumer.

However, even if arbitration will be a benefit to you, I would recommend that if it is not too difficult, you should avoid signing arbitration agreements. Even if you have opted out of an arbitration agreement, you can often change your mind at a later date, and decide you want to arbitrate. But, if you have signed an arbitration clause, you generally may not change your mind and decide later that you want to avoid arbitration.

Photo courtesy of Licensed under CC BY 2.0.


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