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Avoid Arbitration Clauses When Signing Contracts in Indiana

I’m Katelyn Holub, an attorney focusing on personal injury law in northwest Indiana.

Welcome to Personal Injury Primer, where we break down the law into simple terms, provide legal tips, and discuss topics related to personal injury law.

Today’s question comes from someone who recently emailed us saying, “I see in the fine print of a contract I have to sign that it says any disputes that arise will be resolved by arbitration. What does arbitration mean?”

Whether you are a student signing up to take a college course, or opening a new bank account, or signing a document authorizing a car repair, take the time to read what you are being asked to sign.

It is becoming increasingly common for Corporate America to rely on adhesion contracts to force people to accept mandatory binding arbitration.

Arbitration is a way legal disputes can be resolved without going to court and utilizing the traditional court system. Instead, the parties appear and present their arguments before an impartial person or group of persons outside of court who will decide the final outcome of the dispute. Sometimes the parties mutually agree on who the impartial arbitrator will be, and sometimes the arbitrator is pre-determined by a written statute.

Regardless, when you come across arbitration language in a contract you are being asked to sign, it’s important to know that such language often will bar you from filing a lawsuit in court, which will prevent you from having a jury of your peers decide any dispute that may arise between the parties.

So why do so many contracts these days have arbitration clauses? Well, most of these pre-written contracts that are given to you to sign as a consumer, employee, or in other contexts, are designed to protect the drafter of the contract by eliminating the threat of a class action lawsuits.

While class action lawsuits have occasionally been abused by consumer advocacy groups, the vast majority of the time, a class action is the only tried and true legal tool available to enable consumers to challenge unfair action by companies. Companies often have a greater financial ability to hire lawyers and fight in court than consumers do, which makes it difficult for consumers to bring lawsuits on their own.

But when consumers band together, as they do in class action lawsuits, then they are better able to have the finances needed to pursue their legal claims and obtain fair compensation. Companies don’t like that and want to take away the possibility of being sued in a class action by forcing parties that contract with them to agree to settle any disputes through the arbitration process only.

And arbitration isn’t a cheap alternative for a party on its own, either. In fact, it can be more costly than a typical lawsuit filed in court. For example, the average cost to file a lawsuit is $200, but if you are forced into binding arbitration you will not only have to pay your lawyer, but you will have to pay the arbitrators, which can cost as much as thousands of dollars, and may even have to pay the corporation’s lawyers if you lose.

All in all, companies are banking on you not wanting to expend the time and money to pursue claims against them, not in a traditional court room and also not in an arbitration setting. So, that’s why you’re seeing all these arbitration clauses in contracts these days.

I hope you found this information helpful. If you have questions about your legal rights if you get hurt due to the carelessness of another person, or as a result of substandard medical care, or due to a product defect, construction injury, or any other type of personal injury, please give us a call at (219) 736-9700. You can also learn more about us by visiting our website at DavidHolubLaw.com – while there make sure you request a copy of our book “Fighting for Truth”.