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Consumer Arbitration Agreements: 4.4.3.1 General

Even if the party seeking to enforce arbitration can demonstrate that the offer of arbitration was received, there is no assent unless the other party signifies acceptance. The question of what type of action (or inaction) is sufficient to manifest assent must be resolved on a fact-specific basis.

Consumer Arbitration Agreements: 4.4.3.2 Continued Use of Card or Continued Employment

In some states arbitration clauses imposed unilaterally on card holders through the sending of bill stuffers are invalid as a matter of law, regardless of whether the card holder continued to use the card.172 As one federal court analyzed the situation, under the general law of contracts “an offeror has no power to cause the silence of the offeree to operate as an acceptance when the offeree does not intend it to do so.”173

Consumer Arbitration Agreements: 4.4.3.4 Contract Performance As Acceptance

Performance under the contract can manifest intent to be bound by its terms.183 Courts have enforced arbitration clauses contained in nursing home admission contracts, despite the failure of a nursing home representative to sign the admission contract, when the nursing home indicated its assent by admitting the resident and performing the contract terms.184 In a case in which this doctrine bound the business, the Alabama Supreme Court found that the business accepted an amendment sharply limitin

Consumer Arbitration Agreements: 4.5.3 Company Delivers Product But Claims Transaction Not Final

Sellers often argue that an arbitration agreement has been formed when a product is delivered to the consumer and there is a notice that the purchase is not final unless the consumer accepts the terms of the purchase included inside the product’s box. The sellers characterize the transaction as unconsummated until the buyer reviews the product and the terms of the sale, and accepts the product. The sellers argue that, if the terms are not agreeable, the consumer should return the product.

Consumer Arbitration Agreements: 4.5.4.1 Change-in-Terms Provisions Do Not Allow the Addition of an Arbitration Clause

Credit card agreements may contain a provision allowing the card issuer to change the terms of the agreement (but not to add a new term): for example, to increase the interest rate or other fees over time. Card issuers use such provisions to justify sending consumers an arbitration agreement as part of a bill stuffer, arguing that the arbitration agreement is just another change in terms.

Consumer Arbitration Agreements: 4.5.4.3 Delaware Statute Seeks to Allow Addition of New Terms

A Delaware statute attempts to make any added or changed terms found in a bill stuffer binding.214 The statute states that banks can amend their agreements “in any respect” whether the change was originally contemplated by the parties or is integral to their relationship, as long as the agreement does not otherwise provide. New terms may be added. It explicitly allows the addition of an arbitration requirement or “other matters of any kind whatsoever.”

Consumer Arbitration Agreements: 4.8.3 Conflicting, Missing, or Ambiguous Terms in the Agreement

Even if arbitration clauses clearly require binding arbitration, the terms and procedures under which arbitration must proceed must be sufficiently clear. If the consumer agrees to multiple arbitration clauses that conflict with each other, none of the arbitration requirements may be enforceable. A court has refused to enforce any of the arbitration provisions found in three different documents when the arbitration language was confusing and inconsistent from document to document.

Consumer Arbitration Agreements: 4.9.1 General

As described in § 4.8.2, supra, many courts hold that arbitration agreements must be clear and unmistakable. Related to this requirement is a generally applicable state law doctrine that provides that a party does not waive a constitutional or statutory right unless that waiver is made knowingly and voluntarily.269

Consumer Arbitration Agreements: 4.9.2 The Doctrine and FAA Preemption

Parties attempting to enforce arbitration agreements often argue that the FAA preempts state law that might apply the knowing and voluntary waiver standard to arbitration clauses.278 But the FAA only preempts state laws that single out arbitration clauses for discriminatory treatment; it does not preempt generally applicable state law contract doctrines.279 The doctrine that waivers of constitutional rights must be knowing and voluntary is not aimed specifically against arbitration clauses, but

Consumer Arbitration Agreements: 4.9.3 Application of the Doctrine

Although the Ninth Circuit has seemingly struck down the Montana rule,282 Montana cases provide good illustrations of how the knowing and voluntary waiver doctrine has worked in practice. The Montana Supreme Court has found that a ninety-five-year-old widow did not knowingly and voluntarily give up the right to a jury trial when she established a living trust with a brokerage and the fine print included an arbitration clause.283 Courts must rigorously examine such agreements.

Consumer Arbitration Agreements: 4.10.2 Opting Out of an Arbitration Clause

As explained in Chapter 8, infra, more and more companies are including “opt-out” provisions in their arbitration clauses with the purpose of protecting the clause against the argument that it is unconscionable. In cases in which there is a question about whether a party has opted out of an arbitration agreement, the court should decide the issue before compelling arbitration.

Consumer Arbitration Agreements: 4.10.5 Can Assignor Enforce Agreement After Its Assignment

An assignee of a contract containing an arbitration clause can typically seek to enforce the arbitration agreement. However, can the assignor, no longer having rights in the contract, also continue to enforce the arbitration requirement? The argument can be made that in such a situation the assignment extinguishes a party’s right to enforce an arbitration clause if state law and the language of the assignment support such an argument.323

Mortgage Lending: 7.2.1 Introduction

Most abusive lending is not only overpriced but unaffordable from the outset.6 For these loans, default is foreseeable, if not certain. Loans made without regard to the borrower’s ability to repay run against long-standing industry standards.