Asymmetry and Invalid Arbitration Clauses

In the world of franchising, mandatory arbitration contract provisions have become <i>de rigueur</i>. In principle, agreements to arbitrate favor neither party; as a practical matter, however, franchisors and franchisees have quickly learned about the real-life advantages and disadvantages of including an arbitration clause in a franchise contract. Generally, these clauses are included in franchise contracts because they tend to favor the franchisor &mdash; the party that, in most cases, usually has the bargaining power to impose terms and conditions on the weaker party, the franchisee. There are very few, if any, reported cases in which a franchisee challenging the validity of an arbitration clause has been shown to have requested or demanded that an arbitration clause be included in the franchise agreement.

19 minute read April 01, 2004 at 02:41 PM

By

Jeffrey M. Goldstein and Matthew J. Kreutzer