Businesses need to ensure that arbitration provisions in consumer contracts are drafted in clear language and in boldface type or big print. That’s the upshot of a recent decision by the New Jersey appellate court in a homeowner's suit over termite damage.

Despite the practice of New Jersey courts favoring enforcement of arbitration provisions, the Appellate Division on May 9 held that they will be enforced only if they "clearly and unmistakably" establish a waiver of statutory rights. In upholding the trial judge's decision in Kuhn v. Terminix International Co, L.P., the appeals court found that the arbitration clause was not "clear, unambiguous, and specific with regard to the actual terms of the arbitration, as well as noticeable on the contract, such as in bold font or large print," as state law requires.

This significant decision provides guidance to businesses on drafting an enforceable arbitration provision in a consumer contract.  Because the legal analysis is the same, the decision should also be taken into account by employers seeking to establish mandatory arbitration programs for workplace disputes.  Ballard lawyers can provide comprehensive legal counsel in such matters. For more information, contact John B. Kearney or Steven W. Suflas at 856.761.3400.

 Copyright © 2008 by Ballard Spahr LLP.
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