A mandatory arbitration provision is enforceable even when not contained within the four corners of a retail installment sales contract between a consumer and an automobile dealer, Maryland's highest court has ruled.

In Ford v. Antwerpen Motorcars, Ltd., the Maryland Court of Appeals rejected a consumer's argument that an arbitration agreement could not be enforced if it was contained in a document separate from the retail installment sales contract (RISC).

The consumer argued that Maryland regulations mandate that all essential terms of an automobile sales contract be contained in a single document. The court rejected this so-called single document rule and held that an arbitration agreement contained in a separate "buyer's order" signed by the consumer could be enforced. Other states have statutes that contain similar "single document" provisions. 

In Ford, the court ruled that, under well-established Maryland contract law, the RISC and the buyer's order should be construed together as evidencing the parties’ entire agreement. The court found significant the fact that the RISC incorporated the buyer's order by reference and stated that "[t]his contract along with all other documents signed by you in connection with the purchase of the vehicle, comprise the entire agreement."

This language “indicate[d] an intention that (the RISC and buyer's order) are to be read together as constituting one transaction." Accordingly, the court held that the arbitration agreement contained in the buyer's order was enforceable even though there was no arbitration agreement in the RISC. 

The decision shows that it is good practice to incorporate by reference the buyer's order into an RISC. However, the result should not necessarily turn on that fact because the Federal Arbitration Act should preempt any state "single document" rule that might otherwise invalidate the arbitration provision contained in the buyer's order (see Doctor's Associates, Inc. v. Casarotto, 517 U.S. 681 (1996)). It does not appear from the court's decision in Ford that preemption was raised by the litigants.

Ballard Spahr’s Consumer Financial Services Group is nationally recognized for its guidance in structuring and documenting new consumer financial services products, its experience with the full range of federal and state consumer credit laws, and its skill in litigation defense and avoidance.

For more information, please contact CFS Practice Leader Alan S. Kaplinsky at 215.864.8544 or kaplinsky@ballardspahr.com, Mark J. Levin at 215.864.8235 or levinmj@ballardspahr.com.




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