What Is Mutual Agreement To Arbitrate Claims

Procedural scrutiny deals with how an arbitration agreement was formed, while substantive scrutiny considers the fairness of the arbitration under the applied arbitration agreement compared to what an employee would normally have access to in the public court system. It is important to remember that state contract law governs whether an arbitration agreement is enforceable. Although arbitration agreements are generally in good standing, the specific contractual laws of a State may render a particular arbitration agreement unenforceable based on the facts of that case or contract. A good example of how this works is the issue of consideration in contract law. An important term in contract law is that a valid contract must be based on an appropriate „consideration”. This means that for the performance of a contract, the usefulness of the contract must be negotiated, in other words, each party receives something of value in exchange for something else of value. In arbitration, you get an advantage from the employer by agreeing to settle future claims, and so you should receive something valuable in return. For example, if an arbitration agreement is signed as part of the original employment contract, your employment may be a valid consideration – you waive your rights to a possible legal action in exchange for a job. However, what is a valid consideration in the context of employment varies from state to state. For example, in Baker v. Bristol Care, Inc., the Missouri Supreme Court ruled that an arbitration agreement was not contemplated if the agreement was based on maintaining employment (after the employee had already been hired). Thus, the Missouri court ruled that the employee`s continued employment was not valuable enough to account for the benefit obtained by the employer (the arbitration agreement) – therefore, the agreement was not binding for lack of consideration. The courts of another State might have a different conclusion by virtue of the same facts on the basis of the contract law of that State […].

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