Standard terms and conditions - arbitration clauses - Blake Lapthorn

Technology groupStandard terms and conditions – arbitration clausesIn a recent case an arbitration clause in a consumer contract was ruled to beunfair. This was because it caused a significant imbalance in the parties' rightsand obligations under the contract.The case (Mylcrist Builders Limited -v- Buck [2008])In this case the builders (Mylcrist), were the claimant (C). C carried out building work for Mrs Buck whowas the defendant (D).C and D entered into a contract which included an estimate for the work to be done.One of the standard conditions provided for arbitration under the Arbitration Act 1950 or any modificationin the event of a dispute.A dispute arose as to the estimate for the work to be done.C proposed an arbitrator and D informed the arbitrator that D did not wish to make any representationsand did not want the dispute to be resolved by arbitration. Only C signed the agreement to appoint thearbitrator. The arbitrator went ahead and considered the dispute and found D liable to pay C more than £5000. C applied to the court for the award to be enforced against D.The resultThe Court held that:the arbitrator should have been appointed jointly by the parties and this did not happen. Failing that, theArbitration Act provides that the Court can appoint an arbitrator but this did not happen in this case.Therefore, the tribunal lacked substantive jurisdiction to make the award and therefore permission fromthe Court to enforce the award would not be giventhe Unfair Terms in Consumer Regulations 1999 (the Regulations) would apply to deciding whether thisarbitration provision was fairthere are a number of factors to take into account when deciding whether such a provision is fairin particular, there is a requirement of good faith on the supplier. Here the supplier should be fair andopen when dealing with a consumer, its terms should be expressed fully and clearly and there should beno concealed pitfalls or traps. Fair dealing requires a supplier to not take advantage of a consumer's lackof experience, weak bargaining position or unfamiliarity with the subject matterthe Court held that contrary to the requirement of good faith, the arbitration clause did cause a significantimbalance in the parties' rights and responsibilities under the contract to D's detriment including:opreventing D from having access to Court© Blake Lapthorn 2008 www.bllaw.co.uk

oothe amount of arbitrator costs (which were around £2000) as these were quite high compared tothe amount of money which was subject to the disputeD's lack of experience and unfamiliarity which such a clauseSummaryOrganisations should not generally include arbitration clauses in their contracts with consumers unless theclause and its implications are fully explained to consumers in advance.If you are involved in drafting standard terms and conditions or are involved in litigation or arbitration andwould like assistance then please contact us.ContactFor further information or advice, please contact:Jimmy Desai E: jimmy.desai@bllaw.co.uk T: 020 7814 5421This publication is not a substitute for detailed advice on specific transactions and problems and should not be taken as providing legaladvice on any of the topics discussed.Blake Lapthorn uses the information it holds about you to contact you where necessary if (for instance) you have registered to attend aseminar that we are hosting or have requested information regarding the services that we provide. We will also use it to administer,support, improve and develop our business and to contact you for your views on our services, as well as to let you know about otherproducts and services which we offer which may be of interest to you. We may send them by post, telephone or fax, email or SMS. Ifyou would rather NOT receive further information by any particular format, or at all, or if your details need updating, please contact KayHogg on 01865 258010 or by email at kay.hogg@bllaw.co.ukWe will not disclose any of your personal identifiable information to any third parties without your express permission to do so, unlesswe believe that we should do so to comply with the law.© Blake Lapthorn 2008 2