Arbitration Agreement was Illusory and not Enforceable

In a case reported in Massachusetts Lawyers Weekly, the court did not enforce an arbitration agreement because one party to the agreement has the right to change the agreement at any time, at its sole discretion, and without providing notice. Massachusetts Lawyers Weekly said: 

Where defendants sought to compel arbitration, arbitration was inappropriate because the agreement containing the arbitration clause was illusory.

“[Two] provisions plainly provide [Defendant] Green Smoke with the right to modify the terms of the 2011 Agreement ‘at any time’ and at its sole discretion.  In addition, the 2011 Agreement permits Green Smoke to make any such changes without providing any notice … beyond displaying the amended version of the agreement on Green Smoke’s website. While an amended version of the 2011 Agreement would not go into effect until 30 days after the date on which it appeared online, there is no provision in the contract that would preclude any amendment from having a retroactive effect. As a result, Green Smoke would be permitted to amend or terminate … the arbitration provision, even if it had previously received notice of an existing arbitration dispute. Thus, because Green Smoke ‘had the power to require plaintiff to arbitrate the covered dispute, while simultaneously reserving the right to modify the agreement,’ the Court finds that the agreement was illusory from the outset and no agreement to arbitrate was formed between the parties. Domenichetti[ v. Salter Sch., LLC], 2013 WL 1748402, at *7 [D. Mass.]. Defendants are therefore not entitled to arbitration.”

McNamara v. S.I. Logistics, Inc., et al. (Lawyers Weekly No. 02-613-18) (8 pages) (Burroughs, J.) (Civil Action No. 17-cv-12523-ADB) (Dec. 13, 2018).

Source: Arbitration – Illusory agreement – Massachusetts Lawyers Weekly

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