Don’t Overreach by Retaining the Unilateral Right to Modify An Arbitration Agreement

From JDSupra, Shep Davidson discusses a case in which the court said an arbitration agreement was not enforceable because it allowed one party to unilaterally change the agreement. Shep writes:

Even though the 2011 Agreement plainly stated that disputes arising out of it “shall be resolved by arbitration,” McNamara opposed Green Smoke’s motion because, among other things, the Agreement purported to grant Green Smoke the unilateral right to modify its terms without any prior notice to McNamara. In deciding this matter, the District Court Judge highlighted the following language in the “Affiliate Program Summary” and Section 25 of the Agreement:

The Company reserves the right to change, alter, modify, and/or amend this Agreement, from time to time, at its sole discretion without serving any notice to You. You will be bound by all such amended terms and conditions. You can review the most current version of this Agreement at any time at our Web site. All amended versions of this Agreement will go into effect not earlier than thirty (30) days from the date any such amended version is displayed on Our Web site.

The Company reserves the right to change, alter, modify and/or amend this Agreement at its discretion and at any time upon thirty (30) days notice.[] When the Company amends this Agreement, the Company shall make reasonable efforts to provide You with general, not specific, notice of such changes via email, newsletter, or posting a conspicuous announcement on the Company’s Web site of such changes or amendments.

In light of this language, the District Court Judge ultimately ruled that:

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. … Defendants are therefore not entitled to arbitration.

Read the full story at Don’t Overreach by Retaining the Unilateral Right to Modify An Arbitration Agreement | Burns & Levinson LLP – JDSupra

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.