California First-Year Law Students' Exam (Baby Bar) — MCContractsEasy
A software company hires a new programmer. The employment contract includes a clause stating, 'Any dispute arising out of or relating to this agreement shall be submitted to binding arbitration in accordance with the rules of the American Arbitration Association.' Six months later, the programmer is fired and believes it was wrongful termination. The programmer wants to sue the company in court. Can the programmer do so?
- ANo, but only if the arbitration clause was separately negotiated and signed.
- BYes, unless the company can prove that the programmer understood the clause perfectly.
- CYes, because an individual cannot be forced to waive their right to a jury trial.
- DNo, because the arbitration clause is generally enforceable and requires disputes to be arbitrated.
Show answer & explanationAnswer & explanation
Correct answer: D. No, because the arbitration clause is generally enforceable and requires disputes to be arbitrated.
Arbitration clauses are generally enforceable under both federal and state law (e.g., the Federal Arbitration Act). Unless there are grounds for invalidating the clause (such as unconscionability or fraud in the inducement of the arbitration clause itself), parties are bound to arbitrate disputes covered by the agreement.
Why the other options are wrong
- A. Separate negotiation or signing is not typically required for an arbitration clause to be enforceable if it's part of a valid contract.
- B. The burden is usually on the party seeking to avoid arbitration to prove a defect, not on the company to prove perfect understanding.
- C. While a jury trial right exists, it can be waived by agreement, such as through an arbitration clause.
Arbitration Clause Enforceability
A contractual provision requiring parties to resolve disputes through binding arbitration rather than litigation, which is generally upheld by courts.
- Favored by law (e.g., Federal Arbitration Act).
- Waives the right to a jury trial and court litigation.
- Can be challenged on grounds like unconscionability, fraud, or lack of mutual assent, but the challenge must relate to the arbitration clause itself.
Memory trick: Arbitration is the binding station, unless there's a big deviation.