Michigan Arbitration Clauses: What You Need to Know
The Role of Arbitration Clauses
Arbitration clauses commit parties to resolving disputes through a private process instead of litigation. In Michigan, they are especially common in auto industry contracts, employment agreements, consumer purchase agreements, and healthcare service contracts.
Michigan's Arbitration Laws
Michigan follows its own arbitration statute (MCL 600.5001 et seq.) alongside the Federal Arbitration Act for interstate commerce contracts. The Michigan Supreme Court in Gaydos v. White Pine Wireless, LLC (2014) upheld arbitration agreements and noted that Michigan law favors arbitration.
Michigan courts routinely enforce arbitration provisions, requiring a party opposing arbitration to demonstrate clear grounds for invalidity.
When Michigan Courts May Strike Down an Arbitration Clause
- Unconscionability — Michigan applies a fact-intensive analysis looking at both the circumstances of contract formation and the substance of the terms. The court in Clark v. DaimlerChrysler Corp. (2006) found that a one-sided arbitration clause in a consumer context could be unconscionable
- Lack of consideration — An arbitration agreement must be supported by valid consideration to be enforceable
- Fraud or misrepresentation — If the party was deceived about the nature of the arbitration clause
- Scope challenges — A dispute must fall within the scope of the arbitration provision; Michigan courts will not compel arbitration of claims not covered by the clause
Warning Signs
- The clause limits your right to recover damages available under Michigan statute
- It imposes arbitration fees that are disproportionate to the value of your claim
- The arbitration rules referenced in the clause are from an organization that no longer exists or charges excessive administrative fees
- The clause is buried in a lengthy contract with no clear heading or reference
When to Consult a Lawyer
Consider consulting a Michigan attorney before agreeing to arbitrate, particularly if the contract involves your employment, a vehicle purchase, or healthcare services. Legal counsel can identify provisions that may not survive judicial review.
This article is for informational purposes only and does not constitute legal advice. Consult a licensed attorney for guidance specific to your situation.