Arbitration Clauses in North Carolina: Your Rights
Arbitration Clauses at a Glance
Arbitration clauses require that disputes be resolved through private arbitration rather than in court. They appear regularly in North Carolina employment agreements, home construction contracts, consumer transactions, and franchise agreements.
North Carolina's Legal Treatment
North Carolina has the Revised Uniform Arbitration Act (N.C.G.S. Chapter 1, Article 45C), effective since 2004, which provides a modern framework for enforcing arbitration agreements. The state also recognizes the Federal Arbitration Act's broad reach for contracts in interstate commerce.
North Carolina courts have generally enforced arbitration clauses. In Raper v. Oliver House, LLC (2015), the North Carolina Court of Appeals reiterated the strong public policy favoring arbitration, requiring courts to resolve doubts in favor of arbitration.
Grounds for Challenging Enforcement
- Unconscionability — North Carolina applies standard contract unconscionability analysis. In Tillman v. Commercial Credit Loans, Inc. (2008), the North Carolina Supreme Court addressed unconscionability in consumer arbitration agreements
- Lack of agreement — If there is no meeting of the minds or the clause was not part of the signed contract, it cannot be enforced
- Waiver by litigation conduct — A party that actively participates in litigation may waive the right to compel arbitration
- Illusory terms — Clauses that allow one party to unilaterally modify the arbitration agreement may be deemed unenforceable
Red Flags to Watch For
- The clause requires arbitration under rules that are prohibitively expensive for your type of claim
- Venue selection clauses requiring arbitration in a distant state
- Clauses that carve out the drafter's preferred claims from arbitration while requiring the other party to arbitrate everything
- Provisions that eliminate the right to seek injunctive relief in court
When to Consult a Lawyer
Consider speaking with a North Carolina attorney if an arbitration clause appears in a contract involving significant financial stakes or an employment relationship. A lawyer can determine whether the clause meets the requirements of the Revised Uniform Arbitration Act.
This article is for informational purposes only and does not constitute legal advice. Consult a licensed attorney for guidance specific to your situation.