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Can I require customers to sign contracts with binding arbitration clauses in Illinois? What are the requirements?

Requirements for Binding Arbitration Clauses in Illinois

In Illinois, it is generally permissible to require customers to sign contracts with binding arbitration clauses. However, there are certain requirements that must be met in order for such clauses to be enforceable.

Requirements for Enforceable Binding Arbitration Clauses

According to [2.1]" >710 ILCS 5/1, the Illinois Uniform Arbitration Act, a binding arbitration clause is enforceable if:

  • The clause is in writing;
  • The clause is contained in a contract that involves commerce;
  • The clause is not unconscionable; and
  • The clause provides for a neutral arbitrator and a fair arbitration process.

Unconscionability

A binding arbitration clause is considered unconscionable if it is both procedurally and substantively unconscionable. Procedural unconscionability refers to the circumstances surrounding the formation of the contract, such as unequal bargaining power or lack of meaningful choice. Substantive unconscionability refers to the terms of the contract itself, such as terms that are overly harsh or one-sided.

Illinois Law on Binding Arbitration Clauses

Illinois law generally favors the enforcement of binding arbitration clauses, but courts will closely scrutinize such clauses to ensure that they are fair and reasonable. In particular, courts will look at the circumstances surrounding the formation of the contract and the terms of the arbitration clause itself to determine whether the clause is enforceable.

Conclusion

In summary, it is generally permissible to require customers to sign contracts with binding arbitration clauses in Illinois, provided that the clauses meet certain requirements. These requirements include that the clause is in writing, contained in a contract that involves commerce, not unconscionable, and provides for a neutral arbitrator and a fair arbitration process. However, courts will closely scrutinize such clauses to ensure that they are fair and reasonable.

[2.1]" >710 ILCS 5/1

Source(s):
Jurisdiction

Illinois