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

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Validity of Arbitration Agreements in Kentucky

Kentucky law allows for the use of binding arbitration agreements in contracts. According to KYRS 417.050, a written agreement to submit any existing controversy to arbitration or a provision in a written contract to submit to arbitration any controversy thereafter arising between the parties is valid, enforceable, and irrevocable, save upon such grounds as exist at law for the revocation of any contract. However, there are some exemptions to this rule.

Exemptions to Arbitration Agreements

KYRS 417.050 states that this chapter does not apply to:

1. Arbitration agreements contained within the collective bargaining agreements entered into by employers and the respective representatives of member employees;
2. Insurance contracts. Nothing in this subsection shall be deemed to invalidate or render unenforceable contractual arbitration provisions between two (2) or more insurers, including reinsurers; and
3. Arbitration agreements entered by any industrial insured captive insurer that is created under the Product Liability Risk Retention Act of 1981, 15 U.S.C. secs. 3901 et seq., as amended.

Requirements for Arbitration Agreements

There are no specific requirements for arbitration agreements in Kentucky law. However, it is important to ensure that the agreement is clear and unambiguous, and that all parties understand the terms of the agreement. Additionally, it is important to ensure that the agreement complies with any applicable federal or state laws.

Proceedings to Compel or Stay Arbitration

KYRS 417.060 outlines the proceedings to compel or stay arbitration. If a party shows an agreement described in KYRS 417.050, and the opposing party’s refusal to arbitrate, the court shall order the parties to proceed with arbitration. If the opposing party denies the existence of the agreement to arbitrate, the court shall proceed summarily to the determination of the issue so raised. The court shall order arbitration if found for the moving party; otherwise, the application shall be denied.

Fees and Expenses of Arbitration

KYRS 417.140 states that unless otherwise provided in the agreement to arbitrate, the arbitrators’ expenses, fees, and other expenses incurred in the conduct of the arbitration shall be paid as provided in the award. Attorneys’ fees shall not be awarded unless a provision therefor is contained in the written agreement submitted to arbitration.

Award of Costs and Attorney’s Fees

In any action to enforce KRS 371.400 to 371.425, including arbitration, the court or arbitrator shall award costs and reasonable attorney’s fees to the prevailing party if the losing party is deemed to have acted in bad faith [KYRS 371.415].

Conclusion

In Kentucky, it is generally permissible to require customers to sign contracts with binding arbitration clauses. However, there are some exemptions to this rule. There are no specific requirements for arbitration agreements, but it is important to ensure that the agreement is clear and unambiguous, and that all parties understand the terms of the agreement. If a dispute arises, the court may order the parties to proceed with arbitration, and the arbitrators’ fees and expenses will be paid as provided in the award. Finally, if the losing party is deemed to have acted in bad faith, the court or arbitrator may award costs and reasonable attorney’s fees to the prevailing party.

Jurisdiction

Kentucky

• General