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Defenses to Arbitration Clauses in Contracts

Because of the time and costs associated with litigation, arbitration provisions are often included in contracts to avoid the court system. In an arbitration, an individual or group of individuals make a binding decisions about the dispute. The normal trial rules, due process protections and procedural guarantees that are present in a court or jury tried case are not necessarily present in an arbitration. Therefore, courts will scrutinize arbitration provisions in contract to ensure that, among other things, the parties entered into the agreement voluntarily and with full awareness of the facts. In analyzing arbitration provisions, courts view the contract through the lens of ordinary state-law principles that govern contracts. Robinson v. Title Lenders, 364 S.W.3d 505, 515 (Mo. 2012). Normal contract defenses, then, can apply. This includes defenses such as fraud, duress or unconscionability. Id.

Unconscionability, in a contract context, is “an inequality so strong, gross, and manifest that it must be impossible to state it to one with common sense without producing an exclamation at the inequality of it.’” State of Missouri, Dept. Soc. Servs., Div. of Aging v. Brookside Nursing Ctr., Inc., 50 S.W.3d 273, 277 (Mo. 2001). Unconscionability is meant to guard against overwhelmingly one-sided contracts, oppression and unfair surprise. In determining whether unconscionability is present, courts will look at the substance of the contract and the circumstances under which it was signed. 

Similarly, a contract can fail for lack of mutuality. Mutuality of contract means that an obligation rests upon each party to do or permit to be done something in consideration of the act or promise of the other. In other words, neither party is bound unless both are bound. 

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