SENATE, No. 2440

STATE OF NEW JERSEY

214th LEGISLATURE

 

INTRODUCED NOVEMBER 22, 2010

 


 

Sponsored by:

Senator  LORETTA WEINBERG

District 37 (Bergen)

 

 

 

 

SYNOPSIS

     Requires review of arbitration agreements for unconscionability.

 

CURRENT VERSION OF TEXT

     As introduced.

  


An Act concerning unconscionability of arbitration agreements and amending P.L.2003, c.95.

 

     Be It Enacted by the Senate and General Assembly of the State of New Jersey:

 

     1.    Section 6 of P.L.2003, c.95 (C.2A:23B-6) is amended to read as follows:

     6.    Validity of Agreement to Arbitrate.

     a.     An agreement contained in a record to submit to arbitration any existing or subsequent controversy arising between the parties to the agreement is valid, enforceable, and irrevocable except upon a ground that exists at law or in equity for the revocation of a contract.

     b.    The court shall decide whether an agreement to arbitrate exists or a controversy is subject to an agreement to arbitrate.

     c.     An arbitrator shall decide whether a condition precedent to arbitrability has been fulfilled and whether a contract containing a valid agreement to arbitrate is enforceable.

     d.    If a party to a judicial proceeding challenges the existence of, or claims that a controversy is not subject to, an agreement to arbitrate, the arbitration proceeding may continue pending final resolution of the issue by the court, unless the court otherwise orders.

     e.     When determining the validity of an agreement to arbitrate, the court shall consider whether the agreement is unconscionable by considering all relevant circumstances, including, but not limited to:

     (1)   Whether the contract is a standardized form, and the party who did not prepare the contract must accept or decline to enter into the contract without an opportunity to negotiate or change the terms of the agreement to arbitrate; and

     (2)   Whether the arbitration agreement contains clauses providing for:

     (a)   The location of arbitration;

     (b)   The expenses of arbitration;

     (c)   Denial of the ability to consolidate arbitration or to have arbitration for a class of persons involving substantially similar issues; and

     (d)   Other unreasonably one-sided terms that may represent a serious disadvantage to the party that did not prepare the form.

(cf: P.L.2003, c.95, s.6)

 

     2.    This act shall take effect on the 90th day following enactment.


STATEMENT

 

     This bill amends and supplements the current arbitration law in New Jersey to protect consumers from contracts that are unconscionable. Many consumer contracts contain arbitration agreements that may be unconscionable due to several factors. This bill outlines the various factors of unconscionability for a court reviewing a contract containing an arbitration agreement.

     This bill amends New Jersey’s arbitration law regarding the validity of an agreement to arbitrate to instruct courts to review arbitration agreements for unconscionability. The bill supplements the arbitration law by giving a list of factors that courts can look to when determining whether an arbitration agreement is unconscionable.