Legal Memorandum: Arbitration Clause in a Contract

Issue: Under U.S. Virgin Islands law, must a contract clause requiring all disputes be submitted to arbitration be supported by additional consideration when the clause is not mutually binding?

Area of Law: Alternative Dispute Resolution, Business Organizations & Contracts
Keywords: Arbitration clause; Mutually binding; Adequate consideration
Jurisdiction: Federal, Virgin Islands
Cited Cases: None
Cited Statutes: None
Date: 09/01/2007

A factor in the test in Walker v. Ryan’s Family Steak Houses, Inc., 400 F.3d 370 (6th Cir. 2005) for knowing and voluntary waiver of a fundamental right is the consideration for the waiver.  400 F.3d at 381.  Although the Dispute Resolution Agreement at issue here purports to be supported by consideration, Plaintiff’s signature was not supported by adequate consideration.  The fact is that the employer did not agree to be bound to the same extent as the employee.  In Walker, consideration was inadequate because, inter alia, the employer was not equally bound to arbitrate as were the employees.  Walker, 400 F.3d at 380.  “In truth, it is only the . . . applicant or employee who has agreed to bring any employment-related dispute exclusively in the . . . arbitration forum.”  Id. 


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