Arbitration May Be Required in Auto Service Contracts or Extended Warranty Agreements

Recently, the New Jersey Appellate Court has upheld as valid an arbitration provision in an automobile service contract case which emanated from Burlington County, New Jersey.  It involved a purchaser of a used Ford F-250, with a separate service contract from a warranty company from Pennsylvania covering repairs for 180 days or 7,500 miles (Signor v. GWC Warranty).  The service contract had a provision that any and all claims, disputes or controversies of any nature whatsoever shall be resolved by binding arbitration before a single arbitrator.

A disagreement arose as to the coverage under the service contract and the buyer went to court.  After a ruling by the lower court that allowed the case to continue, the warranty company appealed seeking to enforce the arbitration provision in the contract.  The New Jersey Appellate Court upheld the validity of an arbitration agreement and stated the validity is a question of law to be decided by a judge.  In this case, the arbitration provision was valid and enforceable because the clause is clear that the only way the parties can resolve disputes is through arbitration.

The courts in New Jersey favor arbitration agreements and have indicated that they should be read liberally.  There have been other cases in which arbitration clauses have not been upheld based on their possible ambiguity.  Therefore, it is important for those companies seeking to include arbitration clauses in their contracts to seek proper counsel to word those clauses in the best possible way to make them binding.  Also, consumers should be careful to read their contracts and understand whether arbitration is their sole outlet for a dispute and the ramifications of arbitration.