Purchasing a vehicle is often an exciting process for many. However, when an individual purchases a vehicle without reading the contract in its entirety, legal issues may arise. Oftentimes, an arbitration clause is within those lines, and usually states that conflicts must be solved through private arbitration instead of in court. Understanding the importance of an arbitration clause and your legal options is crucial for the future.
Understanding Arbitration Clauses?
An arbitration clause is a contractual condition that requires a conflict to be settled in front of an unbiased mediator rather than a judge or jury. In addition, arbitration often involves the following.
- A private hearing
- Limited discovery compared to court litigation
- Decisions made by an arbitrator instead of a jury
- More limited opportunities to appeal the final decision
Manufacturers and dealerships usually include arbitration conditions in purchase or lease agreements because arbitration may resolve arguments differently than traditional court proceedings. However, signing an arbitration agreement does not automatically mean every future claim must be arbitrated.
California Lemon Law: An Overview
California's Lemon Law protects those who purchase or lease vehicles with significant defects that cannot be repaired within a certain number of attempts. Depending on the circumstances, the law may apply to the following.
- New vehicles
- Certain certified pre-owned vehicles
- Dealer-owned vehicles sold with manufacturer warranties
- Leased vehicles
- Manufacturer warranties that remain in effect
When a qualifying defect significantly damages the vehicle's use, value, or safety, California law may provide legal routes if specific requirements are met.
Arbitration: a Legal Issue
Many lemon law cases are filed against the vehicle manufacturer, and not necessarily the dealership that sold the vehicle. The arbitration agreement is often signed between:
- The consumer
- The dealership
In addition, courts often analyze whether the manufacturer has the legal right to enforce an arbitration clause contained in a dealership purchase agreement.
Arbitration Agreement
If the arbitration agreement exists only between the buyer and the dealership, the manufacturer may need to establish a legal basis for enforcing that agreement. Different contractual relationships may produce different legal outcomes.
Arbitration Clauses
Some arbitration clauses are written without specifics, while others are limited to conflicts arising directly between the purchaser and the dealership. The exact wording can greatly affect whether a lemon law claim is allowed.
Federal Arbitration Act
The Federal Arbitration Act usually favors enforcement of valid arbitration agreements. However, courts must still determine the following.
- Whether a valid agreement exists
- Whether the manufacturer has the ability to enforce it
- Whether the conflict is within the agreement's language
These issues often require careful legal analysis and review of the surrounding facts.
Court Decisions
California courts have issued multiple opinions over the past several years addressing whether manufacturers may make arbitration in lemon law cases. Some decisions have allowed arbitration under specific circumstances, while others have decided that manufacturers could not enforce dealership arbitration agreements. Since appellate decisions continue to develop, outcomes often depend on the following factors.
- The exact contract language
- The parties involved
- The specific legal arguments presented
- The facts of the individual case
As a result, assumptions based only on signing a purchase agreement may not accurately reflect an individual’s legal rights.
Arbitration
Arbitration is a different route for resolving conflicts. Consumers may still present evidence regarding:
- Repair history
- Warranty coverage
- Technical service bulletins
- Vehicle inspection reports
- Manufacturer communications
- Expert testimony, where appropriate
Whether arbitration or litigation is appropriate depends on the applicable contracts and governing law.
Examining Documents Thoroughly
Vehicle purchase documents often include multiple requirements beyond the arbitration clause, including but not limited to the following.
- Warranty disclosures
- Financing agreements
- Buyer's orders
- Retail installment contracts
- Lease agreements
- Manufacturer warranty documents
Each document may affect how a legal conflict proceeds. Even minor wording differences can affect whether arbitration is required.
Steps to Take
If your vehicle has undergone repeated repairs for the same or similar problem, you should consider keeping organized records, including:
- Purchase or lease documents
- Warranty information
- Repair invoices
- Service records
- Recall notices
- Communications with the dealership or manufacturer
- Documentation showing how the defect affects the vehicle
These records may be useful regardless of whether a conflict is resolved through arbitration or court proceedings.
Speaking to a Legal Professional
Seeking legal guidance and support may be beneficial when determining whether you can file a lawsuit. Oftentimes, questions and concerns surrounding arbitration agreements in relation to California’s lemon laws become essential in how you can proceed with your legal dispute moving forward. A qualified attorney may explain the specific facts surrounding your case and your rights so you know how to proceed.
KAASS LAW
KAASS LAW understands that every case is unique and each poses specific facts and legal considerations. Our legal team can explain applicable laws, help you understand your rights, and guide you through the entire legal process. Contact KAASS LAW today.