Arbitration clauses in consumer product contracts are causing controversy in Canada. In a recent lawsuit against Dell Canada Inc the plaintiff complained that the company has sold him computers that had defects causing them to overheat, switch off and fail to restart. Although there was an arbitration clause in the contract, the Ontario Court of Appeal ruled that such a clause does not preclude litigation.
Commercial arbitration routinely includes clauses in consumer product contracts in an effort to protect retail companies from lawsuits. In particular, with the growing trend of litigation in Canada, companies view these clauses as an important tool to limit their legal liabilities. This type of clause mandates that if there is a dispute between the company and a consumer, the issue is to be resolved with the help of arbitration. However, that clause might not be able to save companies from class action anymore.
Companies need to keep in mind that consumers have protection from Ontario’s Consumer Protection Act, which shields them from being forced to attend arbitrations that can be expensive for them, even if the parties reach an agreement.
All that said, arbitration is still a faster and cheaper way of resolving disputes than going to court. The process is confidential, whereas topics discussed in court can be heard by the general public. A contract between an Ontario arbitrator and disputing parties contains a confidentiality clause, so the company image is not jeopardized by the arbitration process. This method of dispute resolution is generally cheaper that litigation because the arbitor’s fees are lower and there is less paperwork.
In a dispute between a company and a consumer group, one of the most important things is to stop further deterioration in existing relationships. Arbitration is much more useful than litigation in this matter. Moreover, as business becomes more global, it is important to remember that Canada is a signatory to the International Commercial Arbitration Act. This means that disputes between companies based outside of Canada can be solved through commercial arbitration. The solutions imposed by the arbitors, known as the arbitral awards, will be recognized and upheld in court.
