Enforcement of Arbitration Clauses Against Deceived Franchisees

Resolving the issue of fraud in the inducement of franchise agreements is an area that merits refinement. To save time and expense, arbitration-which bars both parties from the court system to resolve disputes-is a significant contemporary development. The reliance on arbitrators, who are not bound by precedent, is especially serious when their authority to resolve a particular controversy comes from a franchise agreement. Such agreements have been the subject of legislative inquiry, administrative action and litigation largely because of the informational imbalance between franchisors and franchisees during the course of negotiating their agreements.

This article argues that, because franchisees generally are not able to understand the significance of relinquishing basic legal rights via a broadly-worded arbitration clause, judges, not arbitrators, should resolve franchisees' allegations of fraud in the inducement.