Does Buying a Product Require Me to go to Arbitration with the Company If I Have a Problem with it?

By Fredrick P. Niemann, Esq. of Hanlon Niemann & Wright, a Freehold, NJ Arbitration and Business Law Attorney

It is a bedrock principle any lawyer learns in his first-year of contract law class.  If a contractor makes an offer, and if the offer is accepted by the person or group of people it was sent to, we have a contract.  Acceptance can be by assent (meaning a signature at the end of a long document) or by performance of a condition.  For example, if you agree with a landscape service to cut your lawn for $50, and the lawn gets cut, a contract is in place whereby you must pay the service $50.  But what if as a condition of paying the bill, you were required to arbitrate any claim you may have against the vendor or service provider.  Does paying their bill constitute a valid contract?

It turns out our courts were faced with this issue and the Superior Court, with the Appellate Division’s agreement, held that paying a bill does not constitute a contract that binds one party to arbitration if he or she disputes the bill.  In Bernetich, Hatzell & Pascu, LLC v. MRO, No. A0657-15 (N.J. Super. Ct. App. Div. April 22, 2016), a plaintiff law firm requested medical records on behalf of a prospective client who gave the firm authorization to obtain his hospital records.  The defendant, who was contracted to provide those records, sent the law firm a bill of $204, with a clause in it stating payment would constitute agreement with the terms, including a term that required disputes to be arbitrated.  The law firm sued, claiming the record provider’s fees were far in excess of actual costs, and the record provider moved to compel arbitration.

The trial court declined to enforce the arbitration agreement.  It held this agreement to be a consumer contract that did not give sufficient notice that by paying the bill the law firm waived its right to sue.  On appeal, the medical records company claimed that the law firm accepted its terms by paying the invoice without objecting to the terms.  The Appellate Division framed the issue as to whether the medical record’s company fulfillment of a pre-existing legal duty was sufficient to create an enforceable contract to arbitrate, and it agreed with the trial court in saying there was no enforceable contract.

This is certainly a victory for consumers.  After all, if the court went in the other direction, the mere act of paying a bill, whether it is for medical records or something as simple as your water or electric bill, would require you to agree to certain conditions that you may not want to agree to.  It would have been very unfair.

To discuss your NJ Arbitration matter, please contact Fredrick P. Niemann, Esq. toll-free at (855) 376-5291 or email him at fniemann@hnlawfirm.com.  Please ask us about our video conferencing consultations if you are unable to come to our office.

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