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Public librarian/public patron Q&A: “I’m buying a new car. Even though I’m paying cash, the sales contract stipulates “binding arbitration” for disputes with the dealer. How can I find out what this means in Oregon law?”

Answer: Arbitration, or mandatory arbitration, is a form of alternative dispute resolution. It removes legal disputes from the arena of the courtroom and eliminates the process of submitting a case to a judge or jury for determination. An arbitrator makes the decision after hearing testimony and arguments from both sides. In theory, the arbitration process should be quicker and more efficient, as well as less expensive for all of the parties involved. It is a common practice for commercial organizations to include an arbitration clause in their contracts. The Oregon State Bar has a brief introductory statement about arbitration on their website;

Even where a contract does not specifically require arbitration, the court may require it under the Mandatory Arbitration statutes, ORS 36.400 et seq.
The Oregon State Bar has a Continuing Legal Education (CLE) publication titled Arbitration and Mediation with a thorough treatment of both methods of dispute resolution and a discussion of the statutory requirements of the Arbitration Act.

Where the arbitration clause appears in a contract for the sale of a motor vehicle, it may have serious implications even though the customer intends to pay cash for the car. Any dispute over the car or the terms of the contract not covered by the so-called “Lemon Law”, ORS 646.315 to 646.375, might be controlled by the arbitration clause. The contract might even require arbitration of a dispute that is covered by the Lemon Law. Only your attorney can make that determination.

One of the key elements in an arbitration clause is the process of selecting the arbitrator. In many cases, the contract will provide specific details on that process. There are continuing controversies over the effectiveness and enforceability of contractual arbitration clauses. Only an attorney can tell you whether the arbitration clause in your contract is valid and enforceable. If you have any questions about what effect such a clause may have, you should seek the advice of an attorney. (Thank you again mystery county law librarian!!!!)

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