Arbitration provision in a contract cannot be set aside on the basis of procedural unconscionability alone. It must be further unconscionable in its substantive terms.

The plaintiff was the successful bidder for real property at an auction conducted by the defendant. When the gavel dropped, the plaintiff signed a purchase order containing a broad arbitration clause. He later filed suit, claiming that the defendant delayed the closing on the property. The defendant moved to dismiss under the arbitration provision. The trial court denied the motion because the arbitration clause was procedurally unconscionable since the plaintiff was unaware of its terms and believed he was forced to sign the agreement because of his accepted auction bid. The Court of Appeals reversed, concluding that procedural unconscionability was not enough to invalidate the arbitration clause. The case was remanded for a determination of whether the plaintiff could also show that the arbitration clause was substantively unconscionable, as both grounds are required for the invalidation of contracts generally.

Case Law Alerts, 4th Quarter, October 2014