Arbitration agreements are generally favored under Michigan law. Court systems favor arbitration because it helps ration scarce judicial resources and is usually less expensive for the parties.
In Cohen v Park West Galleries, the Michigan Court of Appeals considered whether arbitration agreements contained in invoices for subsequent purchases could bind consumers to arbitration over claims arising out of the purchase of items previously made, when the invoices of those purchases did not contain arbitration agreements.
For example, in Cohen, plaintiffs made multiple purchases from an art gallery. On some of the purchases, invoices contained arbitration agreements, but for other purchases the invoices contained no arbitration agreement. The lower court ruled the later arbitration agreements covered the previous purchases, even though the invoices for those purchases contained no arbitration clause.
The Court of Appeals reversed the lower court holding that the arbitration agreements did not reach the invoices that failed to mention arbitration. The Court noted that Michigan law requires “that separate contracts be treated separately.” Because each purchase of art had a separate invoice each purchase was subtract to a separate and distinct contract. As a result, only the purchases subject to the arbitration agreements were forced into arbitration. The claims regarding the purchases without arbitration agreements would remain in the Michigan Courts.
In order for businesses to get the full benefit of an arbitration clause, it is important that those clauses be used in every contract, invoice, or other documents consummating a sale of goods or performance of services. Businesses cannot rely on the clause of one agreement to carry over to another.
