By Leslie King O’Neal
Not All Arbitration Agreements Look Alike
Most construction lawyers know the basic premises that, “arbitration is a creature of contract” and that “parties can’t be compelled to arbitrate unless they have agreed to do so.”[i] However, they are sometimes surprised to learn that, while the Federal Arbitration Act[ii] requires arbitration agreements to be in writing, it does not require that the parties sign them. Also, enforceable arbitration agreements may take many different forms.
Arbitration Clauses Aren’t Always in Primary Agreement
Arbitration clauses may be found not only in the parties’ primary agreement, but also in other documents or locations. They may be found in exhibits or warranties, sometimes issued after the original contract was signed.
Not All Arbitration Clauses Are on Paper
Arbitration clauses aren’t limited to the traditional paper (or digital) formats. Courts have found arbitration agreements on parking lot signs to be enforceable.[iii] Even illegible arbitration agreements may be enforceable. As discussed below, a California court enforced a completely illegible arbitration agreement, finding illegibility did not make the agreement unconscionable.[iv]
Different Documents–Dueling Dispute Clauses
An earlier post discussed the issues raised when there are competing dispute resolution clauses in construction contracts. See post: Conflicting ADR Clauses: Who Decides Priority?
Seminole Tribe of Florida v. Lennar Homes
Recently, a Florida judge dealt with conflicting dispute clauses in Seminole Tribe of Florida v. Lennar Homes, LLC. The Seminole Tribe, on behalf 552 homeowners, sued Lennar Homes in Florida state court, seeking damages for alleged construction defects. The parties’ Community Development Agreement prohibited arbitration but individual home warranties and purchase agreements required it. Lennar moved to compel arbitration, citing the arbitration clause in Member Home Purchase Agreements and the Warranty issued at closing to each purchaser. The Tribe countered that overall Community Development Agreement between it and Lennar specifically disclaimed arbitration as a dispute resolution method.[v] The trial court granted Lennar’s motion to compel as to the direct purchasers, but not as to the 343 remaining purchasers.[vi] Lennar may appeal this order; future posts will cover further developments in this case.
Sign Language
A lawyer who found a rare parking spot in a downtown Dallas lot challenged the arbitration clause found on signs in the parking lot when the parking vendor pursued him for additional charges for overstaying his parking time. There were several signs around the parking lot and at the parking kiosk, stating: “By parking on this Facility, you accept these terms,” which included an arbitration clause. One of the signs is shown in the picture and states: “By parking on this Lot, you hereby agree that the sole remedy for an unresolved dispute is binding arbitration . . .”
The trial court found there was a valid contract and that the signs were conspicuous and definite. Finding the contract was neither substantively nor procedurally unconscionable, the court rejected the lawyer’s argument that there were no reasonable alternatives. It also held the contract was not against public policy or oppressive. The judge also found the arbitration clause was broad, but not boundless, and the dispute fell squarely within it. The lawyer’s dispute went to arbitration.
Illegible But Not Unenforceable
A California appellate court upheld an arbitration clause written in blurry, one (1) point font, making it nearly impossible to read. A copy of the agreement is reproduced below. The court in Fuentes v. Empire Nissan[vii] held the contract (and arbitration agreement) were not procedurally or substantively unconscionable, despite the tiny font. Therefore, the appellate court compelled arbitration.
The appellate court noted, “Under California law, an agreement must be both procedurally and substantively unconscionable to be unenforceable.” The court further noted, “Is it strange that a contract can be enforced when it is nearly impossible to read? Contract law enforces contracts you cannot read at all, if you are blind, or illiterate, or the contract language is foreign to you.”
The Fuentes court held that the tiny font was evidence of procedural unconscionability, but it did not make the contract substantively unconscionable. The California Supreme Court heard oral arguments on this case recently. It will be interesting to see the result.
Takeaways:
- Arbitration agreements vary greatly. Counsel should review all contracts, exhibits, addenda, and related documents to determine if there is an arbitration clause.
- Be aware that documents created and signed after the initial transaction may contain arbitration clauses.
- Recognize that enforceable arbitration agreements may take many different forms—on posted signs or even in 1 point font (at least in California)
This is the Fuentes arbitration agreement in its original form. Do you think the court reached the right result in compelling arbitration?
[i] Coinbase v. Suski, 601 U.S. 152 (2024).
[ii] 9 U.S.C. §§1-16.
[iii]Tobey v. Ace Parking Management, Inc., et al., (No: 3:2024cv02932)(U.S.Dist. Ct. N.D.Tex. July 11, 2025) https://law.justia.com/cases/federal/district-courts/texas/txndce/3:2024cv02932/397224/57/
[iv] Fuentes v. Empire Nissan, — Cal. Rptr. 3d. —, (Cal. App. 2d Dist. No. B314490, Apr. 21, 2023) https://law.justia.com/cases/california/court-of-appeal/2023/b314490.html
[v] Seminole Tribe of Florida v. Lennar Homes, LLC, (Case No: CACE 25-003754, Circuit Court of the 17th Judicial Circuit in and for Broward County, Florida).
[vi] The written order was not available when this post was written.
[vii]Fuentes v. Empire Nissan, Inc., — Cal. Rptr. 3d. —, (Cal. App. 2d Dist. No. B314490, Apr. 21, 2023) https://law.justia.com/cases/california/court-of-appeal/2023/b314490.html