An arbitration agreement is a contract term by which both parties give up the right to go to court and agree to have a dispute decided by a private arbitrator instead. In consumer contracts it is rarely negotiated and almost never read. It is nonetheless binding, and in the United States the Federal Arbitration Act requires courts to enforce it.
What the clause typically contains
- A forum: usually the AAA or JAMS, whose rules then govern the procedure and the fees.
- A class-action waiver: the term that prevents claims being aggregated into a class.
- A notice requirement: an obligation to notify a dispute and wait, commonly 30 or 60 days, before filing.
- An opt-out window: often 30 days from the date the term was introduced, after which it binds.
- A fee provision: which party pays the filing and arbitrator fees, and any cap on the consumer's share.
Terms are usually introduced by amendment rather than at sign-up — an email or an in-app notice, with continued use of the service treated as acceptance. That is how PayWave's clause arrived on November 1, 2021.
What it does not do
It does not extinguish the claim. It does not cap what can be recovered. It does not prevent a claimant from being legally represented, and it does not oblige a claimant to attend a hearing — most consumer arbitrations are decided on documents alone.
The clause changes the room the claim is heard in. It does not change whether the money was taken.
Four things worth checking
- Which forum, and therefore which fee schedule. The consumer's share is usually capped; the balance falls on the business.
- Whether pre-filing notice is required. Filing without it can cost months.
- Whether you opted out. If you did, you can sue in court — a materially better position, and worth knowing about.
- Whether the clause survives account closure. It almost always does, which is why former customers usually remain eligible.
Why we do not usually fight the clause
Challenges to enforceability are slow and, since Concepcion, rarely successful. Where a clause is valid it is more useful to claimants enforced than struck down: it obliges the business to arbitrate every claim individually, and to pay the forum for each one. Read carefully, the term drafted to deter claims is the mechanism that makes them viable.
This article is general information about procedure and is not legal advice on any individual claim. Attorney advertising. All case references, figures and names are fictional sample content prepared for this demonstration.
