Enforceability of Agreements to Arbitrate: An Examination of the Public Policy Defense

Stewart E. Sterk, Benjamin N. Cardozo School of Law


This Article seeks to demonstrate that the public policy of doctrine should be, and in general has been, limited to two types of cases. First, as already discussed, an agreement to arbitrate should not be enforced when the statute or case law principle at issue has aims other than promoting justice between the parties. Second, when a party to the agreement belongs to a class peculiarly subject to imposition by the class to which the other party belongs, an agreement to arbitrate will not and should not be enforced.

In the latter class of cases, the susceptibility to imposition may be the product of unequal bargaining power, or of unequal transaction costs that make it likely that one party will draft an agreement that the other will sign without first questioning or reviewing the agreement’s arbitration clause. As with arbitration clauses in the former class of cases, arbitration clauses in contracts of adhesion are unenforceable, not because the subject matter of the dispute does not lend itself to arbitration, but rather because courts are unwilling to permit parties to relinquish so casually their right to judicial remedies.