NOW LEGAL PROFESSIONALS WILL BE HELD ACCOUNTABLE IF THEY DRAFT MISLEADING ARBITRATION CLAUSES IN CONTRACTS – INDIAN SUPREME COURT

 

NOW LEGAL PROFESSIONALS WILL BE

 HELD ACCOUNTABLE  IF THEY DRAFT

 MISLEADING ARBITRATION CLAUSES IN

 CONTRACTS – INDIAN SUPREME COURT

The Supreme Court on May 15,2025 urged courts to exercise their suo motu powers in cases where legal professionals are found deliberately drafting misleading arbitration clauses in contracts.

It is a significant step toward ensuring transparency and integrity in contractual dispute resolution.

KEY POINTS:

Suo motu powers allow courts to take up cases on their own initiative, without a formal complaint.

The focus here is on legal professionals—primarily lawyers and legal drafters—who intentionally create ambiguity or deception in arbitration clauses.

The Supreme Court likely aims to deter unethical legal practices that undermine arbitration as a fair, efficient alternative to litigation.

The ruling may impact how contracts are drafted, particularly in commercial and consumer agreements, encouraging clearer, fairer terms.

IMPLICATIONS:

LEGAL ACCOUNTABILITY:

Lawyers could face disciplinary or legal consequences for unethical drafting.

JUDICIAL OVERSIGHT:

Courts may become more proactive in scrutinizing arbitration clauses, especially in high-stakes or consumer-facing contracts.

REFORM PRESSURE:

It may lead to calls for better regulation or standardized arbitration clause templates.

PROTECTION FOR CONSUMERS & WEAKER PARTIES:

Especially important in situations where one party has limited bargaining power.                       

EXAMPLES OF MISLEADING ARBITRATION CLAUSES IN CONTRACTS

1. "Mandatory Binding Arbitration" Without Explanation

Example Clause:

"Any disputes arising from this agreement shall be resolved through binding arbitration."

WHY IT'S MISLEADING:

Sounds harmless or even efficient, but waives your right to sue in court or join class actions.

2.UNFAIR VENUE OR FORUM SELECTION

Example Clause:

"Arbitration shall take place exclusively in [a distant city or state]."

 

WHY IT'S MISLEADING:

Makes arbitration prohibitively inconvenient or expensive, discouraging people from pursuing valid claims.

Particularly unfair in employment contracts or when dealing with consumers in other states or countries.

3.   PRECLUDING INJUNCTIVE RELIEF

Example Clause:

"The arbitrator shall not have authority to award injunctive or equitable relief."

WHY IT'S MISLEADING:

Prevents you from stopping on-going harm (e.g., privacy violations, discrimination).

Limits the remedies available to the individual in ways courts would not.

R V SECKAR ,FCS, LLB

79047 19295