contracts - arbitration clause - mutual assent
Morales v. Sun Constructors, Inc. - Third Circuit - August 28, 2008 (2-1 decision)
Held: An arbitration clause in an employment contract is enforceable even where one party does not understand the contract because he "is ignorant of the language in which the agreement is written," where there is no claim is fraud or other misleading conduct. The employer undertook to have a bilingual applicant who was also present translate the agreement to plaintiff, but "he did not specifically explain the arbitration clause" and the employer representative only explained it in English, even though he was aware that the plaintiff did not understand English.
The court purported to apply general Pennsylvania contract principles, which require only an outward expression of mutual assent, and not the parties' subjective intent - an objective theory of contract formation, which applies even when one party is illiterate or ignorant of the language in which the document is written. Every contracting party has the duty “to learn and know the contents of a contract before he signs and delivers it”). Arbitration agreements in the employment context are not exempt from this principle. In the absence of fraud or misrepresentation, which are not alleged here, a contract is enforceable even where one party cannot read, write, speak or under the language of the contract. "It was [the plaintiff's] obligation to ensure he understood the Agreement before signing."
The court held that a "heightened 'knowing and voluntary' standard to arbitration agreements would be inconsistent with the Federal Arbitration Act," 9 USC sec. 1 et seq., rejecting a claim that such a standard should apply because of the relinquishment of a valuable right - a court hearing.
The dissent agreed about the heightened standard but disagreed on the contractual issues of mutual assent, which it said should be considered separately and independently of any question of fraud. The dissent believed that the "gravamen of this case is that [the employer] took upon itself the task of translating the agreement for plaintiff and, in doing so, failed to convey the entire contents of the agreement," resulting in a "lack of mutual assent."
It was undisputed that (1) The plaintiff was unable to read the contract; (2) The employer assigned a coworker who himself was not fluent in English to translate the document for plaintiff; (3) the co-worker, in translating the document, neglected to translate the arbitration clauses; and (4) as a result of the incomplete translation, plaintiff was not aware that the agreement contained an arbitration clause.
The dissent found that the applicant's lack of understanding of the contract terms was not the result of his negligence, but rather the employer's failure to properly translate the terms, a task which the employer voluntarily assumed. The employer "made the decision to insert itself" between the applicant and the contract, thus creating a situation where the lack of consent could and did occur. The employer's translation of the contact terms was incorrect and incomplete, thus negating the applicant's assent.