Desiree Shay


This Note addresses the clauses in franchise-franchisee agreements that preserve the right for a franchisor to unilaterally alter the terms of arbitration after the franchise relationship has begun. A majority of courts, applying state contract law, have held that these clauses are unenforceable due to a lack of consideration, making the contract illusory. However, courts still come to different conclusions because each court has to follow state contract law. The United States Supreme Court’s holding on this issue might not be able to have full effect because the Federal Arbitration Act requires that courts rely on state law. The Seventh Circuit’s decision in Druco further throws a twist into the circuit decisions because of the franchisor’s decision to make arbitration non-binding, a factor that was not present in many other courts.



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