Under Illinois law, arbitration agreements are considered an enforceable "part of the bargain" if the agreement is either conspicuous or brought to the consumer's attention elsewhere in the contract, according to the Illinois Appellate Court.

In Tortoriello v. Gerald Nissan of North Aurora, Inc., No. 2-07-0322, 2008 WL 160549, (Ill. App. Ct. Jan. 11, 2008), Tortoriello bought a used car from Gerald Nissan (Gerald). The first sales contract was rejected by the financing company, so the parties executed a second contract several days later. While some terms differed between the contracts, both contained an arbitration agreement.

Tortoriello later sued Gerald, contending that the purchase was procured by fraud. Gerald moved to compel arbitration. The trial court denied the motion, holding that the arbitration agreement was both procedurally and substantively unconscionable.

On appeal, the Court noted that most of the trial court's findings related to procedural unconscionability, and specifically hinged upon whether Tortoriello noticed the agreement as "part of the bargain," and whether she could or did understand the agreement.

Citing Kinkel v. Cingular Wireless LLC, 857 N.E.2d 250 (Ill. 2006), the Court observed that even an inconspicuous arbitration agreement could be "part of the bargain," putting the consumer on notice, "if it was brought to the consumer's attention elsewhere in the contract." Because the sales contract alerted the buyer in bold, capital letters to the terms and conditions on the reverse side of the contract, where the arbitration agreement was located, the Court found Tortoriello was on notice and that the arbitration agreement was part of the bargain.

Moreover, as the Court noted, Tortoriello had been in possession of the first contract for several days before she returned to the dealer to execute the second contract. The arbitration agreements in the two contracts were identical, and given the lapse of time between the two contracts, Tortoriello had an extended opportunity to read the arbitration agreement, which the Court treated as further evidence of notice.

The Court found the trial court's emphasis on the "abstruseness" of the agreement to be misplaced. The Court opined that its lack of clarity was "not unusual for legal contracts, which are seldom extolled for limpid prose," and that the agreement was "not abstruse to the point of invalidity" by the mere use of "legalese."

As to substantive unconscionability, the Court found none in the agreement's lack of mutuality. To the Court, the mutuality requirement was satisfied because the promise to arbitrate was supported by the consideration given for the entire contract. As long as there was sufficient consideration for the contract as a whole, stated the Court, the parties did not need to have identical rights and obligations.

Finally, the Court held that the punitive damages exclusion was substantively unconscionable. However, the contract included a severability clause, which allowed the Court to sever the exclusion and enforce the remainder of the agreement. To the Court, the inclusion of the severability clause demonstrated that the parties intended to enforce the lawful portions of the agreement in the absence of the unlawful ones.

The Court in this case took a novel approach to the lack of mutuality. According to the Court, under Illinois law, an arbitration agreement that only requires one party to submit its claims to arbitration does not create mutuality problems if the arbitration agreement is merely a provision of a larger contract. In other words, a lack of mutuality is problematic only for standalone arbitration agreements.

This approach is arguably inconsistent with the rule of severability enunciated in Prima Paint Corp. v. Flood & Conklin Manufacturing Co., 388 U.S. 395 (1967) and Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440 (2006). Cf. Santana Row Hotel Partners, LP v. Zurich America Ins. Co. , No. C 05-00198 JW, 2007 WL 4754772 (N.D. Cal. Sep. 13, 2007) (applying Buckeye to a standalone arbitration agreement). In any event, parties can avoid mutuality problems by agreeing to arbitrate all disputes, which has the added benefit of taking full advantage of arbitration's efficiency.