Parties to commercial contracts are increasingly using unilateral modification or change-in-terms clauses to incorporate arbitration clauses into contracts without consent from the other party. Illinois courts will enforce arbitration clauses added under unilateral change-in-terms clauses where little or no notice is given, provided that the parties have agreed to such unilateral changes in advance. In light of the numerous risks resulting from a counterparty’s ability to unilaterally change the contract to its advantage, including imposing arbitration for dispute resolution, parties should in all cases negotiate to require any changes to the contract to be made by mutual written agreement.
A key takeaway of this case is that, under Illinois law, if parties agree to allow one party to unilaterally modify a contract without notice, the party then may modify the contract with little or no notice and courts will uphold the modification. As this case has demonstrated, such a modification clause can have severe consequences for the other party. One point to note is that courts in other jurisdictions have recently analyzed a unilateral change-in-terms clause in Hello Fresh’s terms and conditions that requires notice to be given, and both have reached the opposite conclusion from the Miracle-Pond court. See Engen v. Grocery Delivery E-Services USA Inc. d/b/a Hello Fresh, No. 19-cv-2433, 2020 U.S. Dist. LEXIS 63658 (D. Minn. Apr. 10, 2020) (holding under New York law that a promotional email sent to customers that contained a link to updated terms and conditions containing an arbitration provision but did not contain an explicit notice of changes to the terms did not constitute sufficient notice to indicate acceptance by a customer to arbitrate disputes); Murray v. Grocery Delivery E-Services USA Inc. d/b/a Hello Fresh, No. 19-12608-WGY, 2020 U.S. Dist. LEXIS 87805 (D. Mass. May 19, 2020) (holding same under Massachusetts law). Although the courts sided with the customers in these two Hello Fresh cases to hold the arbitration clauses ineffective, parties with the leverage to negotiate terms should not leave it to the courts to protect them from the unforeseen consequences from unilateral changes-in-terms clauses. By sticking to a boilerplate clause requiring any modifications or amendments to the contract to be made through mutual written agreement, parties can avoid the hidden risks and potential loss of rights inherent in unilateral change-in-terms clauses.
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