Class action waiver: Overview, definition and example
What is a class action waiver?
A class action waiver is a clause in a contract that prevents parties from filing or participating in class-action lawsuits. By agreeing to the waiver, individuals or businesses give up their right to join others in a collective legal action and agree to resolve disputes on an individual basis instead. This is commonly found in service contracts, employment agreements, and consumer contracts.
Why is a class action waiver important?
A class action waiver is important because it limits the ability of individuals to band together and pursue collective legal claims. For businesses, it can help reduce the risk of large-scale lawsuits that could be costly and time-consuming. For individuals, agreeing to a class action waiver means they will need to address their claims independently, which could potentially limit their ability to seek damages as part of a larger group.
Understanding a class action waiver through an example
Imagine a software company that provides its users with a licensing agreement that includes a class action waiver. If a user is dissatisfied with the software, they cannot join other users in a class action lawsuit against the company. Instead, the user would need to resolve their issue through individual arbitration or litigation.
In another example, a retail company’s terms of service may include a class action waiver that prohibits customers from suing as part of a class if there is an issue with a product. If customers feel they were wronged, they would have to pursue the matter on their own, rather than joining a group of affected individuals in a lawsuit.
Example of a class action waiver clause
Here’s how a class action waiver clause might look in a contract:
“By signing this Agreement, the parties agree to waive their right to participate in any class action, collective action, or representative action arising out of or related to this Agreement. Any dispute will be resolved on an individual basis.”
Conclusion
A class action waiver limits the ability of parties to file or join class-action lawsuits, requiring disputes to be resolved individually. While this can be beneficial for businesses by reducing legal risks, it means individuals must resolve disputes on their own, often through arbitration or individual lawsuits. Understanding how class action waivers work can help both businesses and individuals make informed decisions when entering into contracts.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.