Godon v. Bend-CDJR, LLC

Summary

The Oregon Court of Appeals reviewed an interlocutory order denying a motion to compel arbitration in a vehicle-purchase dispute. The court held that the trial court applied the wrong analytical framework by addressing the arbitration agreement's validity before considering contract formation and specific challenges to the delegation clause. The court vacated and remanded for factual findings concerning whether the arbitration agreement was formed, including whether the promise to arbitrate was illusory.

Holdings

1. A court must first determine whether the parties formed an agreement to arbitrate. If an agreement was formed, the court must next consider challenges specifically directed at the delegation provision. Only if the delegation provision is invalid may the court decide challenges to the validity of the arbitration agreement as a whole; otherwise, those validity challenges are for the arbitrator.
2. An illusory-promises challenge based on the absence of consideration presents a contract-formation issue reserved for the court.
3. The court could not resolve the illusoriness issue because the trial court had not made necessary factual findings concerning the defendant's knowledge of the arbitration agreement's deficiencies and the record was insufficient to decide that issue in the first instance.

Questions Presented

1. Whether the trial court applied the correct framework in deciding defendants' motion to compel arbitration.
2. Whether contract formation must be decided by the court before enforcing a delegation clause.
3. Whether an illusory-promises challenge based on lack of consideration presents a contract-formation issue for the court.
4. Whether the appellate court could affirm on the alternative ground that the arbitration agreement was illusory when the trial court had not made the necessary factual findings.

Disposition

vacated