Problem
Medical Instruments, Inc. (MIT), required a larger warehouse for its facilities. Medical Instruments Inc. located a 10,000-square-foot building in New Hampshire and signed a lease with Commercial Properties (CP) for one year with a right to renew for five one-year terms upon 60 days' notice. After the first renewal, CP sent back a new lease with substantially the same terms, except that the new lease had a mandatory arbitration clause that required any tenant to go through arbitration in CP's home state of California. Medical Instruments Inc. signed the lease without objection. One month after taking occupancy, Medical Instruments Inc. complained that a leak in the warehouse roof was allowing water to drip into a corner of the warehouse and that Medical Instruments Inc. had to move its hardware equipment out of the warehouse to protect it from water damage. CP did not fix the leak until one month later, and Medical Instruments Inc. suffered losses because its hardware was partially destroyed by the leak. Medical Instruments Inc. also had additional out-of-pocket losses related to the expense of moving the equipment to another location.
I. If Medical Instruments Inc. sues CP in a state trial court for the losses it incurred, what would CP's likely defense be?
II. Discuss the significance of the fact that the original lease did not have an arbitration clause but the new one did. Also, is it significant that the place of arbitration would require Medical Instruments Inc. to travel to California? Do these facts give a court any reason to invalidate the arbitration clause?
III. What cases that you studied in this chapter help to support your arguments in Question II?