3: Unconscionability

Question 1

Unconscionability (General)

Answer 1

an absence of meaningful choice on the part of one of the parties AND K terms which are unreasonably favorable to the other party

Question 2

UCC 2-302: Unconscionable K or Clause

Answer 2

(1) if court finds K (or clause) to have been unconscionable at time it was made, they may refuse to enforce K OR can enforce remainder of K w/o clause OR may limit application of clause to avoid an unconscionable result; (2) when party claims that K/clause may be unconscionable, parties afforded a reasonable opportunity to present evidence of commercial setting, purpose, and effect to aid court in making determination (purpose is prevention of oppression and unfair surprise)

Question 3

Procedural Unconscionability

Answer 3

defects in contractual bargaining process (inequality of bargaining power, no real negotiation, courts cite fine print, no time to sign); indicated by lack of knowledge and lack of voluntariness

Question 4

Substantive Unconscionability

Answer 4

unfairness in outcome of bargaining process; terms unreasonably favorable to one party, so unfair that it shocks the conscience; indicated by: 1 party deprived of all benefits of agreement, left w/o remedy of other party’s nonperformance, disparity between cost and price, terms bear no reasonable relationship to business risks assumed by both parties

Question 5

Contracts of Adhesion

Answer 5

standard form contracts presented on a take-it-or-leave-it basis; generally enforceable

Question 6

Fleet v. US Consumer Council: Attorney Referrals

Answer 6

Purpose of unconscionability is to establish a broad business ethic; indicated by a price that grossly exceeds price at which similar services were readily obtainable in similar transactions by like consumers or goods sold have little/no value to consumer for purpose for which he was persuaded to buy them

Question 7

Ferguson v. Countrywide Credit: Arbitration Terms

Answer 7

Arbitration terms were deemed unconscionable; procedural: oppression (unequal bargaining power, no negotiation), surprise (K terms are hidden); substantive: terms of K were so one-sided as to shock the conscience (forced arbitration for only 1 party’s potential claims, forced 1 party to pay more than would in court, prevention of access to info through discovery)