D purchased a number of household items form D, for which payment was to be made in installments. The titles for the purchased items would remain with D until the total of all of the monthly payments equaled the stated value of the items.
There was a provision in the contract which gave P the right to repossess all items bought by their customers if the customer defaulted on a payment.
In 1962, D bought items from P. Upon default, P sought to repossess all items the D had bought and paid for since 1958.
Procedural History:
Lower court found for P, contract enforceable.
DC COA affirmed, found for P, contract enforceable.
US COA DC found for D, remanded to trial court.
Issues:
Can a contract we invalidated due to unconscionability?
Holding/Rule:
If unconscionability is present at the time a contract is formed, the court can choose not to enforce the contract.
Reasoning:
In other jurisdictions, it has been held as a matter of common law that unconscionable contracts are not enforceable.
Congress has enacted the UCC. UCC 2-302 provides that the court may refuse to enforce a contract which it finds to be unconscionable at the time it was made.
When a party of little bargaining power, and hence little real choice, signs a commercially unreasonable contract with little or no knowledge of its terms, it is hardly likely that consent was ever given to all the terms.
Corbin suggests that the test should be whether the terms are so extreme as to appear unconscionable according to the mores and business practices of the time and place.
Dissent:
The law has always granted parties latitude in making their own contracts.
This decision will affect a great number of seemingly valid installment plan contracts.
Notes:
Unconscionability involves the evaluation of four factors…
The relative harshness of the term in question, including the importance of the legal right that is affected
The manner of presentation of the term in the agreement
The relative bargaining power of the party against whom the term is asserted
