Another Case on Unconscionability

By Laurie Murphy

Laurie Murphy

In previous blogs we've reported on what makes a boilerplate agreement unenforceable.  Recently another appellate court weighed in in another automobile purchase case.  Two buyers of a new car were presented with a long, two sided contract containing an arbitration clause on the back of one the pages at the very bottom of the page.

The arbitration clause itself was harsh and one sided favoring the dealer of course.  The buyers were not given the opportunity to review the contract and did not even know it was two sided.  The trial court did not find the contract was unconscionable.  The appellate court reversed finding both procedural and substantive unconscionability. 

The procedural unconscionability stemmed from the placing of the arbitration clause on the back of the two sided page at the bottom.  The substantive unconscionability stemmed from several clauses in the arbitration paragraph, one permitting an appeal in an award of injunctive relief, one permitting an appeal to an arbitration panel of three arbitrators if the award exceeds $100,000, another requiring the appealing party to pay the filing fee in advance and lastly a clause exempting repossession from arbitration though permitting injunctive relief.  Vargas v. SAI Monrovia  2013 DJDAR 7148. 

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When Are Boilerplate Unfair And One-Sided Provisions In Consumer Agreements Unenforceable?

By Laurie Murphy

This question was answered in a recent case decided by the court of appeals.  When clauses are so one sided or unfair, the courts can decline to enforce them if they are found to be both procedurally and substantively unconscionable. 

Procedural unconscionability is found when there is unequal bargaining power and the contracts are foisted on the unsuspecting with no explanation and/or when their terms conflict with oral representations, are buried in the fine print and/or required as a "take it or leave it" proposition. 

Substantive unconscionability is where the complained of provision is overly harsh and one-sided.  In Vasquez v. Greene Motors Inc. 2013 DJDAR 4087 the appellate court overturned a trial court's finding that an arbitration clause in a used car sales contract was unconscionable. 

The appellate court found that though the sales contract was procedurally unconscionable because it was offered on a take it or leave it basis, there was not a high degree of procedural unconscionability.  And, the court further found that the complained of clause requiring the parties to arbitrate their dispute was not necessarily substantively unconscionable because there was no evidence that the cost to arbitrate would have been so significant to the plaintiff so as to prevent him from arbitrating and/or that arbitration necessarily favors the defendant dealership. 

Because there was not a high degree of procedural unconscionability and essentially no evidence of substantive unconscionability the court reversed the trial court effectively ordering the parties to arbitrate their dispute.

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