D extends line of credit in such a way that unless all furniture is paid off, P has right to repossess upon default of payments. D structured the contract such that there will be a remaining balance on all items purchased within the store if there is a remaining balance on a single item. P’s default on payments.
Court of appeals and trial court rune in favor of D, that they do not have authority to invalidate contract on the basis of unconscionability.
Does the court have the authority to render a contract unenforceable when a choice as to acceptance exists and fraud does not exist?
Judgment: Remanded. The trial and appellate courts did not appropriately consider the unconscionability or reasonableness of the contract.
Unconscionability has generally been recognized to include an absence of meaningful choice on the part of one of the parties together with contract terms which are unreasonably favorable to the other party
No ruling has been specifically held on the basis of unconscionability, which explicitly declares the court’s power to nullify a contract on that basis. The standard as recently affirmed in UCC code states that “If a contract be unreasonable and unconscionable, but not void for fraud, a court of law will give to the party who sues for its breach damages, not according to its letter, but only such as he is equitably entitled to.” Generally the standard has been to first review for choice, and if no choice exists – then determine if the contract is so unfair as to be unenforceable. The new test should be “the terms are “so extreme as to appear unconscionable according to the mores and business practices of the time and place.”
The trial and appellate courts did not seek to determine reasonableness of unconscionability.
Appellant knew the terms and conditions of the contract and received choice. Not appropriate role of the court to initially consider the reasonableness or unconscionability of the contract.