Unconscionability and Standardized Contracts

Introduction

Over the past decade, courts throughout the nation have, with the aid of Section 2-302 of the Uniform Commercial Code, confronted and partially resolved a problem which they have long faced: the necessity of developing judicial standards and remedies for controlling the public use of the standardized agreement. With the advent of mass distribution of goods and the consequent use of standardized agreements, a single contract form may control the rights and property of large numbers of individuals. In so doing, standardized contracts act upon the public as law, not private law bargained for and assented to, but rather a form of unchecked commercial legislation enforced in the interests of its maker. Indeed, it is no exaggeration to suggest that standardized contracts often control the behavior of more individuals than do ordinances of many municipalities.

Unfortunately, the arsenal of doctrines and remedies traditionally available to the courts for policing contract abuse fail to offer relief appropriate to the problems arising from the use of standardized agreements. As will be discussed, common law doctrines such as “fraud” and “constructive fraud” direct a court’s attention not to factors common to a number of similar transactions, but rather to the particularities of a single transaction. The result of such traditional approaches to standardized agreements is that for every Mrs. Williams or Mrs. Owens relieved of the burden of an unconscionable contract, many others remain intimidated by the same contract, and the maker continues to profit at their expense.

States have attempted to confront the public ramifications of the standardized contract by enacting consumer protection acts which give to courts the power to enjoin the use of contracts which are either deceptive or which breach standards of fair dealing. However, it is presently unclear whether courts will use these powers to render invalid contract forms judged to be harsh or inequitable or to continue simply to remedy wrongs on a case-by-case basis. Considering the concern which many courts have of becoming regulators of economic behavior, the likelihood that the former course will be taken–extending remedies to classes of consumers–depends heavily upon the availability of legal standards and rules which treat standardized contracts as public instruments, yet safeguard judges from becoming, in effect, commissioners of consumer affairs.

This Note contends that § 2-302 of the Uniform Commercial Code provides courts with a framework which allows them to examine standardized contracts as public instruments and deal with them accordingly. Properly applying § 2-302, courts need not be afraid to use broadly the powers recently granted them by many state legislatures in consumer protection acts.

The Note begins with a discussion of Kugler v. Romain, a case which reveals not only the tension between the need for public remedies and the limited ability of common law doctrines to provide them, but also one court’s resolution of that tension by applying the doctrine of unconscionability as em- bodied in § 2-302 of the UCC. The next section discusses the common law roots of unconscionability; the necessity that arose for developing a new doc- trine based upon commercial considerations; and § 2-302, the foundation of that doctrine. The final discussion concerns the standards of reasonable expectations and commercial oppression which have emerged from the case law of § 2-302, standards which are peculiarly applicable to problems arising from the use of form contracts.

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