- Fraud is not amenable to any precise definition Consumer Contracts are the general archetype of agreements that may be challenged for unconscionability for the purpose of consumer protection Restatement 2d 208: “If a contract or term thereof is unconscionable at the time the contract is made a court may refuse to enforce the contract, or may enforce the remainder of the contract without the unconscionable term, or may so limit the application of any unconscionable term as to avoid any unconscionable result.” Substantive- oppressive clause, unduly/unequal terms Procedural- unfair language, obscure language - Procedural unconscionability concerns manner in which contract was negotiated; 2 facts important — oppression and surprise. Oppression means inequality of bargaining power, no real negotiation, absence of meaningful choice. Surprise means hidden terms in prolix printed forms. It’s a balancing test you usually need both, but more substantive means you need less procedural and vice versa. If one is so overpowering then you don’t necessarily need the other. Need to prove: - 1. Context of inequality of bargaining power - 2. Procedural unconscionability – some impropriety in the process of bargain, like fine print, obscure language etc. - 3. Substantive unconscionability - Unduly, unequal terms A clause or contract in whole is unconscionable if there is 1) inequality of bargaining power; 2)procedural unconscionability and 3)substantive unconscionability (unequal terms) 45
Ora Lee Williams v. Walker-Thomas Furniture - Walker, a furniture store in a poor minority neighborhood, drafts a contract containing a cross collateral warranty clause saying that each installment must be made and shall be credited pro rata on all outstanding leases, bills, and accounts. Williams is a single mother with little education and 7 children, relying on public assistance. - The clause is there to deal with the problem of default, which happens often in a poor neighborhood -The specific clause is confusing, especially to a poor uneducated person - Trial court finds for Walker; however, Appellate court finds ‘knowing exploitation of vulnerability” Need to prove the 3 step test (above): ○ 1. Inequality of bargaining power: She’s poorly educated, welfare, door-to-door situation ○ 2. Procedural unconscionability – Unclear clause, confusing terms, door-door situation ○ 3. Substantive unconscionability - she doesn’t own anything unless she pays for everything, unfair. Exploiting economic vulnerability of customers. In re Louis Fleet v. United States Consumer Council - USCC, a nongovernmental agency, offers services that it is not qualified to provide and referral lawyer which could be obtained for free by bar association lawyer referral service. They require people to sign contract and pay a fee before receiving such services. Targeted consumers that came for legal advice to protect them from foreclosure of their homes. Used marketing scheme to represent that they could help when they couldn’t and gave off impression that they were govt agency. -
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