Quiz 19: The Formation of Sales and Lease Contracts

Business

Reason why would the seller's knowledge of buyers limited resources support a finding of unconscionability: In the case of Jones v. Star Credit Corp., 59 Misc.2d 189, 298 N.Y.S.2d 264 (Sup.Ct. 1969) the Superior Court held that the finance terms of the contract were unenforceable due to unconscionability and limited the recovery of the Credit Corp. to the amount already collected. The issue before the Court was whether the sale of a freezer unit having a retail value of $300 for $900 was unconscionable as a matter of law. The Court determined that a purchase price substantially higher than the value of an item can render the sale unconscionable as a matter of law. The Court stated that because the seller was aware of the limited resources of the buyer, he took advantage and sold an item for more than three times its value and added credit fees that totaled more than the full retail value of the freezer. The Court went on to state that the item was necessary for a household and that without the resources and wherewithal, a consumer of any status would be in an unconscionable financial credit contract. The Court held that the meaningfulness of choice essential to the making of a contract can be negated by a gross inequality of bargaining power. Hence, the buyers' limited resources supported a finding of unconscionability.

In the case of Fresher Foods, Inc. v. Vernon , a trial court would probably find that Vernon must complete the part of the transaction that has already been paid for because of partial performance. Vernon accepted a partial payment for goods promised. Even though the Statute of Frauds required that any contract for the sale of goods prices at $500 or more must be in writing to be enforceable, the oral agreement has been partially paid and accepted by both parties. That part of the agreement was enforceable, so Vernon must deliver to Fresher 100 bushels of corn at $1.25 per bushel.

In the case of Jones v. Star Credit Corp., 59 Misc.2d 189, 298 N.Y.S.2d 264 (Sup.Ct. 1969) the Superior Court held that the finance terms of the contract were unenforceable due to unconscionability and limited the recovery of the Credit Corp. to the amount already collected. The Court determined that a purchase price substantially higher than the value of an item can render the sale unconscionable as a matter of law. Further, the Court determined that because the seller was in a better position to understand the value and finance charges, it was his/her duty to provide information about the transaction to the buyer. Section 2-302 of the Uniform Commercial Code expressly authorizes the trial court to make a finding as a matter of law that a contract or a contract clause was unconscionable at the time it was made. Upon this finding, the court may tailor the contract to avoid the unconscionable result; it may refuse to enforce the contract; or it may delete the unconscionable clause and enforce the remainder of the contract. The contract must be so one-sided that the principle is oppressed and unfairly surprise regarding the value, financial terms or usability of the item as compared to typical terms in the current marketplace.

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