Can an Alaska court refuse to enforce, or rewrite, an unconscionable contract or clause?
Yes, and the Alaska statutes say so three times over. AS 45.02.302(a) gives the court three options once it finds a contract or clause unconscionable as a matter of law at the time it was made: "the court may refuse to enforce the contract, enforce the remainder of the contract without the unconscionable clause, or so limit the application of an unconscionable clause as to avoid an unconscionable result." The same three options are enacted for contracts that are not sales of goods at all: AS 34.08.790(a) provides that "[u]pon finding as a matter of law that a contract or contract clause was unconscionable at the time the contract was made, a court may refuse to enforce the contract, may enforce the remainder of the contract without the unconscionable clause, or may limit the application of the unconscionable clause in order to avoid an unconscionable result." The Alaska Supreme Court treats that remedy as the model for judicial reformation beyond sales: in Data Management, Inc. v. Greene it adopted reasonable alteration of an overbroad non-compete because "[t]his approach is consistent with U.C.C. § 2-302, as codified in Alaska under AS 45.02.302." The unconscionability inquiry itself is illustrated by Pierce v. Catalina Yachts, Inc., decided under the companion sales provision AS 45.02.719(c) rather than this section: unconscionability under AS 45.02.719(c) "ultimately presents an issue of law for the court, rather than one of fact for the jury." and "we hold the superior court erred in ruling that it would be conscionable to enforce the warranty's bar against consequential damages and in declining to allow the Pierces to present their consequential damages claim to the jury."
The trap
AS 45.02.302(a) anchors the unconscionability inquiry to the moment of contracting (a clause is assessed as unconscionable (or not) "at the time it was made"), yet the Pierce court, applying § 45.02.719(c)'s parallel unconscionability standard, leaned heavily on the seller's BAD-FAITH BREACH after the contract was formed (its failure to honor the limited warranty) as a circumstance making enforcement of the damages bar unconscionable. Nothing read in the statute or the case resolves this apparent tension between the statute's at-formation anchor and an after-the-fact breach driving the court's unconscionability conclusion; it is recorded here as unresolved rather than smoothed over. One statute does make conduct count expressly, and it is worth knowing which: for a consumer LEASE, AS 45.12.108(b) lets the court "grant appropriate relief" where the lease "has been induced by unconscionable conduct or that unconscionable conduct has occurred in the collection of a claim arising from a lease contract", so conduct after signing is squarely within that provision in a way AS 45.02.302(a)'s words are not. Separately, AS 45.02.302(b) requires the parties be given "a reasonable opportunity to present evidence as to its commercial setting, purpose, and effect" before an unconscionability finding is made: a procedural step, not a formality that can be skipped even where the substantive answer seems obvious. AS 34.08.790(b) spells the same opportunity out in four specific heads of evidence, including "whether a party has knowingly taken advantage of the inability of another party reasonably to protect personal interests by reason of physical or mental infirmity, illiteracy, inability to understand the language of the agreement, or similar factors," and it ends with a warning against the obvious shortcut: "[a] disparity between the contract price and the value of the property measured by the price at which similar property was readily obtainable in similar transactions does not, of itself, render the contract unconscionable." Price alone is not enough.
10 authorities
- statuteAS 45.02.302enactment date not established
The words that state the rule
If the court as a matter of law finds the contract or a clause of the contract was unconscionable at the time it was made, the court may refuse to enforce the contract, enforce the remainder of the contract without the unconscionable clause, or so limit the application of an unconscionable clause as to avoid an unconscionable result.
- statuteAS 45.02.302enactment date not established
The words that state the rule
If it is claimed or appears to the court that the contract or any clause of the contract may be unconscionable, the parties shall be given a reasonable opportunity to present evidence as to its commercial setting, purpose, and effect to aid the court in making the determination.
The words that state the rule
For these reasons, we hold the superior court erred in ruling that it would be conscionable to enforce the warranty's bar against consequential damages and in declining to allow the Pierces to present their consequential damages claim to the jury.
The words that state the rule
This approach is consistent with U.C.C. § 2-302, as codified in Alaska under AS 45.02.302, which states: (a) If the court as a matter of law finds the contract or a clause of the contract unconscionable at the time it was made, the court may refuse to enforce the contract, enforce the remainder of the contract without the unconscionable clause, or so limit the application of an unconscionable clause as to avoid an unconscionable result.
The words that state the rule
We agree with Catalina that unconsciona-bility under AS 45.02.719(c) ultimately presents an issue of law for the court, rather than one of fact for the jury.
The words that state the rule
We agree, holding that because Catalina acted in bad faith when it breached the warranty, the company cannot conscionably enforce the warranty's provision barring consequential damages. Accordingly, we remand for a trial to determine consequential damages.
The words that state the rule
But the decisive factor in this case is the nature of Catalina's breach, which caused the limited remedy to fail of its essential purpose. The jury specifically found that Catalina acted in bad faith in failing to honor its warranty. This finding virtually establishes a "cireumstance[ ] resulting in failure of performance that makes it unconscionable to enforce the parties' allocation of risk.
- statuteAS 34.08.790enactment date not established
The words that state the rule
Upon finding as a matter of law that a contract or contract clause was unconscionable at the time the contract was made, a court may refuse to enforce the contract, may enforce the remainder of the contract without the unconscionable clause, or may limit the application of the unconscionable clause in order to avoid an unconscionable result.
- statuteAS 34.08.790enactment date not established
The words that state the rule
Whenever it is claimed or appears to the court that a contract or a contract clause is or may be unconscionable, the parties, in order to aid the court in making the determination, must be afforded a reasonable opportunity to present evidence as to (1) the commercial setting of the negotiations; (2) whether a party has knowingly taken advantage of the inability of another party reasonably to protect personal interests by reason of physical or mental infirmity, illiteracy, inability to understand the language of the agreement, or similar factors; (3) the effect and purpose of the contract or clause; and (4) any gross disparity, if a sale, at the time of contracting, between the amount charged for the property and the value of the property measured by the price at which similar property was readily obtainable in similar transactions. A disparity between the contract price and the value of the property measured by the price at which similar property was readily obtainable in similar transactions does not, of itself, render the contract unconscionable.
- statuteAS 45.12.108enactment date not established
The words that state the rule
With respect to a consumer lease, if the court as a matter of law finds that a lease contract or a clause of a lease contract has been induced by unconscionable conduct or that unconscionable conduct has occurred in the collection of a claim arising from a lease contract, the court may grant appropriate relief.
“Defective” means that reading found something to correct. What you are reading is the rule as it stands after that reading.