How hard is it to get a Delaware court to refuse a one-sided clause as unconscionable?
Hard. For a sale of goods, 6 Del. C. § 2-302 provides that a court finding a contract or clause to have been unconscionable AT THE TIME IT WAS MADE may refuse to enforce the contract, enforce the remainder without the clause, or limit the clause's application, and the parties must be given a reasonable opportunity to present evidence of the commercial setting, purpose and effect. The Supreme Court's test, stated in cases that do not cite § 2-302 (Tulowitzki was a franchise-renewal dispute under § 2552, Ketler a health-club release), so it is the common-law test outside Article 2, has two elements: there must be an absence of meaningful choice AND contract terms unreasonably favourable to one party; superior bargaining power alone, without unreasonableness, does not support a finding of unconscionability or unfairness, the concept is used sparingly, and traditionally an unconscionable contract is one which no man in his senses and not under delusion would make on the one hand, and no honest or fair man would accept on the other. There is no deprivation of meaningful choice if a party can walk away from the contract.
The trap
The walk-away rule does most of the work in Delaware and it defeats the ordinary adhesion argument. In Ketler a $10-a-month gym membership containing a full release of the gym's negligence was not unconscionable because the member was free to accept the membership or not; mere disparity of bargaining power is not enough. Combine that with the doctrine being 'used sparingly' and with § 2-302's as-of-formation timing (a clause that turns out to be harsh in operation is not thereby unconscionable), and an unconscionability attack on a commercial clause in Delaware is close to a last resort.
10 authorities
- statute6 Del. C. § 2-302enactment date not established
The words that state the rule
(1) If the court as a matter of law finds the contract or any clause of the contract to have been unconscionable at the time it was made the court may refuse to enforce the contract, or it may enforce the remainder of the contract without the unconscionable clause, or it may so limit the application of any unconscionable clause as to avoid any unconscionable result.
The words that state the rule
In order to hold Atlantic’s renewal demand “unjust”, it must be found to be unfair or unconscionable; that is to say, there must be an absence of meaningful choice and contract terms unreasonably favorable to one of the parties. Superior bargaining power alone without the element of unreasonableness does not permit a finding of unconscionability or unfairness. The traditional test is this: a contract is unconscionable if it is “such as no man in his senses and not under delusion would make on the one hand, and as no honest or fair man would accept, on the other.” Williams v. Walker-Thomas Furniture Co., 121 U.S.App.D.C. 315, 320 , 350 F.2d 445, 450 , 18 A.L.R.3d 1297, 1301-3 (1965). “It is generally held that the unconscionability test involves the question of whether the provision amounts to the taking of an unfair advantage by one party over the other.” J. A. Jones Construction Co. v. City of Dover, Del.Super., 372 A.2d 540, 552 (1977), appeal dismissed, Del.Supr., 377 A.2d 1 (1977). The business-practices-of-the-community test asks whether the terms are so extreme as to appear unconscionable according to the mores and business practices of the time and place. Applying this test, it was held in Gordon v. Crown Central Petroleum Corp., N.D.Ga., 423 F.Supp. 58, 61-62 (1976), aff’d, 5th Cir., 564 F.2d 413 (1977) that the termination of a gas station dealership by Crown, because the dealer refused to stay open 24 hours per day, was not unconscionable in that such a requirement was “not atypical in the local business community.” Applying such normative test, the proffered addendum is not unconscionable; every dealer except Tulowitzki has accepted it.
The words that state the rule
Unconscionability is a concept that is used sparingly.5 Traditionally, an unconscionable contract is one which “no man in his senses and not under delusion would make on the one hand, and as no honest or fair man would accept, on the other.”6 “But mere disparity between the bargaining powers of parties to a contract will not support a finding of unconscionability.”7 “[T]here must be an absence of meaningful choice and contract terms unreasonably favorable to one of the parties.”8
The words that state the rule
There is no deprivation of meaningful choice if a party can walk away from the contract.9 Here, DeShaun was free to accept the Planet Fitness membership or not. The Superior Court did not err in concluding that the release is not unconscionable.
- statute6 Del. C. § 2-302enactment date not established
The words that state the rule
(2) When it is claimed or appears to the court that the contract or any clause thereof may be unconscionable the parties shall be afforded 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
In summary, Tulowitzki has failed to carry his burden of demonstrating that “the terms of the agreement bear no reasonable relation to the business risks involved and are so one-sided as to be oppressive.” W. L. May Co. v. Philco-Ford Corp., 543 P.2d at 287 . Thus, there is no basis for finding that the requirement that plaintiff sign the vapor recovery agreement in order to renew his service station lease operated to terminate his franchise without just cause. We hold, therefore, that under the totality of circumstances, there is no “unjust termination” or “failure to renew without good cause” in this case. ****** Affirmed.
The words that state the rule
In 2010, DeShaun joined Planet Fitness at a cost of $10 per month.1 DeShaun signed a membership agreement, which contained the following: I understand and expressly agree that my use of this Planet Fitness facility . . . involves the risk of injury to me or my guest whether caused by me or not. I understand that these risks can range from minor injuries to major injuries including death. In consideration of my participation in the activities and use of the facilities offered by Planet Fitness, I understand and voluntarily 1 Devana Fitness, LLC was the franchisee of the Planet Fitness location on the date the Membership Agreement was executed. On July 31, 2012, prior to Ketler’s incident, Devana Fitness, LLC assigned its rights and interests in, and under, all Membership Agreements to PFPA, LLC. 1 accept this risk and agree that Planet Fitness . . . will not be liable for any injury, including, without limitation, personal, bodily, or mental injury. . . resulting from the negligence of Planet Fitness or anyone on Planet Fitness’ behalf whether related to exercise or not.
- statute6 Del. C. § 2-102enactment date not established
The words that state the rule
(1) Unless the context otherwise requires, and except as provided in subsection (3), this Article applies to transactions in goods and, in the case of a hybrid transaction, it applies to the extent provided in subsection (2).
The words that state the rule
In the instant case, Tulowitzki has not sustained his burden of showing that the tendered addendum bears “no reasonable relation to the business risks involved,” nor has he shown that the terms are “so one-sided as to be oppressive”.
The words that state the rule
“An unsupported conclusory allegation . that a contract is unenforceable as unconscionable is not enough. Sufficient facts surrounding the ‘commercial setting, purpose and effect’ of a contract at the time it was made should be alleged so that the court may form a judgment as to the existence of a valid claim of uncon-scionability . . . .”
“Defective” means that reading found something to correct. What you are reading is the rule as it stands after that reading.