Can our counterparty get out of this clause in Maine by calling it unconscionable?
In a sale of goods the statute is there; outside it the doctrine exists but the decisions located do not show the argument succeeding. 11 M.R.S. § 2-302(1): "[i]f 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", and § 2-302(2) entitles the parties to "present evidence as to its commercial setting, purpose and effect". Outside the Code the doctrine is older than the Code: A.L. Brown Construction Co. v. McGuire records in a footnote that "[w]hile 'unconscionable' contracts are specifically made unenforceable in 11 M.R.S.A. § 2-302, governing sales of goods, the Law Court has also long applied the doctrine" of unconscionability "as part of the equity power", citing a 1916 decision. The formula the Court uses is adhesion PLUS overreaching: "when a contract of adhesion is exacted by the overreaching of a party, the defense of unconscionability may be asserted" (Dairy Farm Leasing Co., Inc. v. Hartley, in a footnote in which the Court said it did not reach the question), applied in A.L. Brown, which rejected the defence because "this was not 'a contract of adhesion ... exacted by the overreaching of a party [where] the defense of unconscionability may be asserted'" and VACATED the judgment that had invalidated the settlement agreement. The statute also pre-labels one clause: under 11 M.R.S. § 2-719(3), limiting consequential damages for personal injury in the case of consumer goods is "prima facie unconscionable but limitation of damages where the loss is commercial is not".
The trap
The authority most often served for Maine unconscionability is not the Court's. Barrett v. McDonald Investments, Inc. is quoted for a procedural/substantive factor list and a contract-of-adhesion definition: those passages are at [¶32]-[¶34], and the Court's opinion in Barrett ENDS at [¶23]. The majority holding is about ambiguity, not unconscionability: "[w]e merely hold that when a party drafts an agreement requiring arbitration, and offers it to individuals on a take-it-or-leave-it basis, the drafter bears the risk if its chosen language is found to be ambiguous", and on that ground the Court affirmed the denial of a motion to compel arbitration. That is the rule a Maine drafter should actually plan around: against a take-it-or-leave-it form, ambiguity is resolved against the drafter, which is a cheaper win for the other side than unconscionability. Dairy Farm's adhesion passage is itself a footnote in which the Court said it did "not reach that question in disposing of the appeal before us", and Dairy Farm was decided on liquidated damages, not unconscionability: the entry was "Appeal sustained. Judgment set aside. Remanded with direction to enter judgment for Defendant", because the plaintiff proved neither a valid liquidated-damages clause nor its actual damages. So the two cases most often cited for Maine unconscionability each decided something else. The equity-power footnote in A.L. Brown is the one place the doctrine is said to exist outside the Code, and A.L. Brown still rejected it on the facts.
11 authorities
- statute11 M.R.S. § 2-302enactment date not established
The words that state the rule
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.
- statute11 M.R.S. § 2-302enactment date not established
The words that state the rule
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.
- statute11 M.R.S. § 2-719enactment date not established
The words that state the rule
Consequential damages may be limited or excluded unless the limitation or exclusion is unconscionable. Limitation of consequential damages for injury to the person in the case of consumer goods is prima facie unconscionable but limitation of damages where the loss is commercial is not.
The words that state the rule
It may also be noted that when a contract of adhesion is exacted by the overreaching of a party, the defense of unconscionability may be asserted.
The words that state the rule
Although the Defendant urged at oral argument that the writing which underlies the controversy was a contract of adhesion, we do not reach that question in disposing of the appeal before us.
The words that state the rule
In sum, at the hearing on damages in Superior Court the Plaintiff might have satisfied its burden of proof in either of two ways. It could have established by competent evidence that the provision for liquidated damages met the two-fold requirement of our law. Alternatively, the Plaintiff could have adduced evidence establishing the actual damages to it which resulted from this Defendant’s breach. We conclude that the Plaintiff failed to do either. The entry will be: Appeal sustained. Judgment set aside. Remanded with direction to enter judgment for Defendant, Elvin Hartley.
The words that state the rule
Finally, this was not “a contract of adhesion ... exacted by the overreaching of a party [where] the defense of unconscionability may be asserted.”
The words that state the rule
While "unconscionable” contracts are specifically made unenforceable in 11 M.R.S.A. § 2-302, governing sales of goods, the Law Court has also long applied the doctrine of uncon-scionability as part of the equity power. See, e.g., Bither v. Packard, 115 Me. 306, 314 , 98 A. 929, 933 (1916).
The words that state the rule
Judgment vacated. Remanded to the Superior Court for proceedings consistent with the opinion herein. All concurring.
The words that state the rule
We merely hold that when a party drafts an agreement requiring arbitration, and offers it to individuals on a take-it-or-leave-it basis, the drafter bears the risk if its chosen language is found to be ambiguous.
The words that state the rule
Accordingly, although we reach our conclusion on different grounds than did the motion court, we affirm the court's denial of the motion to stay and compel arbitration of counts IV, V, VIII, and X. [6] The entry is: Judgment affirmed.
“Defective” means that reading found something to correct. What you are reading is the rule as it stands after that reading.