Can a New Jersey court refuse to enforce this clause as unconscionable?
Yes, and for goods the remedy is surgical: if the court AS A MATTER OF LAW finds the contract or any clause unconscionable AT THE TIME IT WAS MADE, it may refuse to enforce the contract, enforce the remainder without the unconscionable clause, or so limit the clause's application as to avoid an unconscionable result, after affording the parties a reasonable opportunity to present evidence of its commercial setting, purpose and effect. More broadly, in deciding whether to enforce a contract of adhesion New Jersey courts look not only to the take-it-or-leave-it nature or standardized form of the document but also to the subject matter of the contract, the parties' relative bargaining positions, the degree of economic compulsion motivating the adhering party, and the public interests affected by the contract.
The trap
Calling a contract adhesive is "the beginning, not the end, of the inquiry" in New Jersey: Rudbart's four factors decide enforceability, and Stelluti applied them to enforce an adhesive gym waiver, so the standardized form of the document by itself wins nothing. The last factor, public interests affected, is weighed, not dispositive: Rudbart enforced the publication-notice term on securities-policy grounds and Stelluti enforced a consumer health-club waiver, folding the public-interest factor into the exculpatory-clause analysis. And because § 12A:2-302(1) lets the court excise the offending clause and enforce the rest, an aggressive term risks being cut out of an agreement that otherwise survives.
11 authorities
- statuteN.J. Stat. Ann. § 12A: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. (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.
- case127 N.J. 344Rudbart v. North Jersey District Water Supply CommissionN.J.decided 1992read it at the source ↗
The words that state the rule
Thus, in determining whether to enforce the terms of a contract of adhesion, courts have looked not only to the take-it-or-leave-it nature or the standardized form of the document but also to the subject matter of the contract, the parties' relative bargaining positions, the degree of economic compulsion motivating the "adhering" party, and the public interests affected by the contract.
- case127 N.J. 344Rudbart v. North Jersey District Water Supply Commissiondecided 1992read it at the source ↗
The words that state the rule
Applying those criteria to the project notes, we find insufficient reason to invalidate the notice-by-publication term.
- case127 N.J. 344Rudbart v. North Jersey District Water Supply Commissiondecided 1992read it at the source ↗
The words that state the rule
We agree that the doctrine of adhesion contracts should not be extended to regulated securities transactions. We now reverse the judgment of the Appellate Division, which was based on that court's holding that the subject securities constituted a contract of adhesion, but remand the matter to the Law Division for resolution of the remaining claims asserted by the plaintiffs.
The words that state the rule
A contract of adhesion is defined as one "presented on a take-it-or-leave-it basis, commonly in a standardized printed form, without opportunity for the `adhering' party to negotiate." Rudbart, supra, 127 N.J. at 353 , 605 A. 2d 681 (citations omitted). Although a contract of adhesion may require one party to choose either to accept or reject the contract as is, the agreement nevertheless may be enforced. See id. at 353, 356-61 , 605 A. 2d 681 (noting such considerations as "the subject matter of the contract, the parties' relative bargaining positions, the degree of economic compulsion motivating the `adhering' party, and the public interests affected by the contract").
- statuteN.J. Stat. Ann. § 12A:2-102enactment date not established
The words that state the rule
Unless the context otherwise requires, this Chapter applies to transactions in goods; it does not apply to any transaction which although in the form of an unconditional contract to sell or present sale is intended to operate only as a security transaction nor does this Chapter impair or repeal any statute regulating sales to consumers, farmers or other specified classes of buyers.
- case127 N.J. 344Rudbart v. North Jersey District Water Supply CommissionN.J.decided 1992read it at the source ↗
The words that state the rule
The project notes involved here unquestionably fit our definition of contracts of adhesion. That is, they were presented to the public on standardized printed forms, on a take-it-or-leave-it basis without opportunity for purchasers to negotiate any of the terms.
- case127 N.J. 344Rudbart v. North Jersey District Water Supply CommissionN.J.decided 1992read it at the source ↗
The words that state the rule
But the observation that the notes fit the definition of contracts of adhesion is the beginning, not the end, of the inquiry: we must now determine as a matter of policy whether to enforce the unilaterally-fixed terms of the notes.
- case127 N.J. 344Rudbart v. North Jersey District Water Supply CommissionN.J.decided 1992read it at the source ↗
The words that state the rule
We therefore conclude that although the project notes fit our literal definition of contracts of adhesion, plaintiffs are bound by the provision for notice by publication because of the unique policy considerations attendant on securities offerings.
The words that state the rule
In sum, although the terms of the agreement were presented "as is" to Stelluti, rendering this a fairly typical adhesion contract in its procedural aspects, we hold that the agreement was not void based on any notion of procedural unconscionability.
The words that state the rule
To the extent that any contract of adhesion also would require review to determine whether its enforcement implicates a matter of public interest, see ibid., that test overlaps, and is subsumed by the more precise analysis employed when assessing whether to enforce an exculpatory agreement.
“Defective” means that reading found something to correct. What you are reading is the rule as it stands after that reading.