Can our counterparty get out of this clause in Rhode Island by calling it unconscionable?
Only by winning a public-policy argument, and no Rhode Island Supreme Court decision striking a commercial contract term as unconscionable was located among the opinions read for this rule, which is not the same as none existing: the word runs through 126 Rhode Island opinions, and the unconscionability discussions in eleven of them, among them a 1983 truck-leasing dispute, were not read. Rhode Island has exactly one statute titled “Unconscionability”, § 34-18-13, and it is confined to residential tenancies: it applies to “[a] rental agreement or any provision thereof” and to a settlement waiving a claim “under this chapter or under a rental agreement”, and ch. 34-18 is the “Residential Landlord and Tenant Act” (§ 34-18-1). Outside that chapter the doctrine is a BRANCH of the Rhode Island public-policy test, not a free-standing defence: “It is well established that in Rhode Island a contract violates public policy only if it is: ‘[1] injurious to the interests of the public, [2] interferes with the public welfare or safety, [3] is unconscionable; or [4] tends to injustice or oppression’” (Gorman v. St. Raphael Academy, restating City of Warwick v. Boeng Corp. and repeated verbatim in NV One, LLC v. Potomac Realty Capital, LLC). The substantive bar, as the Court has stated it, is the old Hume v. United States one: a court refuses enforcement “only when the inequality of the bargain was so manifest as to shock the judgment” of a person of good sense (Grady v. Grady). In a commercial sale the argument has been put and lost on the record rather than on the doctrine: in Star-Shadow Productions, Inc. v. Super 8 Sync Sound System the buyer complained it was never given the chance to show commercial setting, purpose and effect, and the Court answered that “plaintiffs did not avail themselves of the opportunity to submit evidence” of it, and that “limitation of liability clauses are not unconscionable merely because buyers are not fully protected for damages that may arise from the malfunction of their purchased goods or service.”
The trap
Rhode Island does not give you the two boxes the argument is usually pleaded in. No Supreme Court majority adopting a procedural/substantive unconscionability framework was found: the only two opinions that use the phrase ‘substantive unconscionability’ are DeFontes v. Dell, Inc. (in a footnote correcting the hearing justice, and only to say that an illusory-contract point is a formation question, not unconscionability) and a dissent in Constant v. Amica Mutual Insurance quoting a law review. So a Rhode Island brief that argues ‘procedural plus substantive’ is arguing a test no majority opinion located here has stated; the framing that has actually decided Rhode Island cases is the four-branch public-policy test. The second trap is a burden trap out of Star-Shadow: the chance to ‘present evidence as to its commercial setting, purpose and effect’ is a chance, not a presumption, a party opposing summary judgment who rests on the pleadings loses the unconscionability count outright. The third is a forum trap: in DeFontes the Court said that “[w]hile the determination of whether the entire agreement is unconscionable is reserved for the arbitrator, we may consider whether the agreement was illusory”, so where an arbitration clause is in play the unconscionability attack on the whole contract may never be heard by a Rhode Island court at all.
16 authorities
- statuteR.I. Gen. Laws § 34-18-13enactment date not established
The words that state the rule
If the court, as a matter of law, finds: (1) A rental agreement or any provision thereof was unconscionable when made, the court may refuse to enforce the agreement, enforce the remainder of the agreement without the unconscionable provision, or limit the application of any unconscionable provision to avoid an unconscionable result; or
- statuteR.I. Gen. Laws § 34-18-13enactment date not established
The words that state the rule
If unconscionability is put into issue by a party or by the court upon its own motion, the parties shall be afforded a reasonable opportunity to present evidence as to the setting, purpose and effect of the rental agreement or settlement to aid the court in making the determination.
- statuteR.I. Gen. Laws § 34-18-1enactment date not established
The words that state the rule
This chapter shall be known and may be cited as the “Residential Landlord and Tenant Act”.
The words that state the rule
It is well established that in Rhode Island a contract violates public policy only if it is: “[1] injurious to the interests of the public, [2] interferes with the public welfare or safety, [3] is unconscionable; or [4] tends to injustice or oppression.”
The words that state the rule
a contract or agreement is generally against public policy if.it is injurious to the interests of the public, interferes with the public welfare or safety, is unconscionable, or tends to injustice or oppression.
The words that state the rule
A contract, or a term contained therein violates public policy only if it is: “[1] injurious to the interests of the public, [2] interferes with the public welfare or safety, [3] is unconscionable; or [4] tends to injustice or oppression.”
The words that state the rule
Long ago the United States Supreme Court in Hume v. United States, 132 U.S. 406, 411, 415 , 10 S.Ct. 134, 136, 137 , 33 L.Ed. 393, 396, 397 (1889), ruled that a court would usually refuse to enforce a contract on the ground of unconscionability only when the inequality of the bargain was so manifest as to shock the judgment *447 of a person of good sense and when the terms were so unreasonable that
- case730 A.2d 1081Star-Shadow Productions, Inc. v. Super 8 Sync Sound SystemR.I.decided 1999read it at the source ↗
The words that state the rule
First, plaintiffs assert that “in making its determination as to the unconscionability of the contract or clause, the court erred in not affording [plaintiffs] a reasonable opportunity to present evidence as to its commercial setting, purpose and effect,” as required by G.L.1956 § 6A-2-302 (2), to support their claim that the waiver of liability was unconscionable “in light of the general commercial background and commercial needs of the particular trade or case.”
- case730 A.2d 1081Star-Shadow Productions, Inc. v. Super 8 Sync Sound SystemR.I.decided 1999read it at the source ↗
The words that state the rule
In this case, plaintiffs did not avail themselves of the opportunity to submit evidence demonstrating that the limitation of liability was unconscionable in light of the general commercial background and the commercial needs of this particular trade or case, and consequently, the hearing justice properly granted summary judgment on this issue.
- case730 A.2d 1081Star-Shadow Productions, Inc. v. Super 8 Sync Sound SystemR.I.decided 1999read it at the source ↗
The words that state the rule
limitation of liability clauses are not unconscionable merely because buyers are not fully protected for damages that may arise from the malfunction of their purchased goods or service.
- case730 A.2d 1081Star-Shadow Productions, Inc. v. Super 8 Sync Sound SystemR.I.decided 1999read it at the source ↗
The words that state the rule
The fact that plaintiffs in this case have no protection other than their bargained for remedy of replacement film does not make the limitation of liability clause unconscionable.
The words that state the rule
The hearing justice mistakenly characterized his consideration of whether the agreement was illusory as an issue of substantive unconscionability. The distinction is important as the former concerns whether the parties formed a contract and the latter is a defense against its enforcement.
The words that state the rule
While the determination of whether the entire agreement is unconscionable is reserved for the arbitrator, we may consider whether the agreement was illusory.
- statuteR.I. Gen. Laws § 34-18-13enactment date not established
The words that state the rule
(2) A settlement in which a party waives or agrees to forego a claim or right under this chapter or under a rental agreement was unconscionable when made, the court may refuse to enforce the settlement, enforce the remainder of the settlement without the unconscionable provisions, or limit the application of any unconscionable provision to avoid an unconscionable result.
The words that state the rule
Both Mary’s and Thomas’s appeals are denied and dismissed, the judgment appealed from is affirmed, and the case is remanded to the Superior Court.
The words that state the rule
The Gormans did not offer any evidence that a private school rule regulating the length of a student’s hair is injurious to the interests of the public, nor that it interferes with the public welfare or safety. This rule clearly does not rise to the level of “unconscionable,” nor does it tend to injustice or oppression.
“Defective” means that reading found something to correct. What you are reading is the rule as it stands after that reading.