When will a Utah court refuse to enforce a contract or clause as unconscionable?
Utah uses a two-pronged analysis: substantive unconscionability focuses on the agreement's contents and procedural unconscionability on its formation. Substantive unconscionability alone may support a finding of unconscionability, but procedural unconscionability without any substantive imbalance will rarely render a contract unconscionable (Ryan v. Dan's Food Stores). Substantive unconscionability examines the relative fairness of the obligations assumed and asks whether the terms are so one-sided as to oppress or unfairly surprise an innocent party, or whether there is an overall imbalance in the obligations and rights the bargain imposes according to the mores and business practices of the time and place; a term that is merely unreasonable or more advantageous to one party is not enough. Procedural unconscionability asks whether there was overreaching by a party occupying an unfairly superior bargaining position, on six factors: whether each party had a reasonable opportunity to understand the terms, whether there was a lack of opportunity for meaningful negotiation, whether the agreement was a duplicate or boilerplate form drafted solely by the stronger party, whether the terms were explained to the weaker party, whether the aggrieved party had a meaningful choice or felt compelled to accept, and whether the stronger party used deceptive practices to obscure key provisions. Ryan's own challenge failed on both prongs. For a sale of goods, if the court as a matter of law finds the contract or a clause unconscionable at the time it was made it may refuse to enforce the contract, enforce the remainder without the clause, or limit the clause to avoid an unconscionable result (§ 70A-2-302).
The trap
Unfair process alone rarely wins in Utah; the challenger needs a substantively one-sided term. The Code test is measured at the time of contracting, and the parties must have a reasonable opportunity to present evidence of commercial setting, purpose and effect (§ 70A-2-302).
7 authorities
The words that state the rule
In determining whether a contract is unconscionable, we use a two-pronged analysis. See Sosa v. Paulos, 924 P.2d 357, 360 (Utah 1996). The first prong substantive unconscionability focuses on the agreement's contents. The second prong procedural unconscionability focuses on the formation of the agreement.
The words that state the rule
We have acknowledged that substantive unconscionability alone may support a finding of unconscionability but that procedural unconscionability without any substantive imbalance will rarely render a contract unconscionable.
- statuteUtah Code § 70A-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.
- statuteUtah Code § 70A-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.
The words that state the rule
We now apply each prong of the unconscionability test to Ryan's claim. Substantive unconscionability focuses on "the contents of an agreement, examining the `relative fairness of the obligations assumed.'" Id. (quoting Resource Management, 706 P.2d at 1043 ). In determining substantive unconscionability, we consider whether a contract's terms are "so one-sided as to oppress or unfairly surprise an innocent party or whether there exists an overall imbalance in the obligations and rights imposed by the bargain ... according to the mores and business practices of the time and place." Id. (internal quotations and citations omitted). Even if a contract term is unreasonable or more advantageous to one party, the contract, without more, is not unconscionable the terms must be "so one-sided as to oppress ... an innocent party."
The words that state the rule
Turning to the procedural unconscionability prong, we conclude that no procedural unconscionability was present. Procedural unconscionability focuses on the negotiation of the contract and the circumstances of the parties. Sosa, 924 P.2d at 362 . Our principle inquiry is whether there was overreaching by a contracting party occupying an unfairly superior bargaining position. Cf. id.; American Food Management, Inc. v. Henson, 105 Ill.App.3d 141 , 61 Ill.Dec. 122 , 434 N.E.2d 59, 63 (Ill.App.Ct. 1982). Factors bearing on procedural unconscionability include: (1) whether each party had a reasonable opportunity to understand the terms and conditions of the agreement; (2) whether there was a lack of opportunity for meaningful negotiation; (3) whether the agreement was printed on a duplicate or boilerplate form drafted solely by the party in the strongest bargaining position; (4) whether the terms of the agreement were explained to the weaker party; (5) whether the aggrieved party had a meaningful choice or instead felt compelled to accept the terms of the agreement; and (6) whether the stronger party employed deceptive practices to obscure key contractual provisions.
The words that state the rule
We conclude that the acknowledgment form, which provided that Ryan was an at-will employee, is not substantively unconscionable. The at-will employment arrangement gives employers and employees the same right the right to terminate the relationship *403 at any time, for any reason. And while the law places some limits on an employer's ability to terminate an at-will relationship, such as public policy, it does not place similar limitations on employees.
“Defective” means that reading found something to correct. What you are reading is the rule as it stands after that reading.