What does it take to get a contract term struck as unconscionable in Washington?
Either substantive or procedural unconscionability is sufficient to void a contract (Gandee; Adler held that substantive unconscionability alone suffices and expressly declined to decide whether procedural unconscionability alone does: "individual contractual provisions may be so one-sided and harsh as to render them substantively unconscionable despite the fact that the circumstances surrounding the parties' agreement to the contract do not support a finding of procedural unconscionability"). Substantive unconscionability involves a clause or term alleged to be one-sided or overly harsh; procedural unconscionability relates to impropriety during the process of forming a contract (Nelson). The substantive bar is pitched high in the Court's own words for it: a term is substantively unconscionable where it is "one-sided or overly harsh", "[s] hocking to the conscience", "monstrously harsh", or "exceedingly calloused" (Gandee, quoting Adler and Schroeder). A substantively unconscionable term is generally severed and the rest enforced (Adler itself held the attorney fees and limitations provisions unconscionable "but sever[ed] these provisions from the agreement thus preserving the parties' intent to arbitrate their disputes"), but not always: where the unconscionable terms pervade a short clause the court strikes the clause instead, as Gandee did, because "[t]he arbitration clause itself is so permeated with unconscionable provisions as to make severance impossible."
The trap
Drafters used to the conjunctive test (both procedural AND substantive) can lose a clause here on substance alone, even where it was signed with full opportunity to read it. The Supreme Court's recent cases find substantive unconscionability where a term cuts down a STATUTORY right: a 180-day limit in place of a three-year statute (Adler, as Gandee restates it), a 30-day limit on CPA claims (Gandee), a one-year limit on construction defect claims against a six-year statute (Tadych). Gandee shows the method: the clause required that "All disputes or claims between the parties related to this Agreement shall be submitted to binding arbitration in accordance with the rules of [the] American Arbitration Association within 30 days from the dispute date or claim", which "shortens the statute of limitations from the four years provided by the CPA to 30 days", and that was substantively unconscionable "[c]onsistent with Adler's holding". Tadych states it generally: a provision "becomes substantively unconscionable when it eliminates otherwise established statutory rights and is one sided, benefiting the contract drafter, is also not prominently set out in the contract, is not negotiated or bargained for, and provides no benefit to the affected party." Do not count on severance to save the rest: Gandee's four-sentence clause had an express severability clause ("If any of the above provisions are held to be invalid or unenforceable, the remaining provisions will not be affected"), and the Court refused to sever anyway, and Adler warns that where an employer shows an "insidious pattern" of tipping the scales in its favour "courts may decline to sever the unconscionable provisions".
12 authorities
The words that state the rule
In Washington, either substantive or procedural unconscionability is sufficient to void a contract. Adler v. Fred Lind Manor, 153 Wn.2d 331, 347 , 103 P.3d 773 (2004). Here, only substantive unconscionability is alleged.
The words that state the rule
A term is substantively unconscionable where it is “ ‘one-sided or overly harsh,’ ” “ ‘[s] hocking to the conscience,’ ” “ ‘monstrously harsh,’ ” or “ ‘exceedingly calloused.’
The words that state the rule
We agree with the Arizona Supreme Court. In some instances, individual contractual provisions may be so one-sided and harsh as to render them substantively unconscionable despite the fact that the circumstances surrounding the parties’ agreement to the contract do not support a finding of procedural unconscionability. See 2 Restatement (Second) of Contracts § 208 cmt. e (1981) (“Particular terms may be unconscionable whether or not the contract as a whole is unconscionable.”). Accordingly, we *347 now hold that substantive unconscionability alone can support a finding of unconscionability. However, since Adler has yet to prove a valid claim of procedural unconscionability, we decline to consider whether it alone will support a claim of unconscionability.
The words that state the rule
Two classifications of unconscionability have generally been recognized: (1) substantive unconscionability, involving "those cases where a clause or term in the contract is alleged to be one-sided or overly harsh”; and (2) procedural unconscionability, relating "to impropriety during the process of forming a contract”.
The words that state the rule
Arbitration. All disputes or claims between the parties related to this Agreement shall be submitted to binding arbitration in accordance with the rules of [the] American Arbitration Association within 30 days from the dispute date or claim. Any arbitration proceedings brought by Client shall take place in Orange County, California. Judgment upon the decision of the arbitrator may be entered into any court having jurisdiction thereof. The prevailing party in any action or proceeding related to this Agreement shall be entitled to recover reasonable legal fees and costs, including attorney’s fees which may be incurred. Severability. If any of the above provisions are held to be invalid or unenforceable, the remaining provisions will not be affected.
The words that state the rule
Finally, Gandee challenges the 30-day provision. Both sides argue that the provision is ambiguous, potentially operating as either a private statute of limitations or a time frame within which a party must seek to compel arbitration. However, we find no ambiguity in the clause. It requires that “[a] 11 disputes or claims ... be submitted to binding arbitration ... within 30 days from the dispute date or claim.” CP at 75. A plain language reading of this provision indicates that Gandee supposedly had 30 days within which to bring her claim. ¶12 Generally, a private statute of limitations will control over general statutes of limitation “ ‘ “unless prohibited by statute or public policy, or unless [it is] unreasonable.” ’ ” Adler, 153 Wn.2d at 356 (quoting Resp’ts’ *607 Br. at 43 (quoting Ashburn v. Safeco Ins. Co. of Am., 42 Wn. App. 692, 696 , 713 P.2d 742 (1986))). Here, the provision shortens the statute of limitations from the four years provided by the CPA to 30 days. In Adler , we held a shortening of the statute of limitations from three years to 180 days to be substantively unconscionable. Adler, 153 Wn.2d at 355-58 . Consistent with Adler’s holding, we find the statute of limitations provision here to be substantively unconscionable.
- case200 Wash. 2d 635Tadych v. Noble Ridge Construction, Inc.Wash.decided 2022read it at the source ↗
The words that state the rule
A contract provision becomes substantively unconscionable when it eliminates otherwise established statutory rights and is one sided, benefiting the contract drafter, is also not prominently set out in the contract, is not negotiated or bargained for, and provides no benefit to the affected party. Based on this, we hold here that this limitation provision is void and unenforceable. We further hold that under chapter 4.16 RCW, the Tadychs’ suit is timely. We reverse the Court of Appeals and remand for trial.
The words that state the rule
However, we conclude that the attorney fees and limitations provisions of the arbitration agreement are substantively unconscionable but sever these provisions from the agreement thus preserving the parties’ intent to arbitrate their disputes. We remand to the trial court for determination, consistent with this opinion, of Adler’s claims of procedural unconscionability, including whether Adler implicitly waived his right to a jury trial and the substantive conscionability of the fee-splitting provision.
The words that state the rule
Nonetheless, we acknowledge that in instances where an employer engages in an “insidious pattern” of seeking to tip the scales in its favor in employment disputes by inserting numerous unconscionable provisions in an arbitration agreement, courts may decline to sever the unconscionable provisions. Ingle, 328 F.3d at 1180 . In this case, however, Adler and Fred Lind Manor’s arbitration agreement contains just two substantively unconscionable provisions. The primary thrust of their agreement is the agreement to arbitrate. Consequently, we can sever the unconscionable attorney fees and limitations provisions *360 without disturbing the primary intent of the parties to arbitrate their disputes.
The words that state the rule
We affirm the trial court’s denial of the motion to compel arbitration. The arbitration clause itself is so permeated with unconscionable provisions as to make severance impossible. Without an enforceable arbitration clause, the plaintiff cannot be compelled to arbitrate. Accordingly, we remand for further proceedings consistent with this opinion.
The words that state the rule
Severance is the usual remedy for substantively unconscionable terms, but where such terms “pervade” an arbitration agreement, we “refuse to sever those provisions and declare the entire agreement void.”
- case200 Wash. 2d 635Tadych v. Noble Ridge Construction, Inc.Wash.decided 2022read it at the source ↗
The words that state the rule
This contract’s one-year limitation provision deprives the Tadychs of the six-year statute of limitations established under chapter 4.16 RCW to seek damages for faulty construction.
“Defective” means that reading found something to correct. What you are reading is the rule as it stands after that reading.