Can the other side get out of this clause by calling it unconscionable?
Only with a quantum of both halves. In Wisconsin Auto Title Loans the Supreme Court of Wisconsin held an arbitration provision unconscionable because 'a sufficient quantum of both procedural and substantive unconscionability exists to render the arbitration provision invalid'. On the substantive side the court identified a broad, one-sided, unfair 'save and except' parenthetical that gave the lender full access to the courts free of arbitration while limiting the borrower to arbitration; on the procedural side it relied on the lender's experience in drafting such agreements, its substantially greater bargaining power, the borrower's indigence and need for cash, and the contract being an adhesion contract presented on a take-it-or-leave-it basis. For a sale of goods, Wis. Stat. § 402.302(1) lets the court refuse to enforce the contract, enforce the remainder without the unconscionable clause, or limit the application of the clause to avoid an unconscionable result.
The trap
The doctrine has two gates a challenger must get through and the burden is the challenger's: a provision is invalid only if it is both procedurally and substantively unconscionable, the two trade off against each other so that the more substantive unconscionability is present the less procedural unconscionability is required and the other way round, and the party attacking the clause must prove the facts that justify the legal conclusion. Do not read the finding of one-sidedness as a rule that one-sided clauses are void, either: the court expressly reserved that a one-sided arbitration provision may not be unconscionable on the facts of all cases. For a sale of goods, § 402.302(2) requires that, when it is claimed or appears that a contract or clause may be unconscionable, the parties be afforded a reasonable opportunity to present evidence as to its commercial setting, purpose and effect. That is not a guarantee of an evidentiary hearing: in Wisconsin Auto Title Loans none was held, and the court recorded that one may not always be necessary, and Article 2 did not apply to that contract at all. The Wisconsin Consumer Act has its own version in Wis. Stat. § 421.106(4) for a settlement in which a customer gives up rights under chs. 421 to 427, and it lists factors including the customer's education and ability to read the language of the contract. Note the reach of the case before relying on it: Wisconsin Auto Title Loans is a short-term consumer title loan, and the procedural findings that carried it are findings about that borrower and that lender.
13 authorities
The words that state the rule
Thus a sufficient quantum of both procedural and substantive unconscionability exists to render the arbitration provision invalid.
The words that state the rule
The broad, one-sided, unfair "save and except" parenthetical in the arbitration provision of the loan agreement allowing Wiscónsin Auto Title Loans *523 full access to the courts, free of arbitration, while limiting the borrower to arbitration renders the arbitration provision substantively unconscionable.
- statuteWis. Stat. § 402.302enactment 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.
- statuteWis. Stat. § 402.302enactment 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
The following factors render the arbitration provision procedurally unconscionable: Wisconsin Auto Title Loans was in the business of providing loans with automobile titles as collateral and was experienced in drafting such loan agreements; Wisconsin Auto Title Loans was in a position of substantially greater bargaining power than the borrower; the borrower was indigent and in need of cash; and the loan agreement was an adhesion contract presented to the borrower on a take-it-or-leave-it basis.
The words that state the rule
Wisconsin Auto Title Loans is a Wisconsin corporation that provides short-term loans to consumers.
- statuteWis. Stat. § 421.106enactment date not established
The words that state the rule
A settlement in which the customer waives or agrees to forego rights or benefits under chs. 421 to 427 is invalid if the court as a matter of law finds the settlement to be unconscionable at the time it was made. In this regard the court may consider the competence of the customer as measured by his or her education, ability to speak and read the language of the contract, and his or her prior consumer experience; any deception or coercion practiced upon the customer; the nature and extent of the legal advice received by the customer; and the value of the consideration.
The words that state the rule
For a contract or a contract provision to be declared invalid as unconscionable, the contract or contract provision must be determined to be both procedurally and substantively unconscionable.
The words that state the rule
A determination of unconscionability requires a mixture of both procedural and substantive unconscionability that is analyzed on a case-by-case basis. 23 The more substantive unconscionability present, the less procedural unconscionability is re *534 quired, and vice versa. 24 A court will weigh all the elements of unconscionability and may conclude uncon-scionability exists because of the combined quantum of procedural and substantive unconscionability.
The words that state the rule
Fourth, a party seeking to invalidate a provision in a contract (here the borrower) has the burden of proving facts that justify a court's reaching the legal conclusion that the provision is invalid.
The words that state the rule
While we appreciate that a one-sided arbitration provision may not be unconscionable under the facts of all cases, we conclude that the overly one-sidedness of the arbitration provision at issue in the instant case renders the arbitration provision substantively unconscionable.
The words that state the rule
Although an evidentiary hearing is ordinarily required as a basis for the necessary findings of fact, an evidentiary hearing may not always be necessary to support a determination of unconscionability.
The words that state the rule
The circuit court also based its decision on Wis. Stat. § 402.302 (1) (2003-04), the unconscionability provision of Article 2 of the Wisconsin Uniform Commercial Code (U.C.C.) statute. Article 2 of the U.C.C. does not apply to the contract in the present case.
“Defective” means that reading found something to correct. What you are reading is the rule as it stands after that reading.