Jones v. Star Credit Corp.
| Decision Date | 18 March 1969 |
| Citation | 298 N.Y.S.2d 264,59 Misc.2d 189 |
| Parties | , 6 UCC Rep.Serv. 76 Clifton JONES and Cora Jones, Plaintiffs, v. STAR CREDIT CORP., Defendant. |
| Court | New York Supreme Court |
Nager & Korobow, Mineola, for plaintiffs.
Keilson & Keilson, New York City, for defendant.
On August 31, 1965 the plaintiffs, who are welfare recipients, agreed to purchase a home freezer unit for $900 as the result of a visit from a salesman representing Your Shop At Home Service, Inc. With the addition of the time credit charges, credit life insurance, credit property insurance, and sales tax, the purchase price totalled $1,234.80. Thus far the plaintiffs have paid $619.88 toward their purchase. The defendant claims that with various added credit charges paid for an extension of time there is a balance of $819.81 still due from the plaintiffs. The uncontroverted proof at the trial established that the freezer unit, when purchased, had a maximum retail value of approximately $300. The question is whether this transaction and the resulting contract could be considered unconsionable within the meaning of Section 2--302 of the Uniform Commercial Code which provides in part:
(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 unconsionable clause, or it may so limit the application of any unconscionable clause as to avoid any unconsionable 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. L.1962, c. 553, eff. Sept. 27, 1964.
There was a time when the shield of 'caveat emptor' would protect the most unscrupulous in the marketplace--a time when the law, in granting parties unbridled latitude to make their own contracts, allowed exploitive and callous practices which shocked the conscience of both legislative bodies and the courts.
The effort to eliminate these practices has continued to pose a difficult problem. On the one hand it is necessary to recognize the importance of preserving the integrity of agreements and the fundamental right of parties to deal, trade, bargain, and contract. On the other hand there is the concern for the uneducated and often illiterate individual who is the victim of gross inequality of bargaining power, usually the poorest members of the community.
Concern for the protection of these consumers against overreaching by the small but hardy breed of merchants who would prey on them is not novel. The dangers of inequality of bargaining power were vaguely recognized in the early English common law when Lord Hardwicke wrote of a fraud, which 'may be apparent from the intrinsic nature and subject of the bargain itself; such as no man in his senses and not under delusion would make.' The English authorities on this subject were discussed in Hume v. United States, 132 U.S. 406, 411, 10 S.Ct. 134, 136, 33 L.Ed. 393 (1889) where the United States Supreme Court characterized (p. 413, 10 S.Ct. p. 137) these as 'cases in which one party took advantage of the other's ignorance of arithmetic to impose upon him, and the fraud was apparent from the face of the contracts.'
The law is beginning to fight back against those who once took advantage of the poor and illiterate without risk of either exposure or interference. From the common law doctrine of intrinsic fraud we have, over the years, developed common and statutory law which tells not only the buyer but also the seller to beware. This body of laws recognizes the importance of a free enterprise system but at the same time will provide the legal armor to protect and safeguard the prospective victim from the harshness of an unconscionable contract.
Section 2--302 of the Uniform Commercial Code enacts the moral sense of the community into the law of commercial transactions. It authorizes the court to find, as a matter of law, that a contract or a clause of a contract was 'unconscionable at the time it was made', and upon so finding the court may refuse to enforce the contract, excise the objectionable clause or limit the application of the clause to avoid an unconscionable result. 'The principle', states the Official Comment to this section, 'is one of the prevention of oppression and unfair surprise'. It permits a court to accomplish directly what heretofore was often accomplished by construction of language, manipulations of fluid rules of contract law and determinations based upon a presumed public policy.
There is no reason to doubt, moreover, that this section is intended to encompass the price term of an agreement. In addition to the fact that it has already been so applied (State by Lefkowitz v. ITM, Inc., 52 Misc.2d 39, 275 N.Y.S.2d 303; Frostifresh Corp. v. Reynoso, 52 Misc.2d 26, 274 N.Y.S.2d 757, revd. 54 Misc.2d 119, 281 N.Y.S.2d 964; American Home...
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