Legal Memorandum: Procedurally Unconscionable Contract

Issue: When is a contract procedurally unconscionable?

Area of Law: Alternative Dispute Resolution, Business Organizations & Contracts
Keywords: Procedural unconscionability; Contract; Contract of adhesion
Jurisdiction: Federal
Cited Cases: 54 P.3d 1
Cited Statutes: None
Date: 12/01/2008

Procedural unconscionability is generally established if the agreement constitutes a contract of adhesion.  Id. at 265.  A contract of adhesion “is one which is prepared by the party with the excessive bargaining power who presents it to the other party on a take-it-or-leave-it basis.”  Id.  See also Ostroff v. Alterra Healthcare Corp., 433 F. Supp. 2d 538, 544 (E.D. Pa. 2006) (residency contract presented to woman as she was moving her mother into assisted living facility, which she had to sign or her mother would have no place to live, was procedurally unconscionable); Kloss v. Edward D. Jones & Co., 54 P.3d 1 (Mont. 2002) (given that the contract was a contract of adhesion, it could not be presumed that the plaintiff waived her right to a jury trial, and a waiver was not within the plaintiff’s reasonable expectations, such that the arbitration agreement was unenforceable).  Put differently, a contract is procedurally unconscionable if it was obtained by oppression.  “‘The oppression component of the test for procedural unconscionability “arises from an inequality of bargaining power of the parties to the contract and an absence of real negotiation or a meaningful choice on the part of the weaker party.'”  Villa Milano Homewners Ass’n v. Il Davorge, 102 Cal. Rptr. 2d 1, 7 (Ct. App. 2000) (citation omitted) (holding there was procedural unconscionability given that there was absolutely no opportunity for the individual buyers to negotiate the terms of the contracts). 


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