Unconscionability Doctrine in Contract Law - Case Study Example

Unconscionability doctrine in contract law Unconscionability doctrine in contract law, allows a court not to accept or enforce a contract whose terms seem to favor one party. The contract is seen to be unfair and exploitative to the party who ha not understood the terms of the agreement that have been put in the contract: it protects against duress and fraud. There have been different cases in New York and Virginia courts that try to use the doctrine in their ruling. These cases include: Jones v. Star Credit Corp., 298 N.Y.S.2d 264 (Sup. Ct.1969) Derby v. Derby, 378 S.E.2d 74 (Va. Ct. App. 1989) Friendly Ice Cream Corp. v. Beckner, 597 S.E.2d 34 (Va. 2004) Galloway v. Galloway, 622 S.E.2d 267 (Va. Ct. App. 2005) Jessee v. Smith, 278 S.E.2d 793 (Va. 1981) Chaplain v. Chaplain, 682 S.E.2d 108 (Va. Ct. App. 2009) Jones v. Star Credit Corp., 298 N.Y.S.2d 264 (Sup. Ct.1969) In the case of Jones versus the Star Credit Corp, Jones had accepted to purchase a freezer at a price of $900 (Onelbriefs.com par 1). After calculating all the financial charges, the price of the freezer was to be a total of $1200. Contrary to the charges, the initial cost of the freezer was $300. Before the case started, the complainant had paid $600 towards the purchase of the freezer. Jones found out and sued the Star Credit Corps for contract rescission. During the case the court fund the terms of the purchase to be unconscionable, they award the complainant with the freezer at a price of $600 to which he had already paid. The court found the contract unconscionable because of the gross inadequacy in the value of the freezer and the price at which it was to be sold. It was found that the credit charges in the contract exceeded the value of the freezer. The purchaser of the freezer was found to be limited financially during the time of purchase to which the seller also knew. Derby v. Derby, 378 S.E.2d 74 (Va. Ct. App. 1989) The case of the Derby v. Derby is one that is based on divorce. The two were married for twenty two years before Mrs. Derby filed for divorce citing cruelty, years later Mr. Derby alleged adultery and by the wife severally. The court found out that Mr. Derby had signed out an agreement that had been brought to him by the wife citing that he had done so to secure their marriage. The husband says that the wife had promised to live with him if he signed the agreement of her having a real estate that they owned. The court in it ruling stated that, the wife had been opportunistic and used the fact that the husband had been convinced to sign the agreement for them to move back in together. Mr. Derby to sign the agreement in the absence of his lawyer because of the consideration that were misrepresented by the conduct of Mrs. Derby accepting to go back to the husband (Derby v. Derby, 378 S.E.2d 74 (Va. Ct. App. 1989)). The court found the agreement to be invalid as it was unconscionable, the wife had taken advantage of her husband’s emotional weakness and need to rebuild his family to agree. It was not out of free will and voluntary, but it was because of a condition stated. In relation to the Jones case, the intention of the agreement was known to one party thus making both the cases similar. They were both declared “unconscionable” Friendly Ice Cream Corp. v. Beckner, 597 S.E.2d 34 (Va. 2004) In this case, the Beckner family had entered into a leaser with the friendly Ice Cream Corporation (Case Law par 1). The Beckner had allowed the friendly corporation to set up and run a retail store. The lease was to commence in the year 1976 and a 15 years original term. Friendly was allowed to renew the lease with an option of five years each, this meant that the lease was to end in the year 2016.The terms the two had agreed on was: a monthly base rent, an annual 2% payment of the annual gross sales that was more than $275,000 of rent. Friendly and FriendCo Restaurant operate the store, but in the year 2001 they decided to close the retail shop, fourteen years had remained for the lease renewal to be fully exercised. Because of this, another party (Riggs) was interested in taking over the lease. They were to demolish the building and set up a bank. Mrs. Beckner who was by the time a widow was contacted by her first attorney Hammer to see whether she will accept the terms given by the Riggs bank. She does not accept the offer and the terms stated by Hammer, she goes on to dismiss Hammer as her lawyer and appoints Hughes. She wanted an increase in base rent by $80940 a year; her proposal was submitted to the Friendly to which they agreed. Mrs. Beckner at last signed the lease agreement. In March 2002 Mrs. Beckner filed a complaint against the Friendly, she wanted a rescission on the amendment to the lease stating her reasons: fraud, inadequacy f consideration, unjust enrichment and undue influence, the Friendly on the other hand asserted that Mrs. Beckner was not entitled to any rescissions as she had accepted he terms when she cashed the checks she had received. The chancellor ruled in the favor of Mrs. Beckner because she gave a clear evidence of her weakness of mind. The court identified the situation which made the contract unconscionable; the mental state of the contracting party which was evident fro Mrs. Beckner and the confidential relationship which existed between the two contracting parties. Comparing this to the case of Jones v. Star Credit Corp, the case was similar as those involved never knew the intention of the other party during the signing of the contract or lease. Galloway v. Galloway, 622 S.E.2d 267 (Va. Ct. App. 2005) In the case of the Galloway’s, this was a case based on marriage and divorce (Leagle.com par 2). The husband who had been working in civil service resigns from his job in the year 1988 and starts his own business; he runs it alone for five years. The wife who was also employed as a nurse retires and joins him in the business after nine years of marriage. She started working as a secretary in the business where after a few months she installed several heating and air conditioning in the companies premise. The two parties had worked together to expand the business for eleven years prior to the hearing in the year 2004. Before marriage in June 1, 1984 the husband had bought and titled in his name the marital home located on a 3.5 acre land. Thee wife gave the husband an acre as a wedding gift. In the year 1994 the husband bought a 2 acre land and sold it for $80,000 after their separation. The marital property and he business were located in the 3.5 acre land. During the time of hearing the husband had intended to sell the parcel of land they owned at a price that ranged between $200,000 and $250,000. As the property settlement agreement, the husband gave the wife a pick up track they owned and a weekly amount of $400 weekly as the employee of the company, and had to pay for her hospitalization while she was employed. He was granted the marital residence and the business as a whole. Prior to having the agreement drafted the husband had consulted the wife about it and she had proposed no changes to it. They went to the bank the following day to implement the agreement. The wife signed everything that was required of her, so did the husband. During the hearing the wife says that she was never forced to sign the agreement but she made the decision of doing so having a conscious mind. The agreement after being taken under some scrutiny was found not to be unconscionable because they never found the intentions of the husband to be in a bad faith following the testimony of the wife. The wife had acted on her own wish and especially when she had been given the right to look for a lawyer and she did not do so. The wife therefore never proved any unconscionability. The court found the parties agreement valid and enforceable. The courts decision was driven by the fact that the wife had accepted to the terms of the agreement in a good manner, she had not shown any signs of being forced or being in a stressed situation at the time of signing the agreement. Unlike the Jones v. Star Credit Corp case, Galloway v. Galloway case is found not to be unconscionable this is because the wife was at free will to accept the terms of the agreement and also she knew everything that was in the agreement as she was expecting it. Jessee v. Smith, 278 S.E.2d 793 (Va. 1981) In the case of Carl Jessee against Dana Smith (Jessee v. Smith, 278 S.E.2d 793 (Va. 1981). Jessee who was a carpenter seeks $2,673.26 for labor he had done. This was reached after an oral contract was reached. Jessee had negotiated with smith the owner of the clothing store where he did interior finishing in the store, Jessee had declined a “cost plus ten percent” price proposed by Smith, but after a fresh negotiation between Garrett who is the manager of the store and Jessee, he accepted to do the work with a”cost plus plus twenty five percent” Jessee told Garrett that Smith was to pay for the materials and a 25% of the materials amount, for labor. On completion of the work given, Jessee submitted a $2,673.26 which Smith refused to pay. Smith termed it as a misunderstanding in the labor charge. She termed the claims of Jessee price as exorbitant and that he wanted to extort money from her. In this case the court was able to grant Smith a motion to strike the evidence of oral contract that existed between Garrett and Jessee. Jessee ha given his statement stating that Smith had accepted the terms of payment for the work that was to be done, Smith had also give hr statement stating that they had never come to the agreement f the plus 25% of the materials as he labor price and the payment of materials that were used, Garrett was never called to testify and give her statement in the case although she was the one who made the oral contract between the two parties. The decision of the court was not enough to justify Smiths claims because there was no prove of fraud or duress, both the parties had were capable of making as they wee knowledgeable of business. The case was found not to be unconscionable. And unlike the Jones case, this case was not so clear as to examine the adequacy of consideration, the term of agreement was found not to be enforceable as there was no “meeting of the minds” Jessee v. Smith, 278 S.E.2d 793 (Va.1981). Chaplain v. Chaplain, 682 S.E.2d 108 (Va. Ct. App. 2009) This is case of pre marital agreement; Rabha Chaplain (wife) appeals a ruling that her premarital agreement wit Billy chaplain (husband) is enforceable in premarital agreement. The act provided that the agreement would not be enforceable if its proved that; the person did not agree voluntarily and also the person proves that they did not have fair disclosure of property, but in the case of the chaplains, the husband goes o to prove that the wife knew about he financial situation he was in. the husband had not proposed marriage to the wife because he never wanted to get married after his first marriage failed, the wife proposed to the husband severally about getting married and for that reason the husband had to write down tan agreement between themselves that stated that the property that belonged o his was his and what belonged to the wife was hers, the wife after reading through the agreement severally accepted the terms that were there in the presence of her attorney. It was therefore evident that the wife entered the agreement willingly and voluntarily. This reason supports the courts ruling that the agreement was not unconscionable because the wife executed it voluntarily. It was different from the Jones case because the wife had made the decision when she knew al that was entailed in the agreement and hat is was also voluntarily that she entered into the agreement. Conclusion Following the briefs of all the Virginia courts, it is evident that the doctrine of unconscionable is being followed by the courts in its decisions. All the cases that have been briefed from the Virginia court have followed these doctrines to the later, and compared to the Jones v. Star Credit Corps. Work Cited Case Law. Friendly Ice Cream Corporation v. Beckner. 2012. Web. 28 June 2012. http://caselaw.findlaw.com/va-supreme-court/1088383.html Jessee v. Smith 278 S. E. 2d 793 (1981). Supreme Court of Virginia. Web. 28 June 2012. http://www.leagle.com/xmlResult.aspx?xmldoc=19811071278SE2d793_11068.xml&docbase=CSLWAR1-1950-1985. Leagle.com. Galloway v. Galloway, 622 S.E.2d 267. 2005. Web. 28 June 2012. http://www.leagle.com/xmlResult.aspx?page=5&xmldoc=2005889622SE2d267_1883.xml&docbase=CSLWAR2-1986-2006&SizeDisp=7 Onelbriefs.com. Jones v. Star Credit Corp.Supreme Court of NY - 1969 (298 N.Y.S.2d 264). 2009. Web. 28 June 2012. http://www.onelbriefs.com/cases/contracts/jones_starcredit.htm Read More