“Unconscionable Contract” Elements Explained

In finding the arbitration clause in a contract valid, the Third Department explained the criteria for an “unconscionable” contract as follows:

As to the crux of petitioner’s appeal – that the contracts at issue are unconscionable and/or constitute contracts of adhesion – “an unconscionable contract [is] defined as one which is so grossly unreasonable as to be unenforcible because  of an absence  of meaningful choice on  the part of one  . . . part[y] together with contract terms which are unreasonably favorable to the other” …   Unconscionability, in turn, has two  elements. Substantive unconscionability “appear[s] in the content of the contract per se” and may include, by way of example, “inflated prices, unfair termination clauses,  unfair  limitations on consequential damages  and  improper disclaimers of warranty”… .Procedural unconscionability, on the other hand, entails “an examination of the contract formation process and the alleged lack of meaningful choice” ….  In this regard, “[t]he focus is on such matters as the size and commercial  setting of the transaction, whether deceptive or high- pressured tactics were  employed,  the use of fine print in the contract, the experience and education of the party claiming unconscionability, and whether  there  was  disparity  in  bargaining power” … . Matter of Conifer Realty …, 515560, 3rd Dept, 5-9-13