Question

This chapter revisits the idea of unconscionability. Courts will sometimes refuse to enforce deals that are, as UCC 2-302 states it, “shocking and fundamentally unfair”. Consider the following two cases. In each, an electronics store sells an HDTV with a fair market value of $600 for $1500.

a. Sale #1 is made to Ann. She has a terrible credit score, and is willing to pay $1500 because the store offers to finance the TV, and she has no other available credit.

b. Sale #2 is made to Franklin J. Moneypenny, a very wealthy investment banker, on Christmas Eve. He knows the price is much too high, but he is in a big hurry to finish his last minute shopping.

In both cases, the consumers paid 2.5 times the fair value of the TV. In your opinion, is either transaction unconscionable? If so, why? If not, why not?

Answer 1

As per common law the agreement is enforceable but as per UCC, it is not enforceable.

 

The UCC imposes a duty on both the parties to act or perform in good faith, as per UCC good faith means honesty in fact and use of fair commercial practice.

 

For this the UCC uses Doctrine of Unconscionability. If the agreement is between merchants than UCC may or may not use Doctrine of unconscionable but when it comes to a non merchant party the UCC is more eager to apply Doctrine of Unconscionability.

 

The doctrine of good faith focuses on a party’s behavior as it performs an agreement. Was it attempting to carry out its obligations in a reasonable manner and do what both sides expected when they made the deal? If a court concludes that some part of a contract is unconscionable, it will refuse to enforce that provision.

 

The above both cases appears to be categorized as unconscionable transaction since the price charged is unfair.