Frostifresh Corp. v. Reynoso

Nassau County District Court, First District · 1966 · Contracts

ContractsUnconscionabilityU.C.C. § 2-302contractssalesUCC 2-302unconscionabilityoppression

Facts

Defendants agreed orally in Spanish with plaintiff's Spanish-speaking salesman to purchase a refrigerator-freezer, after the salesman told them the appliance would cost them nothing because they would earn bonuses or commissions from sales to neighbors and friends. Defendants then signed a retail installment contract written entirely in English, which was neither translated nor explained to them. The contract listed a cash sales price of $900 and a credit charge of $245.88, for a total of $1,145.88, while plaintiff admitted its own cost for the appliance was $348. Defendants had paid only $32 on the debt and had not returned the appliance.

Issue

Does a court have power under U.C.C. § 2-302 to refuse to enforce the price and credit provisions of a retail installment sales contract when those terms are unconscionable and their enforcement would produce an unconscionable result?

Rule

Under U.C.C. § 2-302, a court may police against contracts or clauses it finds unconscionable and may refuse to enforce price and credit provisions in order to prevent oppression and unfair surprise. Where the commercial setting, purpose, and effect show a bargain that is shocking to the conscience, the court need not enforce the contract as written.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

In Newark, New Jersey, Solano Home Retail sold a stove to Elena and Mateo Cruz on an installment plan. Solano's cost for the stove was $420, but the written contract listed a cash price of $1,050 plus a $390 credit charge; the agreement was presented only in English to the buyers, who could read only Portuguese, and no one explained its terms.

If Solano sues for the unpaid contract balance, how should a court applying the majority's approach most likely rule?

Explanation. The majority held that under U.C.C. § 2-302 a court may police against unconscionable contracts or clauses and refuse to enforce price and credit provisions where the bargain is shocking to the conscience and produces oppression or unfair surprise. Gross disparity between seller cost and contract price, substantial credit charges, and buyers' inability to understand untranslated terms all support that result. Fraud need not be the basis of relief where unconscionability is shown.