Toker v. Perl

Superior Court of New Jersey, Law Division · 1968 · Contracts

Contractsfraud in the inducementunconscionabilityUCC 2-302installment sales contractsassignment and defensesfraudmisrepresentation

Facts

An agent of People's Foods met with defendants at their home to discuss a food plan and, after defendants said they lacked storage space, told them a freezer was included in the plan. The agent then presented three stacked forms for signature, showing only the signature lines on the lower two forms, and told defendants they were signing the agreed food plan; defendants later discovered they had also signed a financing application and an installment contract for a freezer. Defendants immediately tried to cancel, but the freezer and food were delivered anyway, and defendants stopped making payments on the freezer after People's Foods failed to rectify the situation. An expert valued the freezer at no more than $300, while the installment contract required payment of $1,092.96 total, including a $799.95 stated purchase price and a $252.08 time-price differential.

Issue

Whether an installment freezer contract is enforceable where the seller's agent procured defendants' signatures by leading them to believe the freezer was included in the food plan and where the freezer price was grossly excessive. The court also considered whether defendants' failure to read the documents barred them from asserting fraud.

Rule

A knowing misrepresentation as to the contents of a contract constitutes fraud, and the contract may be voided because the defrauded party never assented to those terms. In addition, under N.J.S. 12A:2-302, a court may refuse to enforce a contract if, at the time it was made, the contract or a clause is unconscionable, and an excessively high price may qualify as such an unconscionable term.

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

In Columbus, Ohio, a home-sales agent from Lakeview Meal Services spent two hours selling Nora and Daniel Ruiz on a bulk meat plan. When they said they had no extra storage, the agent said a chest freezer was included, then slid three forms across the table with only signature lines visible on the bottom two; one hidden form was a separate installment sales contract for the freezer. The Ruizes signed without being told that any separate freezer purchase was involved.

If the seller later sues to enforce the freezer installment contract, which is the strongest argument for the Ruizes under the governing rule?

Explanation. The majority rule is that a knowing misrepresentation as to the contents of a contract amounts to fraud, and the contract may be voided because the defrauded party never agreed to those terms. Here, the agent told the buyers the freezer was included and concealed the separate freezer contract's nature. That directly supports lack of assent to the separate installment agreement. (Derived from Toker v. Perl (n.d.).)