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Unconscionability

Unconscionability

Brien Roche

Unconscionability is a concept that applies mostly in contract matters.  However it can have some application to tort issues.

The basic concept is that the agreement or result is so unfair that it cannot be allowed to stand.  

Unconscionability-Criteria

A trial court decision dealing with that issue is Columbia Realty Venture, LLC v. Dang, 83 Va. Cir. 258 (2011-Fairfax).  This case involved a husband and wife.  Husband was individually liable on the lease.  The wife was asked to sign a guarantee which made her liable and actually made her liability greater than that of her husband’s.  The lease was solely in the husband’s name. 

At the closing on the transaction the wife was asked to sign the guarantee.  She was never consulted or advised as to the terms of the lease or the guarantee.  The wife was never given the opportunity to negotiate any of the terms.  She was simply handed the guarantee and told that she had to sign the document, otherwise her husband would not get the lease.  Both the husband and the landlord urged her to sign.  There was no explanation given as to the document’s contents.  No one explained the terms of the underlying lease.  She was never told that by signing the guarantee she was becoming individually liable to a greater degree than her husband would be on the commercial lease.  There was no evidence presented to the contrary. 

The wife at trial testified that the guarantee did not identify the property involved.  Also it did not identify the person whose obligation was being guaranteed.

The court concluded that the party who seeks to prove unconscionability must do so by clear and convincing evidence.  

In this case the guarantee actually made the liability of the guarantor primary and further said that the liability is absolute and unconditional.

Unconscionability-Surety and Guarantee

There is a difference between guarantee and surety in Virginia.  With a guarantee the obligation is secondary.  In suretyship the obligation is primary.  

In this case the guarantor acquired primary liability.

The trial court determined that in this case the wife was really a gratuitous surety.  In such a case the surety is discharged if there is any change in the obligation.  The guarantee in this case required the wife to forfeit several rights she otherwise would have as a gratuitous surety.  

The court concluded that the guarantee itself was unconscionable because of the unequal bargaining power of the wife.  It further concluded that the wife was a gratuitous surety.  In this case the surety was voided by requiring that the wife waive the same defenses that the tenant would have.  That thereby exposes her to greater liability than her husband would have.  The court concluded that this overall shocks the conscience of the court.  Smyth Bros.-McCleary-McClellan Co. v. Beresfored, 128 Va. 137, 170 (1920)

Unconscionability-Procedural and Substantive

The unconscionability may come in the form of procedural or substantive unconscionability. The procedural aspect may be seen in terms of whether or not the contract is one of adhesion, do the terms fall outside the reasonable expectations of the weaker party and was there pressure applied to that weaker party. Substantive unconscionability hinges principally on whether the terms are unduly oppressive or unfairly one-sided. Sanchez v. Valencia, 353 P.3d 741, 748 (Cal. 2015)

Call, or contact us for a free consult. Also for more info on unconscionability see the Wikipedia pages. Also see the post on this site dealing with contract issues.

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Unconscionability

Unconscionability

Brien Roche

Unconscionability is a concept that applies mostly in contract matters.  However it can have some application to tort issues.

The basic concept is that the agreement or result is so unfair that it cannot be allowed to stand.  

Unconscionability-Criteria

A trial court decision dealing with that issue is Columbia Realty Venture, LLC v. Dang, 83 Va. Cir. 258 (2011-Fairfax).  This case involved a husband and wife.  Husband was individually liable on the lease.  The wife was asked to sign a guarantee which made her liable and actually made her liability greater than that of her husband’s.  The lease was solely in the husband’s name. 

At the closing on the transaction the wife was asked to sign the guarantee.  She was never consulted or advised as to the terms of the lease or the guarantee.  The wife was never given the opportunity to negotiate any of the terms.  She was simply handed the guarantee and told that she had to sign the document, otherwise her husband would not get the lease.  Both the husband and the landlord urged her to sign.  There was no explanation given as to the document’s contents.  No one explained the terms of the underlying lease.  She was never told that by signing the guarantee she was becoming individually liable to a greater degree than her husband would be on the commercial lease.  There was no evidence presented to the contrary. 

The wife at trial testified that the guarantee did not identify the property involved.  Also it did not identify the person whose obligation was being guaranteed.

The court concluded that the party who seeks to prove unconscionability must do so by clear and convincing evidence.  

In this case the guarantee actually made the liability of the guarantor primary and further said that the liability is absolute and unconditional.

Unconscionability-Surety and Guarantee

There is a difference between guarantee and surety in Virginia.  With a guarantee the obligation is secondary.  In suretyship the obligation is primary.  

In this case the guarantor acquired primary liability.

The trial court determined that in this case the wife was really a gratuitous surety.  In such a case the surety is discharged if there is any change in the obligation.  The guarantee in this case required the wife to forfeit several rights she otherwise would have as a gratuitous surety.  

The court concluded that the guarantee itself was unconscionable because of the unequal bargaining power of the wife.  It further concluded that the wife was a gratuitous surety.  In this case the surety was voided by requiring that the wife waive the same defenses that the tenant would have.  That thereby exposes her to greater liability than her husband would have.  The court concluded that this overall shocks the conscience of the court.  Smyth Bros.-McCleary-McClellan Co. v. Beresfored, 128 Va. 137, 170 (1920)

Unconscionability-Procedural and Substantive

The unconscionability may come in the form of procedural or substantive unconscionability. The procedural aspect may be seen in terms of whether or not the contract is one of adhesion, do the terms fall outside the reasonable expectations of the weaker party and was there pressure applied to that weaker party. Substantive unconscionability hinges principally on whether the terms are unduly oppressive or unfairly one-sided. Sanchez v. Valencia, 353 P.3d 741, 748 (Cal. 2015)

Call, or contact us for a free consult. Also for more info on unconscionability see the Wikipedia pages. Also see the post on this site dealing with contract issues.

Contact Us For A Free Consultation

    Contact Us For A Free Consultation

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