Jones v. Star Credit Corp.

Facts

Jones (P), a welfare recipient, bought a freezer for $900 through a salesman for Your Shop At Home Service, Inc. The freezer had a maximum retail value of $300. The total purchase price including credit charges totaled $1,235. The plaintiffs defaulted after paying $620.

Star Credit Corp. (D) claimed that Jones owed a balance of $820 including additional credit charges for an extension of time. Star Credit asserted at trial that the transaction and the resulting contract were not unconscionable within the meaning of section 2-302 of the Uniform Commercial Code.

Issues

May the UCC concept of unconscionability be applied to consumer contracts for the sale of goods?
In a consumer context is unconscionability to be determined by both mathematical calculations and limited financial resources known to the seller?
May a court reform an unconscionable contract for price alone?

Holding and Rule of Law

Yes. The UCC concept of unconscionability may be applied to consumer contracts for the sale of goods.
Yes. In a consumer context unconscionability is to be determined by both mathematical calculations and limited financial resources known to the seller.
Yes. A court may reform an unconscionable contract for price alone.

Star Credit Corp. knew of Jones’s financial condition when the sale was consummated. Having already paid more than $600 towards the purchase of a $300 freezer, it is apparent that Star Credit has already been compensated. The contract is thus reformed and payment already made is now payment in full.

Public Policy

There is the concern for the uneducated and often illiterate individual who is the victim of gross inequality of bargaining power, usually the poorest members of the community. In Hume v. United States, the United States Supreme Court characterized these types of contracts as “cases in which one party took advantage of the other’s ignorance of arithmetic to impose upon him, and the fraud was apparent from the face of the contracts.” The modern concept of unconscionable contracts arose from the common law doctrine of intrinsic fraud.

Section 2-302 of the Uniform Commercial Code authorizes the court to find as a matter of law that a contract or a clause of a contract was ‘unconscionable at the time it was made’. The court may refuse to enforce such a contract, excise the objectionable clause or limit the application of the clause to avoid an unconscionable result.

Disposition

Judgment for plaintiff Jones. Star Credit has already been amply compensated.