Air conditioners are sold by AceHeating andCooling. The Freezy, for example, has a fair market value of $300. Ace sells three Freezys for $1,000 during a heat wave to the following people:
Breanna is a single mother with bad credit who cannot afford to pay cash for an air conditioner. Breanna signs a contract to pay $1,000 on a credit plan, plus interest and financing fees of $500.
Barry Bigshot, an investment banker, is aware that the price is far too high but is far too important to waste his time driving around town looking for a better deal.
The AC went out in the middle of the lunch rush at Glamour Café, a fancy restaurant with an upscale clientele. The manager is desperate to get the place cool before people like Barry Bigshot come in for happy hour in the evening.
Shady Rest Nursing Home is a company with a low profit margin. The manager isn’t thrilled with the price, but elderly people are especially vulnerable to heat, and she’s concerned that any delay in getting AC will jeopardize their health.
Who has the best chance of getting out of the contract due to unconscionability under UCC 2-302?
The justice symbol depicts a woman wearing a blindfold to represent how the law should be applied equally regardless of who the parties are. Is it possible that the UCC rule contradicts this? Which method do you believe is more ethical?
It should be noted that Glamour and Shady Rest are both businesses, and courts rarely find contracts between two businesses to be unconscionable. The reasoning is that a business is a sophisticated entity that is familiar with transactions and capable of protecting itself. Do you believe Glamour and Shady Rest are in comparable positions in terms of this contract?
Section 2-302 gives the courts considerable leeway in determining whether a contract term is grossly unfair and whether the parties had such a disproportionate ability to bargain that the contract should be declared unconscionable. Do you think this is a good strategy? Would it be preferable if the law was more specific?