Jones v. Star Credit Corp

Brief Fact Summary. Plaintiffs, various welfare recipients (Plaintiffs), agreed to purchase a home freezer for $900. The Plaintiffs paid $619.88 towards the purchase. The Defendant, Star Credit Corp (Defendant), claimed that charges relating to the extension of time for payment results in a $819.81 still being due. The maximum retail value of the freezer is $300.

Synopsis of Rule of Law. Section 2-302 of the Uniform Commercial Code, (UCC) “authorizes a 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,’ and upon so finding the court may refuse to enforce the contract, excise the objectionable clause or limit the application of the clause to avoid an unconscionable result.”

Facts. Plaintiffs, who are welfare recipients, agreed to purchase a home freezer for $900. The total purchase price became $1,234.80. Thus far, the Plaintiffs have paid $619.88 towards the purchase. Defendant claims that with various charges relating to the extension of time for payment, there is a balance of $819.81 still due. The maximum retail value of the freezer is $300.

Issue. Is the transaction unconscionable pursuant to the terms of UCC Section:2-302?

Held. Yes. Public policy dictates that uneducated consumers should be protected from greedy merchants and the dangers of unequal bargaining power. UCC Section:2-302 provides for a moral sense of community in commercial transactions and if a clause of a contract is unconscionable at the time it was made, the court may refuse to enforce the contract. The UCC applies to the price term of a contract.
There is a public necessity and desirability for installments sales contracts. However, the pricing scheme on such contracts must afford some protection to the seller for the risk of selling to those who may default on payment. The price terms set in the subject contract are in excess of any assurances and the result is an unconscionable contract.

Discussion. The court sees UCC Section:2-302 as applying to the price term of a contract. The purpose of Section:2-302 is to protect the unequal bargaining power that is often inherent in some contractual agreements.