Louisiana Law Review Volume 43 | Number 6 July 1983 Unconscionability: The Approach of the Louisiana Civil Code Ronald L. Hersbergen Repository Citation Ronald L. Hersbergen, Unconscionability: The Approach of the Louisiana Civil Code, 43 La. L. Rev. (1983) Available at: https://digitalcommons.law.lsu.edu/lalrev/vol43/iss6/1 This Front Matter is brought to you for free and open access by the Law Reviews and Journals at LSU Law Digital Commons. It has been accepted for inclusion in Louisiana Law Review by an authorized editor of LSU Law Digital Commons. For more information, please contact [email protected]. UNCONSCIONABILITY: THE APPROACH OF THE LOUISIANA CIVIL CODE Ronald L. Hersbergen* INTRODUCTION In 1975 Louisiana became the fiftieth state to enact the Uniform Commercial Code, but unlike its sister states, Louisiana omitted several UCC articles. As of 1983, UCC articles 2, 6, and 9 remain unadopted in Louisiana, and only article 6 remains under serious con- sideration for adoption by the Louisiana State Law Institute. For the present, articles 2 and 9 appear to be dead-letters in Louisiana, the apparent reason for inaction being a perception that the two articles are incompatible with Louisiana's underlying Civil Code principles.' By not enacting article 2 of the UCC, Louisiana remains, with Califor- nia, a jurisdiction without section 2-3022- not the most important sec- tion in the UCC, perhaps, but by far the most interesting one. The UCC section 2-302 comment advises that the section is, in essence, a grant of power to the courts to "police" contracts within the UCC's ambit and, in the court's discretion, to refuse to enforce Copyright 1983, by LOUISIANA LAW REVIEW. * Professor of Law, Louisiana State University. [Editor's note: Professor Hersbergen's article is the culmination of a research project sponsored by the Center of Civil Law Studies, Paul M. Hebert Law Center. A compan- ion article by Professor Hersbergen, Contracts of Adhesion under the Louisiana Civil Code, appearing in issue number one of this volume, was also a part of the research project sponsored by the Center of Civil Law Studies. The author wishes to express his appreciation to Saul Litvinoff, Professor of Law and Director of the Center of Civil Law Studies, Alain Levasseur, Professor of Law and Associate Director of the Center, and Professors Thomas Harrell and Alston Johnson for their assistance on the project.] 1. See Charlton, Louisiana's Civil Law Renaissance; A Bar to Adoption of the U.C.C.?, 18 AM. Bus. L.J. 1, 10-12 (1980); Mashaw, A Sketch of the Consequences for Louisiana Law of the Adoption of "Article 2: Sales" of the Uniform Commercial Code, 42 TUL. L. REV. 740 (1968); Sachse, Report to the Louisiana Law Institute On Article Nine of the Uniform Commercial Code, 41 TUL. L. REV. 505 (1967). 2. S 2-302. Unconscionable Contract or Clause (1) If the court as a matter of law finds the contract or any clause of the con- tract to have been unconscionable at the time it was made the court may refuse to enforce the contract, or it may enforce the remainder of the contract without the unconscionable clause, or it may so limit the application of any unconscionable clause as to avoid any unconscionable result. (2) When it is claimed or appears to the court that the contract or any clause thereof may be unconscionable the parties shall be afforded a reasonable oppor- tunity to present evidence as to its commercial setting, purpose and effect to aid the court in making the determination. (1978 Official Text). 1316 LOUISIANA LAW REVIEW [Vol. 43 any clause or group of clauses found to be unconscionable3 or, indeed, to refuse to enforce the'contract as a whole. The comment suggests that section 2-302 now permits courts in UCC states to do directly what in the past often was done by indirection, that is, the comment suggests that courts historically have policed unfair contracts and clauses by adverse construction of the contract language, by manipula- tion of the rules of offer and acceptance, or by resort to the always- available ideas of "public" policy. But, it may be wondered, what con- tracts require such policing in the first place and why did the most advanced society in the world, by a "vote" of forty-eight to two, decide very nearly at the time of its bicentennial that such "above-the-board" judicial policing was necessary? The answer to both inquiries is found in common law jurisprudence. Historically, the common law courts have assumed that, as a mat- ter of inherent equitable power, the enforcement of unfair contracts or clauses could be refused if the contract or clause was so onerous, oppressive, or one-sided that a reasonable person, not suffering a delu- sion, would not have freely given his consent to it.' In earlier and 3. Common law courts have not hesitated to apply the principle of unconsciona- bility to cases beyond the ambit of S 2-302, recognizing that the adoption of UCC S 2-302 is an expression of legislative will on a matter having public policy implica- tions that go beyond the scope of the UCC. See, e.g., Weaver v. American Oil Co., 257 Ind. 458, 276 N.E.2d 144 (1971); C & J Fertilizer, Inc. v. Allied Mut. Ins. Co., 227 N.W.2d 169 (Iowa 1975); Ellsworth Dobbs, Inc. v. Johnson, 50 N.J. 528, 236 A.2d 843 (1967). Courts also have held that bailments come under UCC article 2's ambit of "trans- actions in goods," Mieske v. Bartell Drug Co., 9 Wash. 2d 40, 593 P.2d 1308 (1979), as do leases of goods, see, e.g., Fairfield Lease Corp. v. Pratt, 6 Conn. Cir. Ct. 537, 278 A.2d 154 (1971); Industralease Automated & Scientific Equip. Corp. v. R.M.E. Enter., Inc., 58 A.D.2d 482, 396 N.Y.S.2d 427 (1977); Baker v. City of Seattle, 79 Wash. 2d 198, 484 P.2d 405 (1971). Still other decisions have applied the principle of § 2-302 by analogy to checking account agreements, David v. Manufacturers Hanover Trust Co., 55 Misc. 2d 1080, 287 N.Y.S.2d 503 (Civ. Ct. 1968), rev'd on other grounds, 59 Misc. 2d 248, 298 N.Y.S.2d 847 (App. Term. 1969), to an enrollment agreement for a "com- puter programmer" course, Educational Beneficial, Inc. v. Reynolds, 67 Misc. 2d 739, 324 N.Y.S.2d 813 (Civ. Ct. 1971), to a contract for the hiring of a party room, Lazan v. Huntington Town House, Inc., 69 Misc. 2d 1017, 332 N.Y.S.2d 270 (Dist. Ct. 1969), and to an apartment lease, Seabrook v. Commuter Housing Co., 72 Misc. 2d 6, 338 N.Y.S.2d 67 (Civ. Ct. 1972), aff'd on other grounds, 79 Misc. 2d 168, 363 N.Y.S.2d 566 (App. Term 1973). As an aid to the analysis of the unenforceability of unfair contracts under the Civil Code of Louisiana, sellers, lenders, lessors, and contractors of work, labor, and services will be referred to collectively as "suppliers," while buyers, bor- rowers, lessees, and those who contract for the performance of work, labor, and ser- vices will be referred to as "consumers," unless the context otherwise requires. 4. The idea that a contract "such as no man in his senses and not under delusion would make on the one hand, and as no honest and fair man would accept on the other" should not be enforced typically is traced to Earl of Chesterfield v. Janssen, 2 Ves. Sec. 125, 156, 28 Eng. Rep. 82, 100 (1750). The idea germinated in certain deci- sions of the United States Supreme Court; see United States v. Bethlehem Steel Corp., 19831 UNCONSCIONABILITY 1317 simpler times, perhaps such one-sided contracts or clauses were not common, but neither was the mass production and merchandising of goods and services. With mass merchandising inevitably comes mass contracting and the standardization of transactions -and the resulting decline of negotiation and bargaining as the manner of forming con- tracts. Given the volume of transactions involved- commercial and noncommercial -standardized contracting is perhaps the only orderly method by which goods and services can be distributed in the United States today.' Unavoidably, the terms of standard-form contracts are dictated by the distributors of goods and services, and terms unfairly advantageous to the distributor are the predictable result. A legal system in which goods and services are distributed upon the premise of caveat emptor perhaps can dispense justice only upon a case-by- case resort to "adverse construction of language," "manipulation of the rules of offer and acceptance," or by determinations that certain clauses or contracts are contrary to public policy.' For the forty-eight states which enacted section 2-302, unconscio- nability is now the judicial device of choice by which the fairness of standard form contracts of adhesion is judged and adjusted. The policy of section 2-302 was eloquently stated by the New Jersey Supreme Court in Ellsworth Dobbs, Inc. v. Johnson:7 Courts and legislatures have grown increasingly sensitive to imposition, conscious or otherwise, on members of the public by persons with whom they deal, who through experience, specializa- tion, licensure, economic strength or position, or membership in associations created for their mutual benefit and education, have acquired such expertise or monopolistic or practical control in the business transaction involved as to give them an undue advan- tage. Grossly unfair contractual obligations resulting from the use of such expertise or control by the one possessing it, which result in assumption by the other contracting party of a burden which is at odds with the common understanding of the ordinary and untrained member of the public, are considered unconscionable and therefore unenforceable.