Rediscovering Subjectivity in Contracts: Adhesion and Unconscionability

Summary

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Illustration One. I. A Brief Overview of Objectivity and Subjectivity . Illustration Two. Illustration Three. II. The Need for Subjectivity to Limit Objectivity in Formation . Illustration Four. III. Adhesion: a Sign that Objectivity has not Fully Digested the Subjectivity Meal . Illustration Five. Illustration Six. IV. Unconscionability as a Possible Emetic After the Overindulgence . V. Unconscionability as Administered by the Courts . VI. Application:Armendariz and Carnival Cruise Lines. Illustration Seven. A. Armendariz v. Foundation Health Psychare Services, Inc.. B. Carnival Cruise Lines v. Shute. 1. So Who Reads the Boilerplate Anyway?. 2. What We Have Here is a Failure to Negotiate. VII. Conclusion .

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Rediscovering Subjectivity in Contracts: Adhesion and Unconscionability

Professor of Law and Leonard B. Melvin, Jr. Distinguished Lecturer in Law, University of Mississippi. B.A., J.D., 1976, 1979, University of Arizona; LL.M., 1983 Northwestern University. My thanks go to Michael Gorman, U of M Class of 2007, for his help finding materials to support the ideas presented here.

The doctrines of adhesion and unconscionability owe their existence to the power of the libertarian model of bargaining. The premise of this Article is that the concept of objectivity has made adhesion and unconscionability doctrines of convenience, helpful in fine tuning the powerful concept of objectivity in that libertarian model. The conclusion reached is that both of these limiting doctrines are a product of the objective theory and serve complementary purposes. This Article asserts that the purpose of the doctrines of adhesion and unconscionability is to save the objective theory of contracts from troublesome over breadth.

This Article begins with a description of the objective and subjective theories of contract enforceability. It will be shown that the traditional definition of contract as an objective bargain-in- fact1 of the parties leaves too much to the imagination between the parties. Can individuals create a bargain for what is illegal? The libertarian answer would be yes, but the traditional objective doctrine hedges. Some well-recognized limitations will be elaborated to show that the presence of consideration in an objective exchange is not enough to ensure its validity.2

Illustration One.

A highway robber waylaid a stage coach and killed the driver. He then said to the passengers: "Your valuables or your lives." When they complied there was no more than that, compliance. Notwithstanding the fact that there was language of choice, an objectively expressed exchange does not mean that there was a bargained for exchange.3

Adopting the form of an exchange should not be a privilege to commit a tort or a crime.4 Adhesion and unconscionability are useful, in part because they help us identify other instances of form over substance. Their vigor reduces tensions in the Law of Contracts which arise through the dominance of objectivity. We know there are times when we must lift the mask of formula used by the robber and other bad actors.

This Article will elaborate on the distinction between the objective and subjective models of contract.5 Next, a group of significant cases, all of which deal with the doctrines of adhesion and unconscionability as limitations on contract power, will be examined for traces of this unresolved conflict.

This Article proposes that there is great value in retaining some subjectivity as the basis for contract enforcement. One conventional area in which this subjectivity is used is in misunderstandings which can only be discovered and resolved through subjectivity.6 This concededly radical proposition is made less so by limitations on it which will be introduced below.

Conventionality will be supported by two themes carried throughout this Article. The first is that adhesion and unconscionability are to formation what misunderstanding is to interpretation. They should be seen and used in a way that makes them akin to an interpretive gloss on the theory of objective formation. They should not be seen as an antithetical alternative to objectivity. No contest for supremacy will be played.

Second, by being forthright in our application of these modest interpretive devices we save the more manipulative devices which skirt formation, but still erode objectivity of meaning.7 Judges have demonstrated their desire for subjectivity. That desire is the reason that two major sources of contract law, the Uniform Commercial Code (UCC) and the Restatement Second of Contracts (Restatement), speak of unfair surprise as one concern in unconscionability. However, to do the real work we need to connect the unfairness with the lack of assent rather than the result. Some bargains should not be enforced even though their substance is acceptable. They should be rejected solely on the basis of their lack of fair bargaining. If a deal is created by power that presents only the appearance of genuine assent, then the interest of the law in protecting objectivity largely disappears. A lack of genuine assent makes these transactions more akin to robbery than contract.

Where the bargained-for-exchange is not genuine, we need to be able to say this in a forthright manner.8

These tools of adhesion and unconscionability remove some of the pressure from other doctrines and devices. While both require an examination of the circumstances and result of the objective bargain, their directness reduces the reliance on other doctrines which appear more conventional, more doctrinaire, but, in actuality, can be manipulative and result-orient...

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