A delicate balancing of paternalism and freedom to contract: the evolving law of unconscionability in Missouri.

Author:Smithson, Scott Lee, Jr.

    The contracts defense of unconscionability--infrequently exercised and less frequently successful--requires that a contractual provision be so odious that it "shocks the conscience" of the adjudicator. (1) Case law suggests that during the last century, unconscionability has been argued successfully less than twenty times in the state of Missouri. (2) The nature of an overall unconscionability analysis is rather tenuous, given that the defense is highly fact-intensive, and a range of factors, rather than elements, controls. (3) Despite this, Missouri courts had applied a uniform test in nearly every contract situation for decades, including contracts whose terms included a mandatory arbitration clause.

    After the adjudication of the highly anticipated case AT&T Mobility LLC v. Concepcion, (4) the Missouri judiciary was faced with the prospect of examining its own unconscionability test and applying the new ruling. The Concepcion case, decided within the context of mandatory arbitration contracts, held that state unconscionability laws will be pre-empted by the Federal Arbitration Act where such state unconscionability laws stand as an obstacle to the goals of the Federal Arbitration Act. Along with providing a general history of Missouri unconscionability law, this Summary will also examine the major impact of Concepcion upon the state.


    The unconscionability doctrine is rooted in legal precepts dating to the late 1900s, but the defense has only become widespread in Missouri during the last ten years or so. (5) The Legal Background section will investigate the beginnings of the defense in Missouri, examine the formation of the old and new unconscionability tests (including a brief overview of the Federal Arbitration Act), and provide a general overview of the most important Missouri unconscionability cases.

    1. Unconscionability Generally

      1. The Origin of the Defense

        The first judicial definition of "unconscionability" in United States history appears in Hume v. United States, a Supreme Court of the United States case decided in 1889. (6) Hume colorfully illustrates an unconscionable agreement as one that "no man in his senses, not under delusion, would make, on the one hand, and which no fair and honest man would accept on the other[.]" (7) The first Missouri court case to mention the concept came two decades later in Ball v. Reyburn, where the court adopted the same definition. (8) Thereafter, Missouri courts applied a fact-specific analysis to unconscionability claims, resulting in several independent rulings (9) that offered little basis for reliable precedent. (10)

        For example, in Carter v. Boone County Trust, the Supreme Court of Missouri determined the validity of an agreed-upon rental value for "the most valuable business property in Columbia[, Missouri]." (11) The plaintiff argued that the contracted rental price for the property paid by Boone County Trust was "so inadequate" that it should have "shock[ed] the conscience of the court" and have been set aside. (12)

        In addressing the plaintiffs claim, the court first referenced the treatise Page on Contracts and produced the definition for unconscionability noted in Hume. (13) Additionally, the opinion concluded that the threshold for determining whether unequal consideration might qualify as "unconscionable" could only be stated in "abstract terms" and thus offered no practical help. (14) Turning to alternative definitions of unconscionability, the court stated, "where the inadequacy of price is so great that the mind revolts at it, the [c]ourt will lay hold of the slightest circumstances of oppression or advantage to rescind the contract." (15) Finally, the Carter opinion revisited a rule that was "everywhere understood"--if a party was incompetent to understand the nature of the contract, or if it was necessary to otherwise guard and protect the rights of a party, courts would interfere on that party's behalf. (16) Beyond these maxims, the court applied no other test in ultimately finding that the contracted rental price was not unconscionable. (17)

        Other early Missouri unconscionability decisions conducted similar analyses. (18) However, in the 1955 case Miller v. Coffeen, a Missouri court struck down a contractual agreement using reasons similar to the modern unconscionability defense. (19) The matter involved two private individuals engaged in a sale of real property. (20) Miller (21) contracted with a seventy-year-old seller, Coffeen, (22) for the sale of a home located in Kansas City. (23) The home had a fair market value somewhere between $11,000 and $12,000. (24) Coffeen offered to sell Miller the home for $2,400. (25) A day after the papers were executed, and after consulting with his lawyer, Coffeen expressed his desire to back out of the sale. (26) The two parties attempted to reach a monetary figure upon which Coffeen could pay to be relieved of his contractual obligations to sell the home. (27) Unsatisfied with the negotiations, Miller initiated legal action and stated his desire that the trial court enforce the sale through specific performance. (28)

        The trial court rendered a verdict for Miller, and Coffeen appealed. (29) On review, the Supreme Court of Missouri examined the facts of the case, commenting on several factors surrounding the formation of the contract. (30) First, the court noted that Miller had intimate knowledge of Coffeen's property, including the sale price of $12,000 that Coffeen originally paid for the property. (31) Second, Coffeen's lawyer stated at trial that "[Coffeen] didn't know what he was doing," and he "ought to be adjudicated [incompetent]." (32) Finally, the court noted that in addition to Miller's knowledge of the fair value of the property, the parties "did not negotiate and consummate their contract alone and on equal terms." (33) In fact, Miller declined to use Coffeen's lawyer for the sale, and the parties subsequently visited Miller's personal attorney. (34) Without counseling Coffeen in any way, Miller's attorney examined the property's papers and drafted a purchase agreement that was signed immediately. (35)

        In making its decision, the court discussed strong Missouri precedent regarding specific performance. (36) Particularly, the court observed that absent circumstances that would make the contract "unfair, overreaching, [or] biting," and in situations where a contract's terms are plain and fair, a specific performance remedy is generally a matter of right. (37) Also, mere inadequacy in value between the property and the sale price is not a ground for refusing specific performance unless it is accompanied by other inequitable factors, including "the fairness and reasonableness of the consideration in view of all the circumstances." (38) The judicial system values the importance of enforcing contracts voluntarily entered into, even if they are a "hard one," (39) but the Coffeen court clearly believed the circumstances of the case rose to such a level as to render specific performance unavailable as a remedy. (40) Considering the facts of the case, and that various other damage remedies for breach were available to Miller (who had not yet suffered an adverse financial change of position due to the sale), (41) the court concluded that, "in view of the shocking inadequacy of the consideration and the presence of the noted inequitable factors, enforcement of the contract would impose an unreasonable, disproportionate hardship upon [Coffeen]." (42) Therefore, the court denied Miller's request to mandate the sale of property through specific performance. (43)

        Although Coffeen did not specifically mention unconscionability, the modern framework for the defense is derived from the reasoning in that case. (44) The factors applied by the Coffeen court, including unequal bargaining power and oppressive terms, (45) stand as the basis in Missouri for both procedural and substantive unconscionability analyses seen in modern day courts.

      2. The Missouri Approach

        The first Missouri case to establish the modern "substantive and procedural unconscionability" test appeared in Funding Systems Leasing Corporation v. King Louie International, Inc. (46) King Louie involved a dispute between several parties over the effect of a liability disclaimer in a lease-purchase agreement for equipment that subsequently malfunctioned. (47) The trial court entered judgment against King Louie. (48) On appeal, King Louie argued, among other things, that the express liability disclaimer was unconscionable. (49)

        The court of appeals inferred that, in order to find unconscionability, a proper definition of the defense would be necessary to investigate the claim. (50) Noting that the Uniform Commercial Code offered no definition, (51) the majority referenced a test proposed in a 1967 University of Pennsylvania Law Review article (52) that had been accepted by various legal commentators and New York courts. (53) The test distinguished between two facets of unconscionability: "substantive" and "procedural." (54) According to the court of appeals, the substantive aspect related to "undue harshness" in the actual terms of the contract. (55) An unduly harsh term might provide for the total destruction of the right to relief in case of breach. (56) The procedural portion related to problems in the contract formation process, such as unequal bargaining power between the parties (57), high-pressure tactics, fine print, and misrepresentation. (58)

        The King Louie majority established that in order for an unconscionability claim to succeed, there must generally be both substantive and procedural aspects to the claim. (59) However, a sliding scale was also introduced. (60) The sliding scale evaluation permits a court to find a term unconscionable even if, for example, there is little substantive unconscionability but the procedural elements are overwhelming. (61) Thus, in a typical contract, if procedural...

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