Whatdoes the case say the plaintiff have to prove to show the contract was unconscionable?

Why did the court decide the way it did?

Do you agree with the decision?

of cooperation). Another ion requirement. known as laches, is that the plaintiff must not have waited so long to raise the claim that the defendant is impaired in his or her ability to render performance. CASE Wilson v. Mike Steven Motors, Inc., et al., 111 P.3d 1076 (Kan. Ct. App. 2005) In the following judicial opinion, the court examines the sale, Wilson reviewed the sales paperwork and dis- what is necessary to constitute an unconscionable covered the documentation did not reflect the rebate. circumstances that would prevent enforcement of When Wilson made inquiry of Dealer, she was stalled a contract. at first and then directed to resolve her dispute with Mike Steven Motors, Inc. (Dealer) appeals the denial of Toyota Credit. Wilson returned the vehicle to Dealer. In its motion to stay the district court proceedings and to August, Toyota Credit notified Wilson that her account compel arbitration of its dispute with Cornelia Wilson, was past due. In December 2003, the vehicle was sold at arising out of the negotiation and sale of an automobile. auction, even though it purportedly had only 58 miles on We reverse and remand with instructions to grant the the odometer, with the consequence that Wilson owed a motion to compel arbitration. deficiency of over $7,000. In July 2003, Wilson purchased a new Toyota Camry In March 2004, Wilson sued Dealer and Toyota Credit. . . . from Dealer, allegedly based in part upon the salesper- Wilson's first cause of action against Dealer alleged a son's representation that she would receive a $500 re- deceptive act and practice under the Kansas Consumer bate. The purchase was financed through Toyota Motor Protection Act, K.S.A. 50-623 et seq. (KCPA). The second Credit Corporation (Toyota Credit). A few days after cause of action alleged negligent misrepresentation. (continued)462 CHAPTER 13 THE LAW OF CONTRACTS 463 Both were based on the false statement that Wilson presented. The Wichita Auto Dealers Association made by the court is whether an agreement to arbitrate ex- entire contract was a result of the misrepresentations would receive a $500 rebate the following statements as the issues presented: (1) The ists and whether this agreement includes arbitration of FAA applies to the arbitration agreement; (2) Wilson's the specific point at issue. [Citation omitted.]" City of and unconscionable conduct of [Dealer]" because the Before filing an answer to the petition, Dealer filed a Wamego v. L.R. Foy Constro., 9 Kan. App. 2d 168, 171, Dealer falsely "promised a rebate to the plaintiff to in- fraud inducement claim is referable to arbitration; and motion to stay proceedings and compel arbitration. The duce her to purchase the Camry." The response then 3) Wilson's unconscionablety claim is referable to arbi- 675 P.2d 912, rev. denied 234 Kan. 1076 (1984). . . . If motion alleged that the sales contract included an ar- declared that "Wilson's notice of recission [sic] nullified tration, and even if it is not, the arbitration agreement the plaintiff demonstrates a genuine issue of material bitration agreement which applied to every claim aris- fact as to the agreement to arbitrate, then a trial on the the contract and without a valid contract there can be no was not unconscionable. The Kansas Automobile Dealers ing out of the negotiation and sale of the vehicle. Dealer resulting agreement requiring the parties to arbitrate." Association recited under the statement of issues that issue is necessary. See In Re Universal Serv. Fund Tele. further alleged that the transaction involved interstate Other than tying the arbitration agreement's validity di- it would rely on the issues outlined in the appellant's Billing Practices, 300 F. Supp. 2d 1107, 1117 (D. Kan. commerce, making the Federal Arbitration Act, 9 U.S.C. rectly to that of the purchase agreement, Wilson does brief but then presented arguments under the following 2003). ... $ 1 et seq. (2000) (FAA) controlling. not effectively establish a material dispute as to the va- headings: The federal courts employ a separability doctrine when lidity of the separate, written, and signed Arbitration Wilson responded to the motion, contending that Dealer's "I. The Federal Arbitration Act completely occupies the a party challenges the enforceability of an arbitration Agreement. deceptive and unconscionable acts rescinded the contract, field relating to arbitration agreements, and such agree- agreement. An allegation of fraud in the inducement making the arbitration agreement moot. The argument is Wilson provides no authority for the proposition that that the entire contract was effectively rescinded by Deal- ments are subject to dissolution only upon finding fraud of a contract as a whole is subject to arbitration, if the the notice of rescission rendered the entire contract a specific to the arbitration agreement itself. agreement to arbitrate was not alleged to have been er's fraudulent inducement of Wilson's vehicle purchase. nullity. Indeed, whether the purchase contract could be fraudulently induced. Prima Paint v. Flood & Conklin, In the alternative, the response also argued that the A. Refusal to Honor an Uncoerced and Otherwise Valid rescinded is the question to be decided, either by the contracts were executed in a procedurally uncon- Arbitration Agreement Based upon the Kansas Con- 388 U.S. 395, 403-04, 18 L. Ed. 2d 1270, 87 S. Ct. 1801 court or the arbitrator. Because the district court sim sumer Protection Act Cannot Be Reconciled with the (1967). The Supreme Court relied on $ 3 of the FAA, say- ing that when considering a stay under this section, "a ply adopted Wilson's response as its findings, we must scionable manner, thereby rendering the arbitration Federal Arbitration Act and the Supremacy Clause of federal court may consider only issues relating to the declare that the court erred in finding that Wilson's agreement unenforceable. Wilson claims that Dealer was in a superior bargaining position; that Dealer gave the United States Constitution as Interpreted by the United States Supreme Court. making and performance of the agreement to arbitrate." agreement to arbitrate was nullified by her notice of re- 388 U.S. at 404. Sections 3 and 4 apply to the federal scission. To the extent the district court's motion denial Wilson a large stack of forms to sign without allow- B. When Parties to a Contract Freely Agree to Arbitrate courts. See 9 U.S.C. 55 3-4; Southland Corp, 465 U.S. at was based on fraudulent inducement, it is reversed. ing her adequate time to review all of the documents, including the arbitration agreement; and that Dealer All Potential Disputes, including Contract Formation, 16 n.10. ... . .. "Unconscionableity is a doctrine under which courts induced the sale by making a false promise of a rebate. One Party May Not Thereafter Evade the Agreement may deny enforcement of unfair or oppressive contracts The district court heard arguments on the motions. Merely by the Couching of a Clever Draftsperson; The distinction between void and voidable contracts Otherwise, the Bare-Bones Allegation of Fraud in the makes sense. If a party is claiming that the contract because of procedural abuses arising out of the contract formation, or because of substantive abuses relating to The only evidence submitted was the sales contract. After taking the matter under advisement, the district Inducement Would Be Sufficient to Defeat Every Arbi- containing an arbitration agreement never had a legal the terms of the contract, such as terms which violate existence, then, if true, there could never have been a court filed a journal entry denying the motion. All of the tration Agreement. reasonable expectations of parties or which involve gross legal agreement to submit the dispute to an arbitrator. court's findings are set forth below in their entirety Therefore, the courts should make the determination disparities in price. [Citation omitted.] Either abuse can "II. Plaintiff's arguments of unconscionableness are hypo- be the basis for a finding of unconscionablety." Remco "(1) The Court adopts as its own the facts set out and the thetical, and lack the substantiality required by the United whether the whole contract was void ab initio. On the Enterprises, Inc. v. Houston, 9 Kan. App. 2d 296, 301, 677 conclusions of law in the 'Plaintiff's Response to Defendant's States Supreme Court to invalidate the arbitration agree- other hand, by definition a voidable contract does have P.2d 567, rev. denied 235 Kan. 1042 (1984) Mike Steven Motors' Motion to Compel Arbitration'; ment. legal effect, including any provision requiring arbitra- The district court's adoption of Wilson's response to (2) The Defendant's motion should be denied; A. The United States Supreme Court Has Invariably tion, until the allegedly aggrieved party chooses to seek Refused to Eviscerate Arbitration Agreements Based rescission. Therefore, on voidable contracts, the courts Dealer's motion as its findings leaves us with the im- (3) The case shall proceed with discovery in Sedgwick upon Hypothetical Arguments of Inadequacy or Exces should permit the arbitration of the question of the pression that the court did not make a specific finding County District Court." . . sive Arbitration Costs. rescission of the contract as a whole, unless the court of unconscionablety of the arbitration agreement, but decides the arbitration agre nt is separately infirm. rather found the entire contract unconscionable. . . . Wilson chose to restate the issues necessary to the dis- B. Enforcement of the Arbitration Agreement as In considering whether the arbitration agreement was position of the appeal, which is permissible under Su- Against the Plaintiff Does Not Forestall the Kansas Therefore, we restrict our analysis to whether the arbi- unconscionable, we apply general contract law prin- preme Court Rule 6.03(b) (2004 Kan. Ct. R. Annot. 37). Attorney General from Enforcing the KCPA Either for the tration agreement, standing alone, is enforceable. To ciples. See Doctor's Associates, Inc. v. Casarotto, 517 U.S. Wilson's restated issues are: Benefit of a Single Consumer, or on a Class-wide Basis." that end, we will consider whether the arbitration agree- 681, 686-89, 134 L. Ed. 2d 902, 116 S. Ct. 1652 (1996). "I. Whether the arbitration agreement between Ms. Wilson ment was unenforceable because: (1) it was fraudulently In Wille v. Southwestern Bell Tel. Co., 219 Kan. 755, and MSM-Eddy's Toyota [Dealer] is unenforceable be- The arbitration agreement provided that "[njo class ac- induced; (2) it violated Kansas public policy by contra 758-59, 549 P.2d 903 (1976), our Supreme Court identi- cause it is contrary to the public policy of this state. tion arbitration may be ordered and there shall be no vening a consumer's rights under the KCPA; or (3) it was fied the following factors to aid in the determination of joinder of parties except for joinder of parties to the unconscionable. .. unconscionablety. "II. Whether the arbitration agreement between Ms. Wilson same Contract." At oral argument, Wilson's counsel and MSM-Eddy's Toyota is enforceable under the facts stated that the sole question for this court to decide was Dealer presented the court with a written, signed arbi- "(1) The use of printed form or boilerplate contracts tration agreement. . . . Under the separability doctrine, presented. whether the waiver of a class action in the arbitration drawn skillfully by the party in the strongest economic "III. Whether the matter should be remanded for trial agreement violated the KCPA's provision that prohibits it was incumbent on Wilson to come forward with evi- position, which establish industry wide standards of consumer's waiver of rights, thus rendering the arbi- dence of some material disputed fact which would es- fered on a take it or leave it basis to the party in a weaker before the district court on the issue of whether the arbi- tablish that the arbitration agreement was fraudulently tration agreement unenforceable. . . economic position [citation omitted]; (2) a significant tration agreement is enforceable." induced. However, Wilson's response to the motion, cost-price disparity or excessive price; (3) a denial of ba In addition, two associations submitted amicus curiae . . . "[Wjhenever a motion to compel arbitration comes ostensibly adopted by the district court, attacked the briefs, with their own characterization of the issues on for hearing, the threshold determination to be made contract as a whole. The response contended "that the sic rights and remedies to a buyer of consumer goods [citation omitted]; (4) the inclusion of penalty clauses; (continued) (continued)464 CHAPTER 13 Q (5) the circumstances surrounding the execution of the contract. including its commercial setting, its purpose and actual effect [citation omitted]; {63 the hiding of clauses which are disadvantageous to one party in a mass of ne print trivia or in places which are inconspicuous to the party signing the contract [citation omitted]; (7) phrasing clauses in language that is incomprehensible to a layman or that divert his attention from the prob lems raised by them or the rights given up through them; (8) an overall imbalance in the obligations and rights imposed by the bargain; (9) exploitation of the under- privileged. unsophisticated, uneducated and the illiter ate [citation omitted]; and (10) inequality of bargaining or economic power." Furthermore, \"there must be ad- ditional factors such as deceptive bargaining conduct as well as unequal bargaining power to render the contract between the parties unconscionable." 219 Kan. at 7'59. Wilson argued to the district court that Dealer was in a superior bargaining position as the only Toyota dealer in Wichita, that she had been given a large stack of forms to sign without adequate time to review the arbitra tion agreement, and that Dealer used deceptive tactics by promising a rebate in order to induce Wilson into purchasing the vehicle. On appeal, Wilson adds that the Amicus Wichita Auto Dealers Association admitted its members regularly use the preprinted form arbitration agreement, that the agreement denies her basic rights and remedies, that Wilson would not have purchased the vehicle except for the promise of the rebate, and. that Wilson is not as sophisticated as Dealer. Our review of the arbitration agreement fails to disclose unconscionability on its face. The arbitration provision is not hidden in ne print, but rather it is contained in a separate, onepage document, clearlyr entitled. "ARBITRATION AGREEMENT,\" in an adequately sized typeface. The last paragraph of the agreement is in large type, all capital and boldfaced. letters, stating: "THE PARTIES ACKNOWLEDGE THAT THEY HAD A RIGHT TO LITIGATE CLAIMS THROUGH A COURT BEFORE A JUDGE 0R JURY, BUT WILL NOT HAVE THAT RIGHT IF EITHER PARTY ELECTS ARBITRATION. THE PARTIES FURTHER ACKNOWLEDGE THAT DIS- COVERY IS MORE LIMITED EN ARBITRATION. THE PARTIES HEREB'Ir KNOWINGLY AND VOLUNTARILY WANE THEIR RIGHTS TD LITIGATE SUCH CLAIMS IN A COURT BEFORE A JUDGE ORJUR'E UPON ELECTION OF ARBITRATION BY EITHER PARTY." The document was signed by both parties on lines situated immediater below the bold-faced paragraph, making it difth to miss the warning. Wilson had a legal obligation to make some effort to read the agreement before signing. See, e.g., Rosenhaum v. Texas Energies, Inc, 241 Kan. 295, 299, 736 P.2d 888 {198 T). The remaining language of the agreement is not undulyr difcult to understand. While automobile dealers may routinely use the form provided by their trade associations, the record does not reect that Dealer would have missed the sale if Wilson had balked at signing the separate arbitration agreement. We also question whether there existed an inequality of bargaining or economic power. One would not expect to be inundated with media advertise- ments proclaiming sales. rebates, and low to no interest nancing if vehicle purchasers have no bargaining power. Granted, Wilson mag,r have been at a distinct disadvan tage with respect to sales techniques, but we do not per ceive that her lack of sophistication warrants a nding that the arbitration agreement was unconscionable. . . . The district court should have granted Dealer' s motion to stay the proceedings and to compel arbitration. We reverse and remand with directions for the district court to grant the motion. Reversed and remanded with directions. CASE REVIEW QUESTION Would the outcome be affected if the arbitration agree ment were located on the back of one of the forms, in ne print, and did not require a separate signature? APPLICATION 13.9 A wealthy couple is buliding a custom home using wood harvested entirely from the large property on which the house is built. They contract with a general carpenter to mill the wood and install hardwood floors, an out- door deck, and woodwork around the windows. They also contract with the carpenter's brother, a master craftsman, to handcarve banisters on stair- cases, a buffet table in the dining room, mantels for all oi the replaces, {contr'n IJEI'U