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16a-5-108. (UCCC) Unconscionability of act or practice; inducement by unconscionable conduct. (1) The unconscionability of an act or practice is a question for the trier of fact.

(2) With respect to a consumer credit transaction, if the trier of fact finds:

(a) The agreement was unconscionable at the time it was made, or was induced by unconscionable conduct, the court may refuse to enforce the agreement; or

(b) any clause of the agreement was unconscionable at the time it was made, the court may refuse to enforce the agreement, may enforce the remainder of the agreement without the unconscionable clause or may so limit the application of any unconscionable clause as to avoid any unconscionable result.

(3) If it is claimed or appears to the trier of fact that the agreement or any clause thereof may be unconscionable the parties shall be afforded a reasonable opportunity to present evidence as to its setting, purpose, and effect to aid the court in making the determination.

(4) A charge or practice expressly permitted by this act shall not be unconscionable.

History: L. 1973, ch. 85, § 84; L. 2024, ch. 6, § 99; January 1, 2025.

KANSAS COMMENT, 2010

1. Subsections (1) and (2) are derived in large part from the UCC. See K.S.A. 84-2-302. Contrary to the UCC, however, it is the trier of fact who determines whether a particular bargaining context or contract clause is unconscionable under the U3C. The trier of fact may be a judge or a jury. Under the KCPA, the determination of unconscionability is, as under the UCC, a matter of law for the court. See K.S.A. 50-627(b). The model act also followed the UCC and made the issue of unconscionability one of law; as a result, the Kansas provision is nonuniform in this respect. Pursuant to subsection (2), the consumer has a right to choose a judge or jury as the trier of fact with respect to unconscionability claims in a consumer credit contract case. Pursuant to K.S.A. 16a-1-107, a consumer may not waive or agree to forego rights granted pursuant to the U3C. Additionally, K.S.A. 60-238 and Section 5 of the Bill of Rights in the Kansas Constitution provides that a right to a jury trial may not be waived. Since the right to a jury trial may not be waived pursuant to the U3C, K.S.A. 60-238 and the Kansas Constitution, a waiver of jury trial provision should not be included in a contract subject to the U3C.

2. Subsection (1) provides, as does the UCC (see K.S.A. 84-2-302), that a court can refuse to enforce or can adjust an agreement or part of an agreement that was unconscionable on its face at the time it was made. However, many agreements are not in and of themselves unconscionable according to their terms, but they would never have been entered into by a consumer if unconscionable means had not been employed to induce the consumer to agree to the contract. It would be a frustration of the policy against unconscionable contracts for a creditor to be able to utilize unconscionable acts or practices to obtain such an agreement. Consequently, subsection (1) also gives the court the power to refuse to enforce an agreement if the trier of fact finds that it was induced by unconscionable conduct. Finally, subsection (1) includes provisions for a determination of unconscionability in a transaction that a consumer is led to believe will give rise to a consumer credit transaction so that, for example, a seller cannot bind the consumer to a short term sale contract payable in a lump sum on the assurance that the seller will secure financing for the consumer, and then inform the consumer that financing is unavailable and keep the down payment or goods traded in as a penalty for nonpayment.

3. In subsection (2), the omission of the adjective "commercial" found in the UCC (see K.S.A. 84-2-302) from the provision concerning the presentation of evidence as to the contract's "setting, purpose, and effect" is deliberate. Unlike the UCC, this section is concerned only with transactions involving consumers, and the relevant standard of conduct for purposes of this section is not that which might be acceptable as between knowledgeable merchants but rather that which measures acceptable conduct on the part of a business person toward a consumer.

4. This section is intended to make it possible for the courts to police contracts or clauses which are found to be unconscionable or induced by unconscionable conduct. The basic test is whether, in the light of the background and setting of the market, the needs of the particular trade or case, and the condition of the particular parties to the conduct or contract, the conduct involved is, or the contract or clauses involved are so one-sided, or the bargaining power of the parties so unbalanced, as to be unconscionable under the circumstances existing at the time of the making of the contract. The particular facts involved in each case are of utmost importance since certain contracts or contractual provisions may be unconscionable in some situations but not in others. Inequality of bargaining power might be termed "procedural unconscionability" while unfair clauses in the fine print of a contract might be called "substantive unconscionability."

While this section does not contain a "laundry list" of factors to be considered in making the determination of unconscionability, the lists of factors provided in the KCPA, K.S.A. 50-627(b), and in the U3C in K.S.A. 16a-6-111, concerning the administrator's power to halt unconscionable conduct, may be looked to for guidance. Another useful and widely cited discussion can be found in Wille v. Southwestern Bell Tel. Co., 219 Kan. 755, 549 P.2d 903 (1976). See also the discussion in Paglia v. Elliott, 373 N.W.2d 121 (Iowa 1985), discussing the unconscionability provision of the Iowa U3C; and Besta v. Beneficial Loan Co. of Iowa, 855 F.2d 532 (8 th Cir. 1988), holding that it was unconscionable under the Iowa U3C for a finance company to arrange to finance a loan over a six-year period without informing the debtor that a three-year loan would have been cheaper. The following pre-U3C cases may also provide useful guidance. Williams v. Walker-Thomas Furn. Co., 350 F.2d 445 (D.C. Cir. 1965); American Home Improvement, Inc. v. MacIver, 105 N.H. 435, 201 A.2d 886 (1964); Unico v. Owen, 50 N.J. 101, 232 A.2d 405 (1967); Henningsen v. Bloomfield Motors, Inc., 32 N.J. 358, 161 A.2d 69 (1960); Frostifresh Corp. v. Reynoso, 54 Misc.2d 119, 281 N.Y.S.2d 964 (Supp. Ct. App. Term. 2d Dept. 1967), rev'g in part 52 Misc.2d 26, 274 N.Y.S.2d 757 (Nassau Co., 1966); Steele v. J.I. Case Co., 197 Kan. 554, 419 P.2d 902 (1966).

5. Subsection (3) prohibits a finding that a charge or practice expressly permitted by the U3C is in itself unconscionable. However, even though a practice or charge is authorized by the U3C, the totality of a particular creditor's conduct may show that the practice or charge is part of unconscionable conduct. Therefore, in determining unconscionability, the creditor's total conduct, including that part of the creditor's conduct which is in accordance with the provisions of the U3C, may be considered.

Law Review and Bar Journal References:

The extension of the concept of unconscionability under the UCCC, Barkley Clark, 42 J.B.A.K. 147, 198 (1973).

"A New Kansas Approach to an Old Fraud," Polly Higdon Wilhardt, 14 W.L.J. 623, 637, 638 (1975).

"The New UCC Article 9 Amendments," Barkley Clark, 44 J.B.A.K. 131, 179 (1975).

"Survey of Kansas Law: Consumer Law," John C. Maloney, 27 K.L.R. 197, 207 (1979).

"The U.C.C.C. and Real Estate Financing: A Square Peg in a Round Hole," Thomas L. Griswold, 28 K.L.R. 601, 613 (1980).

"Express Contracts of Indemnity," Richard J. Lind, 65 J.K.B.A. No. 7, 36 (1996).

Attorney General's Opinions:

Limitations on consumer's liability; balloon payments; denial of right to refinance. 82-143.

CASE ANNOTATIONS

1. Referred to; advertising contract limiting company liability not unconscionable. Wille v. Southwestern Bell Tel. Co., 219 Kan. 755, 757, 549 P.2d 903 (1976).

2. Doctrine of unconscionability discussed. Willman v. Ewen, 230 Kan. 262, 266, 634 P.2d 1061 (1981).

3. Unconscionability under UCC, consumer protection act and hereunder contrasted; no error in denial of relief hereunder. Topeka Datsun Motor Co. v. Stratton, 12 Kan. App. 2d 95, 107, 108, 736 P.2d 82 (1987).

4. Cited; unconscionability of illegible liquidated damages clause in lease with disparity in sophistication between lessor and lessee farmer examined. John Deere Leasing Co. v. Blubaugh, 636 F. Supp. 1569, 1572 (1986).

5. Section does not create an independent claim for damages based on unconscionability. Gonzales v. Associates Financial Serv. Co. of Kansas, 266 Kan. 141, 158, 967 P.2d 312 (1998).

6. No private cause of action for conscionability under KCCC; unconsionability may be used as defense to enforceability. In re Miner, 369 B.R. 655, 657, 668 (2007).


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