Contract Law: College is the place to make mistakes and these college kids got saved from theirs. When the manner in which a contract is entered into is unconscionable, the court will not enforce the contract against the aggrieved party.

Case Review:

While this case is not the most extreme example of unconscionability being applied, Magno v. The College Network, Inc. is a recent case in which procedural unconscionability was used to successfully avoid a provision in a written and executed contract.

Three California college students were approached in their homes by an Indiana based company offering a distance learning education program.  The salesman explained that the students could get a discount by signing up right away but did not give them a chance to read the documents.  After signing the contracts, the students realized that they did not receive what they had been promised and sued in California for, among other things, misrepresentation and breach of contract.  The Indiana company sought to compel arbitration in Indiana pursuant to the Indiana Arbitration provision in the contract executed by the students.

The students argued that the provision should not be enforced because of procedural unconscionability.  The court agreed.  The court found the unequal bargaining powers, the rushed nature of the transaction, and the fact that the Indiana Arbitration provision was buried on the back of the preprinted carbon paper forms which were not separately initialed by the students as sufficent facts to establish procedural unconscionability.

Caution to anyone entering into a contract:

Procedural unconscionability, when the way in which a contract is entered into shocks the conscious, and substantive unconscionability, when what is contracted for shocks the conscious, may be used to avoid the ramifications of a contract.  However, these theories to make a contract unenforceable generally require facts and circumstances that are painfully obvious and shocking for the defense to work.  To avoid such a drawn out and costly lawsuit in the first place, people should pay attention to the act of contracting and the terms of the agreement.  At the absolute minimum, people must read what they are signing and thereby agreeing to.  Had the three college students read the contract before signing, maybe they would not have agreed to sign and would have avoided the lawsuit all together.