Skip to main content

Search

Consumer Credit Regulation: 2.4.8.2 Elements of a Claim of Unconscionability

There are two forms of unconscionability: procedural and substantive.590 Procedural unconscionability involves the bargaining process when the contract was made, while substantive unconscionability focuses on the content of the contract.591 Some courts hold that both procedural and substantive unconscionability must be shown to invalidate a contract term.592 However, the greater the degree of substantive unconscionability, the lesser the degree of

Consumer Credit Regulation: 2.4.8.3 Unconscionable Inducement

An interesting issue is whether there is a cause of action (or defense)614 of unconscionable inducement that is separate from the cause of action (or defense) of unconscionability. This separate claim or defense should be viable in states that incorporated the common law unconscionability doctrine into a state statute that contains specific language related to inducement.

Consumer Credit Regulation: 2.4.8.5 Improvident Lending As Unconscionable

Improvident lending may also be attacked using unconscionability theories. In Connecticut, a court found both substantive and procedural unconscionability in a second mortgage loan. The loan terms required a monthly payment of $733.33 for a borrower with a monthly income of $1,126.67 and a first mortgage payment of $1,011.00.

Consumer Credit Regulation: 2.4.8.7 Remedies for Unconscionability

The remedy for unconscionability under the common law and the UCC is usually limited to a defense against the enforcement of the unconscionable contract or terms, and may not support an affirmative claim for restitutionary damages.661 Despite this general rule, courts have allowed affirmative common law unconscionability claims for declaratory judgment in which the consumer seeks to delete or limit the application of unconscionable contract provisions and does not seek to recover damages or obtain other affirmative relief except under the con

Consumer Credit Regulation: 2.4.9 Unjust Enrichment

Unjust enrichment is a theory of legal liability based not on contract or statute, but upon equity and justice. Thus, a person who has been unjustly enriched at the expense of another is required to make restitution to the other.

Consumer Credit Regulation: 2.4.10 Contract Claims

In some circumstances, a breach of contract claim can provide reasonably useful remedies for lender overreaching. Breach of contract claims have the advantage of likely avoiding federal preemption.675 Contract claims also avoid the scope issues that can make UDAP and other statutory claims inapplicable to certain lenders. Contract claims are often suitable for class action treatment, as lenders are likely to use form contracts with identical clauses for large groups of consumers.

Consumer Credit Regulation: 2.4.11.1 Nature of the Duty

The duty of good faith and fair dealing between parties to a contract is based both in common law678 and the UCC.679 Unlike unconscionability, which is ordinarily determined by looking at contract terms at the time the contract was made, the duty of good faith is imposed on parties to an existing contract “to prohibit improper behavior in the performance and enforcement” of that contract.680 For example, a bank’s decision to reorder charges posted

Consumer Credit Regulation: 2.4.11.2 Remedies for Violation of Duty of Good Faith

Since the duty of good faith is an implied contract term, most jurisdictions allow a contract claim for violation of this duty.695 Tort liability may require a showing of some special relationship, beyond that of lender and customer, such as special circumstances giving rise to a fiduciary or quasi-fiduciary relationship or other indicia of a heightened duty.696

Consumer Credit Regulation: 2.4.12.2 Estoppel

The elements of an estoppel claim include that the party estopped must have engaged in conduct which amounted to a false representation or concealment of material facts, must have had an intention that such conduct would be acted upon by the other party, and must have known the real facts.

Consumer Credit Regulation: 2.4.12.3 Conversion

Conversion is the wrongful exercise of dominion over personal property.717 As a general rule, conversion involves a specific chattel rather than money.718 However, courts have recognized an exception to this rule where money is specifically identifiable and subject to an obligation to be returned or treated in a particular manner.

Consumer Arbitration Agreements: 6.1 Introduction

Because “arbitration is simply a matter of contract between the parties,”1 to which ordinary principles of contract law generally apply, a party may waive its right to compel arbitration, just as it may waive any other contractual right.2 Waiver is a “generally applicable contract defense” that, pursuant to section 2 of the Federal Arbitration Act (FAA),3 may be applied to invalidate an arbitration agreement.4 The us

Consumer Arbitration Agreements: 6.3.1.1 General

A recurring question is whether a particular challenge to the enforceability of an arbitration requirement should be heard by a court or an arbitrator. Questions of arbitrability are typically for the court absent a clear, unmistakable, and enforceable provision delegating the matter to the arbitrator.19 The same is true for the issue of whether or not litigation conduct waives an arbitration requirement.

Consumer Arbitration Agreements: 6.3.2.1.1 General

The general test for waiver of a contract right is whether the party acted inconsistently with a known right.42 (As will be discussed in § 6.3.3, infra, many courts historically added the element of prejudice to this test when considering waiver of the right to arbitrate

Consumer Arbitration Agreements: 6.3.2.1.2 Factors to consider

The determination of whether a party has waived the right to arbitrate by acting inconsistently with an arbitration agreement due to litigation-related conduct entails a fact-based analysis of the totality of the circumstances. Case law addressing the doctrine has looked at a number of different kinds of litigation conduct. For purposes of an overview, the Texas Supreme Court created a list of just some of the questions that might come up when analyzing whether waiver has occurred in this context: