The Drafting Committee will consider the issue arbitration agreements in the context of contracts of adhesion at its upcoming meeting. Professor Steve Hayford, Professor Tom Stipanowich and I, in conjunction with a number of you, have discussed possible alternatives for treatment of arbitration agreements which may result from unequal bargaining power or otherwise in adhesion agreements. As you know, this is a very difficult issue. Unconscionability and contracts of adhesion have been roadblocks to the drafting of a number of uniform laws, including the recent proposals to revise the Uniform Commercial Code. In general, courts have examined several factors to determine whether an arbitration agreement is unconscionable.
Courts often discuss substantive versus procedural unconscionability.
The prevailing view is that these two elements must both be present in order for a court to exercise its discretion to refuse to enforce a contract or clause under the doctrine of unconscionability. In fact, legal commentators have written of a sliding scale, meaning, that gross procedural unconscionability will make up for slight substantive unconscionability, and vice versa. In general, very seldom do courts find an arbitration agreement to be unconscionable. B. Have the RUAA cover only commercial agreements and propose that the National Conference of Commissioners on Uniform State Laws have separate acts for situations likely involving unequal bargaining power, such as consumer, employment, franchises, etc. I attach his memorandum and strongly urge you to review the Supreme Court decisions that Steve has cited.