Opinion ID: 1192043
Heading Depth: 2
Heading Rank: 3

Heading: helstrom's unconscionability claim.

Text: In Vockner v. Erickson, 712 P.2d 379, 381-83 (Alaska 1986), we adopted the Restatement (Second) of Contracts § 208 standard of unconscionability. Id. at 381; see Restatement (Second) of Contracts § 208 (1981). The Restatement does not provide an explicit definition of unconscionability. It does identify factors, however, that support a finding of unconscionability. Id. Factors include weakness in the contracting process like those involved in more specific rules as to contractual capacity, fraud, and other invalidating causes ..., Restatement (Second) of Contracts § 208 comment a at 107 (1981); gross disparity in the values exchanged, Restatement of Contracts § 208 comment c at 108 (1981) and gross inequality of bargaining power... . Restatement (Second) of Contracts § 208 comment d at 109 (1981). See also Vockner, 712 P.2d at 381 n. 2 & 382 n. 3. Vockner rejected the notion, urged by the Borough here, that both procedural and substantive/adequate consideration unconscionability must be present to void a contract. Vockner, 712 P.2d at 383 n. 8. Rather, a sliding scale is invoked which disregards the regularity of the procedural process of the contract formation, that creates the terms, in proportion to the greater harshness or unreasonableness of the substantive terms themselves. Id., quoting 15 S. Williston, Law of Contracts § 1763A at 226-27 (Jaeger Ed. 1972). Additionally, individual terms of a contract may be unconscionable even though the contract as a whole is not. Restatement (Second) of Contracts § 208 comment e at 110 (1981); see also Arctic Contractors, Inc. v. State, 564 P.2d 30, 51 (Alaska 1977) (liquidated damages clause held unconscionable). The liquidated damages portion of the settlement, entitling the Borough to $20,000 should Helstrom attempt to set the settlement aside, seems unconscionable. It appears to be, as Helstrom argues, not a true liquidated damages clause but a penalty clause masquerading as one. A valid liquidated damages clause is an agreement to set in advance damages for breach which would otherwise be difficult to determine. However, the clause may not set damages so as to penalize the breaching party for the breach, without regard to the harm caused by the breach. Arctic Contractors, 564 P.2d at 51. Just as in Arctic Contractors, the settlement agreement in this case appears to provide for liquidated damages on top of actual damages. The settlement appears to provide for actual damages by freeing the Borough to litigate its claims against Helstrom as well as by requiring Helstrom to pay all costs and attorney's fees connected with any such litigation. It then gives the Borough $20,000 additional damages. Should Helstrom move for summary judgment on this issue, we see no reason on this record why it should not be granted, barring material facts of which we are unaware.