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Strand v. U.S. Bank National Association ND3/31/2005
r unreasonably harsh contractual term which benefits the drafting party at the other party's expense. Another way of viewing this problem is that the fact that a contract is one of adhesion does not itself render the contract unconscionable. The distinction between procedural and substantive abuses, however, may become quite blurred; overwhelming bargaining strength or use of fine print or incomprehensible legalese may reflect procedural unfairness in that it takes advantage of or surprises the victim of the clause, yet the terms contained in the resulting contract-whether in fine print or legal "gobbledygook"-would hardly be of concern unless they were substantively harmful to the non-drafting party as well. Thus, the regularity of the bargaining procedure may be of less importance if it results in harsh or unreasonable substantive terms, or substantive unconscionability may be sufficient in itself even though procedural unconscionability is not.
8 Richard A. Lord, Williston on Contracts ยง 18.10 (4th ed. 1998) (footnotes omitted).
[ ] The result urged by Strand would lead to absurd consequences. Strand contends a showing of procedural unconscionability alone will suffice to render a contract unenforceable. Because all adhesion contracts will include the most common indicators of procedural unconscionability-disparity of bargaining power, lack of bargaining choice, a preprinted standard form contract, and a "take it or leave it" transaction-all adhesion contracts would be unconscionable and unenforceable. Under Strand's theory, virtually every consumer transaction would be rendered unenforceable.
[ ] The majority view is in accordance with this Court's conclusion in Construction Assocs., 446 N.W.2d at 244 (citation omitted):
The concept of unconscionability must necessarily be applied in a flexible manner, taking into consideration all of the facts and circumstances of a particular case. The circumstances of this case demonstrate elements of procedural and substantive unconscionability which, when viewed in totality, adequately support the trial court's conclusion that the clause limiting remedies and excluding consequential damages was unconscionable under the relevant statutory provisions.
We agree with the majority of courts which have addressed the issue and hold that a party alleging unconscionability must demonstrate some quantum of both procedural and substantive unconscionability, and courts are to balance the various factors, viewed in totality, to determine whether the particular contractual provision is "so one-sided as to be unconscionable." Construction Assocs., 446 N.W.2d at 241.
B.
[ ] Procedural unconscionability focuses upon formation of the contract and fairness of the bargaining process, including factors such as inequality of bargaining power, oppression, and unfair surprise. See Construction Assocs., 446 N.W.2d at 241. Courts are more likely to find unconscionability in consumer transactions than in contracts arising in purely commercial settings involving experienced parties. Id. at 242. Under North Dakota law, a consumer transaction which is essentially a contract of adhesion will be examined by the courts with special scrutiny to assure that it is not applied in an unfair or unconscionable manner against the party who did not participate in its drafting. Martin v. Allianz Life Ins. Co., 1998 ND 8, 16, 573 N.W.2d 823; Farmers Union Grain Terminal Ass'n v. Nelson, 223 N.W.2d 494, 497 (N.D. 1974). An adhesion contract is one drafted by experts in the subject matter of the contract and offered on a "take it or leave it" basis. Continental Cas. Co. v. Kinsey, 499 N.W.2d 574, 579 (N.D. 1993). In Black's Law
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