NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A2855
SPONSOR: Steck TITLE OF BILL: An act to amend the general business law, in relation
to unconscionable terms in standard form contracts
PURPOSE OR GENERAL IDEA OF BILL:
To limit the use of contract provisions which are neither negotiated nor
bargained for.
SUMMARY OF SPECIFIC PROVISIONS:
This bill sets out types of contraction terms related to dispute resol-
ution found in form contracts between individuals and contract drafters
which are deemed to be presumptively unconscionable. Such terms include
the purported waiver of rights otherwise provided for in law. The bill
is designed to deter merchants and employers from inserting unconsciona-
ble terms which would chill consumer and employer claims. The bill
creates a presumption that such terms are not serverable from the
contract and that the inclusion of such terms is an unfair and deceptive
trade practice, as otherwise defined under existing law.
EFFECTS OF PRESENT LAW WHICH THIS BILL WOULD ALTER:
Would create a statutory explication of certain types of unconscionable
contract terms.
JUSTIFICATION:
This bill is based upon a proposal from the National Consumer Law
Center, as embodied in their Model State Consumer & Employee Justice
Enforcement Act.
In theory, arbitration clauses in consumer and employment contracts
provide an alternative forum for resolving disputes. In practice, howev-
er, some arbitration clauses often prevent consumers and employees from
being able to assert their rights in any forum.In addition, other
contractual clauses include terms that not only chill claims but in the
case of arbitrations, also are inconsistent with what are seen as the
benefits of arbitration: an efficient and speedy means of claim adjudi-
cation.
Specifically, mandatory forum selection clauses in contracts do often
chill the ability of a person seeking to enforce their rights, if they
have to go to a far-flung venue to do so. This is true for both claims
to be adjudicated, and claims to be arbitrated. Given that the United
States Supreme Court has specifically left adjudication of unconsiona-
bility claims to the various states, there should be no issue as to
federal preemption of a statute such as this one would be, which defines
unconscionability in various contexts. See, Marmet Health Care Ctr.,
Inc. v. Brown, 132 S. CL 1201 (2012).
The bill specifically permits courts to use existing principles of the
common law and the uniform commercial code in order to determine whether
unconscionability exists in any contract provision.
Further, the provision permitting a determination as to an unfair and
deceptive practice is warranted in order to help deter the inclusion of
such clauses in contracts.
PRIOR LEGISLATIVE HISTORY:
New bill
FISCAL IMPLICATIONS FOR STATE AND LOCAL GOVERNMENTS:
None.
EFFECTIVE DATE:
The first of January next succeeding the date on which it shall have
become law, and shall apply to contracts entered into on or after such
date.
