K. D. v. Educational Testing Service
87 Misc. 2d 657, 1976 N.Y. Misc. LEXIS 2272, 386 N.Y.S.2d 747 (1976)
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Rule of Law:
A term within a contract of adhesion is enforceable if the term itself is reasonable, serves a legitimate public policy interest, and is applied in a fair manner by the party with superior bargaining power.
Facts:
- Plaintiff, a 37-year-old college graduate seeking to attend law school, was required to take the Law School Admission Test (LSAT).
- The LSAT is prepared and administered by the defendant, Educational Testing Service (ETS).
- Before taking the exam, Plaintiff signed a registration form accepting the conditions in the ETS bulletin.
- The bulletin stated that ETS reserved the right to cancel any test score if, in its sole opinion, there was adequate reason to question its validity, after offering the candidate a no-cost retest.
- Plaintiff scored 399 on the LSAT in December 1973.
- In April 1974, Plaintiff retook the LSAT and scored 637, an increase of 238 points.
- The significant score increase triggered an investigation by ETS.
- The investigation revealed that 27 of the plaintiff's 39 incorrect answers were identical to the incorrect answers of the candidate seated next to him, a statistically significant correlation suggesting the score's invalidity.
Procedural Posture:
- Plaintiff commenced an action for a declaratory judgment and an injunction against Defendant in a New York trial court.
- Defendant, Educational Testing Service, filed a motion to dismiss the complaint pursuant to CPLR 3211, arguing a defense founded upon documentary evidence and failure to state a cause of action.
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Issue:
Does a clause in a standardized testing agreement, which is a contract of adhesion, that allows the testing service to cancel a score for which there is adequate reason to question its validity, become unenforceable when the service's actions are supported by evidence and it offers a fair opportunity for a retest?
Opinions:
Majority - Arnold G. Fraiman, J.
No. A clause in a contract of adhesion that permits a testing service to cancel a questioned score is enforceable where the service has a reasonable belief that the score is invalid and acts in good faith to protect the integrity of its testing process. While the agreement is a contract of adhesion due to the unequal bargaining power between ETS and the test-taker, it is not automatically void. Courts will not enforce such contracts' harsher terms if they are unfair or unreasonable. Here, the clause allowing cancellation is not unreasonable because ETS has a vital interest in reporting only valid scores to protect its own reputation and fulfill its obligation to the law schools that rely on the scores' accuracy. The statistical evidence provided a sufficient basis for ETS to question the score's validity. Furthermore, ETS's offer of a free retest, with the promise to report the questioned score if the new score was within 50 points, was an eminently fair and reasonable procedure. Therefore, ETS acted within its rights as defined by the contract.
Analysis:
This decision clarifies that a contract of adhesion is not per se unenforceable; rather, its specific terms are subject to judicial scrutiny for fairness and reasonableness. The ruling establishes that a party with superior bargaining power can enforce a potentially harsh contractual term if that term serves a legitimate business purpose and protects reliant third parties, such as the law schools in this case. The court's focus on the fairness of the remedy offered (the retest) provides a model for how dominant parties can enforce their standard terms. This case reinforces the principle that courts will balance the policy against enforcing one-sided contracts with the public interest in upholding the integrity of services like standardized testing.
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