Waters v. Min Ltd.
587 N.E.2d 231 (1992)
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Rule of Law:
A contract is unconscionable and thus unenforceable if it is characterized by a gross inadequacy of consideration combined with procedural unfairness, such as when one party, lacking legal representation and being particularly vulnerable, is unduly influenced by an agent of the other party.
Facts:
- Gail A. Waters was injured as a child and used her settlement proceeds to purchase an annuity contract.
- At age twenty-one, Waters became romantically involved with Thomas Beauchemin, an ex-convict who introduced her to drugs.
- Beauchemin suggested Waters sell her annuity and introduced her to the DeVito defendants, acting as her representative in the negotiations.
- Waters, described as naive, insecure, and vulnerable in contract matters, was unduly influenced by Beauchemin.
- Waters, without legal representation, agreed to assign her annuity—with a cash value of $189,000 and a guaranteed total payout of $694,000—to the DeVito defendants for $50,000.
- The DeVito defendants were represented by legal counsel throughout the negotiations.
- Beauchemin acted as an agent for the DeVito defendants, who forgave a $100 debt of his as a deposit and deducted a separate $7,000 debt he owed them from a payment intended for Waters.
Procedural Posture:
- Gail A. Waters (plaintiff) filed a lawsuit in a Massachusetts Superior Court (trial court) seeking to rescind her contract with the DeVito defendants.
- Defendant Min Ltd. filed a counterclaim seeking a declaratory judgment and specific enforcement of the contract.
- Following a bench trial, the Superior Court judge found for Waters, ruling the contract unconscionable and ordering the annuity returned to her upon repayment of $18,000.
- The DeVito defendants (appellants) appealed the trial court's judgment.
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Issue:
Is a contract for the assignment of an annuity unconscionable, and therefore unenforceable, when there is a gross disparity in consideration and the disadvantaged party was naive, vulnerable, without legal counsel, and unduly influenced by the other party's agent?
Opinions:
Majority - Lynch, J.
Yes. A contract is unconscionable and unenforceable where the sum total of its provisions and the circumstances of its formation drive too hard a bargain for a court of conscience to enforce. The court applied the doctrine of unconscionability by analogy from the Uniform Commercial Code, determining its applicability on a case-by-case basis by looking for oppression and unfair surprise. The court found substantive unconscionability in the gross disparity of consideration: the DeVito defendants were to pay $50,000 for an asset with an immediate cash value of $189,000. It also found procedural unconscionability in the unequal bargaining power and unfair process: Waters was naive, vulnerable, and under the undue influence of Beauchemin, who was secretly an agent for the defendants. Furthermore, Waters lacked legal counsel while the defendants were represented. This combination of an oppressive term and an unfair bargaining process rendered the contract unconscionable.
Analysis:
This case illustrates the application of the unconscionability doctrine, traditionally codified in the UCC for the sale of goods, to common law contracts. It reinforces that courts will examine both procedural unconscionability (defects in the bargaining process) and substantive unconscionability (unfairness of the terms) to determine if a contract should be enforced. The decision provides a strong precedent for invalidating contracts where a vulnerable party is exploited through a combination of a grossly inadequate price and unfair dealing, even if the party formally consented to the agreement.
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