Colorado § 4-2-302 - Unconscionable contract or clause.

§ 4-2-302. Unconscionable contract or clause.

(1) If the court, as a matter of law, finds the contract or any clause of the contract to have been unconscionable at the time it was made, the court may refuse to enforce the contract, or it may enforce the remainder of the contract without the unconscionable clause, or it may so limit the application of any unconscionable clause as to avoid any unconscionable result.

(2) When it is claimed or appears to the court that the contract or any clause thereof may be unconscionable, the parties shall be afforded a reasonable opportunity to present evidence as to its commercial setting, purpose, and effect, to aid the court in making the determination.

Source: L. 65: p. 1306, § 1. C.R.S. 1963: § 155-2-302.

ANNOTATION

Law reviews. For article, "Exclusion and Modification of Warranty under the U.C.C. — How to Succeed in Business Without Being Liable for Not Really Trying", see 46 Den. L.J. 579 (1969). For note, "Exculpatory Clauses and Public Policy: A Judicial Dilemma", see 53 U. Colo. L. Rev. 793 (1982). For article, "When are Merger Clauses Unconscionable?", see 64 Den. U.L. Rev. 529 (1988).

Finding of unconscionability is a question of law. Mullan v. Quickie Aircraft Corp., 797 F.2d 845 (10th Cir. 1986).

In order to support a finding of unconscionability, there must be evidence of some overreaching on the part of one of the parties such as that which results from an inequality of bargaining power or under other circumstances in which there is an absence of meaningful choice on the part of one of the parties, together with contract terms which are unreasonably favorable to that party. McMillion v. McMillion, 31 Colo. App. 33, 522 P.2d 125 (1974); Davis v. M.L.G. Corp., 712 P.2d 985 (Colo. 1986); Mullan v. Quickie Aircraft Corp., 797 F.2d 845 (10th Cir. 1986); Leprino v. Intermountain Brick Co., 759 P.2d 835 (Colo. App. 1988).

Factors relevant to determining whether a contract is unconscionable: (1) a standardized agreement executed by parties of unequal bargaining strength; (2) lack of opportunity to read or become familiar with the document before signing it; (3) use of fine print in the portion of the contract containing the provision; (4) absence of evidence that the provision was commercially reasonable or should reasonably have been anticipated; (5) the terms of the contract, including substantive unfairness; (6) the relationship of the parties, including factors of assent, unfair surprise, and notice; and (7) all the circumstances surrounding the formation of the contract, including its commercial setting, purpose, and effect. Davis v. M.L.G. Corp., 712 P.2d 985 (Colo. 1986).

The first, second, third, sixth, and seventh factors relate to procedural unconscionability. Vernon v. Qwest Commc'ns Int'l, Inc., 925 F. Supp. 2d 1185 (D. Colo. 2013).

Whether contract was unconscionable is discussed in Mullan v. Quickie Aircraft Corp., 797 F.2d 845 (10th Cir. 1986); Leprino v. Intermountain Brick Co., 759 P.2d 835 (Colo. App. 1988); Platt v. Winnebago Indus., 960 F.3d 1264 (10th Cir. 2020).

Applied in In re Stokes, 43 Colo. App. 461, 608 P.2d 824 (1979); In re Manzo, 659 P.2d 669 (Colo. 1983).