law-contract of adhesion | one-sided | unconscionable | contrary to public policy | boilerplate
contract | consideration | mutuality of obligation | validity of and enforceability of arbitration clauses |
enforcing forum selection clause |
CHALLENGES TO VALIDITY AND ENFORCEABILITY OF CONTRACT,
CONTRACTUAL PROVISIONS
Disparity in bargaining power is most commonly described as occurring when one party has no
choice but to accept an agreement limiting the liability of another party. Allright, Inc. v. Elledge, 515
S.W.2d 266, 267 (Tex. 1974). In Hernandez’s affidavit, he claimed that he was not able to obtain
any legal advice, he does not have formal business school training, he was unaware of the
“contract provision when [he] signed it,” and that “the documents” were presented to him on a
“take-it-or-leave-it” basis. But a bargain is not negated because one party may have been in a
more advantageous bargaining position. In re Palm Harbor Homes, Inc., 195 S.W.3d 672, 679 (Tex.
2006). Rather, we consider whether a contract results in unfair surprise or oppression. Id. The
forum-selection clause in the Restructuring Agreement was in all capital letters and was similar to
the clause in the Master Agreement. Additionally, parties to a contract have an obligation to protect
themselves by reading what they sign and, absent a showing of fraud, cannot excuse themselves
from the consequences of failing to meet that obligation. In re Prudential, 148 S.W.3d at 134.
Hernandez’s statements do not evidence overreaching or trickery by Lyon. They show a transaction
where Lyon offered to do business on a specified basis and MNI accepted.
In re Lyon Financial Services, Inc., No. 07-0486, 257 S.W.3d 228 (Tex. June 20, 2008)(per curiam)
(orig. proc.) (mandamus, forum selection clause, motion to dismiss improperly denied)
As additional evidence of unfairness and overreaching, MNI points to the clause permitting Lyon to
litigate its claims in either Texas or Pennsylvania while limiting MNI to seeking relief in Pennsylvania.
MNI also claimed that the inclusion of the forum-selection clause created an adhesion contract with
Lyon. Parties have the right to contract as they see fit as long as their agreement does not violate
the law or public policy. Id. at 129. In the arbitration context, arbitration clauses generally do not
require mutuality of obligation so long as adequate consideration supports the underlying
contract. In re FirstMerit Bank, N.A., 52 S.W.3d 749, 757 (Tex. 2001).
MNI has not made any claim that either the Master Agreement or Restructuring Agreement were not
supported by adequate consideration. However, we must also decide if the forum-selection clause
was “so one-sided that it is unconscionable under the circumstances when the parties made the
contract.” In re Palm Harbor Homes, 195 S.W.3d at 678. As previously discussed, the
circumstances under which the contracts were made do not show that the clause is so one-sided as
to be unconscionable. Further, even if we assume that the agreement constituted a contract of
adhesion, as MNI contends, we have held on numerous occasions that adhesion contracts are not
per se unconscionable or void. Id.; In re AdvancePCS Health L.P., 172 S.W.3d 603, 608 (Tex.
2005); In re Oakwood Mobile Homes, Inc., 987 S.W.2d 571, 574 (Tex. 1999).
In re Palm Harbor Homes, Inc., 195 S.W.3d 672, 678 (Tex. 2006) (“The test for substantive
unconscionability is whether, given the parties’ general commercial background and the
commercial needs of the particular trade or case, the clause involved is so one-sided that it is
unconscionable under the circumstances existing when the parties made the contract.” (internal
quotation marks omitted)).
Source: In Re Fleetwood Homes of Texas, LP, 257 S.W.3d 692 (Tex. 2008) (orig. proc.)(arbitration
clause enforced, no waiver)