Assignment 2: Be Careful What You Sign - Sudson Washe 796171

Assignment 2 Be Careful What You Signsudson Washer And Dryer Service

Sudson Washer and Dryer Service is in the business of leasing used washers and dryers to apartment landlords for a contracted lease term. The coin-operated machines are used by apartment tenants. Letisha, 25, a human resource clerk, owns a five-unit apartment complex. While she resides in one of the units, the others are occupied by tenants. Sudson contacts Letisha and offers to lease one washer and one dryer.

The washer and dryer in Letisha’s apartment complex are old and worn-out. Anxious to keep her tenants happy, Letisha meets with Sudson’s salesman who presents her with a one-page agreement for the use of one washer and dryer for five years. The five-year term is standard and the front page of the contract states the lease period. Letisha (as lessee) and the salesman for Sudson (as lessor) sign the front page of the contract and Letisha retains a copy of the signed agreement. The salesman did not inform Letisha of, nor did she bother to read the back of the agreement which contained additional terms, one of which is an automatic renewal clause that states: “If the lessee fails to provide a 90-day written notice to terminate the contract by certified mail to the lessor, the five-year lease term period shall automatically renew for three additional five-year terms and shall only be subject to termination by the lessor.”

Letisha uses the machines for the five-year period and just a few weeks prior to the end of the term, calls Sudson to provide them with a courtesy notice saying she is not going to renew her agreement.

The operator replies that since she failed to provide the 90-day written, certified notice of termination, the lease will be renewed for three five-year terms or another 15 years. Letisha says that she never saw that clause. The operator replies that it was her obligation to read the back page of the agreement and Sudson will require her to make monthly payments for the next 15 years. Letisha does not know what recourse she now has. Research whether Letisha has a contract formation or enforcement defense based on the legal and ethical use of automatic renewal clauses in lease agreements, using your textbook, the Argosy University online library resources, and the Internet.

Paper For Above instruction

An automatic renewal clause in lease agreements, such as the one presented in Letisha’s case, raises significant legal and ethical questions about contract formation, enforceability, and consumer protection. The core issue revolves around whether the clause, which renews the lease automatically unless specific notice is given, is valid and enforceable, particularly when the tenant claims ignorance of its existence. This paper analyzes potential legal defenses Letisha could invoke against enforcement of the automatic renewal clause, the supporting arguments Sudson may present, and the ethical considerations underlying such contractual practices. Additionally, the applicability of the Uniform Commercial Code (UCC) Article 2A and alternative complaint avenues for consumers are examined to provide a comprehensive overview of the legal landscape governing such contractual provisions.

Legal arguments against enforcement of the automatic renewal clause

One primary defense Letisha could raise involves the doctrine of unconscionability, particularly procedural unconscionability, which pertains to deceptive practices or a lack of meaningful consent. Courts have historically scrutinized adhesion contracts—premade agreements presented on a take-it-or-leave-it basis—when they contain unfair terms (Randall v. Rolls-Royce Motor Cars North America, 2000). If Letisha can demonstrate that she was unaware of the clause due to non-disclosure or inadequate conspicuousness, she may argue that enforcing such a clause violates public policy and consumer fairness.

Furthermore, the principle of mutual assent—the traditional requirement that both parties agree to contract terms—may be challenged. Since Letisha claims she did not read or was unaware of the automatic renewal clause, she could argue there was no genuine consent to those terms, rendering the clause potentially unenforceable (Specht v. Netscape Communications Corp., 2002).

Another possible defense relates to the statutory regulation of automatic renewal clauses under state laws. Several jurisdictions have enacted statutes requiring clear, conspicuous disclosure of renewal terms and the right to cancel or opt-out, especially in consumer contracts (California Business and Professions Code § 1750, et seq.). If such laws apply, the fact that Letisha was unaware or did not read the back of the contract could serve as grounds for invalidating the renewal clause due to insufficient disclosure.

Legal arguments in support of enforcement of the automatic renewal clause

On the other hand, Sudson's position could rely on the enforceability of contractual agreements freely entered into by competent parties. Typically, a signed contract containing clear terms is binding, and courts tend to uphold such clauses to promote contractual stability (Restatement (Second) of Contracts § 208). Because Letisha signed the front of the agreement, which acknowledged the lease period, Sudson might argue she assented to all terms, including those on the reverse side.

Additionally, courts often uphold automatic renewal clauses when they are explicitly incorporated into the contract and adequately disclosed. If the clause is written in plain language on the back of the agreement and Letisha had the opportunity to review it, the defense of non-disclosure weakens. Moreover, it is generally understood that individuals are responsible for reading contracts before signing (Columbia Data Products, Inc. v. J. L. Shuman Co., 1986).

Ethical issues related to automatic renewal clauses

The use of automatic renewal clauses raises ethical concerns about transparency and fairness. Such clauses often favor the business interests of the provider, potentially trapping consumers in long-term obligations they may not fully understand or intend. Ethical issues include whether companies are adequately disclosing renewal terms in an accessible manner, whether consumers are given realistic opportunities to review and understand them, and whether there is a duty to ensure informed consent.

Particularly problematic are clauses hidden on the reverse or in fine print, potentially constituting a form of contract trickery or unconscionable practice. Ethical business conduct would require clear, conspicuous disclosures of renewal terms and explanations of how consumers can terminate or prevent automatic renewal, especially in cases involving long-term lease arrangements like in Letisha’s scenario.

Applicability of the UCC Article 2A

The Uniform Commercial Code (UCC) Article 2A governs leases of goods, including consumer and commercial equipment leasing. Given that Sudson leases washers and dryers, which are tangible goods, UCC Article 2A potentially applies. Under UCC 2A-407, contracts for the lease of goods may include provisions for automatic renewal if the renewal is part of the original agreement and the lessee consents.

However, enforcement may be limited if the renewal provisions are deemed unconscionable or if there was a failure to adequately disclose the renewal terms. UCC may provide remedies for consumers if they prove that the renewal clause was hidden or presented in a misleading manner, aligning with consumer protection principles.

Government and private complaint avenues for consumers

Consumers like Letisha have access to various governmental and private entities to address unfair business practices. The Federal Trade Commission (FTC) enforces laws against deceptive practices and unfair contractual terms, providing avenues for complaints and enforcement actions. State attorneys general also handle consumer complaints and have the authority to investigate and prosecute unfair business practices under state law.

Additionally, the Better Business Bureau (BBB) offers dispute resolution services, and consumer protection agencies often provide resources and guidance on handling unfair lease or contract terms. Consumers can also seek assistance from legal aid organizations or consult with private attorneys specializing in consumer protection laws.

Predicted legal outcome of the case

Based on the facts and legal principles discussed, the likely outcome hinges on whether the court finds the automatic renewal clause unconscionable or improperly disclosed. Given that Letisha claims lack of knowledge and did not read the clause, and considering consumer protection statutes requiring clear disclosure, a court might side with her, ruling that the clause is unenforceable due to lack of informed consent. Certain jurisdictions have recognized that hidden or obscure renewal clauses violate fairness standards.

Conversely, if the court determines that the clause was sufficiently disclosed, signed knowingly, and that Letisha had an obligation to review the entire agreement, it might enforce the renewal clause, requiring her to continue payments for 15 additional years. The decision ultimately depends on the specific facts regarding disclosure, scope of the contract, and jurisdictional legal standards pertaining to automatic renewal provisions.

In conclusion, while businesses are entitled to enforce clearly drafted and duly disclosed contractual provisions, the use of hidden or opaque automatic renewal clauses can be challenged on legal and ethical grounds. Protecting consumers from potentially unfair contractual traps necessitates careful scrutiny by courts, regulatory agencies, and responsible business practices.

References

• Cal. Bus. & Prof. Code § 1750, et seq. (Consumer Legal Remedies Act)
• Columbia Data Products, Inc. v. J. L. Shuman Co., 728 F. Supp. 585 (D. Md. 1986)
• Restatement (Second) of Contracts § 208 (Unconscionability)
• Randall v. Rolls-Royce Motor Cars North America, Inc., 134 Cal. App. 4th 1339 (2005)
• Specht v. Netscape Communications Corp., 150 F. Supp. 2d 585 (E.D. Pa. 2001)
• Uniform Commercial Code (UCC) Article 2A - Leases of Goods
• Federal Trade Commission – Consumer Protection Bureau. FTC Consumer Protection Laws
• State of California Department of Consumer Affairs. Automatic Renewal Laws
• National Consumer Law Center. Automatic Renewal Contracts: Consumer Protections and Legal Strategies
• Better Business Bureau. Consumer Dispute Resolution Resources