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Posted: February 23, 2016

Agreement Not Unconscionable Even Though it Was Improvident

On February 5, 2016, Justice Platkin of the Albany County Commercial Division issued a decision in Mme. Pirie’s Inc. v. Keto Ventures, LLC, 2016 NY Slip Op. 50159(U), rejecting the defense that a contract was void for unconscionability, explaining:

An unconscionable contract has been defined as one which is so grossly unreasonable as to be unenforceable because of an absence of meaningful choice on the part of one of the parties together with contract terms which are unreasonably favorable to the other party. . . .

As this Court stated at the outset of the litigation:

At bottom, defendants’ principal complaint is that Rosa Belleville induced an unsophisticated young woman with limited business experience and her own personal troubles to improvidently purchase the Shop for an excessive price, thereby depleting her entire inheritance, incurring substantial indebtedness and risking her financial future. While the present record provides some support for this characterization of events, [f]reedom of contract extends even to unwise and ill-conceived ventures, particularly in the context of commercial agreements. Further, plaintiffs’ apparent ability to derive substantial economic benefit from the Shop for many years undercuts defendants’ claim of economic impossibility.

The same conclusions follow today. There simply is no record proof establishing that the terms of the Purchase Agreement, Note or Security Agreement are grossly unreasonable or otherwise substantively unconscionable. While defendants firmly believe that Keto paid an excessive price for the business, they have not demonstrated anything conscience-shocking in the sale of an ongoing, profitable enterprise for less than four times the annual income and other financial benefits derivable from the business. And defendants’ contention that it would have been impossible for Keto to repay the Note by successfully operating the Shop over a period of years is unsupported by objective proof and, instead, rests solely upon speculation.

Nor has there been any showing of unconscionability or undue influence by Belleville that would preclude plaintiffs from enforcing the Purchase Agreement, Note and Security Agreement. Even viewing the evidence in a light most favorable to defendants, it cannot be said that Keto was deprived of meaningful choice with respect to the transaction or that Belleville’s influence over Keto rose to the level of moral coercion. . . . .

In sum, while the purchase of the Shop may have been an improvident decision for an unsophisticated young woman with limited business experience and her own personal troubles, the record provides no basis for concluding that Keto’s decision to purchase the Shop was anything other than the product of her free and uncoerced will.

(Internal quotations and citations omitted) (emphasis added).

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