Commercial Division Blog

Posted: February 13, 2014 / Categories Commercial, Contracts

Agreement Not Unconscionable Because it Was Not One Only a Delusional Party Would Make

On February 11, 2014, the First Department issued a decision in B.D. Estate Planning Corp. v. Trachtenberg, 2014 NY Slip Op. 00889, granting the plaintiff summary judgment on the defendant's defense that an agreement was unconscionable.

In B.D. Estate Planning Corp., the First Department affirmed the trial court's dismissal of the defendant's unconscionability defense, explaining:

At common law an unconscionable agreement was one that no promisor (absent delusion) would make on the one hand and no honest and fair promisee would accept on the other. If the Ellis Limquee Family Insurance Trust (by its trustee, defendant Marcy Trachtenberg) had not signed the promissory note on which plaintiff sues, the policy on Ellis's life would have lapsed for nonpayment of premiums, and Carolyn (the trust's beneficiary) would ultimately have received nothing. Since the trust executed the note, it received $4 million after Ellis died, but it will have to give plaintiff approximately half of that amount if the note is enforced. A decision to get $2 million, as opposed to nothing, is not a bargain that only a delusional trustee would make.

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

This decision illustrates the high standard a defendant must meet in order to assert an unconscionability defense.