## Facts

- Frostifresh Corporation sold a combination refrigerator-freezer to Luis and Teresita Reynoso through a door-to-door transaction on a retail installment contract.
- Negotiations were conducted orally in Spanish between defendants and plaintiff’s Spanish-speaking salesman.
- Defendants stated they could not afford the appliance; the salesman allegedly assured them it would “cost them nothing” because they would earn $25 bonuses/commissions from sales to neighbors and friends.
- Defendants signed a written installment contract entirely in English; it was not translated or explained to them.
- The contract listed a $900 cash price, a $245.88 credit charge, and a $1,145.88 total time price.
- Plaintiff’s admitted cost for the appliance was $348.
- Defendants paid $32 and made no further payments.
- Plaintiff sued for $1,364.10, consisting of the contract balance plus attorney’s fees and a late charge.
- Although fraud was not pleaded as an affirmative defense, the court raised unconscionability during trial and continued proceedings to take evidence on the contract’s commercial setting, purpose, and effect.

## Issues

1. Whether U.C.C. § 2-302 authorizes a court to refuse to enforce, or to limit enforcement of, the price and credit provisions of a consumer installment contract as unconscionable.
2. Whether a gross disparity between seller’s cost and the contract’s time price and service charge, combined with the buyers’ inability to understand an English-only contract negotiated in Spanish, supports a finding of unconscionability.
3. What remedy is appropriate under U.C.C. § 2-302 when only the price and finance terms are found unconscionable.

## Decision

- The court found the contract unconscionable as to its price and finance terms under U.C.C. § 2-302.
- The court refused to enforce the price and credit provisions as written, characterizing the transaction as “shocking to the conscience” and the service charge as indicative of “oppression.”
- The court limited plaintiff’s recovery essentially to its actual cost of the appliance, reduced by the $32 already paid.
- The court denied recovery of the finance/service charges and disallowed additional claimed amounts such as attorney’s fees and late charges.

## Legal Principles

- Under U.C.C. § 2-302, a court may police contracts for unconscionability and may refuse enforcement, enforce the remainder without the offending terms, or limit application of an unconscionable clause to avoid an unconscionable result.
- Unconscionability may be found where contract terms impose an extreme and oppressive financial burden, including a service or finance charge grossly disproportionate to the transaction.
- Procedural unfairness supporting unconscionability includes meaningful inequality in bargaining and “unfair surprise,” such as presenting a binding written contract in a language the consumer cannot read, without translation or explanation, after negotiations in the consumer’s language.
- A court may consider unconscionability even when fraud is not pleaded, treating unconscionability as a distinct basis for limiting enforcement.

## Conclusion

The court used U.C.C. § 2-302 to prevent enforcement of a consumer installment sale’s oppressive price and finance terms, limiting the seller’s recovery to its actual cost (minus payments made) because the combination of extreme economic disparity and the buyers’ lack of understanding rendered the contract unconscionable.


Frostifresh Corp. v. Reynoso, 52 Misc. 2d 26, 274 N.Y.S.2d 757 (N.Y. Dist. Ct. Nassau Cty. 1966)