Proposal Turns Consumer Contracts Upside Down
When is a consumer contract not a contract?
A proposal in the legislature’s Banking Committee could make that unfortunate scenario happen soon in Connecticut.
HB 5561 includes several provisions profoundly changing certain business contracts, such as:
- Allowing consumers to reform and alter contracts that they’ve legally entered into with businesses
- Redefining the meaning and scope of “unconscionability” to make interpretations of contracts subjective
- Requiring all of the material terms of a consumer contract to be contained in a single document
Allowing consumers to rewrite or change contracts after the fact and based on a variety of subjective factors defies logic and would have a chilling effect on the ability—or desire—of businesses to continue offering product or services in Connecticut.
Depending on the type of business and product, the complexity of many products or services requires contracts or agreements that can’t be encompassed in a single document and must incorporate other documents by reference.
This is standard, accepted, and wise practice in consumer contracts.
The proposal includes several changes that would unwisely expand and redefine the term “unconscionability.”
HB 5561 considers it substantively unconscionable if a consumer contract includes a requirement that resolution of legal claims take place in an “inconvenient venue”—defined as a place other than the judicial district where the consumer resides or where the transaction occurred.
Sometimes, disputes arising from consumer contracts are venued by a customer’s billing address, which might differ from an address where a consumer resides or where the transaction took place.
By nullifying arbitration clauses in consumer contracts, HB 5561 contradicts federal law and recent U.S. Supreme Court decisions.
But consumer contracts often limit liability, and usually contain arbitration clauses in which a consumer waives the right to bring suits in courts of general jurisdiction or class actions.
By nullifying arbitration clauses in consumer contracts, HB 5561 contradicts federal law and recent United States Supreme Court decisions.
The proposal also requires an action be brought within a time period shorter than the applicable statute of limitations.
However, in Connecticut, the statute of limitations applicable to contract actions is six years after the right of action accrues.
Many consumer product contracts have a shorter time frame for bringing a dispute.
And HB 5561 would open businesses to untold penalties by making it a violation of the Connecticut Unfair Trade Practices Act to include any “presumptively unconscionable terms” in a consumer contract.
Businesses could face a full array of CUTPA remedies, including compensatory and punitive damages, attorney’s fees and injunctive relief.
Attorney Robert Langer, partner in the Hartford office of the law firm Wiggin & Dana, and well-versed in the issue from his previous service in the state attorney general’s office, cautioned lawmakers.
He said they should “fully understand the impact [this change would have] both on businesses that deal in consumer contracts, as well as consumer’s access to goods and services in our state.”
CBIA urges the committee to reject HB 5561 as being much too problematic and ultimately too costly for Connecticut’s businesses and economy.
For more information, contact CBIA’s Louise DiCocco (203.589.6515) | @LouiseDiCocco
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