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A determination of unconscionability generally requires a showing that the contract was both procedurally and substantively unconscionable when made--i.e., some showing 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.
Young attorneys, who acquired their mother's shares in a corporation, entered into an agreement with the elderly shareholders to purchase their shares when they died. The attorneys did not draft the agreement and there were no deceptive or high-pressured tactics or undue influence used to induce the elderly shareholders to sign the agreement. The Surrogate's Court dismissed the attorneys' complaint and granted defendant individuals' counterclaim for declaratory judgment, holding that the attorneys had no right to purchase the shares of deceased shareholders pursuant to a shareholders' agreement.
Did the Surrogate err in concluding that the post-mortem buyout provision of the 1981 Ched shareholders' agreement was unenforceable?
The court reversed the decision of the lower court, holding that nothing in the record supported the contention that the agreement was unconscionable. The court further held that the record did not support the implication that, because of the disparity in age and educational background, the decedents were deceived by the young attorneys. The court also held that the agreement should be enforced because, when parties set down their agreement in a clear, complete document, their writing should as a rule be enforced according to its terms. The court also held that no fiduciary duty was created by a shareholders' agreement containing a mandatory buyout provision.