In this civil action for breach of contract, the primary issue posed today is whether the court should enforce a waiver of the constitutional right of trial by jury contained in a standardized mass contract, commonly referred to as a contract of adhesion.
On January 30, 1991, defendant Techni-Graphics, Inc., a New Jersey corporation (TGI) signed a 39-month lease for a coffee machine at a rental of $209.50 per month with third-party defendant U-Vend, Inc., a New York corporation (U-Vend). Defendant Robin Umstead guaranteed performance of the lease for TGI. U-Vend assigned the lease to plaintiff, Fairfield Leasing Corporation, a New Jersey corporation (FLC). Under the contract only U-Vend is responsible to TGI for failures with respect to the leased equipment, and payment to the assignee of the monthly rent must continue despite any breach of contract by U-Vend.
TGI alleged that the machine was defective and infested with cockroach larvae. Because U-Vend refused to take corrective action, TGI stopped making the rental payments to FLC in March, 1991. FLC instituted suit and TGI brought in U-Vend by way of a third-party complaint based on breach of contract. TGI demanded a trial by jury on all issues.
This matter is now before the court on the joint motion of plaintiff FLC and third-party defendant U-Vend to strike the jury demand based on the following provision contained in the lease and in the guarantee:
The undersigned does further waive trials by jury in any action or proceeding brought by the leasing Company, or its assignee, against the undersigned on any matters whatsoever arising out of, under or by virtue of the terms of the Agreement or of this Guarantee.
The agreement is a standardized form contract containing 23 paragraphs. U-Vend prepared it. The jury waiver provision is contained in the last part of the twenty-second paragraph, which also contains a merger clause and a no-modification clause. The guarantee, which is part of the agreement, contains the jury waiver clause on lines 21 to 23 of a 25-line paragraph. The letters of the single-spaced contract and guarantee are 1/10 of a centimeter in height, or approximately one-half the size of the letters produced by the typical typewriter. It is a classic example of a document which has been prepared with the intent that it neither be negotiated nor read.
Two New Jersey cases have directly considered the question of waiver of trial by jury in civil cases based upon a provision of the contract in litigation: Sexton v. Newark Dist. Telegraph Co., 84 N.J.L. 85, 101, 86 A. 451 (Sup.Ct.1913) and Franklin Discount Co. v. Ford, 27 N.J. 473, 492-493, 143 A.2d 161 (1958). Although both cases accept that such a waiver can be made, neither case involved a contract of adhesion.
In Henningsen v. Bloomfield Motors, Inc., 32 N.J. 358, 161 A.2d 69 (1960), the Supreme Court identified the problem with commercial adhesion contracts in these words:
The traditional contract is the result of free bargaining of parties who are brought together by the play of the market, and who meet each other on a footing of approximate economic equality. In such a society there is no danger that freedom of contract will be a threat to the social order as a whole. But in present-day commercial life the standardized mass contract has appeared. It is used primarily by enterprises with strong bargaining power and position. "The weaker party, in need of the goods or services, is frequently not in a position to shop around for better terms, either because the author of the standard contract has a monopoly (natural or artificial) or because all competitors use the same clauses. His contractual intention is but a subjection more or less voluntary to terms dictated by the stronger party, terms whose consequences are often understood in a vague way, if at all." Such standardized contracts have been described as those in which one predominant party will dictate its law to an undetermined multiple rather than to an individual. They are said to resemble a law rather than a meeting of the minds. (at 389-390, 161 A.2d 69) (Citations omitted).
Since Henningsen, our courts have invalidated unconscionable or unfair terms of such contracts in a ...