The California Supreme Court issued an opinion in *Fuentes v. Empire Nissan, Inc.* (S280256) that resolves a conflict between lower courts regarding how illegible contract terms should be analyzed in unconscionability determinations. Justice Groban authored the February 2, 2026 opinion for the majority, with Chief Justice Guerrero filing a dissenting opinion.

The case centers on the fundamental principle that to establish a contract is unenforceable due to unconscionability, the opposing party must demonstrate unfairness in both the procedure by which the contract was formed and the substance of its terms. The central legal question addressed whether small, difficult-to-read print in contracts should be considered under procedural unconscionability, substantive unconscionability, or both.

The dispute originated when the trial court relied on *Davis v. TWC Dealer Group, Inc.* (2019) 41 Cal.App.5th 662, 674 to conclude that small, difficult-to-read print supports a finding of both substantive and procedural unconscionability. This approach effectively allowed the same contract defect to be counted twice in the unconscionability analysis.

The Court of Appeal disagreed with this interpretation, holding in *Fuentes v. Empire Nissan, Inc.* (2023) 90 Cal.App.5th 919, 930 that "tiny and unreadable print" presents a problem of procedural unconscionability only and should not be double-counted as a problem of substantive unconscionability. The Court of Appeal's reasoning focused on preventing the same contract deficiency from being used to satisfy both prongs of the unconscionability test.

The California Supreme Court granted review specifically to resolve this conflict between the trial court's reliance on *Davis* and the Court of Appeal's contrary holding. The high court's resolution provides important guidance for future contract disputes involving illegible terms.

In its holding, the Supreme Court established that "a contract's format generally is irrelevant to the substantive unconscionability analysis, which focuses on the fairness of the contract's terms." This ruling aligns with the Court of Appeal's position that formatting issues like tiny print should not be considered under substantive unconscionability.

However, the court did not simply dismiss formatting concerns entirely. The opinion emphasizes that "courts must closely scrutinize the terms of difficult-to-read contracts for unfairness or one-sidedness." This requirement ensures that while formatting alone does not constitute substantive unconscionability, contracts with poor formatting receive heightened judicial examination for potentially unfair terms.

The decision effectively rejects the approach taken in *Davis*, which had allowed small print to support findings of both types of unconscionability. By clarifying that format issues belong exclusively in the procedural unconscionability analysis, the court prevents the double-counting problem that concerned the Court of Appeal.

The practical implications of this ruling extend beyond auto dealership contracts to any consumer agreement with formatting issues. Courts must now separate their analysis of how a contract was presented from their evaluation of whether the contract's actual terms are fair and balanced.

For procedural unconscionability, factors like tiny print, hidden terms, or incomprehensible formatting remain relevant. These elements speak to whether one party had a meaningful opportunity to understand and negotiate the contract terms. The unconscionability doctrine requires both procedural and substantive unconscionability to be present, though they can exist in varying degrees.

For substantive unconscionability, courts must focus exclusively on the fairness of the contract's actual terms rather than their presentation. This might include examining whether terms are one-sided, whether they impose excessive penalties, or whether they effectively eliminate meaningful remedies for one party.

The heightened scrutiny requirement serves as a bridge between these analyses. When contracts are difficult to read, courts must examine the actual terms more carefully to determine if poor formatting was used to hide unfair provisions from consumers.

The case now returns to the lower courts for reconsideration under the clarified legal standard. The remand allows the trial court to apply the Supreme Court's guidance to the specific facts of the Fuentes case, potentially affecting the ultimate outcome for the parties.

This decision provides important clarity for California contract law and consumer protection. By establishing clear boundaries between procedural and substantive unconscionability while maintaining protection for consumers facing illegible contracts, the court has created a framework that should reduce confusion in future cases involving similar formatting issues.

The ruling may influence how businesses draft consumer contracts, as companies can no longer rely on small print alone to shield substantively unfair terms from challenge. While formatting remains relevant to procedural unconscionability, the enhanced scrutiny requirement means courts will examine the underlying terms more carefully when contracts are difficult to read.