Unconscionability: Everything You Need to Know
Unconscionability refers to a contract that is so one-sided and unfair that it would “shock the conscience” of the court.3 min read
2. Unfair Surprise
3. Unconscionable Provisions
4. What Does Unconscionable Mean?
5. Procedural vs. Substantive Unconscionability
Unconscionability refers to a contract that is so one-sided and unfair that it would “shock the conscience” of the court. Thus, a court might deem the entire contract invalid due to such unconscionable terms identified therein.
Doctrine of Unconscionability: An Overview
The doctrine itself can be found in The Uniform Contract Code 2-302. It essentially states that if a court deems the entire contract or part of it unconscionable, then the court can choose to do one of the following things:
- Find the entire contract invalid, thereby providing that the parties will stop performing under the contract as if it was never agreed upon
- Find part of the contract invalid, meaning that only those unconscionable terms will be taken out, but the remainder of the contract will be deemed valid
- Find the contract enforceable, but ask the parties to modify the terms that were found to be unconscionable
Unfair surprise is a common reason as to why courts might find such contracts unconscionable. An example of this would be if the one party can prove that the other party inserted a term in the contract that the disadvantaged party wasn’t aware of, and that he or she wouldn’t otherwise have agreed to.
There are usually two types of provisions that can be found to be unconscionable in a contract, including exculpatory clauses and limitations on liability. Specifically, exculpatory clauses release one party from liability for injuries that he or she causes. If the clause itself excludes the party from being held liable for any intentional wrongful conduct, that clause will be deemed unconscionable. However, keep in mind that the exculpatory clause for negligence is treated differently. While most courts will also deem these unconscionable, some courts do in fact enforce them.
When it comes to clauses that limit liability, such warranties can be found in most contracts that involve the sale of goods. Generally, when a buyer purchases a product, the seller will offer a warranty for a period of time, i.e., one-year warranty against manufacturer’s defects and workmanship. However, some companies will try to limit their liability by not including such warranties, and instead including a provision indicating that the seller cannot be held liable for a defective product. However, based on the implied warranty of merchantability, the court will likely determine that the implied warranty exists and force the seller to make the buyer whole again by either reimbursing the purchaser or providing a replacement free of charge.
What Does Unconscionable Mean?
When courts look at the factors constituting unconscionability, they will generally determine such validity by asking the following questions:
- Was the contract provision or language of the entire contract shocking to the conscience?
- Was the contract language so unfair and one-sided in that it favored one party over the other?
- Did the one party have significant bargaining power over the other party?
- Would any reasonable or mentally component person or business enter into this contract?
- Did the one party include complex, technical jargon that it knew the other party wouldn’t understand?
- How old were the parties entering into the contract? What was the mental capacity of such parties?
- Did the superior party include hidden language in the contract that was stated in a confusing way or written in much smaller font than the remaining language in the contract?
- Did the one party threaten the other party to enter into the contract? Was it entered into under duress?
- Did the one party coerce the other, or otherwise force the party to sign the agreement?
- Did the one party become violent with the other party, resulting in the disadvantaged party to have no other choice but to sign the agreement?
Procedural vs. Substantive Unconscionability
Procedural unconscionability refers to the actual negotiation process that occurs before both parties formally sign the contract. Generally, this is when violence, duress, or coercion takes place, ultimately resulting in the other party feeling as though there is no other choice but to sign the contract.
Substantive unconscionability, however, involves the actual terms of the contract itself. As previously mentioned, the advantaged party might include very complex language that it knows the other party won’t understand. Moreover, the party might include language in a much smaller font in the hopes that the other party won’t take notice or pay close attention to those provisions.
If you need help learning more about unconscionability, or if you need legal assistance determining whether or not a contract you are a party to is unconscionable, you can post your legal need on UpCounsel’s marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.