Unconscionable Bargain: Everything You Need to Know
An unconscionable bargain is an unfair provision or clause identified in a contract that could deem the entire contract invalid.3 min read
2. Undue Influence
4. Unequal Bargaining Power
5. Unfair Surprise
6. Limiting Warranty
7. Unconscionable vs. Illegal Contract
8. What are the Remedies for an Unconscionable Contract?
9. Is a Lawyer Required for Disputes Arising from Unconscionable Bargain?
An unconscionable bargain is an unfair provision or clause identified in a contract that could deem the entire contract invalid. It is essentially a transaction that no reasonable person would enter into. Courts almost always invalidate unconscionable bargains as the entire contract would be unfair for one of the parties. However, the court could also void only part of the contract by removing the unconscionable terms or alternatively request that such terms in the contract be modified.
What is an Unconscionable Contract?
When a court deems an entire contract unconscionable, no specific damages or specific performance under the contract is issued; rather, the parties will be released from all contractual obligations.
There are five factors that could deem a contract unconscionable, and these include:
- Undue influence
- Unequal bargaining power
- Unfair surprise
- Limiting warranty
Undue influence occurs when one party exercises pressure on the other party to sign the contract. While such pressure doesn’t necessarily constitute threatening acts, the pressure itself causes the other party to feel forced into signing the agreement.
Duress involves one party making a threat to the other party to sign the contract. This could be a physical or verbal threat in which the one party threatens the other party in such a way that the victim feels as though there is no other choice but to sign the agreement.
Unequal Bargaining Power
Unequal bargaining power occurs when one party has an unreasonable advantage over another party. This can be proven if the disadvantaged party can prove that the other party has additional resources and knowledge of the terms under the contract. For example, if the other party included complex technical jargon in the contract that the disadvantaged party wouldn’t be aware of, this will likely deem the contract unconscionable. Some other examples include inputting content into the contract that is in very small font or inserting it in such a way that would mislead the other party signing the contract.
Unfair surprise occurs when one of the parties in the contract creates a clause or provision without the other party’s knowledge that wouldn’t be a provision that the other party would agree to.
Limiting warranty involves one party attempting to limit their own liability in the event the contract is breached. An example of this is if the one party includes terms and provisions in the contract indicating that even if they breach the contract, they can’t be held personally liable.
Unconscionable vs. Illegal Contract
These two terms are not the same. An illegal contract is an agreement that is against the law because the actual subject matter of the contract is illegal. An example of this could be a contract involving illegal gambling. In contrast, an unconscionable contract might be entirely legal in its terms and provisions, but is unenforceable due to the circumstances in which the contract was entered.
What are the Remedies for an Unconscionable Contract?
There are three main remedies that are available:
- Void the entire contract
- Void part of the contract
- Modify the contract
The court might deem the entire contract void as if it never existed. Therefore, both parties must stop performing under the agreement, and have to repay any money that was paid by either of the parties.
The court might also determine to void only part of the contract, particularly the provision or terms that were deemed unconscionable. But the remainder of the contract will be deemed valid.
The court could also decide to have the contract modified. Therefore, the court could uphold the contract, but request the terms be modified to exclude any unconscionable provisions.
Is a Lawyer Required for Disputes Arising from Unconscionable Bargain?
Such unconscionable bargains can represent challenges. Therefore, you might want to hire an attorney who can better assist you with any questions that you might have regarding the terms of the contract. An attorney can go over the laws with you, and help you identify if you have a claim.
If you need help learning more about what constitutes an unconscionable bargain, or if you believe that you have a legal claim due to unconscionable terms in a contract, 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.