1. Unconscionable Conduct and Contracts
2. Types of Unconscionable Conduct
3. Penalties for Unconscionable Conduct

Unconscionable conduct describes actions that are shockingly bad or outrageous and show a lack of conscience. Unconscionable conduct is one of the grounds that courts can use to declare a whole contract, or parts of it, invalid. Conduct that may be ruled by courts to be unconscionable includes financial terms that are shockingly unfair, signing a contract with a minor, or signing a contract with a person whose background or education calls into question the fairness of the contract.

Unconscionable Conduct and Contracts

The unconscionable doctrine attempts to protect disadvantaged entities from being trapped into contracts that are unfair and should not have been made in the first place. In a landmark ruling by the U.S. Supreme Court in the Rochin v. California case in 1952, the court ruled that forcefully extracting drugs from the stomach of a drug trafficking suspect "shocks the conscience" and is against the "canons of decency and fairness which express the notions of justice of English-speaking peoples."

Although the court did not set specific rules for what constitutes unconscionable conduct, it laid down principles that can be followed to determine such conduct. Unconscionable conduct is often used as a defense in breach of contract lawsuits. 

Types of Unconscionable Conduct

According to the Uniform Commercial Code (UCC), for a court to declare a contract unconscionable, it must:

  • Examine the terms of the contract. If a clause in the contract is deemed unconscionable, the court may decline to enforce the offending clause or the entire contract.
  • The court must hear the accused party and take his defense into consideration before coming to a decision.

It is worth noting that unconscionable conduct can occur at different stages of making a contract: It may occur when:

  • Entering a contract
  • Negotiating contract terms
  • Changing the terms of a contract
  • Enforcing a contract

There is no standard measure for unconscionable conduct. Courts reserve the right to determine what constitutes unconscionable conduct, and the interpretation of unconscionable conduct varies from state to state. In general, courts may rule that conduct is unconscionable if it meets any of the following criteria:

  • The contract is extremely one-sided. Examples of one-sided contracts are ones which disclaim a warranty, limit the ability of one of the parties to the contract from claiming damages, or prohibit one of the parties from filing a lawsuit.
  • If a business took advantage of a barely literate or uneducated person.
  • One of the parties to the contract is mentally incompetent to enter a contract.
  • The age of one of the parties to the contract is inadequate, for example, if one of the parties to the contract is a minor.
  • Fraud or deceit was used to facilitate the signing of the contract. This occurs in cases of misrepresentation.
  • If courts have, in the past, interpreted certain actions as unconscionable conduct. Such past courts decisions are also called "unwritten laws" and violating them may constitute unconscionable conduct.

Penalties for Unconscionable Conduct

When a court is convinced that a there was unconscionable conduct in the signing of a contract, there are a number of penalty options:

  • Refusal to Enforce the Whole Contract
    The court may refuse to enforce the entire contract because it is unconscionable. This normally occurs when the methods used to sign the contract were unconscionable, for example when a contract was signed with a minor
  • Declaring Specific Clauses of the Contract Unenforceable
    A court may refuse to enforce specific clauses in a contract which the court may deem unconscionable. In this case, the remaining parts of the contract can be ruled enforceable by the court. 
  • Changing the Terms of the Contract
    The court may change the unconscionable clauses in the contract. This may be by reducing the financial penalties for breach of parts of the contract.
  • Refunds
    The court may order the party responsible for the unconscionable conduct to give the aggrieved party a refund. This is normally done in cases where the aggrieved party has suffered financial loss because of the unconscionable contract.
  • Damages
    The party responsible for unconscionability may be ordered by the court to pay damages to the aggrieved party.  

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