1. Unconscionability Doctrine
2. What Makes a Contract Unconscionable?
3. What Is Procedural Unconscionability?
4. What Is Substantive Unconscionability?
5. Comparing Unconscionable Contracts to Illegal Contracts

Unconscionable contracts are ones that are so one-sided and unfair that they become legally unenforceable. One party has no choice but to accept the contract, usually because of differences in bargaining power. This type of contract would unfairly benefit the person who drafted it and intentionally deceive the other party. It would be unfair not to let the person who has been deceived out of the contract. 

Even if a contract has all the legal elements, it might still be deemed unenforceable if a portion of it violates legal doctrine. The contract must be unconscionable at the time it is drafted to be declared void and see that the person who drafted it is punished. 

Take, for example, a contract between an experienced business person in a specialty field and a normal consumer. The dealer requires the consumer to sign a contract. But he's intentionally hidden complicated jargon that most people would never understand. The chosen font is tiny, and the unfair clause is cleverly inserted to help mislead the consumer into signing the contract. This is how knowledgeable dealers use their superior bargaining position to take advantage of consumers. 

Unconscionability Doctrine

U.C.C. Section 2-302 covers the doctrine of unconscionability. The doctrine is a legal principle designed to protect parties from a variety of issues, including duress and fraudulent concealment. The courts will apply this doctrine to every contract case, not just ones that deal with the purchase of goods.

The UCC, or Uniform Commercial Code, says that if a court decides a contract or any portion of a contract was unconscionable when it was drafted, the court can handle it in one of three ways: 

  • Enforce the contract minus the unconscionable clause.
  • Refuse to enforce the entire contract.
  • Limit the clause that is deemed unconscionable so it's no longer unconscionable.

What Makes a Contract Unconscionable?

A contract can be found to be unconscionable based on different factors, including:

  • Duress: One party pressures the other into signing the contract using threat, sometimes even physical threat.
  • Unequal bargaining power: This is where one party has an unfair advantage over the other.
  • Undue influence: When one side uses unreasonable pressure to get the other person to agree to the contract.
  • Limiting warranty: If one party attempts to reduce their own liability in a breach of contract and make the other party responsible for damages.
  • Unfair surprise: One party includes a term or terms without the other party's knowledge, and it is outside their scope of expectation.

What Is Procedural Unconscionability?

Procedural unconscionability describes an unfairness that renders a contract unconscionable. It references the disadvantage one party is put at by consenting to a completely unfair contract. This is similar to doctrines related to other contractual topics, such as a duty to disclose. 

Two main elements that comprise procedural unconscionability are:

  • Surprise, when the misinformed party inadvertently agrees to hidden terms in the contract that are meant to defraud him or her.
  • Oppression, which is one party's extreme power over the other, allowing him or her to take advantage of that person.

What Is Substantive Unconscionability?

Substantive unconscionability refers to the contract “substance,” or terms that are unfair. An example could be unfair payment terms, such as demanding payment by the end of the day or the price will increase. If that deadline falls on a banking holiday, it will be impossible for the party to satisfy the payment terms. Essentially, it's the content of the contract and not the process that led to it being signed.

Comparing Unconscionable Contracts to Illegal Contracts

Unconscionable contracts differ from illegal contracts in that illegal contracts are ones whose subject matter is against the law. Common examples include contracts that deal with illegal gambling or prostitution. An unconscionable contract is not illegal, but it's unenforceable due to the manner in which the contract was entered into. This means a contract that has legal elements might be deemed unconscionable because of how one party convinced the other to sign.

If you think you are facing an unconscionable contract, you might want to hire a contracts lawyer who can help you navigate the legal difficulties these contracts present.  

If you need help unconscionable contracts, 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.