What is unconscionability?
Unconscionability is a term in contract law that is used to describe the terms of a contract that are so severely unfair or one-sided that no reasonable person would enter into such a contract.
What is an unconscionable clause in law?
(1) If the court as a matter of law finds the contractor any clause of the contract to have been unconscionable at the time it was made the court may refuse to enforce the contract, or it may enforce the remainder of the contract without the unconscionable clause, or it may so limit the application of any unconscionable clause as to avoid any ...
Is an unconscionable contract the same as an illegal contract?
An unconscionable contract is not the same as an illegal contract. An illegal contract is one that is against the law because the subject matter of the contract is illegal. An example of this is a contract that seeks to address illegal gambling matters.
What happens if a contract is declared void or unconscionable?
If a contract is declared void, there is no damages awarded or specific performance ordered, but, instead the parties will be released from their original contract obligations. An unconscionable contract is also a type of abusive contract.
Why is a contract unconscionable?
In this example, the contract may be declared unconscionable due to the unequal bargaining power between the two parties as well as the fact that one party used their knowledge and experience to take advantage of another party. If the court deems the contract unconscionable, it will be declared unenforceable and void.
What is an Unconscionable Contract Example?
A typical example of an unconscionable contract occurs when one party is an experienced dealer in a certain type of business and the other party is an average customer. For instance, suppose that the business healer required the customer to sign a contract.
What are the Elements of an Unconscionable Contract?
There are several elements or factors that may cause a contract to be found unconscionable. In unconscionable contract cases, the party wishing to cancel the contract must show one of the following:
How to void a contract?
There are several different possible remedies for unconscionable contracts. If a court determines a contract is unconscionable, the court may do one of three things: 1 Void the contract; 2 Void part of the contract; or 3 Modify the contract.
What happens if a lawsuit is filed and the court finds that a contract is unconscionable?
If a lawsuit is filed and the court finds that a contract is unconscionable, the contract will typically be declared void. If a contract is declared void, there is no damages awarded or specific performance ordered, but, instead the parties will be released from their original contract obligations. An unconscionable contract is also a type ...
What is unequal bargaining power?
Unequal bargaining power occurs when one party has an unreasonable advantage over the other party. This can be demonstrated by showing that one party is aware that the other party obviously did not understand the contract terms.
Is an abusive contract enforceable?
These types of contracts are void under the law and are not enforceable. An unconscionable abusive contract is a contract that is so one sided, it would be unjust for one of the parties to be required to perform their duties under the contract. The majority of abusive contracts are deemed unconscionable due to unequal bargaining power between ...
Why does unconscionability exist?
Unconscionability must exist at the time the contract is drafted in order for the contract to be declared void, and for the drafter to be punished accordingly. There are no set guidelines insofar as determining whether a contract is unconscionable.
What is procedural unconscionability?
Procedural unconscionability is a term used to describe the very unfairness that makes a contract an unconscionable one. Procedural unconscionability refers to the disadvantage suffered by the misinformed party upon consenting, against what would have been his better judgment, to extremely unfair terms. There are two main factors that make up procedural unconscionability: oppression and surprise. The oppression comes from one party’s overwhelming power over the other that enables him to take advantage of the other party. Surprise exists when the misinformed party supposedly agrees to what are, in actuality, hidden terms designed to defraud him.
What are some examples of unconscionable conduct?
An example of unconscionable conduct can be found in a case wherein one trucker helped another trucker with a start-up business, then failed to receive the compensation he was initially promised. Randall Lemke owned a trucking business in Wisconsin that ultimately went bankrupt. Thereafter, in the spring of 1992, businessman George Arrowood approached Lemke for help in starting his own trucking business: M&G Trucking, Inc. Lemke agreed on the condition that he would receive half of the company’s profits for three years.
Why is unconscionability considered unenforceable?
Because of how unreasonable an unconscionable contract is, the contract is considered by law to be unenforceable. This is because it would not be fair for the person who drafted the contract to benefit from his deliberate deception. It would also be equally unfair not to let the other party out of a contract that was drafted for the purpose of deceiving him.
What is unconscionable language?
For example, unconscionable language consists of terms or phrases that the average person would not understand. This lack of understanding would then be glossed over by the perpetrator in his attempt to have the other party sign a contract that he would not have agreed to, had he more fully understood what he was signing.
What is substantive unconscionability?
Substantive unconscionability is a term used to describe the terms of a contract in that the terms, or “substance” of the contract, are unfair. Substantive unconscionability is found when the terms of a contract are oppressive or cruel to the extreme. Substantive unconscionability is found in cases wherein the terms of the contract themselves would ...
What is the oppression of the misinformed party?
The oppression comes from one party’s overwhelming power over the other that enables him to take advantage of the other party. Surprise exists when the misinformed party supposedly agrees to what are, in actuality, hidden terms designed to defraud him.
What is procedural unconscionability?
“Procedural unconscionability” relates to the bargaining process that occurred before the contract was finalized. In general, this is akin to other doctrines such as duress (for example, feeling forced to enter an agreement out of fear), or duty to disclose (for example, the offeror did not disclose an important defect in the goods) before the contract was signed.
What is substantive unconscionability?
“Substantive unconscionability” relates to a term (or terms) in the contract. For example, if the terms require that payment be received by the end of the day or the price will go up dramatically, but it’s a banking holiday and it’s impossible for the purchaser to get the funds, that term might be considered unconscionable depending on the context of the entire agreement.
What does "unconscionable" mean?
Substantive Unconscionability in a Nutshell. Order Your Own Affairs. If a contract falls under the definition of unconscionable, it may not be legally valid. That means it could be voided, even if it’s signed by both parties.
Is contract law complex?
While contract law has some simple elements, there are also vastly complex doctrines and theories associated with contract law. Whether you are entering into a simple transaction or a complex one involving high-dollar amounts, you will want to ensure that there are no unconscionable terms in your contracts.
Is a contract enforceable if it violates a contract doctrine?
Even though all the elements of a contract are present in an agreement, it may still not be enforceable if something violates legal“doctrine.”. Doctrines are legal principles that protect the parties, such as fraudulent concealment or duress, to name just a few. One of these contract doctrines is unconscionability.