Examples of Unconscionable Contracts
Unconscionability in a contract refers to unfairness in the bargaining process or the contract terms. Unconscionability is determined based on the state of affairs when the contract was made. If you have specific questions about a contract, you should talk to a lawyer.
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Procedural Unconscionability
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Procedural unconscionability occurs when one party to a contract was incapable of understanding its terms, and is therefore unfairly surprised when the time comes to perform his contract duties.
Procedural Example
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A large seller of motorcycles creates a standardized contract that contains considerable small print ("boilerplate"), which shifts the risks of all mechanical defects to the buyer. The boilerplate would be incomprehensible to the average person. Courts would likely find this unconscionable.
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Substantive Unconscionability
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Substantive unconscionability occurs when the contract itself contains terms that are unfairly oppressive to one party. This usually happens when one party has vastly superior bargaining power, allowing it to dictate the terms.
Substantive Example
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A skydiving company forces all customers to sign a contract where the terms are fixed and the customer cannot negotiate (this is known as an adhesion contract). The customer finds that every single skydiving company offers the same sort of contract. Courts would probably find each adhesion contract unconscionable.
Proving Unconscionability
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Courts have historically been hesitant to rule contracts unconscionable. Many jurisdictions require evidence of some combination of procedural and substantive unconscionability in order to make the finding.
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