A court may rule a contract unconscionable and refuse to enforce it if it is unfair or burdensome to one party in a way that shows abuses occurred during its development. Unconscionability is most likely to be discovered in a contract if both unfair negotiation and unjust substantive terms are present. Abuses that could render a contract unconscionable include hiding costs, limitations of liability, and trickery regarding sign-up procedures. Contracts may also be deemed unconscionable if there is no possibility for the weaker party to receive reasonably equivalent value in exchange for signing the document. Unconscionability is not simply a matter of opinion; instead, it has a legal basis in equity.
In general, parties to an agreement can decide what terms will apply including whether state law will give those terms effect. If someone feels like they were tricked into accepting unacceptable terms, then they can seek relief in court. State laws on unconscionability vary but many courts have found contracts to be unenforceable if one party was underprivileged (i.e., had little choice but to agree to the terms) or if the other party engaged in fraud or coercion. In some states, classes of contracts such as adhesion contracts or contracts of essential need (e.g., food, shelter, and transportation) can be declared unconscionable without any additional factors being present.
Unconscionability is a defense against a breach of contract claim.
A contract that is unconscionable is one that is so one-sided or unjust that it shocks the conscience. The court normally declares such contracts unenforceable in whole or in part, depending on whether the entire contract is unconscionable or simply particular words or sections mentioned within are. One example of an unconscionable contract is where one party is young and inexperienced while the other has many years of experience. In this case, the older party probably would not have agreed to the terms proposed by the younger party if they had been presented to them honestly and openly without any attempt by the younger party to get more out of them than they were willing to give.
The test for determining whether a contract is unconscionable is very similar to that used to determine whether a contract is void due to fraud. Thus, if you can show that a party took advantage of your lack of knowledge, experience, or education during negotiations, then the contract may be found to be unconscionable. For example, if a seller knows that a buyer is going to purchase a house sight unseen, then it is unfair for the seller to charge a higher price for the house than it would have sold for if it had been shown to the buyer first.
A contract that is unconscionable is one that is so one-sided that it is unjust to one party and so invalid under law. It is a contract in which one side has no real, meaningful option, frequently due to significant discrepancies in negotiating power between the parties. One example of an unconscionable contract is where one party is young and inexperienced, but very wealthy, while the other is older and less well off but determined not to yield. The term "unconscionable" comes from the unchangeable terms of the contract being unreasonable.
An unconscionable contract can be declared void by a court if it is found to be overly harsh or one-sided. For example, if a company claims it cannot be sued for damages even though it is clear there was negligence on their part, this would be considered a valid defense to a lawsuit. However, such a contract would be deemed unconscionable and therefore invalid under the law.
In the context of employment, an employer may be able to avoid hiring someone by claiming they are unable to find suitable work because all of their contracts with other employers are unconscionable. This could also be said to apply to any situation in which one party has significantly more bargaining power than another.
Unconscionability is a common defense to a breach of contract claim.