Also known as:unconscionability · unconscionable · unconscionably · doctrine of unconscionability
Written by attorneys · grounded in primary & secondary sources — see below
A doctrine permitting a court to refuse enforcement of a contract or term that is unconscionable when made. The doctrine authorizes the court to decline enforcement of the entire agreement, to enforce the remainder after excising the offending term, or to limit the term's application to prevent an unconscionable result. Determination of unconscionability examines the setting, purpose, and effect of the agreement, including defects in the bargaining process and gross disparity in the exchange.
Sources & Authorities
How it applies
Common Examples
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Unilateral Bid Mistake Producing Bankruptcy
Uri Underwood, owner of a small remediation firm, submitted a fixed-price bid to Ultra Precision based on a misread lab report that understated contamination levels by a factor of ten. Performance under the accepted contract would cost more than four times the bid price and force the firm into bankruptcy. Because enforcement would impose an oppressive financial burden arising from the mistake, the court holds the contract voidable under the unconscionability doctrine.
Unfair Separation Agreement In Divorce
Uliana Ustinova and Ulysses Ulrich negotiated a separation agreement that awarded Uliana nearly all marital assets while leaving Ulysses with minimal support and substantial debt. At the dissolution hearing the court reviews the parties' economic circumstances and finds the agreement leaves Ulysses unable to meet basic needs. The court therefore refuses to enforce the agreement as unconscionable and enters its own orders for property division and maintenance.
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Uniform Acts
Restatements
Casebooks
Hornbooks
Study Supplements
Premarital Term Causing Later Hardship
Ulysses Usher and Unity Underhill signed a premarital agreement waiving all spousal support. Five years after marriage Unity suffers a disabling illness that prevents employment and leaves her eligible for public assistance. Because enforcement of the waiver would produce substantial hardship from a material post-signing change in circumstances, the court refuses to enforce that term.
Unconscionable Damage Limitation In Consumer Sale
Ugo Uberti purchased a household appliance from Urban Logistics under a contract that excluded all consequential damages for personal injury. When a defect caused severe burns requiring hospitalization, Ugo sought damages for medical expenses. The court finds the exclusion prima facie unconscionable in a consumer-goods transaction and refuses to enforce the limitation.
Oppressive Contract Term Stricken
Ultra Precision contracted with Uri Underwood for exclusive assignment of all future inventions in exchange for modest continued employment. The clause sweeps far beyond any invention related to Uri's actual work. The court refuses to enforce the overbroad term while upholding the remainder of the agreement to avoid an unconscionable result.
Court Orders After Finding Agreement Unconscionable
Ulysses Usher and Uliana Ustinova presented a separation agreement that awarded all significant assets to Ulysses while leaving Uliana without support or housing. The court determines the agreement is unconscionable in light of the parties' economic circumstances. It therefore declines to incorporate the agreement and instead enters its own orders allocating property and awarding maintenance.
Common questions
Frequently Asked
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What must a court find before refusing to enforce a contract or term under the unconscionability doctrine?+
A court must determine that the contract or term was unconscionable at the time it was made, considering its setting, purpose, and effect. Relevant factors include defects in the bargaining process and gross disparity in the values exchanged. Once unconscionability is found, the court may refuse enforcement, excise the term, or limit its application.
Supporting sources
Does the unconscionability doctrine apply to separation agreements in divorce proceedings?+
Yes. Under the Uniform Marriage and Divorce Act a court is not bound by the terms of a separation agreement if it finds the agreement unconscionable after considering the parties' economic circumstances. If unconscionability is found the court may request a revised agreement or enter its own orders for property, maintenance, and support.
Supporting sources
When is a limitation of consequential damages unconscionable under the UCC?+
A limitation or exclusion of consequential damages is unconscionable when it appears in a consumer-goods transaction involving personal injury. Such a limitation is prima facie unconscionable, while a similar limitation in a commercial setting is not. The court may refuse to enforce the limitation after giving the parties an opportunity to present evidence on commercial setting, purpose, and effect.
Supporting sources
32 N.J. 358, 161 A.2d 69 (1960)Torts
…and undue influence, not to mention differences in economic bargaining power” to enable the courts to avoid enforcement of unconscionable provisions in long printed standardized contracts. 1 Corbin on Contracts (1950) § 128, p. 188. Freedom of contract is not such an immutable doctrine as to admit of no qualification in the…