Unconscionable Contract Lawyers

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What Are Unconscionable Contracts?

Unconscionable contracts are those contracts which are so unfair to a party that no reasonable or informed person would agree to it. In a suit for breach of contract, a court will void an unconscionable contract. That means the court will not award damages or order specific performance against the person unfairly treated.

The concept of unconscionability allows the court to refuse to enforce a provision or entire contract (or try to modify the terms of the contract) to avoid any "unfair terms". Usually terms are considered unfair if it gives the other party more bargaining power. Usually a unfair price alone is not enough to make a contract unconscionable.

When Are Contracts Unconscionable?

Contracts are unconscionable if a party was misled, lacked information or signed under pressure or misunderstanding. Generally, unconscionable contracts are grouped into one of these categories:

Duress

Duress involves either physical threats or unacceptable commercial pressure used to make someone sign a contract. A successful plea of duress will result in a contract being held to be voidable, meaning that the party not at fault may have the option to enforce the contract . There are three recognized forms of duress:

Physical duress:  is the use of force, false imprisonment or compelling someone to act contrary to his/her wishes or interests. Physical duress cases are relatively rare.

Duress of goods:  Occurs when someone will not release goods in order to persuade the other party to sign a document of waiver or pay some money. The threat not to release the goods must be an illegitimate threat. However, there are situations where it is perfectly legal to hold onto someone’s goods to pressure them to pay, for example, in car repair; it is perfectly legal for the repairer to hold onto a car until the bill is paid.

Economic duress: Economic duress occurs when some form of unacceptable commercial pressure results in advantages secured by the use of such pressure. However, it is sometimes very difficult to distinguish between unacceptable and acceptable commercial pressure.

Undue Influence

Undue influence refers to the amount of pressure one party uses to force the other to sign a contract or a will. Undue influence falls into two categories: those where there is a presumption of undue influence because the law assumes that one party must have taken advantage of the other party; and those where there is an appearance of undue influence due to the particular nature of the case.

Unconscionable Bargaining Power

Unconscionable bargaining occurs in instances where there is no pressure or undue influence, but it is obvious to one party that the other did not comprehend the consequences of signing the contract.

Take It or Leave It Clause

Some contracts will be unenforceable if it seems like the other party agreed to the terms of the contract because the other party to the contract would not go through with the contract unless a provision was agreed to.

Risk Shifting Provisions

Some contracts may contain clauses that shift the risk that is usually upon one party to the other party. This means that all the risk would be enforced upon one party even if he was not at fault. Courts have invalidated these provisions since it would be unfair. Other similar provisions such as releasing a contracting party's liability for his own intentional wrongful acts are also invalidated.

Limiting on Remedies

A contract that has provisions that limits a parties rights to certain remedies would be valid unless the limitation is considered unfair

What Are the Effects of Unconscionable Contracts?

If a court finds that a contract or a clause within the contract is unconscionable or unfair at the time the contract was made, the court may (1) refuse to enforce the entire contract (2) enforce the remainder of the contract, but invalidate the unfair terms (3) limit the action of unfair terms to avoid an unconscionable result.

Unconscionable contracts are a common defense to make a contract unenforceable. The party challenging the enforceability of the contract must prove that the terms of the contract is so unfair that it gives the other party great bargaining power and also power to control the entire transaction and these terms were made at the time the contract was created. A party challenging the enforceability of the contract cannot use this defense just because the contract did not go the way they wanted.

Should I Consult a Lawyer?

Contract law can be quite complicated and determining whether a contract is unconscionable can be difficult. A business attorney can assist you in this determination and explain to you the merits of your case. Additionally, every state has different procedures for filing suit. An attorney can help a party conform to the applicable procedural rules and collect all the proper documents to contest or claim an unconscionable contract.

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Last Modified: 01-28-2015 01:57 PM PST

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