Unconscionability
What is the Unconscionability?
A court may refuse to enforce a contract or clause that is so unfair and one-sided that it shocks the conscience, considering both procedural unfairness in the bargaining process and substantive unfairness in the terms.
Source: Williams v. Walker-Thomas Furniture Co., 350 F.2d 445 (D.C. Cir. 1965)
Definition
Unconscionability is an equitable doctrine, codified in UCC section 2-302 and recognized at common law, that permits a court to refuse to enforce a contract or contract term that is so one-sided and unfair as to be oppressive. The doctrine serves as a safety valve to prevent enforcement of agreements that, while technically meeting formation requirements, were produced through fundamentally unfair processes or contain terms that no reasonable person would accept.
Courts typically require a showing of both procedural and substantive unconscionability, though the exact balance varies by jurisdiction. Procedural unconscionability relates to defects in the bargaining process—such as unequal bargaining power, lack of meaningful choice, fine print, deceptive practices, or exploitation of the weaker party's lack of education or sophistication. Substantive unconscionability relates to the terms themselves—clauses that are unreasonably favorable to the stronger party, such as excessive price markups, one-sided arbitration clauses, waiver of important rights, or exculpatory clauses.
The determination of unconscionability is made by the court as a matter of law, not by the jury. The relevant time for the analysis is the time of contract formation, not subsequent events. If a court finds unconscionability, it may refuse to enforce the entire contract, strike the unconscionable clause and enforce the remainder, or limit the application of the unconscionable term. The doctrine is applied with particular scrutiny in consumer contracts and adhesion contracts, where inequality of bargaining power is most pronounced.
Key Elements
- 1Procedural unconscionability: defects in the bargaining process (unequal power, lack of choice, hidden terms, exploitation)
- 2Substantive unconscionability: unreasonably one-sided or oppressive contract terms
- 3Both elements are typically required, though they operate on a sliding scale
- 4The unconscionability existed at the time of contract formation
- 5The court determines unconscionability as a matter of law
Landmark Cases
Williams v. Walker-Thomas Furniture Co.
350 F.2d 445 (D.C. Cir. 1965)
Wright's landmark opinion holding that a cross-collateral clause in a consumer installment contract could be unconscionable, establishing the two-pronged test of procedural and substantive unconscionability.
Jones v. Star Credit Corp.
59 Misc. 2d 189 (N.Y. Sup. Ct. 1969)
Found a freezer sale unconscionable where the price was $900 for a $300 item sold to welfare recipients, emphasizing substantive unconscionability.
Henningsen v. Bloomfield Motors, Inc.
32 N.J. 358 (1960)
Found an automobile warranty disclaimer unconscionable in an adhesion contract, highlighting the inequality of bargaining power in consumer transactions.
AT&T Mobility LLC v. Concepcion
563 U.S. 333 (2011)
Addressed the interplay between unconscionability and federal arbitration law, holding that the FAA preempts state unconscionability rules that disfavor arbitration.
Exam Tips
- Apply the sliding scale: the more procedurally unconscionable, the less substantive unconscionability is needed, and vice versa.
- Analyze unconscionability at the time of contract formation, not based on how events unfolded afterward.
- Identify specific procedural defects (fine print, no negotiation, unequal power) and specific substantive terms (excessively one-sided clauses).
- Remember that the court, not the jury, decides unconscionability—it is a question of law.
Common Mistakes to Avoid
- Analyzing unconscionability based on events after contract formation rather than at the time the contract was made.
- Arguing only substantive or only procedural unconscionability when most jurisdictions require both prongs on a sliding scale.
- Confusing unconscionability with duress or undue influence—unconscionability focuses on the oppressiveness of the terms and process, not on threats or manipulation.
Memory Aid
Unconscionability = Process + Price. Was the process unfair AND the price (or terms) outrageous? Both prongs, sliding scale.