Contracts are an essential part of business dealings, and it is important to ensure that they are fair and equitable to all parties involved. However, it is not uncommon for contracts to contain clauses that are unconscionable – that is, they unreasonably favor one party over the other. In this article, we will explain the two dimensions of unconscionable clauses in a contract.
The first dimension of an unconscionable clause is procedural unconscionability. This refers to the process by which the contract was made and the circumstances surrounding its formation. Procedural unconscionability exists when one party had an unfair advantage in negotiating the terms of the contract or when the other party had no meaningful choice but to accept the terms.
Examples of procedural unconscionability include contracts with fine print that is difficult to read or understand, contracts that are presented on a take-it-or-leave-it basis, and contracts where one party has significantly more bargaining power than the other.
The second dimension of an unconscionable clause is substantive unconscionability. This refers to the actual terms of the contract and whether they are unreasonably one-sided. Substantive unconscionability exists when the terms of the contract are so one-sided that they shock the conscience of a reasonable person.
Examples of substantive unconscionability include contracts that contain exorbitant fees, contracts that limit one party’s ability to sue or restrict the legal remedies available, and contracts that contain clauses that are contrary to public policy.
It is important to note that a contract can be unconscionable even if it is not illegal. However, if a contract is found to be unconscionable, a court may refuse to enforce the unconscionable clauses, or it may strike down the entire contract.
To avoid unconscionable clauses in contracts, it is important to ensure that the terms of the contract are fair and reasonable, and that both parties have equal bargaining power in negotiating the terms. If there is any doubt about the fairness of a contract, it is recommended to seek legal advice before signing.
In conclusion, unconscionable clauses in contracts can be both procedurally and substantively unconscionable. Procedural unconscionability refers to the process by which the contract was formed, while substantive unconscionability refers to the actual terms of the contract. To avoid unconscionable clauses, it is important to ensure that the terms of the contract are fair and reasonable, and that both parties have equal bargaining power.