Unconscionability (also known as Unconscientious dealings) is a term used in contract law to describe a defense against the enforcement of a contract based on the presence of terms unfair to one party. Typically, such a contract is held to be unenforceable because the consideration offered is lacking or is so obviously inadequate that to enforce the contract would be unfair to the party seeking to escape the contract.
In and of itself, inadequate consideration is likely not enough to make a contract unenforceable. However, a court of law will consider evidence that one party to the contract took advantage of its superior bargaining power to insert provisions that make the agreement overwhelmingly favor the interests of that party. Usually for a court to find a contract unconscionable the party claiming unconscionability will have to prove both that there was a problem with the substance of the contract and the process through which that contract was formed. The substantive problem will usually be the consideration, but could also be the terms, interest payments, or other obligations the court finds unfair. Procedural issues that a court could consider include a party's lack of choice, superior bargaining position or knowledge, and other circumstances surrounding the bargaining process.
Upon finding unconscionability a court has a great deal of flexibility on how it remedies the situation. It may refuse to enforce the contract, refuse to enforce the offending clause, or take other measures it deems necessary to have a fair outcome. Damages are usually not awarded.
For the defense of unconscionability to apply, the contract has to have been unconscionable at the time that it was made - later circumstances that have the effect of making the contract extremely one-sided are irrelevant. The determination of unconscionability is made by the judge, not by a jury.
However, sorely inadequate consideration in and of itself is not a determination of whether a transaction is unconscionable. For example, in an Ontario case, a property owner agreed to sell an option for the sale of his property for the sum of $1.00. The owner later learned that options to purchase property usually sell for more than nominal sums. The court enforced the contract in favor of the option holder, ruling that the negotiations over the price of the option and the price the option holder would pay for the house if he chose to buy were both fairly negotiated and that the seller had adequate opportunity to investigate the market and simply did not do so.
Amadio, and other cases have seen a greater willingness by courts to set aside contracts on the grounds of unconscionability. This has been partly influenced by recent statutory developments such as the Contracts Review Act 1980 (NSW) and the Trade Practices Act 1974 (Cth).
Despite the indication of these considerations, however, most challenges to liquidated damages clauses survive legal challenges based on unconscionability.
"Unconscionability" can also be used in reference to an action, statement, or practice that is morally unjustifiable, especially if it seems particularly bold or audacious, as in "This is just unconscionable". In political controversy, proposed policies are often said by their opponents to be unconscionable: for example, in the U.S., social conservatives often label liberal public policies as such, and economic progressives often label conservative fiscal and defense policies as such.
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