Unconscionability is a defense against the enforcement of a contract or portion of a contract. If a contract is unfair or oppressive to one party in a way that suggests abuses during its formation, a court may find it unconscionable and refuse to enforce it.
There are two types of unconscionability in contracts, procedural and substantive.
- Procedural unconscionability is present when during the contract’s formation, at least one party does not have fair/meaningful choice, there’s misrepresentation, or unequal bargaining power among other factors.
- Substantive unconscionability is when the contract’s terms unfairly benefit/harm one side such as extremely unequal price compared to value exchanged.
A contract is most likely to be found unconscionable if both unfair bargaining and unfair substantive terms are shown. An absence of meaningful choice by the disadvantaged party is often used to prove unfair bargaining. For example, in Jones v Star Credit, the Court refused to enforce a contract that charged three times the market value of an appliance to a low-income plaintiff, with significantly unequal education and experience compared to the defendant, by finding the contract unconscionable.
[Last updated in June of 2024 by the Wex Definitions Team]
