Unconscionability
Unconscionability (or unconscientious dealings) describes a defense against the enforcement of a contract based on the presence of terms unfair to one party.
The two forms of unconscionability are procedural and substantive. Procedural unconscionability is concerned with the bargaining process under which a contract is made. Substantive unconscionability deals with the content of the contract.
Procedural unconscionability usually occurs as oppression or surprise in the bargaining process. Oppression can occur when bargaining power is disproportionate between the parties involved. Surprise comes up when a lender hides contract terms in the fine print or in complicated clauses.
Procedural unconscionability is not sufficient by itself to nullify a term of a contract, substantive unconscionability must also be demonstrated. Substantive unconscionability can be proven if a contract “reallocates the risks of the bargain in an objectively unreasonable or unexpected manner.” Vulnerabilities present with low income consumers such as financial distress and limited education are relevant to evaluating unconscionability.
The 1974 version of the Uniform Consumer Credit Code (UCCC) in part describes substantive standards as:
- Gross price disparity
- Entering into contract where it is known that the consumer will not receive substantial benefit from it
- Entering into a contract where the lender knows that there is little reasonable probability of the consumer being able to provide repayment in full
More Information
- Legal Challenges to Foreclosure
- Lawyers and Legal Assistance
- Laws that Protect You When Facing Foreclosure
