Unconscionability, Illegal Contracts and Public Policy

Question 1

When is a contract unconscionable?

Answer 1

Where inadequacy of price is coupled with inequitable or oppressive conduct, a court may refuse to enforce such a contract as unconscionable.

Question 2

Unconscionable example

Answer 2

Ryan v. Weiner - Man with 8th grade education manipulated into selling home for far less than market value

Question 3

Is a contract to facilitate illegal operations valid?

Answer 3

No. “no court will lend its assistance in any way toward carrying out the terms of a contract, the inherent purpose of which is to violate the law.

Question 4

When is a contract substantively unconscionable?

Answer 4

A contract is substantively unconscionable when its terms are overly harsh or one-sided against one of the parties.

Question 5

When is a contract procedurally unconscionable?

Answer 5

A contract is procedurally unconscionable when it results from a significant inequality of bargaining power between the two parties.

Question 6

When does the pre-existing duty rule apply?

Answer 6

First, a modification is enforceable if it results from unforeseen circumstances not anticipated by the parties when the contract was formed. Second, a modification is enforceable if the parties’ duties are altered sufficiently to constitute consideration. Third, the rule does not apply to contracts for the sale of goods under § 2-209 of the Uniform Commercial Code (UCC).