Legal Definitions - unconscionable

The term unconscionable describes something so shockingly unfair, unjust, or oppressive that it offends one's sense of right and wrong. In a legal context, it most frequently refers to contracts or specific clauses within contracts that are so overwhelmingly one-sided and unreasonable that they cannot be enforced by a court.

When a court determines that a contract or a part of a contract is unconscionable, it means the terms are so grossly unfair that they "shock the conscience" of the court. This often occurs when there is a significant imbalance of power between the parties, and one party has taken unfair advantage of the other's vulnerability, lack of knowledge, or desperate circumstances. If a court finds a contract to be unconscionable, it may refuse to enforce the entire contract, strike out the unconscionable clause, or modify the terms to make them fair.

Here are some examples illustrating the concept of unconscionability:

• Predatory Lending: Imagine a scenario where a company offers a loan to an individual facing severe financial hardship. The loan agreement includes an annual interest rate of 400%, hidden fees that effectively double the principal amount, and a clause allowing the company to seize the borrower's primary residence if a single payment is missed, even if the home's value far exceeds the loan amount. The borrower, desperate for funds, signs without fully understanding the complex and oppressive terms.

  Explanation: This situation is unconscionable because the lender has taken extreme advantage of the borrower's vulnerable position. The terms (exorbitant interest, hidden fees, and disproportionate penalty of home seizure) are so grossly unfair and one-sided that they "shock the conscience," indicating a lack of good faith and fair dealing.

• Unfair Service Contract: Consider a small business owner who signs a contract with a large, dominant technology provider for essential software services. The contract, presented on a "take-it-or-leave-it" basis with no room for negotiation, includes a clause stating that the technology provider can unilaterally increase service fees by any amount at any time, terminate the service without notice, and is not liable for any data loss or business interruption, regardless of fault. The small business has no viable alternative providers in the market.

  Explanation: This contract could be deemed unconscionable due to the extreme imbalance of bargaining power and the overwhelmingly one-sided terms. The clauses granting the provider absolute discretion over fees and termination, while absolving them of all liability, are so unfair and oppressive to the small business that they would likely be considered unconscionable by a court.