Business contracts need to be basically fair to all parties who sign on to them to be enforceable. They can negotiate for terms they want or need and keep out terms that could harm them. However, if any part of a contract – or the contract as a whole – is “unconscionable,” it can be ruled invalid.
An unconscionable clause or contract can be useless to the party it’s meant to favor if it can’t be enforced. Therefore, it’s best for all parties to keep such clauses out of their contracts.
Examples of “elements of unconscionability”
There’s no official legal definition for “unconscionable” when it comes to contracts. However, there are “elements of unconscionability.” Here are a few examples:
- An imbalance of power between or among the parties
- Deceptive or confusing clauses that could be misinterpreted or interpreted in more than one way
- The use of duress or coercion to get a party to sign the contract
The last one typically involves some kind of action or threat (even potentially a non-verbal threat) to get a party to sign. It can also include having an unreasonable deadline for signing that prevents a party from properly reviewing a contract with a legal professional or negotiating any of the terms.
It’s unwise to be on either end of an unconscionable contract – even for the party it seems to favor. All parties are typically better off when a contract has terms that are reasonable.
Whether you need assistance drafting, reviewing or negotiating a contract or you’re dealing with the aftermath of a potentially unconscionable contract, getting experienced legal guidance can help you protect your rights and your business.