An Economic Perspective on Legal Remedies for Unconscionable Contracts

Abstract

This paper applies a law-and-economics approach to the study of legal remedies for unconscionable contracts, intending to develop a theoretical framework for the private law remedies in relation to the doctrine of unconscionability. It examines how the different legal remedies will modify a contractor's incentive for unconscionable contracts. It is argued that there is a strong positive correlation between legal deterrence of unconscionable contract and disincentive for a party to trade that should be taken in consideration seriously in designing the legal remedies for unconscionable contract.

Keywords: unconscionability, contract law, legal remedies, rescission, damages

JEL Classification: K12, K13