Unconscionability's Greatly Exaggerated Death
59 Pages Posted: 14 Jan 2019
Date Written: January 11, 2019
Reports of unconscionability’s demise are greatly exaggerated. According to conventional wisdom, the common-law contracts doctrine is rarely used, except in limiting clauses that purport to waive consumers’ remedial rights. In fact, as this Article documents, the doctrine is quietly flourishing: courts are using it to strike down substantive terms, including interest rates, in consumer finance contracts. In recent years judges across the country have rewritten or voided payday loans, signature loans, overdraft fees, and mortgage contracts on the grounds that their interest rates or other core terms were unconscionably unfair.
Since unconscionability is alive and well, the time is ripe to answer an unexplored question in the doctrine’s contours. How tailored should the unconscionability analysis be to the characteristics of a particular consumer entering into a contract, versus untailored to the typical, median, or “reasonable” consumer? This Article advances an argument in favor of tailoring unconscionability. In addition to consistency with unconscionability’s theoretical underpinnings, tailoring brings the doctrine in line with modern contracting practices. Today’s consumer contracts involve increasing market segmentation, individualized pricing, and customization of terms, in stark contrast to the stylized view of boilerplate that most scholars take for granted. Unconscionability can thus play an important role in consumer protection policy, which faces the challenge that consumers are highly heterogeneous and need different protections. Courts have a particular edge here: they specialize in individualized fact-finding, in contrast to regulations, which are generally one-size-fits-all.
Keywords: unconscionability, contracts, consumer protection
JEL Classification: K12, D18
Suggested Citation: Suggested Citation