Squeezing Subjectivity from the Doctrine of Unconscionability

Abstract

Judicial determinations about unconscionability are inherently subjective because courts determine unconscionability by assessing how a suspect term impacts the parties to an agreement. I propose a different approach and suggest that rather than looking at the impact on the parties, the focus be on the impact of a suspect term on third parties.

This article argues that as a matter of contract law there is no public interest in facilitating the avoidance of an improvident contract. Rather there is value in helping to avoid damage caused by a poorly conceived or drafted contract on those indirectly impacted. With this in mind, I submit that a term is unconscionable only if:

1. With respect to any contract a. The term undermines the integrity of the contracting system itself, or b. The term undermines the integrity of any statutory scheme granting to the court the power to review agreements allowed by the statutory scheme.

2. With respect to matrimonial agreements a. The operation of the term appears likely to result in any party to the agreement seeking public assistance, or b. The term interferes with the ability of a party to seek reform to avoid having to seek public assistance, or c. Adversely impacts the interests of children of the marriage.

This article suggests that the judicial powers to make determinations concerning unconscionability be limited. The result will be that parties to any contract must assume greater responsibility for the consequences of the terms they agree to. The article argues that fears that such limitations on judicial power will result in an elimination of a fail-safe mechanism against predatory practices not otherwise addressed in the law are unfounded. Only those who are not prepared to accept responsibility for a poor decision stand to lose by my proposal. After all, the ultimate fail-safe mechanism is to simply not sign on the dotted line.

In addition, I restate the vocabulary traditionally used to describe unconscionability suggesting that the labels "substantive" and "procedural" describe only the geography associated with unconscionability and do little to clarify what actually is or isn't an unconscionable term. These labels superimpose another layer of complexity leading to confusion and subjectivity. Instead I propose that the inquiry be limited to answering the following question: During the negotiations leading to a contract have the parties done anything that is unconscionable, and if so, did it result in a term or agreement that operates in an unconscionable manner?

Keywords: Unconscionability, procedural unconscionability, substantive unconscionability, contracts, objective standards, third party interest, collateral impact

JEL Classification: K12, K19, K20, K30, K39, K42, K49