You may have heard about “unconscionable” contracts. Certainly, “unconscionable” is a powerful word. Under the law, however, it basically just means that it’s too one-sided or otherwise unfair to one or more parties to be considered valid and enforceable if it’s challenged.
The best way to avoid being on the wrong side of an unconscionable contract – or to be accused of being the one trying to benefit from such a contract — is to have sound legal guidance throughout its creation, negotiation and signing. All sides want to be party to a contract that meets their needs and has solid benefits for them. However, they need to be fair to all parties.
Examples of things that can make all or part of a contract unconscionable
There’s no strict definition of an unconscionable contract. However, there are recognized “elements of unconscionability.” These include:
- Unreasonable terms that give one side more rights and benefits than the other
- Imbalance of power between or among the parties
- Lack of transparency, such as deceptive or confusing clauses that can be misinterpreted
- Coercion or duress
The last refers to the conditions under which a contract was signed rather than any language in the contract. One party can’t be pressured, threatened or blackmailed into signing a contract. Further, all parties must have the opportunity to consult an attorney before signing the contract.
If a contract has one or more unconscionable clauses, those clauses alone may be ruled unconscionable. That may not necessarily invalidate the entire contract.
If a business owner believes they’ve entered into an unconscionable contract, it’s often better to work to renegotiate all or part of it as soon as possible – particularly if they realize that they may not be able to fulfill one or more of the requirements. Having experienced legal support is critical.
