#unconscionability

I'm on a tour with my new book, the international bestseller Enshittification: catch me next in London, Toronto and San Diego! Full schedule here.

The most exciting thing about Biden's antitrust enforcers was how good they were at their jobs. They were dead-on chapter-and-verse on every authority and statute available to the administrative branch, and they set about in earnest figuring out how to use those powers to help the American people:

https://www.eff.org/de/deeplinks/2021/08/party-its-1979-og-antitrust-back-baby

It was a remarkable contrast from the default Democratic Party line, which is to insist that being elected gives you no power at all, because of filibusters or Republicans or pollsters or decorum or billionaire donors or Mercury in retrograde. It's also a remarkable contrast from Republicans, whose approach to politics is "fuck you, we said so, and our billionaires have showered the Supreme Court in enough money to make that stick."

But under Biden, the trustbusters that had been chosen and fought for by the Warren-Sanders wing of the party proved themselves to be both a) incredibly principled; and b) incredibly skilled. They memorized the rulebook(s) and then figured out what they needed to do to mobilize those rules to makes Americans' lives better by shielding them from swindlers, predators and billionaires (often the same person, obvs).

They epitomized the joke about the photocopier repair tech, who comes into the office, delivers a swift kick to the xerox machine, and hands you a bill for $75.

"$75 for kicking the photocopier?"

"No, it's $5 to kick the photocopier, and $70 for knowing where to kick it."

https://pluralistic.net/2022/10/18/administrative-competence/#i-know-stuff

One of Biden's best photocopier kickers was and is Lina Khan. She embodies the incredible potential of a fully operational battle-station, which is to say that she embodies the awesome power of a skilled technocrat who is also deeply ethical and genuinely interested in helping the public. Technocrats get a bad name, because they tend to be empty suits like Pete Buttigieg, who either didn't know what powers he had, or lacked the courage (or desire) to wield them:

https://pluralistic.net/2023/01/10/the-courage-to-govern/#whos-in-charge

But another way of saying "technocrat" is "someone who is very good at their job." And that's Khan.

You'll never guess what Khan is doing now: she's co-chairing Zohran Mamdani's transition team!

https://www.theguardian.com/commentisfree/2025/nov/12/yes-new-york-will-soon-be-under-new-management-but-zohran-mamdani-is-just-the-start

Khan's role in the Mamdani administration will be familiar to those of us who cheered her on at the Federal Trade Commission: she is metabolizing the rules that define the actions that mayors are allowed to take, figuring out how to use those actions to improve the lives of working New Yorkers, and making a plan to combine the former with the latter to make a real difference:

https://www.semafor.com/article/11/12/2025/lina-khans-populist-plan-for-new-york-cheaper-hot-dogs-and-other-things

Front and center is the New York City Consumer Protection Law of 1969, which contains a broad prohibition on "unconscionable" commercial practices:

https://repository.law.umich.edu/cgi/viewcontent.cgi?article=2404&context=mjlr

Unconscionability: When Is a Contract Too Unfair to Enforce? I. The Legal Foundation of UnconscionabilityA. Codification and Role in the Uniform Commercial Code B. Common Law Roots and Evolution C. Modern Application in Consumer and Employment Contexts D. Comparative and International Perspectives E. Judicial Discretion and Evolving Standards II. Procedural and Substantive UnconscionabilityA. Procedural Unconscionability: The Context of Consent B. Substantive Unconscionability: The Content of Obligation C. The Interplay: Must Both Be Present? D. Criticisms and Defenses of the Dual Framework III. Philosophical Underpinnings: Autonomy vs. Justice IV. Key Cases Illustrating Unconscionability V. The Limits and Risks of the Doctrine VI. Unconscionability in Contemporary ContextsA. Unconscionability and Digital Contracts: The Challenge of Invisible Consent1. Structural Imbalance in Knowledge and Power B. Consumer Financial Instruments: The Reassertion of Substantive Justice1. Predatory Lending and Exorbitant Terms 2. Student Loans and Financial Entrapment C. Employment and Gig Economy Contracts D. Unconscionability as a Mechanism of Social Justice

Unconscionability: When Is a Contract Too Unfair to Enforce?

In the realm of contract law, the doctrine of unconscionability operates as a moral and legal safeguard against exploitative bargains. A principle derived from equity, unconscionability challenges the assumption that all contracts are the result of equal bargaining power and informed consent. At its core, the doctrine asks: When is a contract so one-sided, so exploitative, that it offends the conscience of the court? This essay explores the legal and philosophical dimensions of unconscionability, analyzing its function, criteria, and implications in determining when a contract becomes too unfair to enforce.

I. The Legal Foundation of Unconscionability

Unconscionability is a doctrine rooted in the equitable powers of the judiciary, allowing courts to intervene when the enforcement of a contract—or a specific clause within it—would result in an outcome so grossly unfair that it offends the conscience of the court. This doctrine is designed not merely as a corrective tool, but as a preventive mechanism, ensuring that contract law remains not just a vehicle of private ordering, but also an instrument of justice. A. Codification and Role in the Uniform Commercial Code In American jurisprudence, unconscionability gained formal recognition with the promulgation of Section 2-302 of the Uniform Commercial Code (UCC). This section, adopted widely across U.S. jurisdictions, was intentionally framed in broad, discretionary terms. It reads: “If the court as a matter of law finds the contract or any clause of the contract to have been unconscionable at the time it was made, the court may refuse to enforce the contract, or it may enforce the remainder of the contract without the unconscionable clause, or it may so limit the application of any unconscionable clause as to avoid any unconscionable result.” The drafters of the UCC chose not to define the term "unconscionable" precisely, thus leaving the matter to judicial interpretation. This decision reflects the inherently contextual and fact-sensitive nature of the doctrine. The UCC’s structure encourages courts to assess unconscionability both procedurally and substantively, focusing on the totality of the circumstances surrounding the formation and substance of the contract. Section 2-302, while technically limited to the sale of goods under Article 2, has influenced courts and legislatures to recognize unconscionability more broadly, extending it into employment contracts, leases, service agreements, and a range of consumer transactions. B. Common Law Roots and Evolution Long before the UCC, courts of equity exercised a similar power under doctrines of fraud, duress, and public policy. English chancery courts, for instance, would occasionally decline to enforce contracts that were the product of gross inequality or undue advantage, even where no direct deception occurred. One early expression of this principle can be found in Earl of Chesterfield v. Janssen (1750), where Lord Hardwicke famously suggested that a contract could be voided “upon such an inequality as to shock the conscience.” While English common law never developed a distinct doctrine of unconscionability as American courts have, the philosophical foundation is shared: namely, that a contract's enforceability must be tempered by a minimum threshold of fairness. In American law, this equity-based concern was gradually absorbed into the broader common law system, culminating in a more structured and autonomous doctrine in the 20th century. The landmark case Hume v. United States (1885) foreshadowed the later modern usage, describing certain contracts as having “the grossest inequality of terms” and thus unfit for judicial enforcement. C. Modern Application in Consumer and Employment Contexts While unconscionability originally developed in commercial settings, its modern legal significance is most acutely felt in the context of consumer protection and employment law. In these areas, the doctrine functions as a critical counterbalance to systemic imbalances in power, knowledge, and resources. For instance, consumer contracts—such as cellphone agreements, car leases, and online service terms—are typically non-negotiable and drafted unilaterally by corporations. These "contracts of adhesion" leave consumers with no realistic alternative but to accept whatever terms are imposed. Here, courts have applied the unconscionability doctrine to invalidate or limit terms such as forced arbitration clauses, class action waivers, and punitive fees. Similarly, in employment law, unconscionability plays a vital role in challenging contracts that unduly restrict worker rights through non-compete clauses, waiver of legal remedies, or exploitative wage arrangements. Though courts are generally cautious in interfering with contractual freedom, they have increasingly recognized the need to protect vulnerable workers from unjust terms that result from stark imbalances in bargaining power. D. Comparative and International Perspectives In comparative terms, the doctrine of unconscionability aligns with various legal mechanisms found in other jurisdictions, though under different nomenclature. For example: - In English law, while the term "unconscionability" is used more narrowly (mostly in equity, for cases like undue influence or estoppel), courts have developed doctrines like “unfair contract terms,” particularly under the Unfair Contract Terms Act 1977 and Consumer Rights Act 2015, which aim at striking down overly harsh terms. - In German law, §138 of the German Civil Code (BGB) invalidates contracts that violate “gute Sitten” (good morals), particularly when one party exploits another’s distress, inexperience, or lack of judgment. This principle resembles substantive unconscionability. - European Union law more broadly enforces the Directive 93/13/EEC on Unfair Terms in Consumer Contracts, providing member states with tools to strike down clauses that create a significant imbalance to the detriment of the consumer. Thus, although the specific legal doctrines differ, the underlying normative concern—to prevent the enforcement of unjust bargains arising from asymmetry and exploitation—is widely shared. E. Judicial Discretion and Evolving Standards One of the distinctive features of unconscionability is its reliance on judicial discretion. The doctrine resists rigid codification precisely because its purpose is to serve equity and justice in individual circumstances. Courts are called not merely to apply rules, but to assess context, motive, impact, and morality. Yet this flexibility is also the source of criticism. Without bright-line rules, outcomes may vary unpredictably, leading to accusations of judicial activism or inconsistency. To mitigate this, courts often rely on guiding factors such as: - Gross disparity in value exchanged - Deceptive or high-pressure sales tactics - Surprise or hidden terms - Vulnerability or dependency of one party - Lack of real choice or meaningful negotiation Ultimately, the doctrine of unconscionability walks a fine line between legal formalism and equitable pragmatism. It acknowledges that while freedom of contract remains a foundational principle of private law, that freedom must not be weaponized to entrench inequality or perpetuate harm. The legal foundation of unconscionability reflects a unique blend of moral intuition and legal structure. It signals the judiciary’s commitment to ensuring that justice and fairness remain at the heart of contract enforcement. Far from being an anomaly or exception, unconscionability stands as a sentinel principle—a reminder that the law, even in its most private and transactional forms, must serve human dignity and social equity.

II. Procedural and Substantive Unconscionability

The legal doctrine of unconscionability functions through a dual analytical framework: procedural unconscionability and substantive unconscionability. These two categories—while analytically distinct—are not rigid compartments but rather interconnected dimensions of fairness. Courts often weigh them together, applying a sliding scale: the more egregious the imbalance in one dimension, the less is required in the other to render a contract or term unenforceable. This duality enables courts to holistically examine both how a contract was formed and what it requires—a recognition that justice in contract law demands attention not only to formality and consent but also to substance and consequences. A. Procedural Unconscionability: The Context of Consent Procedural unconscionability concerns the process of contracting—whether one party’s ability to make an informed and voluntary decision was undermined. At its core is the question of autonomy: did the weaker party truly have a fair opportunity to understand the terms and exercise meaningful choice? Key indicators include: - Inequality in bargaining power Often seen in contexts where a powerful entity (such as a corporation or employer) imposes terms on an economically dependent party (such as a consumer or worker). The law presumes that contracts entered into under such disparity are susceptible to coercion or undue influence. - Absence of meaningful choice This may occur when the weaker party has no reasonable alternatives, or where the contract is presented on a "take-it-or-leave-it" basis. Such contracts—known as contracts of adhesion—do not necessarily invalidate a contract but raise red flags, especially when coupled with oppressive terms. - Lack of negotiation or opportunity to review Situations where the weaker party was rushed, distracted, or discouraged from reading the contract can support a finding of procedural unfairness. Examples include signings at the point of sale, in hospital admissions, or through digital platforms requiring immediate consent. - Use of complex or deceptive language Legalese, fine print, and confusing structures may obscure the actual obligations being imposed. The doctrine emphasizes transparency, especially when contracts affect laypersons unfamiliar with legal or financial terminology. - Cognitive limitations or vulnerabilities Procedural unconscionability is often found in cases involving minors, the elderly, or individuals with limited education or literacy. Courts also consider language barriers and cultural factors that may impede understanding. Illustrative Case: In Williams v. Walker-Thomas Furniture Co. (1965), the court examined a furniture store’s contract that allowed it to repossess all previously purchased items if the consumer defaulted on any one payment. The court found that the terms, combined with the economic vulnerability of the buyer and the seller's knowledge of this vulnerability, raised serious concerns of procedural unconscionability. B. Substantive Unconscionability: The Content of Obligation While procedural unconscionability concerns process, substantive unconscionability examines content. The central inquiry is whether the terms of the contract are so unreasonably harsh, one-sided, or oppressive that they defy basic notions of fairness and public policy. This assessment is normative and contextual, often relying on judicial intuition—what is often called the “shock the conscience” test. The following features are commonly scrutinized: - Excessive or hidden fees For example, contracts that impose exorbitant penalties for late payments or hidden service charges, particularly when these are disproportionate to the actual harm suffered by the stronger party. - Unilateral remedies Clauses that allow only one party to terminate the contract, sue for damages, or compel arbitration, while denying such remedies to the other, are inherently suspect. - Limitation of liability or waiver of rights Contracts that seek to waive core legal rights—such as access to the courts, class action participation, or statutory remedies—often run afoul of substantive unconscionability, especially when not clearly disclosed. - Imbalanced price-to-value ratio Although courts are reluctant to police “bad bargains,” extreme cases—such as charging a grossly inflated price for a simple product or service—may suggest exploitation or unjust enrichment. - Pernicious non-compete or arbitration clauses For example, an employment contract that requires arbitration in a distant jurisdiction, imposes steep costs on the employee, or prevents them from working in their field for years may be invalidated as substantively unconscionable. Illustrative Case: In Discover Bank v. Superior Court (2005), the California Supreme Court held that a class-action waiver in a consumer arbitration agreement was substantively unconscionable because it insulated the corporation from liability for small but widespread harms. The court emphasized that such clauses effectively deprived consumers of a practical remedy, rendering the contract term unjust. C. The Interplay: Must Both Be Present? There is no universal rule on whether both procedural and substantive unconscionability must be established. However, the dominant approach in American courts is the "sliding scale" or balancing test. Under this framework: - A contract with minimal procedural flaws may still be struck down if the substantive unfairness is extreme. - Conversely, a contract with egregious procedural defects may be invalidated even if the terms are not facially outrageous. This approach reflects judicial pragmatism: a recognition that injustice may arise in different guises, and that courts must retain discretion to assess contracts holistically. Some states, such as California, adhere closely to this flexible doctrine. Others, like New York, often require a “modicum” of both procedural and substantive unconscionability, though courts retain the ultimate authority to invalidate patently unjust bargains. D. Criticisms and Defenses of the Dual Framework Critics argue that the procedural-substantive distinction is vague and unpredictable, allowing too much discretion to judges. It can lead to inconsistent outcomes, especially in economically significant areas like arbitration or employment law. Moreover, some assert that the focus on “shock the conscience” is too subjective and lacks a principled standard. Businesses often fear that courts will overstep, undermining contractual certainty and deterring innovation in contractual design. Defenders, however, contend that the very purpose of unconscionability is to introduce a moral dimension into contract law. The doctrine safeguards human dignity and curtails exploitation in a legal regime otherwise dominated by formal consent and economic rationalism. Its flexibility is its strength—allowing courts to respond to evolving norms of fairness in an increasingly complex marketplace. The doctrine of unconscionability is a sophisticated judicial instrument, blending procedural justice with substantive equity. Through its twin lenses, courts can scrutinize both the integrity of the contracting process and the ethical weight of contractual content. In doing so, the law recognizes that consent must be more than formal—it must be informed, voluntary, and fair. The procedural-substantive framework thus acts as a safeguard against the dehumanization of contract law, reminding us that even in commerce, justice is not an optional ornament but a structural necessity.

III. Philosophical Underpinnings: Autonomy vs. Justice

Lessons from an Overbearing Arbitration Agreement

The Arbitration Agreement Shackled the Employee

Baxter complained to her Company that performance evaluation forms illegally coded for age, race, and gender. She also objected to the Company reneging on an extension of about 15 to 30 days on her FMLA leave. Within 2 hours of her protest of being required to return to work earlier than the agreed on leave, she received a call from a Human…

I'm looking for cases that stand for the principle that parties are generally bound to their contracts...that, absent fraud/mutual mistake/unconscionability, courts will typically bind parties to the terms they've dickered over--even if those terms favor one party or the other. I've found a handful of relevant cases, but I'm looking for more.

I don't really care about jurisdiction--any case law will do.

DEFENSE TO CONTRACT FORMATION

Contract is valid, BUT "shocks the conscience"

procedural -- defect in the bargain

substantive -- egregious rip-off