2. Unconscionable Contracts or Clauses A bargain that is unfairly one-sided is unconscionable. a. Procedural Unconscionability This relates to a party’s lack of knowledge or understanding of contract terms because of small print, “legalese,” etc. An adhesion contract (drafted by one party for his benefit) may be held unconscionable. b. Substantive Unconscionability This relates to the parts of a contract that are so unfairly one-sided they “shock the conscience” of the court. 3. Exculpatory Clauses Contract clauses attempting to release parties of negligence or other wrongs. Sometimes enforced, particularly if the party seeking enforcement is a private business not considered important to the public interest, such as an amusement park. In most real property leases, however, these clauses are held to be contrary to public policy. 4. Discriminatory Contracts Contracts in which a party promises to discriminate in terms of color, race, religion, national origin, disability, or gender are illegal. C. EFFECT OF ILLEGALITY Generally, an illegal contract is void. No party can sue to enforce it and no party can recover for its breach. Exceptions include— 1. Justifiable Ignorance of the Facts A party who is innocent may recover benefits conferred in a partially executed contract or enforce a fully performed contract. 2. Members of Protected Classes When a statute is designed to protect a certain class of people, a member of that class can enforce a contract in violation of the statute (the other party to the contract cannot enforce it). 3. Withdrawal from an Illegal Agreement If the illegal part of an agreement has not been performed, the party rendering performance can withdraw and recover the performance or its value. 4. Contracts Illegal through Fraud, Duress, or Undue Influence A party induced to enter into an illegal bargain by fraud, duress, or undue influence can enforce the contract or recover for its value. 5. Severable, or Divisible Contracts If a contract can be divided into parts, a court may enforce a legal portion but not an illegal part.
- Fall '08
- Business Law Outlines, mentally incompetent, Disaffirmance