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The party with the stronger bargaining power exploits that power by driving a bargain containing a term or terms that are so unfair that they “shock the conscience of the court”Substantive Unconscionability – Whether contract terms themselves are oppressive, unreasonably one-sided or unjustifiably harsh. Situations in which a party to the contract bears a disproportionate amount of risk or other negative aspects of the transaction and situations in which a party is deprived of a remedy for the other party’s breach.The UCC and the Restatement sections on unconscionability give courts the power to manipulate a contract containing an unconscionable provision so as to reach a just result. If a court finds that a contract or a term in the contract is unconscionable, it can do one of three things:It can refuse to enforce the entire agreementIt can refuse to enforce the unconscionable provision but enforce the rest of the contractOr it can “limit the application of the unconscionable clause so as to avoid any unconscionable result”UCC 2–302 gives courts power to refuse to enforce or modify unconscionable contracts for sale of goodsSee Circuit City Stores, Inc. v. MantorAdhesion and Exculpatory Clauses A contract of adhesion, usually a contract on a standardized form, is offered by a party who is in a superior bargaining position on a “take-it-or-leave-it” basisAn exculpatory clause(release, liability waiver) in a contract attempts to protect one party from liability for damagesAn exculpatory clause cannot protect a party from liability for any wrongdoing greater than negligenceExculpatory clauses will not be effective to exclude tort liability on the part of a party who owes a duty to the public (such as an airline) because this would present an obvious threat to the public health and safety.Courts enforce these contracts unless effect is overly harsh or oppressiveWhen the contracts are harsh or oppressive, they rise to the level of an unconscionable contract
Chapter 16- WritingBasicsIn general, a writing is notrequired to create a legally enforceable contractWriting may be required by Statute of FraudsEnacted in 17thcentury England to prevent fraud by requiring written evidenceAmerican states adopted similar statutesA contract is unenforceable if it does not satisfy the statute of fraudsThe Statute of frauds applies only to executory contracts. If an oral contract has been completely performed by both parties, the fact that it did not comply with the statute of frauds would not be grounds for recission of contract.Covered ContractsCollateral contracts in which a person promises to perform the obligation of another personContracts for real estateContracts for more than one yearContracts for sale of goods over $500Contracts in which an executor or administrator promises to be personally liable for the debt of an estate