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Defenses to unfair contracts
second semester
Undergraduate 1

Additional Law Flashcards




  • Inadequacy of consideration is so gross as to be unconscionable.
  • Courts look for a particularly overbearing provision
  • Factors are:
  • relative power of the parties
  • the consideration in exchange 
  • McKinnon v. Bennett
Adhesion Contracts
  • A standardized contract, which, imposed and drafted by the party of superior bargaining strength, relegates to the subscribing party only the opportunity to adhere to the contract or reject it.
  • Ct. is concerned with whether a party to a standardized contract can reasonably be held to have seen, understood, and assented to its unfavorable terms, and accordingly be bound by them.
  • often combatted w/ freedom to contract
Adhesion Contracts
  • A K to relieve of own negligence is acceptable unless:
    • against public policy of the state
    • social r'ship of parties militating against upholding the agreement.
  • public interests coupled w/ dominant position of those seeking exculpation
    • exculpation- clauses that absolves of liability
  • Enforceability has 2 factors
    • doesn't fall w/in r'ble expectations of signing the k w/ the party
    • is it unduly oppressive or "unconscionable"
Adhesion Contracts

Assent is gained to any not unreasonable or indecent terms the seller may have on his form, which do not alter or eviscerate the R'ble meaning of the dickered terms.

  • Restatement 211
Duty to Read

One who signs a written agreement is bound by its terms whether he read and understood it or not, or whether he can read or not.


Illiteracy is not an excuse

  • An inadequacy of consideration "so gross as to be unconscionable and a bar to the plaintiffs invocation of the extraordinary equitable powers of the court.
  • UCC 2-302
    • authorizes a court to refuse enforce or to limit the application of a contract or clause  that it determines to have been "unconscionable."
  • principle is one of prevention of oppression and unfair surprise and not of disturbance of allocation of risks b/c of superior bargaining power.
Principles of prevention
  1. oppressive and unfair surprise
  2. disturbance of allocation of risks  b/c of superior bargaining power

Example Case: Campbell Soup v. Wentz

Restatement 208

A contract can be unconscionable even if it doesn't have an unconscionable term- developing unconscionability norms:

  1. Fair/efficiency argument apply specific norms when fairness/efficiency aren't supported by bargain principle application.
  2. Manner of deviation from market compared to a perfect market.

Unconscionability determined by the absence of meaningful choice, where courts look for:

  1. gross inequity of bargaining power
  2. manner contract was entered into
  3. R'ble opportunity to understand terms
  • Not enforced as much in franchise agreements b/c of the bargaining ability of both parties.

Williams v. Walker-Thomas furniture

Jones v. Star Credit Corp.



Good Faith Performance

Restatement 205

UCC 1-304


Good faith performance

  • neither party shall do anything which will have the effect of destroying or injuring the right of the other party to receive the fruits of the contract

R2d- 205

  • Every contract imposes upon each party a duty of good faith and fair dealing in its performance and its enforcement.

UCC 1-304

  • Every contract or duty within the Uniform Commercial Code imposes an obligation of good faith in its performance and enforcement.
Actions in Bad faith

Acts by which a defendant allegedly impedes the plaintiff's right to receive benefits that he or she R'bly expected to receive under the contract must have been taken in bad faith.

  • actual or constructive fraud
  • a design to mislead or deceive another
  • neglect or refusal to fulfill some duty or some contractual obligation
  • not prompted by an honest mistake as to one's R's or duties but by some interested or sinister move
  • Involves a dishonest purpose.

Purposeful conduct that is inimical to the material terms of the lease.


Public Policy

Something the legislature has forbidden.


2 categories

  • illegal contracts- violate specific criminal laws
    • performance of a contract contributes to an illegal act
  • Judicially created Public Policy- legislation related to subject of agreement, sense of social or legal norms.
    • R2d 179 works against:
      • restraint of trade
      • impairment of family relations
3 types of illegal Contracts
  1. inducing official action
    1. contract to pay for services to be performed in the endeavor to obtain or defeat legislation by other means.
  2. commercial bribery
    1. bribery of a public official
  3. violations of licensing laws

A party to an illegal agreement is permitted to set up the illegality as a defense even though the party may be alleging his own turpitude

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