Relief for the Weaker Party to the Contract - Unconscionability

Question 1

Define unconscionability?

Answer 1

Unconscionability is anchored in fairness. If something is so unfair that it is unconscionable, equity will set it aside.

Procedural inequality coupled with a substantively unfair deal:
- Procedural: process of formation. Inequality of bargaining power between the parties means there is a procedural imbalance
- Substantive: The outcome itself is unfair

• In principle all the equitable bars to recission apply to unconscionability but this is very unlikely to occur since there’s no examples in practice
• Partial severance: to either sever or strike out or delete/remove one particular clause of a contract while leaving the rest in place (Tercon or Uber)
  • Including either an exclusion clause (Tercon) or an arbitration clause (Uber) but there is no limit

Question 2

Uber Technologies Inc v Heller (Framework for Unconscionability)

Answer 2

Two Step Test for Unconscionability: the court can rescind an entire contract or strike out a clause where two things are met:
1. There must be an inequality in bargaining power which arises where one party cannot adequately protect its interest in the contracting process (procedural).
* The inequality of bargaining power may stem from either personal characteristics or environmental circumstances. These impairments don’t have to rise to a level of vitiating consent.
* Examples: extreme need, financial desperation, situations involving special relationships with dependents, situations of necessity (ex: a vessel stranded at sea)
* Refers to idea of cognitive asymmetry: where as a practical matter, only one party can appreciate the full import of contractual terms because the language is dense or difficult to understand language.
* Touchstone: the normal assumptions about free bargaining are incapable of being fairly applied because the autonomy of the weaker party is comprised. They may be vulnerable to exploitation either because of personal characteristics dealing with capacity or education, or extreme need, or because of external factors such as necessity.

2. the deal itself must be improvident, meaning that it must be a substantively unfair deal where (substantive):
   
   1. the stronger party has been unduly enriched in light of the context, or
      - can assess this again market value
   2. whether the terms of the contract flout the reasonable expectations of the weaker party to cause unfair surprise
      - did the contract contain things that the weaker party might be surprised about?