Restatement (Second) of Contracts · Section § 208
This section addresses the enforceability of contracts that are unconscionable at formation.
Source: Restatement Restatement (Second) of Contracts § § 208
If a contract or a term thereof is unconscionable at the time it was made, a court may refuse to enforce the contract or may enforce the remainder of the contract without the unconscionable term.
Contracts that are fundamentally unfair or oppressive at the time they are formed may not be enforceable. Courts have the discretion to either void the entire contract or keep parts of it that are fair.
This section emphasizes the protection of parties from unfair contract terms.
Unconscionability can be procedural, related to the formation process, or substantive, related to the terms themselves.
Courts typically look for evidence of unequal bargaining power or unfair advantages.
Illustration 1
A consumer is required to sign a lengthy contract full of complex legal jargon without sufficient time to understand it, which may be viewed as procedural unconscionability.
Illustration 2
A contract that imposes exorbitant penalties for late payment while granting the creditor excessive rights may be considered substantively unconscionable.
This case established the principles of unconscionability, demonstrating the application of § 208 where a consumer was bound by unfair contract terms.
The court discussed alternative dispute resolution clauses that were deemed unconscionable under § 208, refusing to enforce certain terms.
Section 208 is crucial in ensuring fairness in contractual agreements, preventing exploitation of weaker parties. Legal practitioners can leverage this section to argue for the unenforceability of unjust contract terms.