What is an example of a substantive unconscionability?
Asked by: Jamal Langosh | Last update: February 1, 2026Score: 4.9/5 (12 votes)
An example of substantive unconscionability is a loan agreement with excessively high interest rates and hidden fees that bear no reasonable relation to the loan's value, especially when a low-income consumer with unequal bargaining power signs it, making the terms overly harsh and unfair on their face, such as charging three times the market value for an appliance. It occurs when the contract's terms themselves are shockingly one-sided, oppressive, or exploit one party, like clauses that eliminate all legal remedies or impose extreme penalties.
What is substantive unconscionability?
Substantive unconscionability is when the contract's terms unfairly benefit/harm one side such as extremely unequal price compared to value exchanged.
Which of the following is an example of substantive unconscionability?
One example of substantive unconscionability is a grossly excessive price for a product. Generally speaking, courts do not enforce illegal agreements or compensate parties who have performed under such agreements.
What is an example of unconscionability?
Courts evaluate both procedural and substantive unconscionability to determine if a contract or term is enforceable. Real-life examples include predatory lending, deceptive arbitration clauses, unfair waiver provisions, and one-sided contract terms in adhesion contracts.
Do you need both substantive and procedural unconscionability?
To prevail a party must prove both procedural and substantive unconscionability. The best way to dispel myths is through facts.
Substantive Unconscionability (Business Contract Law) - What is the definition? - Finance Dictionary
What does it mean for an arbitration agreement to be substantively unconscionable?
Substantive unconscionability is present when a term is so one-sided as to shock the conscience of a reasonable person. In the employment context, courts have found that an agreement is substantively unconscionable when it is so one-sided in favor of the employer that it is without justification.
What is the difference between procedural and substantive?
Substantive law establishes the rights and obligations that govern people and organizations; it includes all laws of general and specific applicability. Procedural law establishes the legal rules by which substantive law is created, applied and enforced, particularly in a court of law.
What are four types of mistakes that can invalidate a contract?
However, being aware of the four vices that can void a contract — duress, undue influence, misrepresentation, and mistake — is crucial for ensuring that your agreements are legally enforceable and that your rights are protected.
What are the two elements of unconscionability?
There are two main things a court will look for when making an unconscionability determination: overall imbalance (often called substantive unconscionability) and weakness in the bargaining process (often called procedural unconscionability).
What is the two prong test for unconscionability cases?
The court uses a two prong test for unconscionability: (1) whether one of the parties had no meaningful choice, and (2) whether the contract terms unreasonably favored one party.
What are three examples of substantive law?
Substantive law refers to the set of written laws that define the rights and responsibilities of individuals and organizations. This body of law encompasses various categories, including contract law, property law, tort law, and criminal law.
What is statutory unconscionability?
Statutory unconscionability is broader than in equity and may include a system of conduct or pattern of unconscionable behaviour, whether or not a particular individual is identified as having been disadvantaged by that conduct or behaviour.
What makes a contract not enforceable?
If someone is a minor or does not have the mental capacity, there may not be an enforceable contract. Legal purpose: The purpose of the agreement must not break the law. A judge can't enforce a contract to do something illegal, like sell illegal drugs. Additionally, some types of contracts must be in writing.
What does substantive mean in court?
A: In California, substantive evidence is evidence that is relevant and material to the issues in a legal case, and that tends to prove or disprove a fact in dispute.
What is the difference between undue influence and unconscionability?
Where undue influence is established, the court will deem the contract voidable. Unconscionability focuses on the inequality of bargaining power, the result of which is a substantially unfair deal.
What invalidates an arbitration agreement?
More broadly, courts will find arbitration agreements substantively unconscionable if they effectively limit a party's ability to assert their legal rights. For example, if an arbitration agreement limits the types of claims, or the remedies, that a party can assert, it may be held substantively unconscionable.
What is the equitable principle of unconscionability?
A transaction will be unconscientious within the meaning of the relevant equitable principles only if the party seeking to enforce the transaction has taken unfair advantage of his own superior bargaining power, or of the position of disadvantage in which the other party was placed The principle of equity applies " ...
Who decides unconscionability?
The court ruled that the arbitrator, not the court, must decide the unconscionability challenges as they pertain to enforceability, not formation of the contract.
What are the principles of unconscionability?
The doctrine of unconscionability comprises four factors: (i) the vulnerable party's special or serious disadvantage; (ii) actual or constructive fraud, that is, conscious and reprehensible exploitation; (iii) highly disadvantageous terms; and (iv) lack of independent advice.
What invalidates an agreement?
The terms of a contract specify the illegal activity. One of the parties to which the agreement relates doesn't have legal capacity (is mentally incapable of entering into a legally binding agreement). One of the parties was coerced (undue influence) or manipulated (misrepresentation) into signing the contract.
What is Section 22 of the contract Act?
22Contract caused by mistake of one party as to matter of fact. A contract is not voidable merely because it was caused by one of the parties to it being under a mistake as to a matter of fact.
What mistake is likely to be voidable?
A voidable contract is legally valid but can be canceled by one party due to specific legal defects. Common reasons include misrepresentation, fraud, duress, undue influence, mental incompetence, or mutual mistake.
Can substantive law be challenged?
Yes, individuals can challenge substantive rules if they believe the rules were improperly adopted or are unlawful.
What is an example of a substantive rule?
An example of a criminal substantive law would be the statutes that set out the elements for crimes like murder, arson or theft. An example of a civil substantive law would be statutes setting out elements of wrongs such as trespass or defamation.
What is the difference between procedural and substantive unfairness?
It ensures the dismissal is based on valid, lawful grounds such as misconduct, incapacity, or operational requirements. While procedural fairness relates to the process, substantive fairness examines whether the reason for dismissal is justified.