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Law

Unconscionability in Online Consumer Contracts

Quick fact

In a landmark online case, a court struck down an arbitration clause in a consumer contract because it required the consumer to bring claims individually in a distant forum, making the cost of pursuit prohibitively expensive—a classic example of substantive unconscionability.

Why this is interesting

You've probably clicked 'I agree' to a contract you never read. Have you ever wondered if that contract can be so unfair that a court would refuse to enforce it?

Read the full explanation

Understanding Unconscionability in Online Consumer Contracts

When you sign up for an online service, you're entering into a contract. But often these are 'take-it-or-leave-it' agreements, known as contracts of adhesion. Unconscionability is a legal escape hatch for consumers when those contracts are shockingly unfair. Courts assess two things: the process of forming the contract (procedural unconscionability) and the terms themselves (substantive unconscionability). If both are present, a court can refuse to enforce the contract or the offensive term. Imagine a salesperson physically pushing you to sign a contract without letting you read it, and then the contract says you owe them an outrageous amount of money. That's an extreme offline example. Online, the process is similar: the terms are buried in a long document behind a button, and the terms might be equally outrageous. Unconscionability levels the playing field.

A deeper explanation

The doctrine of unconscionability arises from equity, allowing courts to prevent injustice when contract terms are oppressive. It requires a dual showing: procedural and substantive unfairness. Procedural unfairness involves 'unfair surprise'—for example, hiding an arbitration clause deep in a terms-of-service agreement that is involuntarily accepted. Substantive unfairness involves terms that are one-sided, such as requiring the consumer to waive certain rights or making remedies disproportionately limited. Courts often consider the bargaining power of the parties and the 'reasonable expectations' of the consumer. In online contracts, this analysis is crucial because consumers rarely read the terms, and the sheer volume of contracts makes judicial oversight essential. Unconscionability also serves a deterrence function, discouraging businesses from drafting egregious clauses. However, it is not a broad fairness review; it applies only to truly shocking clauses, preserving the freedom to contract.

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