All contracts need to be fair to all parties to be held up in court if they’re ever challenged. That goes for everything from personal contracts like prenuptial agreements to business agreements of all kinds – including construction contracts.
If all or part of a contract significantly favors one party to the detriment of the other(s), it can be considered “unconscionable” and ruled invalid in court. It may also be possible to modify a problematic provision rather than delete it.
When all parties to a contract have sound legal representation as they craft and negotiate contracts, they aren’t likely to have unconscionable provisions in them – either ones that favor or harm them. It’s crucial to avoid using contract templates and reusing contracts.
Elements of unconscionability
The term “unconscionable” doesn’t have an official legal definition. There are, however, recognized “elements of unconscionability.” These include the following:
- Extremely one-sided terms
- Clauses that are open to misinterpretation or able to be interpreted in multiple ways
- An imbalance of power between or among the parties
- The use of duress or coercion to get a party to sign the contract
- Unreasonable limitation of liability for one party
- Unnecessarily punitive consequences
- Lack of opportunity to negotiate
- Unequal bargaining power
- Waiver of essential rights
Unconscionability doesn’t always occur in contracts between large and small businesses, even though there can certainly be an imbalance of power and resources. It’s critical not just for smaller businesses to protect themselves from unconscionable elements in a contract.
Larger, more established businesses need to take care to avoid them. They can harm their reputation, bring about regulatory scrutiny and open them up to litigation. All construction professionals benefit from having an experienced representative involved in all of their contracts.
