Author: Attorney Desk Reference Manual
Last updated: August 2010

Statutes and Other Law 
Unconscionability
Common Law Contract Defenses

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Statutes and Other Law

The Illinois UCC statute defining unconscionability is 810 ILCS 5/2-302.  Other common law contract defenses also exist, including the common law of implied warranties for service contracts.

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Unconscionability

The Remedy of Last Resort

The defense of unconscionability is appropriate only in cases that are shocking to the conscience and is available only when other theories are unavailable. It is a defense available in the common law for contracts for services or labor. For sales of goods, the doctrine has been codified in §2-302 of the UCC. The advent of the Illinois’ unfair and deceptive practices statutes has lessened the usefulness of this claim.

No Definition of the Term

Unconscionability is determined by the facts and circumstances of each case, but generally involves a lack of meaningful choice and the presence of unreasonable terms.

Substantive Contract Terms That May be Unconscionable

The following contract terms may be unconscionable:

• A waiver of defense clauses;
• Attorney fee provisions;
• A blanket security interest in all household goods;
• A consent to breach of the peace in repossession;
• A waiver of interest in repossessed personal property;
• Clauses authorizing venue or jurisdiction in distant forums; or
• Extreme limitations upon buyer’s remedies.

Excessive price is generally very difficult to establish as unconscionable, especially where the buyer had an opportunity to shop around. It can be proved when there is a gross disparity between price and value.

Section 2-302 Remedies

The court may refuse enforcement of the entire contract, in effect voiding it; may enforce the contract except for the offensive term or clause; or enforce the offensive term or clause but limit its application to avoid any unconscionable result.

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Common Law Contract Defenses

Introduction

In defense to a suit for non-payment on a contract, the buyer may be able to raise a variety of traditional contract defenses. These defenses include lack of capacity to contract, duress, mistake, failure of consideration, failure of condition, impossibility, and illegality. The best defense is that the buyer didn’t breach the contract because it does not say what the seller claims it says. Many contracts are open to interpretation as to its terms, or the law may imply terms to the buyer’s benefit.

Lack of Capacity

There is a presumption of capacity, but there are two classes of persons with only limited capacity to contract; minors and mental incompetents. A minor can bring an action to enforce a contract, but the contract cannot be enforced against a minor. A person is a mental incompetent and the contract is voidable if, by reason of the mental defect: 1) he is unable to understand the nature and consequences of the contract, or 2) he is unable to reasonably perform and the other party has reason to know of his condition. Both minors and mental incompetents may be liable for necessaries.

Duress, Coercion, Oppression or Undue Influence

These defenses can arise whenever one party overpowers the will of another. If so, the contract is not binding on the inferior party. Such contracts are voidable by that party; but the inferior party must elect to rescind the contract and communicate that election to the other party. Also, a contract entered into under duress may be ratified by accepting its benefits, remaining silent, or acquiescing.

Mutual Mistake of Material Terms

This defense arises where both parties enter into a contract based upon a mistaken understanding of the facts or a mistaken understanding of the law. Mistake can occur for a variety of reasons, including:

• where parties have different subjective interpretations of an ambiguous term;
• where the buyer is uninformed as to what was being purchased, where the seller was negligent or fraudulent in representing the contract terms;
• where both parties make the same incorrect assumptions.

Failure of Consideration

Two conditions must be met for a promise to be supported by consideration; one party must give up something of value or limit his or her freedom in some way; and the other party must make a similar promise as part of the bargain. Failure to meet either condition renders the contract unenforceable.

Failure of Condition

Buyers can defend against a suit for non-payment on a contract by claiming that the payment was conditional upon the happening of some event which did not happen. However, conditions are distinct from promises and it is frequently difficult to tell if an event is one or the other. Courts will look to the intent of the parties as well as their actions or conduct.

Impossibility of Performance or Impracticability

Impossibility can arise where the subject matter of the contract is destroyed or unavailable; the agreed upon means of performance becomes too costly, time-consuming or otherwise impractical; or a party dies. Also, when events occur which frustrate one party’s purpose in entering into the contract, most courts will discharge that party’s performance. E.g., a consumer who contracts for a car’s repainting is not liable on the contract if the car is totaled in an accident before the painting.

Illegality

This defense arises when the subject matter of the contract is unlawful. Two common types of illegal contracts in the consumer area are contracts with illegal exculpatory clauses which release a party from liability and contracts involving an unlicensed person in a business for which a license or permit is required.

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