Other Definitions
unconscionable (dict)
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UnconscionableAn unconscionable transaction is a contract that is unenforceable because the consideration offered is lacking or is so obviously inadequate that to enforce the contract would be unfair to the party seeking to escape the contract. In and of itself, inadequate consideration is not enough to make a contract unenforceable. However, if there is evidence that the bargaining position of the party seeking to escape the contract was highly unequal compared to that of the party seeking to enforce it, the fact that the consideration was lower than what would ordinarily be expected in the circumstances will often result in the court refusing to allow the contract to be enforced. The leading case on this point is considered to be the English case of Lloyd's Bank v. Bundy. In that case, Bundy had agreed to increase the mortgage on his house in order to maintain the credit line being extended to his son's business. The English Court of Appeal ruled that as Bundy received no direct benefit from the agreement to increase the mortgage amount, and that the bank had threatened to call in the son's loan if Bundy had not agreed to the extension, and that the amount of the loan was already higher than the existing mortgage, that the transaction was unconscionable and Bundy only had to honor the lower mortgage. Essentially, the court ruled that only the bank benefitted from the agreement to raise the amount of the mortgage. In a Canadian case, a member of the First Nations was allowed to rescind a contract for the sale of his boat and fishing license for a nominal amount. The boat was worthless but, unknown to the native, his fishing license was worth a great deal of money, and could have been mortgaged to finance a new boat. The court ruled that the buyer was merely trying to take advantage of the seller's lack of knowledge of the value of the license and refused to allow the contract to be enforced. However, sorely inadequate consideration in and of itself is not a determination of whether a transaction is unconscionable. For example, in an Ontario case, a property owner agreed to sell an option for the sale of his property for the sum of $1.00. The owner later learned that options to purchase property usually sell for more than nominal sums. The court enforced the contract in favor of the option holder, ruling that the negotiations over the price of the option and the price the option holder would pay for the house if he chose to buy were both fairly negotiated and that the seller had adequate opportunity to investigate the market and simply did not do so.
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