What does Unconscionable Mean - Term Paper Example

The term unconscionable is mainly associated with contracts and it is generally defined as a contract which is refused to enforce by the court due to its fundamental unfairness. “Unconscionable” means unreasonably excessive or advantageous and in the context of law it implies that the terms of contract are unreasonably advantageous to one of the parties pursuing the contract. It is important to note that a contract is not deemed to be described as unconscionable just because one party’s term and condition are unfavorable. For a contract to be deemed as unconscionable, it is imperative that the terms of the contract should prove to be shocking to an ordinary person’s conscience. To identify whether that a contract is unconscionable or not one must understand and analyze the questions of competency, fairness and honesty. A competent person would never enter to an unconscionable contract. Generally, the level of competency hinges on the age of a person. For instance, an adolescent singer who signs a contract with a music executive who shows unfair favoritism towards the music company than the court can rule it as unconscionable contract due to the relative expertise and age of the music director. Questions of honesty are concerned with whether the facts of the contract have been truly represented or misrepresented by one of the parties. The Times Magazine of July 3, 1986 reports a case of frail old man aging 80 years who obtained relief after having agreed to sell his bungalow for £2950 when the actual price should have been £29,500. The contract was declared void and deemed as unconscionable contract (Judge, 1999). Adhesion contracts are also categorized as a form of unconscionable contract. In adhesion contracts, a contract is prepared by one party on a “take it or leave it” basis. An employee named Paul Mantor worked for circuit city during 90’s. In 1995, the company planned to enter into a contract with the employees regarding signing an agreement for an arbitration program to prevent the employees from filing lawsuits as they resulted in prohibitive litigation costs. The managers admonished the employees to sign the agreement or either be prepared for termination. Mantor resisted from signing the agreement in the first place but was forced to sign the agreement by 1998. When he was terminated in 2000, he filed a lawsuit at the trial level court where it was ruled that the problem should be solved through arbitration since he had signed the contract. However, when Mantor appealed to the higher level court, it was declared that it was a contract of adhesion and hence ruled as unconscionable contract (Mallor et d, 2001). Shrink Wrap Agreement Shrink wrap contracts are generally license agreements which are enforced only after the customer has opened the product. The term “shrink wrap” refers to the plastic wrapping used to coat software boxes. This kind of an agreement creates a limited contractual right between the customer and software developer which allows the user to use the product in a way described by the producer of the product. There are several drawbacks of shrink wrap contracts. Firstly, the customer does not gain any opportunity to review the product before its purchase. Secondly, if the packaging is opened by the customer, than the producer is not responsible for any defects found in the product as opening of the package implies that the terms are accepted by the end user. Ambiguous Term Ambiguity means that there are doubts in understanding the meaning of the language or the language is capable of being comprehended in multiple ways. In the case of law, a word will be ambiguous if it is unclear or doubtful to understand by a competent person who has a broad trove of knowledge. Ambiguity causes a lot of confusion as different parties can argue about the interpretation of the agreements. In such circumstances, the court will decide the meaning of the terms and condition based on reasonable judgment. If the court is unsuccessful in making a decision to what the terms implied due to ambiguity then the particular clause or term would be eliminated from the contract. The elimination of a particular clause can render the contract void since it may have described the fundamental condition. Otherwise the contract will be valid since the particular clause could be trivial in nature. Ambiguity can be classified in two categories; latent and patent. Latent ambiguity refers to the condition when a language seems reasonable to a competent person but some external evidence creates a need for interpretation of the clause. Patent ambiguity comes from within the obscure language used by the party who prepared the contract. Ambiguity in contract law implies that “after a court has applied rules of interpretation, such as the plain meaning, course of dealing, course of performance, or trade usage rules to the unclear terms, the court still cannot say with certainty what meaning was intended by the parties to the contract” (West’ Encycopedia of American Law, 2008). Most of the time court interprets the ambiguous terms against the interests of the parties who prepared the contract and was responsible for creating ambiguity. Condition Precedent Condition precedent in the discipline of law implies than a condition that must be fulfilled before something else be executed. Under contract law, it refers to the event which must occur before a certain party performs his part of the contract. For instance, contracts between two parties make a condition precedent which states that the buyer will pay for the freight only if the ship makes it to the port. If the ship due to unexpected circumstances such as due to a hurricane doesn’t make to the destination then the buyer is not obliged to pay for the freight. In a deed to real property, condition precedent implies that an event that must take place before the title of the property transfers to the name of the receiving party. An example of such case would be when if Sister Angelina marries than she will have full title to the property. Condition precedents are evident in most of the real estate contracts which state that the contract will not be binding until and unless the property undergoes a rigorous professional inspection and the results are deemed adequate by the purchaser of the property. If a court hears a dispute with regards to whether the condition was fulfilled or not, it can look at the terms described in the condition precedent. The terms of the condition must be precise and clear and if the condition is not clearly stipulated, than the court must interpret the condition in the light of intention of both the parties. If the condition precedent is not fulfilled than the legal contract also states that what will happen in the case the condition is not fulfilled. Assignment In the context of law, the term assignment is a process by which one party called assignor transfers its rights to another party called assignee. The assignee receives no greater rights than those initially possessed by the assignor. In addition to that, the burden of contract cannot be assigned until and unless the third party (assignee) agrees to it. For an assignment to be deemed as valid, it must be carried in the present. If the assignor has promised to assign in the future then it does not carry any legal standing. The assignment must be carried in writing for certain cases. Assignment of Salary Assignment of choses of action Assignment as collateral for a debt Assignment of interest in real property Under contract law, assignment of rights is an absolute transfer of rights so that the assignee may receive the benefits which were initially in the domain of assignor. For instance, if Part A conducts a contract with Party B to sell a piece of land for $500,000 and party A transfers the right to receive $500,000 to party C through assignment than Party C is entitled to receive payment from party B. However, it is important to note that Party C only has a right to receive the benefits; he is not entitled to provide the car as the obligation remains with the previous owner. In a partnership agreement, the partners have the autonomy to mortgage or assign their proportion of shares to any third party through assignment. The assignee will be entitled to receive the share of profits due to the assignor and only the appropriate share of assets in case the partnership is dissolved. However, this assignment does not entitle the assignee to take part in the general administration and management of the business nor does it allow his to inspect the accounts of the business. Two common techniques are deployed to prevent a party from transferring the rights through assignment. One of them is rescission clause and the other is through condition subsequent. A rescission clause gives the other party the power to rescind the contract when an assignment is made whereas condition subsequent will automatically rescind the contract if assignment comes into play. Privity of Contract The Privity of Contract means that generally contracts cannot confer rights or impose obligations on any parties other than those involved in the contract (Kelly, Holmes & Hayward, 2002). The parties involved in the contract have the right to sue one another for any breach of contract. Common sense also demands that third parties should not enjoy any rights or should not have any obligations as they are not in Privity of the contract. A practical illustration can clear the concept of Privity of contract. Let’s assume that two parties Andrew and Michael enter into a contract where Andrew agrees to provide 1000 units of tires to Michael by a specific date. Similarly, Michael has entered into an agreement with Steve to provide him with 1000 units. In case if Andrew does not fulfill his promise to provide 1000 units to Michael, he can be sued for breach of contract by Michael. In a similar way Michael can also be sued by Steve for the breach of contract. However, Steve does not possess any right to carry litigation against Andrew as they are not in Privity of contract with one another. There are several exceptions to Privity of contract as third parties can obtain the right to Privity of contract. As discussed in the previous section, third parties can obtain rights through the process of assignment. It can also be obtained through delegation when one of the parties confers his duties to a third party. References Judge, S. 1999, Business Law, Macmillan Press Ltd: London Kelly, D., Holmes, A. & Hayward, R. 2002, Business Law, Cavendish Publishing Limited: London Mallor, J., Phillips, M., Bowers, L. & Langvardt, A. 2001, Business Law and the Regulatory Environment: Concepts and Cases, McGraw Hill: New York West's Encyclopedia of American Law 2008, Available form site: http://legal-dictionary.thefreedictionary.com/ambiguity Read More