Unconscionability
Question 1: An electronics retailer conditions delivery of purchased goods on the customer’s assent to a densely packed, pre-printed agreement incorporated by reference on the back of a receipt. One clause provides that the retailer “shall bear no liability for any intentional acts committed by its agents in the course of delivery.” Which is the strongest basis for refusing enforcement of this clause?
A. The clause shocks the conscience by imposing an overly harsh allocation of risk on the
weaker party.
B. The clause fails for lack of mutual assent because the customer did not read it.
C. The clause is unenforceable because all disclaimers violate public policy
D. The clause is void for lack of consideration because the retailer gave nothing in return.
A: The clause shocks the conscience by imposing an overly harsh allocation of risk on the weaker party.
A buyer seeks rescission of a contract based on misrepresentation but cannot show any
economic loss. Which statement best reflects contract law doctrine?
A. The claim fails because misrepresentation requires proof of pecuniary loss.
B. The claim fails unless the misrepresentation was fraudulent.
C. The claim may succeed only if punitive damages are available.
D.The claim may succeed because the injury lies in being induced into an unwanted contract.
D.The claim may succeed because the injury lies in being induced into an unwanted contract.
1. In balancing the importance of enforcing the contract against furthering the public policy, which of the following factors would a court consider?
A. Will voiding the contract or clause further the public policy?
B. What is the seriousness of any misconduct involved?
C. How strong is the public policy?
D. All of the above?
D. All of the above?
When assessing the element of whether the party seeking relief bears the risk of the mistake, what does the court look at?
a. The terms of the agreement allocate the risk to a party
b. The court looks at the surrounding circumstances to determine a party reasonably bears the risk
c. The party knows he/she is not fully informed, but remains consciously ignorant of the mistake
d. Any of the above
d. Any of the above
This standard clause found in many contracts excuses a party from performing due to unforeseeable external forces beyond their control, such as "acts of God."
A. Liquidated damages clause
B. Force Majeure clause
C. Choice of law clause
D. Integration clause
B. Force Majeure clause
A door-to-door salesperson contracts with a homeowner who does not speak English, presenting a lengthy agreement written entirely in technical legal English. The system costs $8,000 despite a $1,200 market value. Under the Sliding Scale Approach, which statement best captures the court’s analysis?
A. The contract is unconscionable only if both procedural and substantive unfairness are
independently extreme.
B. The language barrier alone establishes unconscionability regardless of price.
C. Significant procedural unfairness may allow a court to find unconscionability despite uncertainty about the precise degree of price disparity.
D. Price disparity cannot be considered unless the contract is one of adhesion.
C. Significant procedural unfairness may allow a court to find unconscionability despite uncertainty about the precise degree of price disparity.
Which statement is most likely to constitute a misrepresentation?
A. A seller truthfully states an opinion that later turns out to be incorrect.
B. A seller guesses about a fact without knowing whether it is true and presents it as certain.
C. A seller exaggerates the value of goods using vague promotional language.
D. A seller expresses uncertainty about a fact and advises the buyer to investigate.
B. A seller guesses about a fact without knowing whether it is true and presents it as certain.
Which of the following contracts might be enforceable even though a law is broken in the performance of the contract?
A. A contract to sell heroin
B. A contract to commit the tort of false imprisonment
C. A contract that contemplates violating parking laws
D. None of the above
C. A contract that contemplates violating parking laws
What is the difference between unilateral mistake and mutual mistake?
a. One is the mistake is made at contract formation and the other mistake is made at any time
b. Unilateral mistake is when the party asserting the defense did not assume the risk and Mutual is when neither party assumed the risk
c. Unilateral mistake may be unconscionable if enforced while Mutual mistake does not focus on unconscionability
d. Mutual mistake is a mistake made by one party while Unilateral mistake is a mistake made by both parties.
c. Unilateral mistake may be unconscionable if enforced while Mutual mistake does not focus on unconscionability
To successfully assert this defense, performance of an agreement must be literally impossible—viewed objectively—even for a "superhero."
A. Commercial Impracticability
B. Frustration of Purpose
C. Mutual Mistake
D. Doctrine of Impossibility
D. Doctrine of Impossibility
A highly skilled software engineer is offered employment under a standardized, non-negotiable agreement containing a mandatory arbitration clause. The clause is conspicuous and clearly worded. The market for similar positions is competitive. What would the court’s conclude?
A. The arbitration clause is unenforceable because adhesion contracts inherently lack meaningful choice.
B. The clause reflects low to moderate procedural unconscionability and will generally be enforced absent overly harsh substantive terms.
C. Mandatory arbitration clauses are substantively unconscionable per se.
D. The clause shocks the conscience solely because it limits access to court.
B. The clause reflects low to moderate procedural unconscionability and will generally be enforced absent overly harsh substantive terms.
Which scenario most clearly converts nondisclosure into an actionable misrepresentation?
A. A seller fails to disclose a latent defect but remains passive.
B. A seller cleans and stages a home for sale.
C. A seller takes steps designed to prevent the buyer from discovering a defect.
D. A seller discloses defects only when directly asked.
C. A seller takes steps designed to prevent the buyer from discovering a defect.
Rural County has only two veterinarians. Vet A sells her practice to Buyer and agrees not to practice veterinary medicine within 40 miles for five years. Two years later, Buyer shuts down operations. Vet A resumes practice to serve local farmers. Buyer sues. Most likely result?
A. Buyer wins because sale of goodwill allows non-competes.
B. Vet A wins because enforcement would injure the public.
C. Buyer wins because Vet A breached knowingly.
D. Court enforces but shortens duration.
B. Vet A wins because enforcement would injure the public.
A party alleges Unilateral Mistake but is unable to prove the other party had reason to know of the mistake or his fault caused the mistake. What must the party still show to satisfy his argument?
a. The effect would be unconscionable if enforced
b. The other party misrepresented himself as the time of contract formation
c. The effect would cause injury to the public
d. The contract was unreasonable in nature
a. The effect would be unconscionable if enforced
This specific defense is used when performance is technically possible and not necessarily difficult, but the principal purpose of the contract has become meaningless for the party involved.
A. Doctrine of Impossibility
B. Commercial Impracticability
C. Frustration of Purpose
D. Parol Evidence Rule
C. Frustration of Purpose
A furniture retailer sells household items to a low-income customer under a standardized installment contract. The agreement provides that all items previously purchased remain collateral until every balance is paid in full, allowing repossession of the entire household if the buyer defaults on a single minor payment. The customer had no meaningful opportunity to negotiate and no realistic alternative sources of credit. Which statement best explains why a court could refuse enforcement of the clause?
A. The clause is unenforceable solely because the contract is one of adhesion.
B. The clause shocks the conscience because severe procedural unfairness combines with an overly harsh allocation of risk.
C. The clause is substantively unconscionable, but enforceable because the customer technically
assented.
D. The clause must be enforced unless the customer proves a false statement of fact.
B. The clause shocks the conscience because severe procedural unfairness combines with an overly harsh allocation of risk.
Which relationship most strongly supports rescission based on nondisclosure?
A. Arms-length commercial buyers and sellers
B. Longtime friends negotiating a single transaction
C. A fiduciary advising a beneficiary in a transaction
D. Competitors negotiating a supply contract
C. A fiduciary advising a beneficiary in a transaction
Landlord leases property to Tenant for use as a restaurant. The lease includes a clause requiring Tenant to pay Landlord $2,000 per month plus an additional $500 per month to ensure health inspectors “do not interfere.” Tenant refuses to pay the extra $500. Landlord sues for breach. What is the best outcome?
A. Entire lease is void.
B. Landlord wins on all terms.
C. Court enforces rent but severs the illegal provision.
D. Tenant owes nothing.
C. Court enforces rent but severs the illegal provision.
Patti enters a contract to sell land to Kayla. The land is primarily valuable because of the large wooded area. Both Patti and Kayla believe the wooded area is still there, but in reality the trees have burned to the ground in a fire. What defense can Kayla assert and why?
a. Answer: Mutual Mistake
i. Mistake of fact: belief that the wooded area was still in tact when it had burned down
ii. Basic assumption: parties would not have entered the contract if they knew the wooded area had burned down
iii. Material effect: the value of the land largely depends on the existence of the wooded area (buyer is overpaying for the land)
iv. Kayla did not bear the risk
1. Not stated in the contract (no “as is” clause in the agreement)
2. No conscious ignorance: Kayla had no way of knowing the area burned down
3. Kayla is not at fault for not checking the land
In the case of Newbury v. Cafe Nero, the court ruled that the defendant's duty to pay rent was discharged because a government shutdown order prohibited this specific activity, which was the primary purpose of the lease.
A. Sale of takeaway beverages
B. On-premise consumption of food and beverages
C. Operating a retail business
D. Food preparation services
B. On-premise consumption of food and beverages
A California employee signs a mandatory arbitration agreement requiring arbitration in Indiana, equal cost-sharing of arbitrator fees, and granting the employer, but not the employee, access to court for confidentiality disputes. During litigation, the employer offers to waive the fee-splitting provision. Under your notes, the best argument against enforcement is that:
A. The waiver cures any substantive unconscionability defect.
B. Actual notice of the terms defeats an unconscionability defense.
C. The cumulative one-sided provisions create a chilling effect that shocks the conscience and could result in an inappropriate severance.
D. The employee must instead pursue a misrepresentation defense
C. The cumulative one-sided provisions create a chilling effect that shocks the conscience and could result in an inappropriate severance.
A party alleges misrepresentation but admits the false statement was not the primary reason for
entering the contract. What must the party still show to satisfy inducement?
A. The misrepresentation substantially contributed to assent
B. The misrepresentation occurred after formation
C. The misrepresentation was decisive
D. The misrepresentation caused economic harm
D. The misrepresentation caused economic harm
Buyer agrees to purchase stolen artwork from Seller for $100,000. Buyer pays $40,000 upfront. Before delivery, Buyer learns the painting is stolen and immediately demands return of the money. Seller refuses. Buyer sues. Result?
A. Buyer barred under in equal fault.
B. Buyer recovers because he withdrew before illegal purpose was achieved.
C. Buyer recovers only half.
D. Buyer recovers only if Seller confesses.
B. Buyer recovers because he withdrew before illegal purpose was achieved.
Phillip enters a contract to sell a red and white 1974 Ford Bronco to Kevin. The two negotiate back and forth on pricing before Kevin agreed to purchase the car as is for $74,000.00. When Kevin picks up the car, he notices the engine is missing so he is unable to drive it. Can Kevin rescind the contract using the defense of Unilateral/Mutual Mistake?
No, Kevin assumed the risk since the contract stated Kevin agreed to purchase the car “as is” (allocated by agreement).
While the death of a promisor typically does not excuse their estate from contractual obligations, an exception is made for this specific category of agreement where a specific individual's performance is required., Answer: What is a personal service contract?
A. Assignment Contract
B. Delegable Duty Agreement
C. Personal Service Contract
D. Third-Party Beneficiary Contract
C. Personal Service Contract