INTRODUCTION I. THE UNCONSCIONABILITY DOCTRINE: RECENT USAGE AND HISTORY A. The Recent Rise in the Use of Unconscionability B. The Origins of Unconscionability 1. Railroad Co. v. Lockwood and Contracts of Adhesion 2. Unconscionability and the U.C.C 3. The Years of Ambiguity for Unconscionability II. THE NORMATIVE MEANING OF UNCONSCIONABILITY A. An Efficiency-Based Normative Meaning B. A Rights-Based Normative Meaning III. UNCONSCIONABILITY AS A COHERENT CONCEPT A. Emphasis on Whether the Contract Was Understandable B. Preventing Collective Action Problems 1. Confidentiality Requirements 2. Class Action Waivers C. The Incipience of the Concept D. The Concept's Jural Meaning and Formalist Concerns E. Reasonable Expectations and Substantive Fairness CONCLUSION INTRODUCTION
The idea that contracts give legal force to a "meeting of the minds," or a bargained-for exchange between two parties, is an old concept in contract law. (1) Enforcement of a contract that satisfies this "meeting of the minds" furthers welfare maximization and individual autonomy by reinforcing a promise that both parties believed would make them better off. But in many modern contracts--especially those between businesses and consumers--a meeting of the minds never occurs. Rather, consumers almost never bargain for the terms. And often, they do not even know what the terms are. With respect to these "contracts of adhesion," (2) it is not clear that the standard justification for contract enforcement exists.
Indeed, the common law does not require a meeting of the minds for a contract to exist. Long ago, the common law abandoned that element in favor of a requirement of objective manifestation of assent (3)--today, a signature on the line or click of the box constitutes valid acceptance, regardless of the consumer's ignorance of, or opposition to, the terms of the contract. Moreover, once a consumer has assented to the contract, evidence about what she thought the contract contained is barred under the parol evidence rule, which requires courts to interpret contracts according to their clearly written terms, excluding evidence of negotiations or expectations of the parties. (4) As a result, with the law's endorsement, contracts of adhesion have proliferated.
Today, contracts of adhesion govern almost every major financial undertaking, like securing a loan, using purchased software, obtaining insurance, renting a car, having a cell phone, going on a cruise, banking online, and accepting employments. (5) Typically, such contracts require arbitration of disputes, mandate confidentiality with respect to the results of the arbitration, waive the consumer's right to participate in a class action lawsuit, provide a shorter limitations period in which to file suit, choose a forum for any ensuing litigation, and assign all court costs to the consumer. (6) The contracts may also limit the company's liability and give unilateral modification rights to the business. (7) Reading and understanding these contracts would require significant time and legal training. Consumers thus often choose not to read them, leaving themselves at the mercy of businesses with respect to the legal rights that govern their daily economic transactions.
Some courts searched for a way to rein in contracts of adhesion, perceiving them to be an abuse of contract law, ultimately landing on the doctrine of unconscionability. (8) Unconscionability was an arcane, nebulous concept in contract law that courts had used to avoid enforcing contracts that "shock the conscience." (9) The doctrine seeks "the prevention of oppression and unfair surprise" and directs against the "disturbance of allocation of risks because of superior bargaining power." (10) The distinctive element of the unconscionability defense, as opposed to fraud or duress, is its two-pronged analysis: traditionally, a provision must be both procedurally and substantively unconscionable to be held unenforceable. (11) Procedural unconscionability "arises out of defects in the process by which the contract was formed, and can include a variety of inadequacies, such as age, literacy, lack of sophistication, hidden or unduly complex contract terms, bargaining tactics, and the particular setting existing during the contract formation process." (12) Substantive unconscionability "suggests the exchange of obligations so one-sided as to shock the court's conscience." (13) If a court finds that a provision is substantively unconscionable, it can void the specific provision and leave the rest of the contract intact. (14) Using unconscionability, it is possible for courts to step in and prevent the enforcement of a variety of contract provisions.
Most courts do not find contracts of adhesion to be unconscionable per se, though they typically consider the lack of bargaining power and inability to choose, negotiate, or understand terms as indications of procedural unconscionability. (15) A minority of courts find that adhesiveness alone--a low likelihood that a consumer read, understood, or negotiated the contract--can establish procedural unconscionability. (16) In general, however, contracts of adhesion are enforceable unless the substantive terms are also unconscionable. (17)
Courts and scholars alike fear the ambiguity of the doctrine, worrying that it lacks predictability and consistency, and that liberal use could swallow all of contract law. (18) They recognize the need for a structure--for unconscionability to act as a true legal concept with clearly defined edges that prevent it from bleeding into every case. This raises the question: what would unconscionability need in order to be a legal concept? And does it already qualify?
A legal concept is "an abstract set of legal categories that ... subordinate[s] particular legal relationships to a general system of classification." (19) Without a concept, it would be difficult if not impossible for a judge to rule consistently on a case involving the same legal issue as a prior case but a different factual situation. (20) For example, if there is precedent that a contract is unconscionable because it required a consumer to file her claim in California despite only having contacts in New York, how is a judge in a subsequent case to know whether a contract requiring a consumer to file within sixty days is similarly unconscionable? Does the concept of unconscionability encompass the former, but not the latter? In order to know, one must clearly define what the concept means. In this way, concepts connect particular factual scenarios together--they order our thinking, abstracted from particular instances. This ability to categorize is the first element of a legal concept.
The second element of a legal concept is that it serves as a rational basis for normative decisions. A legal concept, unlike, say, a literary concept, must do more than simply classify. It becomes "a normative force that provides a reason for action or decision." (21) Because judges use classifications as the bases for judgments, the classification must rationally connect to a rule. Classification and normativity are the hallmarks of a legal concept. (22)
These two elements also suggest two meanings at work behind legal concepts: jural meaning and normative meaning. As Shyamkrishna Balganesh and Gideon Parchomovsky explain, the jural meaning is the "structural core" of the concept, or its rule-like character. (23) However, this meaning is often open-textured, or indeterminate. To apply a concept, judges employ the normative meaning that accompanies it. (24) A useful example in tort law is the duty of care. The jural meaning of the duty of care is that an individual has an obligation to avoid causing significant harm. The normative meaning is debated, but one commonly put forth is that the cheapest cost avoider should bear the duty. (25) Another normative meaning is that the duty of care is based on "basic moral principles." (26) Balganesh and Parchomovsky argue that the dual meanings of concepts in the common law--both jural and normative--give the common law useful flexibility, allowing it to adapt to new situations. (27)
Unconscionability is an interesting creature in the common law--for some time, it was a quasi-concept. It had a normative meaning but lacked a jural meaning. This made the doctrine unclear, unstable, and unpredictable; to be a legal concept, unconscionability must coalesce around a jural meaning as well. It must categorize instances predictably, so that like cases can be treated alike, be definable in a way that accounts for other concepts in the law, and be situated in the common law context of contract law with definable limits, such that it works within, not against, current legal concepts.
By looking at courts' recent uses of unconscionability to hold contracts of adhesion unenforceable, this Comment argues that a structural, rule-like meaning has emerged in the concept that should allay concerns about its vagueness. This meaning fills in the previously ambiguous conceptions of unconscionability with the following definition: when the offeror has reason to believe that a reasonable person in the shoes of the offeree would not know the meaning of the contract, the offeror cannot impose on the offeree terms either that a reasonable person would not expect, or that, even if expected, would impose costs on third parties similarly situated to the offeree. In addition to providing predictability, this definition fits within the common law system already in place.
Describing and advocating for unconscionability's coherence as a concept with a jural meaning implicates the debate over the usefulness of legal concepts. At the heart of this debate is the American Law Institute's (ALI) project of restating the law by identifying concepts' structural meaning. Realists once ridiculed this project as "the last ... gasp of a dying tradition." (28) Yet it continues to serve a central role in the...