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Contracts Rules of Law

The following contains the Rules of Law you'll need for the Contracts Practice Exam. These rules are presented in outline form only for purposes of the practice exam.

NOTE: Some rules are stated with elements that must be proven. Other rules are just stated without being broken into elements. In the latter case, you should figure out what the elements of the crime are yourself and incorporate that into your answer.

Uniform Commercial Code (UCC) 2-102 Uniform Commercial Code (UCC) 2-302 Unconscionability Procedural Unconscionability Substantive Unconscionability

Uniform Commercial Code (UCC) 2-102

Contracts for the sale of goods should be interpreted by the UCC.

Uniform Commercial Code (UCC) 2-302

If the court as a matter of law finds the contract or any clause of the contract to have been unconscionable at the time it was made, the court may refuse to enforce the contract....

Unconscionable Contracts

Courts that find any contract or clause to be unconscionable at the time it was made can refuse to enforce the contract or limit the application of an unconscionable clause to avoid an unconscionable result.

Unconscionability requires two elements, both of which must be present in order to make a contract invalid - procedural unconscionability and substantive unconscionability. In applying element, a sliding scale allows for a greater degree of one factor and a lesser degree of another to result in a finding of unconscionability.

1. Procedural unconscionability may be shown by either:

1. Inequality in Bargaining Power
   Evidence of inequality in bargaining power can be shown by 1) terms unreasonably favorable to other party, 2) terms that are hidden in the contract, and 3) a plaintiff with a lower education.

2. OR Unfair Surprise
   Evidence of unfair surprise is shown by hidden terms in a prolix document.


Defense: Although procedural unconscionability may be present, this element can be defeated if the complaining party had other sources of supply at a price, which was not unconscionable.

2. Substantive unconscionability may be shown by:

1. Overly harsh allocation of risks or costs not justified by the circumstances.

2. Great price disparity
   Three to four times the fair market value is considered to be a great price disparity.

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