Unconscionability: A Critical Reappraisal

Abstract

THE classical conception of contract at common law had as its first premise the belief that private agreements should be enforced in accordance with their terms. That premise of course was subject to important qualifications. Promises procured by fraud, duress, or undue influence were not generally enforced by the courts; and the same was true with certain exceptions of promises made by infants and incompetents. Again, agreements that had as their object illegal ends were usually not enforced, as, for example, in cases of bribes of public officials or contracts to kill third persons. Yet even after these exceptions are taken into account, there was still one ground on which the initial premise could not be challenged: the terms of private agreements could not be set aside because the court found them to be harsh, unconscionable, or unjust. The reasonableness of the terms of a private agreement was the business of the parties to that agreement. True, there were numerous cases in which the language of the contract stood in need of judicial interpretation, but once that task was done there was no place for a court to impose upon the parties its own views about their rights and duties. Public policy was an unruly horse,' to be mounted only in exceptional cases and then only with care. This general regime of freedom of contract can be defended from two points of view. One defense is utilitarian. So long as the tort law protects the interests of strangers to the agreement, its enforcement will tend to maximize the welfare of the parties to it, and therefore the good of the society as a whole.2 The alternative defense is on libertarian grounds. One of the first functions of the law is to guarantee to individuals a sphere of influence in which they will be able to operate, without having to justify themselves to the state or to third parties: if one individual is entitled to do within the