Legal Definitions - substantive unconscionability

Substantive unconscionability refers to extreme unfairness in a contract's terms. It occurs when one party has no meaningful choice, and the other party unreasonably benefits from the contract's terms. A court may refuse to enforce a contract that is unfair or oppressive due to overreaching contractual terms, especially those that are unreasonably favorable to one party while precluding meaningful choice for the other party.

For example, a car dealership may include a clause in a contract that states the buyer cannot sue the dealership for any reason. This clause is an example of substantive unconscionability because it unreasonably favors the dealership and precludes the buyer's meaningful choice to seek legal action if necessary.

Substantive unconscionability depends on the contract's terms at the time of formation, and a later rise in market price is irrelevant. It is different from procedural unconscionability, which results from improprieties in contract formation, such as oral misrepresentations or disparities in bargaining position.

Most cases of unconscionability involve a combination of procedural and substantive unconscionability, as it is generally agreed that if more of one is present, then less of the other is required.