Contract law (2022): Excuses for non-performance: Unconscionability + Accord and satisfaction

Unconscionability is a doctrine in contract law that describes terms that are so extremely unjust, or overwhelmingly one-sided in favor of the party who has the superior bargaining power, that they are contrary to good conscience. Typically, an unconscionable contract is held to be unenforceable because no reasonable or informed person would otherwise agree to it. The perpetrator of the conduct is not allowed to benefit, because the consideration offered is lacking, or is so obviously inadequate, that to enforce the contract would be unfair to the party seeking to escape the contract.

Unconscionability is determined by examining the circumstances of the parties when the contract was made, such as their bargaining power, age, and mental capacity. Other issues might include lack of choice, superior knowledge, and other obligations or circumstances surrounding the bargaining process. Unconscionable conduct is also found in acts of fraud and deceit, where the deliberate misrepresentation of fact deprives someone of a valuable possession. When a party takes unconscionable advantage of another, the action may be treated as criminal fraud or the civil action of deceit.

For the defense of unconscionability to apply, the contract has to have been unconscionable at the time it was made; later circumstances that make the contract extremely one-sided are irrelevant. There are generally no standardized criteria for determining unconscionability; it is a subjective judgment by the judge, not a jury, and is applied only when it would be an affront to the integrity of the judicial system to enforce such a contract. Upon finding unconscionability a court has a great deal of flexibility on how it remedies the situation. It may refuse to enforce the contract against the party unfairly treated on the theory that they were misled, lacked information, or signed under duress or misunderstanding; it may refuse to enforce the offending clause, or take other measures it deems necessary to have a fair outcome. Damages are usually not awarded.

Procedural unconscionability is seen as the disadvantage suffered by a weaker party in negotiations, whereas substantive unconscionability refers to the unfairness of terms or outcomes. Most often the former will lead to the latter, but not always. The existence of the procedural unconscionability without substantive unconscionability may be sufficient to set aside a contract, but the latter, by itself, may not. As with issues of consideration, the court's role is not to determine whether someone has made a good or bad bargain, but merely whether that party had the opportunity to properly judge what was best in their own interests.

Accord and satisfaction is a contract law concept about the purchase of the release from a debt obligation. It is one of the methods by which parties to a contract may terminate their agreement. The release is completed by the transfer of valuable consideration that must not be the actual performance of the obligation itself. The accord is the agreement to discharge the obligation and the satisfaction is the legal "consideration" which binds the parties to the agreement. A valid accord does not discharge the prior contract; instead it suspends the right to enforce it in accordance with the terms of the accord contract, in which satisfaction, or performance of the contract will discharge both contracts (the original and the accord). If the creditor breaches the accord, then the debtor will be able to bring up the existence of the accord in order to enjoin any action against him.

If a person is sued over an alleged debt, that person bears the burden of proving the affirmative defense of accord and satisfaction.