New York Law (NYLE) Practice Exam

What must a litigant demonstrate to avoid a contract due to unconscionability?

1. Procedural unconscionability only

2. Substantive unconscionability only

3. Both substantive and procedural unconscionability

4. Neither, if the agreement appears fair

The correct answer is: Both substantive and procedural unconscionability

To avoid a contract due to unconscionability, a litigant must demonstrate both substantive and procedural unconscionability. This dual requirement reflects the understanding that for a contract to be deemed unconscionable, there must be both an unfair bargaining process (procedural unconscionability) and a fundamentally unfair contract term (substantive unconscionability). Procedural unconscionability involves factors such as the presence of deceptive practices, unequal bargaining power, or a lack of meaningful choice. Situations may arise when one party is at a significant disadvantage, which could lead to an oppressive or unfair agreement. On the other hand, substantive unconscionability refers to actual terms of the contract that are excessively unfair, such as excessive fees or a severe imbalance in obligations, making them unreasonable. When both elements are present, it indicates a serious issue with the fairness of the contract, warranting judicial intervention. The combination of these two forms underscores a comprehensive view of unconscionability, ensuring that both the negotiation process and the essential terms of the agreement are just and equitable. A mere appearance of fairness or one of the two elements being present would not suffice to void the contract, thus solidifying the necessity for both factors to