The doctrine of unconscionability: a judicial business ethic
| Autor | Keith William Diener |
| Cargo | Professor at Stockton University |
| Páginas | 103-128 |
THE DOCTRINE OF UNCONSCIONABILITY: A JUDICIAL BUSINESS ETHIC
KEITH WILLIAM DIENER1
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I. Introduction ................................................................................................................................................... 104
II. The Rise of the Doctrine of Unconscionability ................................................................................... 104
III. Unconscionability: A Judicially Construed Business Ethic ............................................................. 111
A. Protecting the Vulnerable and Unconscionability ............................................................................111
B. Equality and Unconscionability ..............................................................................................................114
IV.Using Business Ethics Theory to Inform the Doctrine of Unconscionability ............................. 115
A. Stockholder Theory .....................................................................................................................................116
B. Stakeholder Theory .....................................................................................................................................117
C. Social Contracts Theory ............................................................................................................................119
D. Virtue Ethics .................................................................................................................................................121
V. A Pluralistic Approach to Unconscionability ..................................................................................... 122
A. Three Stages of the Pluralistic Analysis ................................................................................................123
1. Stage 1: The Process of Contracting & Procedural Unconscionability ................................... 123
2. Stage 2: The Terms of the Contract & Substantive Unconscionability ................................. 123
3. Stage 3: The Morality of the Enforcer (Judge or Arbitrator) .................................................... 124
B. Three Levels of Moral Obligation ............................................................................................................124
1. Level 1: The Individual Level .............................................................................................................. 124
2. Level 2: The Local Level ...................................................................................................................... 124
3. Level 3: The Global Level ................................................................................................................... 125
C. The Final Test of Legitimacy ....................................................................................................................125
D. Application of the Pluralistic Framework ...........................................................................................125
1. Application of the Pluralistic Framework to Example Case 1 .................................................. 126
1 Dr. Keith William Diener is a professor at Stockton University. Obtained his J.D. from Georgia State University Law
School. Also, obtained his LLM in International and Comparative Law from George Washington University.
Furthermore, acquired his Doctorate degree from Georgetown University.
University of Puerto Rico Business Law Journal Vol. 8
104
2. Application of the Pluralistic Framework to Example Case 2 ................................................. 127
VI. Conclusion .................................................................................................................................................. 128
INTRODUCTION
The historical public policy favoring freedom of contract is promoted through expansive
allocations of power to contractual parties who seek to engage in the presumptive transactional
and economic benefits of contractual relations. These policies instill confidence in the
enforcement of contractual provisions so long as the provisions are mutually and voluntarily
agreed. The presupposition that human beings are mature, responsible, and sufficiently morally
upstanding so as to engage in fair exchanges has recurrently proven itself a rule with vicissitudes
of exceptions. Perhaps it is the nature of humanity or perhaps it is due to unfortunate
circumstances of nurturing that some human beings become so self-interested that they attempt
to attain advantage by unscrupulous means at the expense of other, more vulnerable human
beings. When such advantage is gained through contract and the degree of that advantage
becomes sufficiently immoral, unjust, or inequitable, the doctrine of unconscionability becomes a
prophylactic of the vulnerable. Although outside of contractual settings, often advantageous
behavior of humans, sometimes arising from an abundance of self-love or a failure of empathy,
rarely has a viable legal remedy. When such behavior is documented in an otherwise legally
binding contract, there is recourse for victims of such injustice. What constitutes an
unconscionable contract remains an amorphous standard that encourages minimal adherence to
ethical behavior in both the process of contracting and in the terms of the contract itself, thereby
promoting a necessary, albeit imprecise baseline of ethics in business. This article proposes a new
approach to examining purportedly unconscionable contracts –an approach based in ethical
pluralism– and by doing so, contends that business ethics theory may play an integral role in
defining the boundaries of unconscionability.
Part II traces the major historical developments of the doctrine of unconscionability. Part
III contends that the pragmatic implementation of the doctrine of unconscionability is creating a
judicially construed business ethic. Part IV suggests that business ethics theory may inform
future applications of the doctrine of unconscionability. Part V introduces a pluralistic approach
to unconscionability. Part VI concludes.
THE RISE OF THE DOCTRINE OF UNCONSCIONABILITY
The notion that a contract with unfair terms can be rescinded is not unique to common
law countries, but is also present in many civil law countries. In civil law countries, this notion is
rooted in the doctrine of
laesio enormis
which is preserved in, among other places, the Roman
Code of Justinian (529-565 C.E.).2 The doctrine, as defined in the Code of Justinian, allows a seller
to rescind a contract if the sales price is less than half of the actual price.3 Today, the doctrine of
2
Code of Justin ian
, THE ENCYCLOPEDIA BRITANNICA, (Nov. 12 2014), http://www.britannica.com/topic/Code-of-
Justinian (last visited Aug. 5, 2017). In addition to the doctrine of
laesio enormis
, doctrines s imilar to
unconscionability are found in a variety of places in many civil law countries. A group of scholars compiled many of
the legal instruments in several European countries that relate to the common law doctrine of unconscionability.
See
MEL KENNY, J AMES DEVENNEY, & LORNA FOX O’MAHONY, UNCONSCIONABILITY IN EUROPEAN PRIVATE FINANCIAL
TRANSACTIONS: PROTECTING THE VULNERABLE (Eds. 2010).
See
also
ELENA D’AGOSTINO, CONTRACTS OF ADHESION
BETWEEN LAW AND ECONOMICS: RETHINKING THE UNCONSCIONABILITY DOCTRINE (2015) (for criticisms of the main
criteria of the doctrine of unconscionability in the context of contracts of adhesion).
3 RAYMOND WESTBROOK, EX ORIENTE LEX: NEAR EASTERN INFLUENCES ON ANCIENT GREEK AND ROMAN LAW (edited
by Deborah Lyons and Kurt A. Raaflaub) (2015).
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