Oxford University Comparative Law Forum

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Oxford University Comparative Law Forum

The Doctrines Of Unconscionability And Abusive Clauses: a Common Point Between Civil And Common Law Legal Traditions

By Camilo A. Rodriguez-Yong*

(2011) Oxford U Comparative L Forum 1 at ouclf.iuscomp.org | How to cite this article

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The speed at which the world moves and advances has brought multiple economic and social changes to our society. One of the clearest examples of these transformations is the way in which people contract in the acquisition of goods and services. We have moved from a period where the content of a contract was individually negotiated by both parties to one where only one of them imposes it, the party that holds bargain superiority. This situation has led to the creation of a contractual model known as adhesion contracts1, so named by the French scholar Raymond Saleilles.2 Taking into consideration the great power that one of the parties enjoys in determining the rights and obligations of the contract, it has become necessary to develop mechanisms that limit such authority. One of these mechanisms is the adoption of legal doctrines that attempt to avoid the unlimited and abusive exercise of that unequal power by restricting the autonomy of will and the freedom of the parties to enter into contract.3 Within these developments, it is possible to identify two key doctrines: the doctrines of unconscionability and of abusive clauses.4 These doctrines represent legal instruments that prevent contractual unfairness and protect parties 'from overreaching.'5 The former is implemented in common law countries such as the United States and the latter in countries which are part of the civil law legal tradition such as Colombia. Considering that the doctrines belong to different legal families that respond to different historical roots, philosophical ideologies and approaches to law, the purpose of this article is to identify the similarities existing between the doctrines by analyzing the American and Colombian experiences on the subject. This article is divided into three main parts. Part 1 and Part 2 present a brief description of the most significant elements of both the doctrine of unconscionability and abusive clauses. These explanations are grounded and developed in the case law of American and Colombian courts. Part 3 of this article individually analyzes the common characteristics shared by the two doctrines. These include the influence of the doctrine of abuse of rights, the unilateral drafting of contract clauses by the party with the greater bargaining power, the existence of a significant imbalance between the rights and obligations assumed by the parties, and the use of control mechanisms aimed at preventing the incorporation of unconscionable and abusive contracts or clauses.

1. The Doctrine of Unconscionability

The doctrine of unconscionability is considered to be one of the legal instruments used by American judges to 'police'6 agreements and protect against unfairness.7 Hence, the purpose of the doctrine is to avoid the incorporation and legal enforcement of one-sided, oppressive or unfair contracts or clauses. It does not seek to punish the mere existence of an unequal bargaining position or a bad bargain by one of the parties.8 Consequently, an unconscionable contract or clause has been defined as one that 'no man in his senses and not under delusion would make on the one hand and as no honest and fair man would accept on the other.'9 The recognition of unconscionability by a court is not a simple determination to make, particularly due to the serious consequence that it produces--that of unenforceability. The case law itself has clearly demonstrated that the unconscionable character of a contract or clause will only be accepted as unconscionable in those cases 'so outrageous and unfair in its wording or its application that it shocks the conscience or offends the sensibilities of the court.'10 The doctrine of unconscionability was initially developed and adopted through the courts of equity, which determined that 'a contract that was 'inequitable' or 'unconscionable' . . . would not be enforced in equity.'11 In modern times, the doctrine has been statutorily recognized by the Uniform Commercial Code article 2–302, which establishes the following:12 If the court as a matter of law finds the contract or any clause of the contract to have been unconscionable at the time it was made the court may refuse to enforce the contract, or it may enforce the remainder of the contract without the unconscionable clause, or it may so limit the application of any unconscionable clause as to avoid any unconscionable result.13 While the doctrine of unconscionability is recognized by article 2 of the U.C.C., which applies to transactions for the sale of goods, it has also been applied to other contracts by means of analogy.14 Moreover, the extensive and broad application of the doctrine has been fostered by its incorporation in several uniform laws15 and the Restatement (Second) of Contracts.16 With regard to the requirements that must be fulfilled in order to find a clause or contract unconscionable, the case law has made clear that there must be both procedural and substantive unconscionability.17 However, while both must be present, the two elements will not necessarily possess the same intensity.18 Yet, what exactly do procedural and substantive unconscionability mean? Procedural unconscionability refers to 'the process by which an agreement is reached and the form of an agreement.'19 Here, the court analyzes the existence of 'oppression' and 'surprise' over the innocent party.20 Oppression will exist if there is 'an inequality of bargaining power that results in no real negotiation and an absence of meaningful choice.'21 Surprise 'involves the extent to which the supposedly agreed-upon terms are hidden in a prolix printed form drafted by the party seeking to enforce them.'22 Multiple criteria have been implemented by the courts to determine if a contract is procedurally unconscionable. Some of the most important criteria are: a) the way the contract was agreed upon by the parties (Could the party negotiate the content of the contract?23 Was the agreement an adhesion contract?24 ); b) the bargaining power of the parties (Was one of the parties economically or legally stronger than the other?25 ), c) the availability of a meaningful choice for the party alleging unconscionability at the time when the contract was agreed upon;26 d) whether the clauses were offered on a 'take it or leave it basis',27 e) whether the party claiming the unconscionable character of the contract or clauses, considering his or her education or lack thereof, had the ability and reasonable opportunity to understand the terms of the contracts;28 and f) whether the relevant terms 'were hidden in a maze of fine print.'29 Concerning substantive unconscionability, the task of the court is to analyze the terms of the contract.30 More specifically, the court 'addresses the fairness of the term in dispute.'31 Consequently, the focus of the court's analysis is to determine two important aspects: whether the term is one-sided and whether the term has an 'overly harsh effect on the disadvantaged party.'32 In other words, the judge analyzes whether the clauses of the agreement are 'unreasonable and unfair,'33 or if the provision 'unreasonably favors the party asserting it.'34 The court must evaluate all the circumstances on an objective basis, 'considering the reasonable expectations of the average person entering into such an agreement.'35 An example of a situation where 'harsh' or 'overly one-sided' clauses were found is the case of Nagrampa v Mailcoups Inc.36 In this case, the Ninth Circuit Court of Appeals held that an arbitration clause was substantively unconscionable because the contract provided to one party the choice between a judicial and an arbitral forum, while the other was only allowed to submit her claims to an arbitral proceeding.37 Moreover, the court determined that the arbitral agreement was unconscionable because the venue was intentionally selected for the purpose of 'maximizing an advantage' over the weaker party.38 The arbitral agreement had a forum selection clause that chose Boston, Massachusetts, a city within several miles of the drafting party's headquarters, as the venue for the arbitration proceeding.39 The court stated that the venue, which was three thousand miles from the weaker party's home in California, constituted a mechanism that restricted the participation of the weaker party because she would have had to incur traveling and living expenses, as well as additional costs to obtain legal counsel that handled the local law.40 Taking into consideration what has been previously mentioned, American case law has identified multiple factors to guide the judge in determining whether a clause or agreement is unconscionable or not. These factors are:41 (1) The use of printed form or boilerplate contracts drawn skillfully by the party in the strongest economic position, which establish industry wide standards offered on a take it or leave it basis to the party in a weaker economic position; (2) a significant cost-price disparity or excessive price; (3) a denial of basic rights and remedies to a buyer of consumer goods; (4) the inclusion of penalty clauses; (5) the circumstances surrounding the execution of the contract, including its commercial setting, its purpose and actual effect; (6) the hiding of clauses which are disadvantageous to one party in a mass of fine print trivia or in places which are inconspicuous to the party signing the contract; (7) phrasing clauses in language that is incomprehensible to a layman or that divert his attention from the problems raised by them or the rights given up through them; (8) an overall imbalance in the obligations and rights imposed by the bargain; (9) exploitation of the underprivileged, unsophisticated, uneducated and the illiterate; and (10) inequality of bargaining or economic power.42 Finally, a party who has proposed the unconscionable term, is prevented from alleging the existence of a unconscionable term or clause. The Supreme Court of Wyoming ruled: Because a court focuses on the relative fairness of the obligations assumed and is determining the presence vel non of one-sided terms which oppress or unfairly surprise an innocent party, we find it difficult to accept the notion that a party who proposes an allegedly unconscionable term can be viewed as an innocent party who is oppressed or unfairly surprised by a provision of its own making.43 This approach is perfectly logical considering the purpose and philosophy of the doctrine. It would be unfounded and unfair for a party, who has proposed, drafted and imposed an abusive clause, to subsequently claim before a court that the clause is unconscionable, one-sided or unfair. No party can allege its own negligence or fault for its own benefit.

2. The Doctrine of Abusive Clauses

Thus far, the doctrine of unconscionability has been presented as a common law legal doctrine aimed at preventing the incorporation of unfair terms in a contract drafted by only one of the parties. The implementation of legal doctrines of this type is not, however, an exclusive issue of the common law legal tradition or American laws and courts. In other legal traditions and systems, legal doctrines have been developed that promote the same objectives and purposes as the doctrine of unconscionability. As to the civil law system, the legal doctrine of abusive clauses has been developed and implemented in places such as Europe and Latin America. Generally, an abusive clause has been defined as a clause that is unilaterally imposed by one of the contract's parties, unequally affecting the other or creating a situation of imbalance between the duties and rights of the parties.44 In Colombia, the national case law has defined the abusive clause in the following terms: An abusive clause is one that, having been imposed or established by the party with the strong or dominant position, and therefore possesses a preeminent bargaining power, privileges or unequally favors the drafter to the detriment of the person adhering to the contract, harming with this the normal balance of the contract.45 Similarly, the Colombian Supreme Court of Justice has identified certain features of an abusive clause, including clauses that: a) are the result of a lack of individual negotiation, b) harm the principle of good faith, and c) generate a significant imbalance of the rights and obligations assumed by the parties.46 Under this context, it is possible to state the main characteristic elements of an abusive clause as the following: a) it is imposed or drafted by one of the parties, b) it violates the principle of good faith,47 c) the party determining the content of the clause is the party with the stronger bargaining power, and d) the clause unequally favors the stronger party, affecting the symmetry of the contract.48

3. The Doctrines of Unconscionability and Abusive Clauses – Are They So Different?

Having presented the main elements of the doctrines of unconscionability and abusive clauses from the perspective of U.S. and Colombian courts, the multiple similarities that exist between the doctrines are further examined below.

3.1. The Doctrines of Unconscionability and Abusive Clauses Arise as a Consequence of the Abuse of Right to Contract

As one of its fundamental principles, the law of contracts has established the freedom of contract,49 which allows a person to decide when, with whom and on what terms to contract with another.50 This liberty is not absolute. Several limitations are placed on the exercise of this right.51 Among these limitations is what has become known as the abuse of right, a doctrine recognized in civil law countries such as Colombia and American states such as Louisiana.52 In Colombia, the abuse of right doctrine has developed from the constitutional, legal and jurisprudential perspective. Article 95 of the Colombian Constitution requires Colombian citizens to respect third parties' rights and prohibits the abuse of one's own rights.53 Similarly, article 830 of the Code of Commerce points out that any person who abuses her or his right must indemnify the damages that such abuse causes.54 Finally, the Colombian Supreme Court of Justice and several arbitral decisions have identified situations where the doctrine of abuse of right may arise. These include situations where a person: a) exercises a right with the purpose, or intention of harming someone (subjective character), or b) the exercise of a right in such a way that it deviates from its economic or social finality (objective character).55 From the U.S. law perspective, states such as Louisiana have also recognized the doctrine of abuse of right. It applies when: a) a right is exercised with the exclusive purpose of 'harming another or with the predominant motive to cause harm,' b) a right is exercised for a purpose that differs from the one for which it was granted, c) a serious or legitimate interest that deserves to be judicially protected does not exist, or d) the use of the right violates moral rules, good faith, or elementary fairness.56 Aside from Louisiana courts, other American courts have also recognized and sanctioned abuses committeed by holders of rights. For example, the courts have found abuse of rights in cases relating to access to the courts,57 requests for information or documents,58 and free speech.59 Amongst the most developed applications of the theory of abuse of right in the field of contractual law figure the doctrines of patent and copyright misuse. These doctrines have been defined in the following terms: Patent misuse is an equitable defense to patent infringement. It was designed: "[T]o restrain practices that did not in themselves violate any law, but that drew anticompetitive strength from the patent right, and thus were deemed to be contrary to public policy"(citation omitted). The key inquiry in determining whether a patentee's conduct constitutes misuse "is whether, by imposing conditions that derive their force from the patent, the patentee has impermissibly broadened the scope of the patent grant with anticompetitive effect." Id. (quoting C.R. Bard, Inc. v. M3 Sys., Inc., 157 F.3d 1340, 1372 (Fed. Cir. 1998)).60 Relevant case law interprets the doctrine of copyright misuse as a 'defense to copyright infringement.' . . . which 'forbids the use of the [copyright] to secure an exclusive right or limited monopoly not granted by the [Copyright] Office and which is contrary to public policy to grant.'61 Both patent and copyright misuse doctrines represent a clear example of an abuse of rights. In both cases, the holders are entitled to exercise their legally recognized rights. This exercise can become abusive, however, because the holders pretend to use their rights in a way that extends beyond the purpose justifying their recognition. A patent or copyright is granted as a mechanism to promote the creativity of people62 and to 'secure a fair return for an 'author's' creative labor.'63 Therefore, the holder of a copyright or patent enjoys a set of exclusive prerogatives for the exploitation of his or her right with the purpose of recovering the time and money invested in his or her creative process rather than the purpose of affecting the free competition or creativity of third parties. Hence, the use of a patent or copyright in the latter direction constitutes an abuse of right. The doctrine of abuse of right is clearly related to the doctrines of unconscionability and abusive clauses.64 It arises as a consequence of the abuse of a fundamental right in the modern world, which is the right to contract or the freedom to contract. In this sense, both American and Colombian courts have recognized the doctrine. From the American perspective, the Supreme Court of Alabama expressly pointed out: 'the doctrine of unconscionability is used by the courts to police the excesses of certain parties who abuse their right to contract freely.'65 The Colombian Supreme Court stated: '[I]n the formation of a contract and, specifically, in the determination of 'the clauses called to regulate the relationship so created, abusive conduct can exist''.66 Therefore, it is clear that both U.S and Colombian legal systems find in the doctrine of abuse of right a legal and philosophical foundation for the justification of the doctrines of unconscionability and abusive clauses.

3.2. The Doctrines of Abusive and Unconscionable Contract or Clause Apply to Agreements Imposed or Drafted by Only One of the Parties

Another similarity between the doctrines of unconscionability and abuse of right is that they apply in cases where the agreement or clauses alleged as abusive or unconscionable have been drafted by only one of the parties to the contract. In effect, the Colombian Supreme Court of Justice has clearly identified, as one of the main characteristics of an abusive clause, the lack of its individual negotiation. A contract in this situation is generally considered a contract of adhesion.67 For this reason, it is necessary to control an adhesion contract's content with the purpose of excluding those clauses that grant 'egoist advantages' in prejudice of one of the parties.68 In the case of the American legal system, the doctrine of unconscionability shows a clear link to contracts of adhesion. This contract model has been defined by the case law as 'a standardized contract imposed upon the subscribing party without an opportunity to negotiate the terms.'69 Its fundamental characteristics are: 1) a contract printed in a standard form, 2) prepared by one party and proposed to the other on a 'take it or leave it' basis, and 3) there is a real absence of an equal bargaining power of the parties.70 An example of these main features is found in the case Zuver v. Airtouch, where the court found that the arbitration agreement entered by the parties was an adhesion contract because: a) the party adhering to the contract received an arbitration agreement that was contained in a standard form; b) employment of the adhering party was conditional on her signing the employment agreement, thereby constituting a 'take or leave it basis'; and c) the adhering party was not able to negotiate the terms of her employment and the agreement, thus, lacked equal bargaining power.71 Under U.S. case law, an adhesion contract is generally deemed procedurally unconscionable. Hence, Californian courts have ruled that 'a contract is procedurally unconscionable under California law if it is 'a standardized contract, drafted by the party of superior bargaining strength, that relegates to the subscribing party only the opportunity to adhere to the contract or reject it.''72 Moreover, in the case Parilla v Iap Worldwide Services VI, Inc, the Court of Appeals for the Third Circuit pointed out that '[p]rocedural unconscionability. . .is generally satisfied if the agreement constitutes a contract of adhesion.'73 It must be noted, however, that '[a] contract of adhesion is not unconscionable per se.'74 It must also be unconscionable in substance.75 We can thus note that the U.S and Colombian legal systems recognize as typical element of an abusive or unconscionable clause or contract that it has been unilaterally drafted by one party and imposed on the other party. This common point is both reasonable and logical taking into consideration that it is necessary to protect the party who adhered to the contract without having the possibility to influence its content.

3.3. The Party Who Has Drafted the Contract or Clause Has More Bargaining Power than the One Who Accepts the Contract

Another common point between the doctrines of unconscionability and abusive clause is that the party drafting the contract is in a stronger bargaining position than the party accepting it. This reflects the purpose and justification of the doctrines, which are to protect the weaker party of a contract from the possibility that the stronger party abuses that power and writes the terms of the contract to its sole advantage. In the U.S., the role of bargaining power in the doctrine of unconscionability is manifestly observed. Its unequal presence is a fundamental factor within the analysis of procedural unconscionability. Here, the courts analyze whether the contract possesses 'an inequality of bargaining power that results in no real negotiation and an absence of meaningful choice.'76 Likewise, the courts take into consideration as factors that determine the unconscionable character of a contract or clause, the 'relative positions of the parties' and 'the adequacy of the bargaining position.'77 This clearly reflects the weight and importance that bargaining power has when determining unconscionability. It is important to note, however, that a contract can be held valid and enforceable even if there is a substantial difference in the bargaining powers of both parties. While the doctrine seeks to avoid the enforcement of one-sided or unfair contracts or clauses, it is not intended to punish the mere existence of an unequal bargaining position, or offer to one party an escape from a bad bargain.78 From the perspective of the Colombian legal system, the difference in the contracting parties' bargaining power also has a relevant role in the doctrine of abusive clauses. Several arguments support this idea. First, it has been recognized in arbitration practice that when a clause is drafted by the party enjoying the preeminent bargaining power, it possesses one of the main characteristics of an abusive clause.79 Second, the Colombian Supreme Court of Justice has noted that the exercise of a superior bargaining power can lead to the inclusion of abusive clauses in the contract.80 In this sense, the Court stated that a party, in taking advantage of the bargaining power acquired from its dominant position in the market, can establish contractual provisions that affect the economic equilibrium of the agreement.81 Finally, the Colombian Act 142 of 1994, in regulating the activities of utilities companies, established in its articles 14.13 and 133 two relevant aspects. The articles state that the utilities companies have, in relation to their customers, a dominant position that is considered abusive if certain clauses are incorporated into the utilities contract.82 Concerning the relevance of unequal bargaining power for the doctrine of abusive clauses, it is also important to mention the European experience, where the doctrine of abusive clauses takes a prominent role. Several European states have enacted legislation on abusive clauses which limits the scope of application to relationships between merchants (or other professionals) and consumers, relationships that clearly involve the existence of an unequal bargaining power between the parties to the contract.83 The European Community has enacted legislation on unfair terms used in business to consumer contracts (Directive 93/13 of 1993), which points out in its article 3: A contractual term which has not been individually negotiated shall be regarded as unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the parties' rights and obligations arising under the contract, to the detriment of the consumer.84 The European Court of Justice has stated that this Directive was conceived under the premise that the consumer is in a weaker position than the seller or supplier in terms of bargaining power and knowledge.85 The U.S and Colombian doctrines differ from the European approach in that the protection against abusive clauses is restricted to relationships between merchants and consumers. In both, the U.S. and Colombia, the existence of unequal bargaining power between the contracting parties is not limited to relationships between consumers and businesses; it has also been recognized in relationships between two merchants or commercial parties. For instance, case law recognizing the doctrine of unconscionability has been applied to franchising contracts.86 With regard to Colombia, the doctrine of abusive clauses has been applied to supply contracts.87 Nonetheless, the doctrines are most often applied in cases between consumers and businesses.88>

3.4. The Doctrines of Unconscionability and Abusive Clauses Arise in Contracts Where There is a Significant Imbalance Between the Rights and Obligations Assumed by the Parties

Another common element of the doctrines of unconscionability and abusive clauses is that they are both applied in cases where the content of the contract or clause is grossly unbalanced. Here, the discussion does not shift toward the existence of an unequal bargaining power relationship, but instead focuses on the presence of gravely inequitable and/or unfair clauses. In effect, one of the most important factors of the doctrine of unconscionability is whether a clause or provision 'unreasonably favors the other party to the contract.'89 This analysis is carried out in the field of substantive unconscionability where two important aspects are determined: whether the term is one-sided and whether it will have an overly harsh effect on the disadvantaged party.90 In other words, the judge analyzes whether the clauses of the agreement are 'unreasonable and unfair'91 or if the provision in question 'unreasonably favors the party asserting it.'92 In the case of abusive clauses, it is possible to identify a similar philosophy to the one followed by the American doctrine. This has been the position of the Colombian Supreme Court of Justice that has ruled that an abusive clause involves a significant inequality of the rights and obligations assumed by the parties.93 Thus, an abusive clause is an unbalanced clause.94 In sum, the existence of grossly unfair and unbalanced duties and obligations between the parties justifies the application of the doctrines of unconscionability and abusive clauses. This situation treats the doctrines as fundamental mechanisms which protect the weakest party of a contractual relationship from agreements that impose unequal and one-sided terms.

3.5. The Control Mechanisms Used to Avoid the Inclusion of Unconscionable and Abusive Clauses

Another commonality between the U.S. and Colombian legal systems' approach to contracts is the way in which they control the inclusion of unconscionable or abusive clauses. Generally, different controls have been identified to avoid the inclusion of abusive clauses. In particular, three different controls have been implemented: administrative, legislative, and judicial.95 The administrative system is carried out by a governmental agency that grants an approval to the contracts drafted by one of the parties before it is used in the market to regulate their contractual relationships.96 The legislative control system is carried out by the adoption of national laws which make abusive clauses void.97 Three different alternatives have been employed to this effect. The first is through a general rule that defines what is considered an abusive clause and therefore qualifies all the contractual clauses that match that definition.98 The second is the establishment of a list of clauses that are considered abusive or unfair if incorporated in a contract.99 A third possibility is the adoption of both a general rule and a set of clauses considered abusive.100 Finally, the last control system is a judicial one controlled by qualified judges who rule whether or not a contract clause is abusive, even if no particular legislation has been enacted to this effect.101 All of these mechanisms apply both in the U.S and the Colombian legal systems. For example, within the U.S legal system it is possible to identify a legislative control to avoid the adoption of unconscionable clauses in a contract. There are several acts which establish the prohibition of incorporating certain clauses in a contract. Although many of the acts do not expressly qualify the clauses as unconscionable, their content clearly aims at protecting the party adhering to the contract and avoiding a grave unbalance between the rights and obligations of the parties. An example of the prohibition of specific clauses that can be considered unconscionable is Pennsylvania's Unfair Trade Practices and Consumer Protection Law.102 It prohibits incorporating in a contract a 'confessed judgment clause that waives the consumer's rights to assert a legal defense to an action.'103 Another example is the Florida Code Sec 563.022, which states that it is unlawful 'to require a beer distributor to assent to a release, assignment, novation, waiver or estoppel which would relieve any person from liability imposed by [the law].'104 Likewise, Ohio Code Sec 109:4-3-28, which addresses unconscionable terms in home mortgage loans, describes a set of arbitration clauses that are considered unconscionable.105 Examples include: (2) An arbitration clause that limits, restricts or precludes the applicability of any rights or remedies afforded the consumer . . . ; (4) An arbitration clause that fails to provide the consumer with fair and reasonable access to discover and present information, documents and other evidence necessary to support the consumer's claim or defense; . . . (6) An arbitration clause that fails to provide an appeal process for a decision on the basis that the decision is arbitrary, capricious or contrary to law;106 . In California, the Consumers Legal Remedies Act renders unlawful the incorporation of an unconscionable provision in a contract.107 Likewise, the California Civil Code expressly states that a contract or obligation shall not contain any provision by which: a) The buyer agrees not to assert against a seller a claim or defense arising out of the sale . . . . c) A power of attorney is given to confess judgment in this state . . . . d)The seller or holder of the contract or other person acting on his or her behalf is given authority to enter upon the buyer's premises unlawfully or to commit any breach of the peace in the repossession of goods . . . . g) The buyer relieves the seller from liability for any legal remedies which the buyer may have against the seller under the contract . . . . h) The buyer agrees to the payment of any charge by reason of the exercise of his or her right to rescind or void the contract.108 Similar provisions are also found in statutes of states like Delaware,109 New York110 and Florida.111 Civil law countries also implement legislative control over abusive clauses. In Colombia, the previously mentioned national law of utilities determines a set of clauses that are presumably abusive and therefore cannot be enforced by the judge. It includes clauses that: a) exclude or limit the liability that corresponds to the utility company, b) recognize the power of the utility company to terminate the contract, or modify its conditions by any reason other than the user's breach of contract, major force or fortuity case, c) submit the user to the utility company's consent for the exercise of his legal or contractual right, d) force the user to give up any of the contractual rights he or she has, e) grant the utility company more power than the other party in the case of an arbitral award, f) force the user to give to the company an excessive compensation when they anticipate termination of contract, and g) restrict user's right to claim damages or resolution of the contract as a consequence of the utility company's breach of contract.112 The establishment of a list of abusive clauses is not an exclusive matter for the utilities law. In Colombia, Act 1328, 2009, which went into effect on July 1, 2010, lists a number of clauses considered abusive if included in a contract between a financial institution and a financial user.113 Article 11 sets forth several provisions that prohibit: a) limiting or implicating a relinquishment of financial consumers' rights, b) shifting the burden of proof to the financial consumer, c) inserting blank spaces not accompanied by explanatory instructions, d) limiting the rights of the financial consumers and the duties of financial entities, and e) absolving, reducing or limiting the financial entities' liability.114 The administrative control is also present in both the U.S. and Colombian legal systems. In the former, there are multiple state regulations requiring that a contract must be approved before it can be used in the market. For instance, Kentucky's insurance code states that a policy or insurance contract must be approved before it can be utilized in the state.115 In doing so, the State verifies that unconscionable clauses are not incorporated within said policy or insurance contract.116 The prohibition of certain prejudicial clauses is also found in laws from states like New York,117 California118 and Indiana.119 It is important to highlight that some scholars have argued that all adhesion contracts should be uniformly regulated by the Federal Trade Commission.120 Colombia also uses its administrative control to regulate contracts through governmental agencies. Specifically, in financial, insurance and utilities contracts, Colombian legislation gives corporations the option to submit their contracts to a government agency for approval before use in the market. For example, Act 142 of 1994 gives utility companies the option to submit their contracts to an executive agency that will determine whether its clauses are legal. The governmental agency's analysis includes a review to ensure that the contract does not incorporate abusive provisions.121 In financial contracts, Colombian law requires that the trust agreements used by the trust companies be approved by the Financial Superintendence, a governmental agency in charge of oversight of the activity of financial institutions.122 It has been expressly recognized that the purpose of this control is to avoid agreements with abusive clauses that negatively affect customers' interests.123 Insurance contracts are also submitted for approval by the Superintendence when a new insurance company begins offering contracts in the market or it commences activities in a new field.124 Finally, the judicial control mechanism is also present in both U.S. and Colombian jurisdictions. In fact, many of the characteristics and principles of the doctrines of unconscionability and abusive clauses have been determined and developed in case law from the national courts. Therefore, judges have a fundamental role in the present and future development of the doctrines. Considering the different controls susceptible being applied to unconscionable or abusive clauses, the legislative control represents the most objective mechanism because it does not require the weaker party to the contract to show that a particular clause is unfair or grossly unbalanced. The qualification of a clause as unfair or unconscionable evidently involves to some extent a subjective consideration. What is grossly unfair to somebody may not be so to another. However, it must recognized that factors considered by the American courts such as age, education, and experience, have gone some way to make subjective factors more predictable. Nevertheless, a statutory qualification of specific clauses as unconscionable or abusive provides the parties with more legal certainty about the character of their contract's clauses.

4. Conclusion

The doctrines of unconscionability and abusive clauses represent a fundamental tool for the protection of weaker parties and in particular consumers. It is necessary, however, that countries develop more objective, efficient, and stronger judicial and administrative mechanisms in order to achieve that goal. Consumer protection laws are insufficient in themselves to prevent unconscionable or abusive clauses from being included in a contract. Therefore, it is necessary that the laws are accompanied by fast and efficient administrative and judicial proceedings that guarantee actual consumer protection. This article has shown how both civil and common law countries have developed and recognized parallel legal instruments which aim to protect the weaker party of a contract from grossly unequal and unfair clauses imposed by the stronger party. This article has identified multiple similarities among these instruments, despite their differing legal origins and traditions. In this sense, this intellectual exercise can constitute a useful tool for a possible future international harmonization of the relevant contract law rules.125


* Professor of Law, Universidad del Rosario Law School (Colombia); LLM, S.J.D. (Indiana University Maurer School of Law). Attorney-at-law (NY), Abogado (Colombia). The article is the result of the research project entitled Traditional Subjects of Commercial Law carried out by the commercial law research group of Universidad del Rosario Law School. The author would like to thank Rebecca Bertoloni-Meli for her generous help.

1 The following features have been identified as characteristics of contracts of adhesion:

(1) The document whose legal validity is at issue is a printed form that contains many terms and clearly purports to be a contract, (2) The form has been drafted by, or on behalf of, one party to the transaction, (3) The drafting party participates in numerous transactions of the type represented by the form and enters into these transactions as a matter of routine, (4) The form is presented to the adhering party with the representation that, except perhaps for a few identified items (such as the price term), the drafting party will enter into the transaction only on the terms contained in the document. This representation may be explicit or may be implicit in the situation, but it is understood by the adherent, (5) After the parties have dickered over whatever terms are open to bargaining, the document is signed by the adherent, (6) The adhering party enters into few transactions of the type represented by the form -- few, at least, in comparison with the drafting party, (7) The principal obligation of the adhering party in the transaction considered as a whole is the payment of money. Todd D. Rakoff, 'Contracts of Adhesion: an Essay in Reconstruction' (1983) 96 Harv.L.Rev. 1174, 1177.

Regarding adhesion contracts from a civil law perspective see also Jose Puig Brutau, Compendio de Derecho Civil, vol 2(Bosch Casa Editorial S.A. 1987) 288-291; Arturo Alessandri Rodriguez, De los Contratos (Editorial Temis 1993) 114-116.

2 Julie A. Reich, 'French and American Approaches to Contract Formation and Enforceability: A Comparative Perspective' (2005) Tulsa J.Comp.& Int'l L. 357, 377; Collins v Farmers Ins Co of Or, 822 P 2d 1146, 1160 n 20 (Or 1991).

3 Ernesto Rengifo García, Del Abuso del Derecho al Abuso de la Posicion Dominante (2d edn, Universidad Externado de Colombia 2002) 189-190; Valued Servs of Kentucky v Watkins 309 SW 3d 256, 261 (Ky Ct App 2009).

4 The Spanish term for the doctrine is 'clausula abusiva.'

5 E. Allan Farnsworth, Contracts (4th edn, Aspen Publishers 2004) 218.

6 James White and Robert S. Summers, Uniform Commercial Code (5th edn, West Group 2000) 151. Policing means:

[A] court's refusal to enforce all the terms of a contract, or its award of damages against the allegedly over-reaching party to the contract either because that party engaged in fraud or kindred conduct in procuring the other party's agreement or because the terms as agreed upon were oppressive, contrary to public policy or illegal.

7 Farnsworth (n 5) 217. Other doctrines are fraud, misrepresentation, and good faith. White and Summers (n 6) 152-153.

8 John Deere Leasing Co v Blubaugh 636 F Supp 1569, 1573 (D Kan 1986) (citing Wille v Southwesten Bell Tel Cop 549 P 2d 903, 907 (Kan 1976)) (The doctrine of unconscionability is used by the courts to police the excesses of certain parties who abuse their right to contract freely. It is directed against one[-]sided, oppressive and unfairly surprising contracts, and not against the consequences per se of uneven bargaining power or even a simple old-fashioned bad bargain).

9 Pelfrey v Pelfrey 487 SE 2d 281, 284 (Va Ct App 1997) (quotations omitted).

10 Adams v John Deere Co 774 P 2d 355, 357 (Kan Ct App 1989).

11 Farnsworth (n 5) 294-95 (noting that the traditional reluctance of common law courts to police agreements for substantive unfairness was never shared by courts of equity, and over the years this traditional reluctance has declined). See also White and Summers (n 6) 153.

12 Farnsworth (n 5) 298. (With the appearance of the U.C.C., a general standard of fairness for law and equity was established.) 

13 Id. As observed, the doctrine was not defined by the Code. Precisely the lack of definition of the doctrine has been one of its main features. It has even claimed that '[i]t is not possible to define the unconscionability. It is not a concept, but a determination to be made in light of a variety of factors not unifiable into a formula'. White and Summers (n 6) 156.

14 Farnsworth (n 5) 298-299.

15 Unif Consumer Credit Code Act § 5.108 (1974); Unif Consumer Sales Practices Act § 4 (1970); Unif Land Transactions Act § 1-311 (1975); Unif Residential Landlord & Tenant Act § 1.303 (1972).

16 The doctrine has been recognized by the Restatement (Second) of Contracts, § 208 (1981):

If a contract or term thereof is unconscionable at the time the contract is made a court may refuse to enforce the contract, or may enforce the remainder of the contract without the unconscionable term, or may so limit the application of any unconscionable term as to avoid any unconscionable result.

17 Fensterstock v Educ Fin Partners 611 F 3d 124, 134-136 (2d Cir 2009); Edwards v Hovensa LLC 497 F 3d 355, 362 (3d Cir 2007).

18 Nagrampa v MailCoups Inc 469 F 3d 1257, 1280 (9th Cir 2006) (internal quotations, citations omitted) ("In California, the 'prevailing view' is that procedural unconscionability and substantive unconscionability need not both be present to the same degree: Essentially a sliding scale is invoked which disregards the regularity of the procedural process of the contract formation . . . in proportion to the greater harshness or unreasonableness of the substantive terms themselves.") (quoting 15 Williston on Contracts § 1763A, at 226-27 (3d ed. 1972)). In other words, the more substantively oppressive the contract term, the less evidence of procedural unconscionability required to conclude that the term is unenforceable, and vice versa. See also Mercuro v Superior Court 116 Cal Rptr 2d 671, 676 (Ct App 2002) ('Given Countrywide's highly oppressive conduct in securing Mercuro's consent to its arbitration agreement, he need only make a minimal showing of the agreement's substantive unconscionability.').

19 Zimmer v CooperNeff Advisors Inc 523 F 3d 224, 228 (3d Cir 2008).

20 Nagrampa (n 18).

21 ibid.

22 ibid. With regard to lack of a meaningful choice, two examples can serve to clarify its understanding by the courts. In Clerk v Ace Cash Express Inc, the court rejected the argument of lack of meaningful choice made by one of the parties. No 09-05117, 2010 US Dist Lexis 7978, at *24 (ED  Pa Jan 29, 2010). The court did not accept the claim because the agreement itself gave the option to the claiming party to reject the clause, an arbitral agreement, within a period of thirty days. Moreover, the agreement clearly expressed that a rejection of the clause would not negatively affect the terms of the main agreement. ibid. In another case, Roussalis v. Wyoming Medical Center Inc, the court rejected the application of the doctrine of unconscionability, which was alleged by one of the parties because the claiming party received legal advice during the negotiation process, was not forced to agree to the terms of the contract, and had the opportunity to propose clauses to the agreement. Further, it had several options during the negotiation process, such as providing its consent, modifying the agreement's content, or abstaining from contracting. Roussalis v Wyoming Medical Center Inc 4 P 3d 209, 246-248 (Wyo 2000).

23 Vistein v American Registry of Radiologic Technologists 342 Fed Appx 113, 124 (6th Cir 2009).

24 ibid 121.

25 ibid.

26 ibid.

27 ibid 125; Pendergast v Sprint Nextel Corp 592 F 3d 1119, 1135 (11th Cir 2010) ("To determine whether a contract is procedurally unconscionable under Florida law, courts must look to: (1) the manner in which the contract was entered into; (2) the relative bargaining power of the parties and whether the complaining party had a meaningful choice at the time the contract was entered into; (3) whether the terms were merely presented on a "take-it-or-leave-it" basis; and (4) the complaining party's ability and opportunity to understand the disputed terms of the contract.").

28 ibid.

29 Vistein (n 23) 121. Moreover, other factors to consider include age, education, intelligence, business acumen and experience, bargaining power, who drafted the terms of the contract, whether the terms were made clear to the weaker party, whether if was possible to modify the terms, and whether existed alternative sources of supply for the goods or services. ibid.

30 Cicle v Chase Bank USA 583 F 3d 549, 554 (8th Cir 2009).

31 Pokorny v Quixtar Inc 601 F 3d 987, 997 (10th Cir 2010).

32 ibid.

33 Pendergast (n 27) 1139.

34 Zimmer (n 19).

35 Cicle (n 30).

36 Nagrampa (n 18) 1289.

37 ibid 1286-87.

38 ibid 1290.

39 ibid 1289.

40 ibid.

41 Adams (n 10) 358. Moreover, from a legislative perspective, there are also statutes that establish different criteria to determine the unconscionable character of a provision or contract. For instance, section 38-33.3-112 of the Colorado Common Interest Ownership Act establishes criteria including:  (a) The commercial setting of the negotiations; (b) Whether the first party has knowingly taken advantage of the inability of the second party reasonably to protect such second party's interests by reason of physical or mental infirmity, illiteracy, or inability to understand the language of the agreement or similar factors; (c) The effect and purpose of the contract or clause; and (d) If a sale, any gross disparity at the time of contracting between the amount charged for the property and the value of that property measured by the price at which similar property was readily obtainable in similar transactions. . . . Colo Rev Stat § 38-33.3-112 (1993).

Kansas establishes in section 50-627 of its Consumer Protection Law other factors such as:

a) "the transaction the supplier induced the consumer to enter into was excessively onesided in favor of the supplier" and, b) "the supplier excluded, modified or otherwise attempted to limit either the implied warranties of merchantability and fitness for a particular purpose or any remedy provided by law for a breach of those warranties." Kan Stat Ann § 50 627 (1998).

42 Adams (n 10) 358, (citing Willie v Southwestern Bell Tel. Co 549 P 2d 903, 907 (Kan 1976). See also Art's Flower Shop Inc v Chesapeake & Potomac Tel Co of West Virginia 413 SE 2d 670, 671 (WVa 1991) (In determining whether a contract is void for unconscionability, the court should consider "the circumstances surrounding the execution of the contract and the fairness of the contract as a whole."); Traders Bank v Kollar No 06:07-cv-00178, 2008 US Dist LEXIS 21852, at *13 (SDWVa Mar 18, 2008) ("In undertaking its analysis, the court should focus on the relative positions of the parties, the adequacy of the bargaining position, the meaningful alternatives available to the plaintiff, and the existence of unfair terms in the contract.").

43 Roussalis (n 22) 246.

44 Javier Wajntraub, Proteccion Juridica del Consumidor (Depalma 2004) 183-184. ("Abusive clauses are those clauses that are unilaterally imposed by one of the parties, harming the other in an unequal way or causing an imbalance between the parties' rights and obligations, to the detriment, generally, of consumers or users, although also can be to someone who does not have the character of a consumer.").

45 Calderon Palacio v Cafesalud Medicina Prepagada SA, Arbitral Award (Camara de Comercio de Bogota 2002).

46 There are typical characteristics of abusive clauses – primarily: a) that their negotiation was not individual; b) that they injure the emerging requirements of good faith, c) that they create a significant imbalance in light of the rights and obligations that are undertaken by the parties. Expediente 5670, Corte Suprema de Justicia [Supreme Court of Justice], 2 Feb 2001, MP: CI Jaramillo (Colom).

47 The principle of good faith has been considered a limit on the freedom to contract and a valuable instrument to determine the existence of an abusive clause in a contract. Francesco Jordano Fraga, La Responsabilidad Contractual (Editorial Civitas S.A. 1987) 397-399. See also Luis Diez-Picazo and Antonio Gullon, Sistema de Derecho Civil, vol 2 (Editorial Tecnos 1979) 85.

48 Therefore, there are no abusive clauses that: a) result in equal advantages or relinquishments by both parties, b) provoke damages only for the drafting party, c) do not involve grave or gross unbalance of the contract, and d) were drafted by both parties. Gabriel A. Stiglitz and Ruben Stiglitz, Derechos y Defensa de los Consumidores (Ediciones La Rocca 1994) 249-250.

49 Francesco Galgano, El Negocio Juridico (Francisco de P. Blasco Gasco and Lorenzo Prats Albentosa trs, Tirant lo Blanch 1992) 65-68.

50 The principle of freedom to contract is recognized both in the United States and Colombia:

"In Kansas, we adhere to the general principle that competent parties may make contracts on their own terms, provided they are neither illegal nor contrary to public policy, and that in the absence of fraud, mistake, or duress a party who has fairly and voluntarily entered into such a contract is bound. This rule applies regardless of a failure to read the contract or inclusion of terms disadvantageous to one party." Adams (n 10).

In Colombia, the Council of State stated:

"The freedom of will, according to the doctrine, manifests in two aspects: 'freedom of conclusion,' by which a person decides if she should enter into the agreement and with whom; and 'freedom of configuration,' through which she models the agreement's effects. The freedom of will or contractual freedom is not unlimited and much less . . . . The law regulates and restricts the freedom of will in both aspects, especially the configuration aspect, by means of imperative legal rules that remove from the parties' will some aspects of the contract, with the purpose that general principles such as public policy, moral or good prevails." Expediente 1276, Consejo de Estado [Council of State], 5 July 2000, CP: CH Salazar (Colom).

51 Luis Diez Picazo, Fundamentos del Derecho Civil Patrimonial (4th edn, Editorial Civitas 1993) 128-130.

52 That the doctrine has been adopted by Louisiana is understandable considering the civil law influence in the State.

53 Anna I. Vellvé and Jefri Ruchti (trs), 'Political Constitution of Colombia of 1991Consolidated to Legislative Act No. 2 of 2009' in Jefri Jay Ruchti (ed), World Constitutions Illustrated (William S. Hein & Co., Inc. 2010) art. 95.

54 A person who abuses his rights shall be obligated to pay indemnification for the damages caused. Code of Commerce 16 June 1971, Diario Oficial 33339 (Colom), art 830. Moreover the Colombian Court of Justice stated that in establishing article 830 of the Code of Commerce, which states that a person who abuses his rights shall be obligated to pay indemnification for the damages caused, the Colombian legal system adopted, without hesitation, the 'abuse of right' rule which points out that:

[T]he rights must be exercised in accordance with their purposes, purposes that are determined by the specific function that they have in human coexistence, and by virtue of which the objective law regulates and protects. . . Therefore, it is necessary to stress that those activities protected by the law that are anomalously executed, motivated by unspeakable, illegitimate or unfair interests that move away from their social-economic goals, must be considered abusive and, therefore, generators of the indemnity obligation, as are also those that involve the malicious and useless exercise of the subjective right. Expediente 5372, Corte Suprema de Justicia [Supreme Court of Justice], 9 Aug 2000, MP: JA Castillo Rugeles (Colom).

55 Expediente 3972, Corte Suprema de Justicia [Supreme Court of Justice], 19 Oct 1994, MP: CE Jaramillo Schloss (Colom). See also Consorcio Business Ltda v Bellsouth Colombia SA Arbitral Award (Camara de Comercio de Bogota 2004). ("In sum, there is nothing senseless in understanding, keeping consonance with these basic directions, that the tribunals will know in each case to make use of the controlling power that involves the punishment of abusive acts in the ample terms that establish rules such as the Code of Commerce's article 830, taking into consideration that the illegality originated from the 'abuse' can manifest itself in a subjective way – when there exists in the agent the defined intention of offending a foreign interest or there is no serious and legitimate interest in his acts – or under objective form when the injury comes from an excess or abnormality in the exercise of certain power, considering the purpose to which this one was incorporated and recognized in the legal order . . . . "). 

56 Coleman v Sch Bd of Richland Parish 418 F 3d 511, 524 (5th Cir 2005) ("Louisiana courts will apply the abuse of rights doctrine only when one of four conditions is met: (1) the exercise of rights exclusively for the purpose of harming another or with the predominant motive to cause harm; (2) the non-existence of a serious and legitimate interest that is worthy of judicial protection; (3) the use of the right in violation of moral rules, good faith or elementary fairness; or (4) the exercise of the right for a purpose other than that for which it was granted.").

57 Green Jr v Price No 95-1079, No 951080, 1996 US App LEXIS 1898, at *3-6 (10th Cir 1996).

58 Moothart v Bell 21 F 3d 1499, 1504 (10th Cir 1994).

59 Mangan v S Cayuga Cent Sch Dist, No 5:05-cv-681 (FJS/GJD), 2005 US Dist LEXIS 22425, at *9-10 (NDNY 2005).

60 Princo Corp v Int'l Trade Comm'n 563 F 3d 1301, 1307 (Fed Cir 2009), vacated, 583 F 3d 1380 (Oct. 13, 2009), aff'd in part & vacated in part No. 2007-1386, 2010 WL 3385953 (Fed Cir  Aug  30, 2010) (internal citations omitted).

61 Aletara Corp v Clear Logic Inc 424 F 3d 1079, 1090 (9th Cir 2005) (emphasis, alterations in original).

62 Video Pipeline Inc v Buena Vista Home Entm't Inc 342 F 3d 191, 197 (3d Cir 2003) ("Congress's constitutional power to provide for copyright protection 'is intended to motivate the creative activity of authors . . . by the provision of a special reward, and to allow the public access to the products of their genius after the limited period of exclusive control has expired.'").

63 Twentieth Century Music Corp v Aiken 422 US 151, 156 (1975).

64 Rengifo Garcia (n 3) 190.

65 Anderson v Ashby 873 So 2d 168, 194 (Ala 2003).

66 Expediente 5670 (n 46.).

67 Although in Colombia, an adhesion contract is not necessarily considered abusive, in the national arbitral award Calderon Palacio v Cafesalud, the arbitrators recognized that abusive clauses are frequently incorporated within them. See Calderon Palacio (n 45).

68 Expediente 5670 (n 46) ("It is important to note that dealing with legal acts concluded and developed through the adhesion to standard terms, which – as a general rule – happens with insurance contracts, comparative legislation and universal doctrine, from some time ago, have placed in the first level the necessity of limiting their content, especially to 'exclude those clauses that help to grant egoist advantages to the cost of the individual party.'").

69 Nagrampa (n 18) 1281 (citing Flores v Transamerica HomeFirst Inc 93 Cal App 4th 846, 853, 113 Cal Rptr 2d 376 (2001)).

70 Zuver v Airtouch Commc'ns Inc 103 P 3d 753, 760 (Wash 2004).

71 ibid.

72 Pokorny (n 31) 996.

73 368 F 3d 269, 276 (10th Cir 2004).

74 Vistein (n 23) 122.

75 Parilla (n 73) ("An adhesion contract is not necessarily unenforceable. The party challenging the contract therefore must also establish substantive unconscionability. This element refers to terms that unreasonably favor one party to which the disfavored party does not truly assent.").

76 Bosinger v Belden CDT Inc 358 Fed Appx 812, 814 (9th Cir 2009).

77 See Traders Bank (n 42).

78 John Deere Leasing Co (n 8) ("The cases seem to support the view that there must be additional factors such as deceptive bargaining conduct as well as unequal bargaining power to render the contract between parties unconscionable. The doctrine of unconscionability is used by the courts to police the excesses of certain parties who abuse their right to contract freely. It is directed against one-sided, oppressive and unfairly surprising contracts, and not against the consequences per se of uneven bargaining power or even a simple old-fashioned bad bargain.").

79 Calderon Palacio (n 45).

80 Expediente 3972 (n 55).

81 ibid ("[A]n undoubtedly persuasive example of this kind of illegal behavior is provided by the exercise of the so-called 'bargaining power' by who, being by de facto or legally in a dominant position in the capital, goods, and services traffic, has not only pointed out the terms in which the agreement is entered into, but also controls their terms in the executing or fulfillment phase, configuring in this scope a supposed clear abuse when, considering the particular circumstances that surround the case, results in a dominant position being taken advantage of, by action or omission, with detriment of the contractual economic equilibrium.").

82 Act 142 of 1994, 11 July 1994, Diario Oficial 41433 (Colom), arts. 14.13 and 133 (Act 142 of 1994).

83 Spain is one such example. See Sobre Condiciones Generales de la Contratacion  (B.O.E. 1998, 7) (Spain). See also Codice civile (CC) art 1469-bis (Italy), Gesetz zur Regelung des Rechts der Allgemeinen Geschäftsbedingungen [AGB-Gesetz] [Standard Contract Terms Act] of 1977, now incorporated into §§ 305ff Bürgerliches Gesetzbuch [BGB] [German Civil Code].

84 Council Directive 93/13/EEC of 5 April 1993on unfair terms in consumer contracts [1993] OJ L 095/29, art. 3.

85 Case C-168/05, Elisa Maria Mostaza Claro v Centro Movil Milenium SL [2006] ECR 10421.

86 Farnsworsth (n 5) 303. See also Nagrampa (n 18).

87 Calderon Palacio (n 45).

88 Steffl v JI Case Co 862 F 2d 692, 695 (8th Cir 1988) ("On the question of unconscionability, we note that unconscionability is seldom found in contracts between commercial parties unless there is both impropriety in the negotiations and substantive unfairness in the contract term sought to be enforced.").

89 Clerk (n 22) 21.

90 Pokorny (n 31).

91 Pendergast (n 27) 1139.

92 Zimmer (n 19). See also Cicle (n 30) (noting that, in determining whether substantive unconscionability exists, courts "look at the totality of the circumstances on an objective basis, considering the reasonable expectations of the average person entering into such an agreement.").

93 Expediente 5670 (n 46) ("[T]here are typical characteristics of abusive clauses – mainly: a) their negotiation was not individual; b) they injure the emerging requirements of good faith . . . , [sic] and c) they create a meaningful unbalance in the rights and obligations that are undertaken by the parties.").

94 Juan Pablo Cárdenas, 'Justicia y Abuso Contractual' in Fabricio Mantilla Espinosa and Francisco Ternera (eds), Los Contratos en el Derecho Privado (Universidad del Rosario, 2007) 702.

95 See Carlos Alberto Soto Coaguila, 'Las Clausulas Generales de Contratacion y las Clausulas Abusivas en los Contratos Predispuestos' (2003) 106 Vniversitas 563. Another recognized mechanism has been the independent or autonomous control. This is carried out by private individuals who decide whether they want to be entered into the contract or not and by consumer associations who inform their members and the general public that a particular company incorporates unfair clauses in their contracts.  ibid 589-590.

96 ibid 590-591.

97 ibid 592.

98 ibid.

99 ibid 592-593.

100 ibid 592.

101 ibid 594-596.

102 73 Pa Stat Ann § 201-1 to 9.3 (2010).

103 ibid § 201-2(18).

104 Fla Stat § 563.022 (2008).

105 Ohio Admin Code 109:4-3-28 (2010).

106 ibid.

107 Cal Civ Code §1770 (2010).

108 ibid § 1804.1

109 Del Code Ann tit 6, § 4311 (2010).

110 NY Pers Prop Law § 403 (2010).

111 Fla Stat Ann § 83.47 (LexisNexis 2010) (1) ("A provision in a rental agreement is void and unenforceable to the extent that it: (a) Purports to waive or preclude the rights, remedies, or requirements set forth in this part. (b) Purports to limit or preclude any liability of the landlord to the tenant or of the tenant to the landlord, arising under law.").

112 Act 142 of 1994, art 133.

113 Act 1328 of 2009, 15 July 2009, Diario Oficial 47411 (Colom).

114 ibid art. 11. Within the group of countries members of the civil law tradition, the most important example of the legislative control of an abusive clause is the European Directive 93/13 of 1993 (n 86). This directive not only establishes a general rule about what constitutes an abusive clause but also a list of a non-exhaustive set of clauses that are considered to have that character. The list includes clauses: ("(a) excluding or limiting the legal liability of a seller or supplier in the event of the death of a consumer or personal injury to the latter resulting from an act or omission of that seller or supplier; (b) inappropriately excluding or limiting the legal rights of the consumer vis-à-vis the seller or supplier or another party in the event of total or partial non-performance or inadequate performance by the seller or supplier of any of the contractual obligations, including the option of offsetting a debt owed to the seller or supplier against any claim which the consumer may have against him; . . . (e) requiring any consumer who fails to fulfil his obligation to pay a disproportionately high sum in compensation; (f) authorizing the seller or supplier to dissolve the contract on a discretionary basis where the same facility is not granted to the consumer, or permitting the seller or supplier to retain the sums paid for services not yet supplied by him where it is the seller or supplier himself who dissolves the contract; (g) enabling the seller or supplier to terminate a contract of indeterminate duration without reasonable notice except where there are serious grounds for doing so; . . . (j) enabling the seller or supplier to alter the terms of the contract unilaterally without a valid reason which is specified in the contract; (k) enabling the seller or supplier to alter unilaterally without a valid reason any characteristics of the product or service to be provided; . . . (m) giving the seller or supplier the right to determine whether the goods or services supplied are in conformity with the contract, or giving him the exclusive right to interpret any term of the contract; . . . (o) obliging the consumer to fulfil all his obligations where the seller or supplier does not perform his.")

115 806 Ky Admin Regs 14:005 (2010).

116 Ky Rev Stat Ann § 304.15-280 (2010) ("(2) No industrial life insurance policy shall be delivered or issued for delivery in this state if it contains any of the following provisions:(a) A provision by which the insurer may deny liability under the policy for the reason that the insured has previously obtained other insurance from the same insurer, (b) A provision giving the insurer the right to declare the policy void because the insured has had any disease or ailment, whether specified or not, or because the insured has received institutional, hospital, medical or surgical treatment or attention . . . , (c) A provision giving the insurer the right to declare the policy void because the insured has been rejected for insurance, unless such right be conditioned upon a showing by the insurer that knowledge of such rejection would have led to a refusal by the insurer to make such contract.").

117 NY Law (Consol) § 3201. New York laws states that: "[t]he superintendent may disapprove any life insurance policy form, or  any  form  of  annuity contract or group annuity certificate, or any   form of funding agreement for delivery or issuance for delivery in  this   state,  if  its  issuance  would  be  prejudicial  to  the  interests of policyholders or members or it contains  provisions  which  are  unjust, unfair or inequitable."

118 Cal Code (Deering) §10291.5 (2010) ("(a) The purpose of this section is to achieve both of the following: (1) Prevent, in respect to disability insurance, fraud, unfair, trade practices, and insurance economically unsound to the insured. (2) Assure that the language of all insurance policies can be readily understood and interpreted.").

119 Burns Ind Code Ann 27-1-12-8.

120 Larry Bates, 'Administrative Regulation of Terms in Form Contracts: Comparative Analysis of Consumer Protection' (2002) 16 Emory Int'l L.Rev. 1, 90-105.

121 Act 142 of 1994, art 133.

122 Decree 663, 5 Apr 1993, Diario Oficial 40820, art 146 (Colom) (Decree 663).

123 Circular Jurídica Básica (Circular Externa 007), tit. 5, 3.1, <http://www.superfinanciera.gov.co/Normativa/NormasyReglamentaciones/cir007.htm> accessed 19 November 2010.

124 Decree 663, art 184.

125 Art. 3.10 Unidroit Principles of International Commercial Contracts (2004) contains a rudimentary rule which makes a term void if this "term unjustifiably gave the other party an excessive advantage", but leaves the details largely open.

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