[Draft 1] - Relief for Unconscionable Contracts

[Simone Republic]

Motivation

This is a subset of tort reform focusing on contracts that are deemed unconscionable, following on from 447 and 681. It is roughly to protect individual consumers (and small businesses such as sole proprietors) who do not understand a contract from being binding on a contract if they entered into the said contract without full knowledge of the terms and conditions therein.

Category: regulation/legal reform (or regulation/consumer protection, but I think this is closer to tort reform)

Draft 1

The World Assembly (WA),

Noting past resolutions on contracts such as GARs 205, 447 and 681;

Believing that there is a compelling public interest in regulating unconscionable contracts to protect the general public, as well as small businesses that enter into contracts without the benefit of competent legal advice;

The WA hereby enacts as follows:

1. Definitions. In this resolution:
   
   1. "Authority" means a competent authority of a WA state in charge of enforcement of this resolution.
   2. "Business" includes the supply of any goods and services by an individual or an entity as part of an endeavor for their own benefit. This includes cases where an authority of a WA state deems the party to be holding themselves out as conducting a business.
   3. "Contract" includes written, verbal or other forms of contracting customary to that WA state.
   4. "Entity" includes state-owned enterprises entities controlled by WA states, but excludes entities of WA states carrying out regulatory functions.
   5. "WAJC" means the WA Judiciary Committee.
   6. Defined terms in the singular include the plural and vice versa.
2. Definitions of consumers.
   
   1. A party to a contract is deemed a “consumer” if it does not make the contract in the course of a business, and the other party making the contract does make the contract in the course of a business.
   2. An authority may deem a business to be a “consumer” if it finds that the business lacks the necessary scale, resources, or sophistication to enter into a contract as a business.
3. Unconscionable contact. An authority is required to consider the following factors in determining if a contract is unconscionable:
   
   1. The relative bargaining power of the parties to the contract, and any tactics deployed during bargaining;
   2. The imposition of any requirements not necessary on the part of the consumer to protect the interests of the other party;
   3. The sophistication of the consumer in understanding the terms and conditions therein;
   4. The deliberate obfuscation of terms and conditions;
   5. The use (or misuse) of unfair tactics during negotiation;
   6. The conduct of the parties after the execution of the contract;
   7. The pricing of any goods and services under the contact compared to prices available elsewhere in the same (or similar) WA states; or
   8. The circumstances of the unconscionability and whether such circumstances can be reasonably foreseen.
4. Proof.
   
   1. It is up to the party claiming that a contract (in whole or in party) is unconscionable to prove that it is.
   2. National security, necessity in times of war or military action, or compliance with WA resolutions are valid defenses against a claim of unconscionability.
5. Relief. If an authority of a WA state finds a contract between a consumer and a business unconscionable, it may determine that:
   
   1. The contract cannot be enforced in full or in part;
   2. Alter any part of a contract to avoid any results deemed unconscionable.
6. Scope of relief.
   
   1. Relief under this resolution is limited to compensatory relief.
   2. This resolution does not regulate punitive damages. However, no WA state may impose punitive damages for breaches of this resolution on contracts entered into prior to the enactment of this resolution.
7. Severability.
   
   1. A contract clause that is deemed unconscionable may only be severable if no one who is a party to a contract specifically benefits from such severance.
   2. This clause overrides severability provisions in all contracts upon enactment of this resolution.
8. Choice of law.
   
   1. No WA may enforce choice of law provisions in any contract if this results in the contract being adjudicated in a non-WA state versus a WA state.
   2. No WA state may enforce contracts with exclusive jurisdiction in a non-WA state, or decisions regarding the contract from a non-WA state, if the said contract is deemed unconscionable in whole or in part by an authority of any WA state.
   3. This resolution is binding on all parties to a contract as long as one party to a contract is subject to the jurisdiction of a WA state.
9. Jurisdiction.
   
   1. Each WA state is responsible for interpretation and enforcement of this resolution.
   2. In case of disputes over jurisdiction, or in case of conflicting rulings from different WA states over matters in this resolution, WAJC shall be the appellate court and shall consider all appeals on a de novo basis.
   3. WAJC may also accept appeals from non-WA state parties if such parties submit to WAJC jurisdiction.

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