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Contract Disputes: Dealing With Enforceability and Unequal Bargaining Power

Business and Commercial DisputesLitigation By Binnall Law Group - 2021/07/23 at 10:08am

“Contracts, like hearts, are meant to be broken,” according to famous businessman Ray Kroc who helped make McDonald’s what it is today. While some in the business world may believe that, the reality is certainly to the contrary. At Binnall Law Group, each Alexandria business dispute attorney at our firm knows that contract disputes arise all the time over any number of issues. For example, if you are a party in a dispute that involves unequal bargaining power concerns, there’s a good chance that the court will find that the underlying contract was unconscionable and, therefore, unenforceable. Still, based on your position in the lawsuit, such a finding could have positive or negative consequences for you.

A Brief Look at the Factors That Can Affect a Party’s Bargaining Power

Courts consider numerous factors when examining the bargaining power of contracting parties, some of which include, but are not limited to, the parties’ experience within the industry; the training, education and certifications of the parties; and the presence of attorneys when entering into the contract.  For instance, let’s say there’s a contract between Happy Homeowner and Joe Blow’s Construction to do some home renovations. Joe Blow includes several non-standard, highly technical terms in the agreement, in small print that’s neatly tucked away in one of the last paragraphs on the last page in the back.

In such cases, the court is likely to consider Happy Homeowner to be in an unequal bargaining position because he or she does not have industry experience or may not have had the financial resources to have an Alexandria business dispute attorney guide them through the contract process.  In this scenario, Joe Blow’s Construction appears to be using its experience and knowledge to take advantage of Happy Homeowner.  Accordingly, a judge could find that the contract was, therefore, unconscionable and should be thrown out.

Contract Unenforceability

Contracts will be found to be unconscionable and unenforceable under the law if a court determines that the parties had unequal bargaining power and if one party took advantage of the inferior position of the other. Note that this is a highly fact-based issue. For instance, if the terms are reasonably fair, the court may not find that the contract is unconscionable, even if the parties were in different bargaining positions.

A Note About Unconscionability

Let’s take a look at another example. Let’s say a business owner and an ordinary purchaser enter into an agreement for a large order of pens and shirts. The contract may appear to have standard, cookie-cutter language at first look; however, it actually has an extensive amount of complicated, technical language (i.e., small print) that would be unclear to an ordinary purchaser. Thus, if a problem arises between the business owner and the purchaser such that it goes to court, a judge may deem the contract unconscionable based on the unequal bargaining power of the contracting parties, and the contract will be void/unenforceable.

Let Our Alexandria Business Dispute Attorney Help You Understand Your Rights

So, what are the ordinary purchaser’s rights in the above example? As noted, the court could decide to make the whole contract void, and the business owner would need to repay any money already spent on deposits, etc. On the other hand, the court may conclude that the whole contract doesn’t need to be voided but rather changed to remove the unconscionable sections. If that determination is made, the contract can still be fulfilled without having to create a new one.

As you can see, contract disputes can be tricky to deal with. But help is available to you. Contact an Alexandria business dispute attorney at Binnall Law Group today for assistance.