Coase-Sandor Working Paper Series in Law and Economics
Publication Date
2008
Publication Title
Law & Economics Working Papers
Abstract
Several doctrines of contract law allow courts to strike down excessively one-sided terms. A large literature explored which terms should be viewed as excessive, but a related question is often ignored—what provision should replace the vacated excessive term? This paper begins by suggesting that there are three competing criteria for a replacement provision: (1) the most reasonable term; (2) a punitive term, strongly unfavorable to the overreaching party; and (3) the maximally tolerable term. The paper explores in depth the third criterion—the maximally tolerable term—under which the excessive term is reduced merely to the highest level that the law considers tolerable. This solution preserves the original bargain to maximal permissible extent, and yet brings it within the tolerable range. The paper demonstrates that this criterion, which received no prior scholarly notice, is quite prevalent in legal doctrine, and that its adoption is based on powerful conceptual and normative underpinnings.
Number
417
Recommended Citation
Omri Ben-Shahar, "How to Repair Unconscionable Contracts" (John M. Olin Program in Law and Economics Working Paper No. 417, 2008).
Additional Information
Chicago Unbound includes both works in progress and final versions of articles. Please be aware that a more recent version of this article may be available on Chicago Unbound, SSRN or elsewhere.