Legal Blog

Unconscionable

Uber Technologies Inc. v. Heller 2020 SCC

The SCC upheld the decision of the Ontario Court of Appeal, which struck down an arbitration clause as unconscionable. The SCC postulated a two-part test for unconscionability: an inequality of bargaining power and an improvident transaction.

• An inequality of bargaining power exists when one party cannot protect its interests in the bargaining process. This inequality can arise out of knowledge, experience, or vulnerabilities peculiar to individual situations. It can include cognitive asymmetry (i.e. only one party can appreciate and understand the full impact of the contractual terms). In essence, it arises in the context of a bargaining context in which the law’s normal assumptions about free bargaining resulting in a fair transaction no longer hold.
• A transaction is improvident if it unduly advantages the stronger party and disadvantages the more vulnerable. Again, improvidence has to be assessed contextually, reading the terms of the contract in light of the surrounding circumstances at the time of contract formation. These include the market price, commercial setting, and position of the parties.

Written by Jonathan Speigel, the founding partner of Speigel Nichols Fox LLP, leads the litigation and construction practices.