Avoiding unconscionable contracts

There are good deals, and there are bad deals. It’s all a part of the business.

And the law won’t necessarily save you from a bad bargain. Sometimes, however, a bargain is not simply bad – it’s downright unconscionable. And in these cases, the person on the wrong end of the bargain may be able to find recourse in the law.

Hong Kong

Legal recourse in Hong Kong exists in the form of statutes. There are, for example, general consumer protection provisions found in the Sales of Goods Ordinance (Cap. 26), the Supply of Services (Implied Terms) Ordinance (Cap. 457), and the Control of Exemption Clauses Ordinance (Cap. 284), which all seek to regulate the conduct of contracting parties. The one that would fall squarely under the ambit of this article, is the Unconscionable Contracts Ordinance (Cap. 458) (the “UCO”).

The UCO applies only to contracts for the sale of goods or supply of services in which one of the contracting parties is a consumer. The aggrieved party may institute proceedings and seek the Court’s agreement that the contract (or parts of it) is indeed unconscionable (and thus unenforceable). In accordance to section 6 of the UCO, which enumerates a number of factors to be considered, such as:-

  • Bargaining strength – bargaining strength is relative, and ordinarily, a service provider entering into standard boilerplate contracts would be deemed to be in a stronger position;
  • Whether the consumer was required to comply with conditions not reasonably necessary for the protection of the seller or service provider’s legitimate interests;
  • Whether any undue influence was exerted, or unfair tactics were deployed; and
  • The amount for which, or circumstances under which, the consumer could have acquired identical or equivalent goods or services from another party.

The Court will, therefore, consider whether a contract is wholly or partially unconscionable based on the considerations listed under section 6, which is inexhaustive.

The UCO does not otherwise provide for a definition of the term “unconscionable”. There have been comments in the past over the UCO’s deficiency in granting adequate protection to consumers. This was based on the Court’s tendency to consider “all circumstances”. This meant that a contract may be considered to be conscionable as long as there was procedural fairness in the way the contract was formed. This lead to the situation where a single unfair term cannot by itself render an entire contract to be unconscionable and thus unenforceable in the eyes of the UCO.


Likewise, the conscionability of conduct is regulated by statute in Australia in the form of the Australian Consumer Law (the “ACL”) set out in Schedule 2 of the Competition and Consumer Act 2010. Similar to the UCO, the ACL does not precisely define the scope of “unconscionable” conduct, preferring to have it be determined on a case-to-case basis. These will be decided in accordance with factors under ACL section 22, which are not dissimilar to those found under section 6 of the UCO. Australian courts, like their Hong Kong counterparts, will also consider any other factors they think relevant.

As alluded to above, the lack of a precise definition helps the Court in determining cases with flexibility. At the same time, this could make things difficult and uncertain for an aggrieved consumer, or even service providers or goods suppliers accused of unconscionable conduct. After all, the natural meaning of the word “unconscionable” refers to something more than simply “unfair” or “bad”, something that is against the good conscience of society.

This is obviously subjective. It would be prudent for all contracting parties to take precautions to bear in mind the following practical tips.

For Consumers:

    • Ensuring that all terms of the agreement are in writing. It is not uncommon for agreements to be supplemented or altered orally, and the lack of written evidence may complicate things unnecessarily down the road;
    • Ask for plain language explanations and obtain independent legal or financial advice if unsure. It is important to fully understand all the terms of the transaction you’re getting into;
    • If you feel or become aware that you are being treated differently, voice out your concerns. If you cannot obtain a satisfactory explanation, remember that you are at liberty to walk away from the deal; and
    • Be aware of what the other side may be pulling off to exert pressure or trick you. For example, switching up contracts, only providing a signature sheet, not providing all the schedules to the contract etc. may all be methods to induce you into signing.

For service providers and suppliers:-

    • Carefully assessing the characteristics and vulnerabilities of customers. For instance, customers from non-English speaking backgrounds may require plainer explanations;
    • Giving reasonably sufficient time and space for customers to consider the contract. It is also important to avoid saying or doing anything that may one day be argued in Court to have been said or done in an attempt to pressurise the customer;
    • Giving customers the time and opportunity to seek legal advice if they so require; and
    • Doing all you can to draw the customers’ attention to important or unusual terms or conditions.

It’s important to be cautious and proactive to avoid unconscionable conduct. By practicing diligent contract management, parties can prevent or address situations that may be deemed unfair or unethical. Taking precautions and ensuring transparency in contracts helps protect the rights and interests of all involved parties, promoting ethical business practices and maintaining the integrity of contractual relationships.

This article does not constitute legal advice.

The opinions expressed in the column above represent the author’s own.

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