Are there laws stating that contracts should have good morals?

Question

I am reading a contract that is clearly one sided and demands a lot of rights on the recipient's end to be withdrawn for the sake of the lease agreement. The lending party also wants to negate a lot of responsibilities that are enforced by law such as safety for the receiving party.

I like to categorize this under bad morals and evil intent and would like to accuse the lending party of such. Although I just want to see some enactments or civil codes that protect citizens from expensive corporations abusing people through signed contracts.

The jurisdiction is California.

Answer 1

There is no requirement that the terms of a contract be even-handed

The common law position is that parties are free to contract on whatever terms they like: if you agree to sell me your late model car for $1 that's a matter between the two of us.

The law allows you to make a bad bargain.

Unconscionability

There is an equitable doctrine that allows the court to refuse to enforce unconscionable contracts or terms.

The California Supreme Court has ruled that "the central idea (of the) unconscionability doctrine is concerned not with ‘a simple old-fashioned bad bargain "… but with terms that are 'unreasonably favorable to the more powerful party.'" In other words, courts will not enforce contracts that are "overly harsh," "unduly oppressive," or "so one-sided as to shock the conscience."

However, I would be extremely surprised if the terms you are upset about rising to the level of unconscionability.

The basic test of unconscionability, as expressed in official comment 1 to section 2-302, is:

whether, in the light of the general commercial background and the commercial needs of the particular trade or case, the clauses involved are so one-sided as to be unconscionable under the circumstances existing at the time of the making of the contract. . . .The principle is one of the prevention of oppression and unfair surprise. . . and not of disturbance of allocation of risks because of superior bargaining power.

They seem to be dealing with risk allocation and moving risks that are normally on the lender to the buyer or requiring the buyer to waive statutory rights and warranties - there is nothing illegal in that unless the law has a "no contracting out" provision. Some laws do and some laws don't. Some laws may not allow contracting out in consumer transactions but may allow them in business transactions.

You seem to be talking about some sort of equipment financing arrangement. As such, if you don't like the deal, there's a bank down the street with a different deal.

US law recognises that once there is a contract, the parties have to act in good faith to ensure each party gets the benefit of the bargain they made but there is no such requirement in negotiating that bargain. If you can use your economic strength to get a better deal, that's called capitalism.

Answer 2

Ideally a contract is an agreement between parties who are both are getting something out of it. Why enter into a contract if i whatever you are getting is not worth whatever you ate giving up? That presumes there is no coercion and the parties are competent to understand what they are agreeing to.

There are situations where the relative power of the parties are so different that “unconscionable” terms are forced on one party. There is also the possibility of fraud if one party hides information from the other.

There is not likely to be any crime to propose a one sided agreement absent fraud.

Answer 3

People have broad freedom to choose contract terms

One should not enter into a contract unless one thinks that it will be better than making no deal at all, and is the best deal one can obtain.

When one party is in a stronger position, that party can and often does get the better of the deal, and this is perfectly legal. When one party has used very superior market power to get a deal that is excessively one-sided, a count may set it aside as "unconscionable" . There is no clear bright line for when a court will do this, but generally it is only done when the deal is far more one-sided than is normal in business between strangers. If one side has somehow taken advantage to a degree that nears coercion, a count is more likely to step in. A court is more likely to step in when the contract is for a consumer transaction.

There are various specific laws placing limits on contracts in particular fields of action, again particularly consumer contracts. In some cases these impose limits that may not be waived or contracted away. Courts will routinely enforce such laws. California probably has more such laws than many other US states.

Without kn owing the specific ways in which the contract in question is one-sided, there is no way to judge if it is a contract that a court would enforce as written or modify. But courts tend to be reluctant to modify contracts unless they are against specific laws, or there has been actual fraud, or such unfairness as to amount to the same thing as fraud or coercion. Merely being "morally wrong" generally has little effect.