Contracts and Sales Multistate Bar Practice Exam

When might a risk-shifting clause in a contract be deemed unconscionable?

1. Always, if it shifts risk from one party to another

2. When it is unclear or incomprehensible to an average person

3. If it includes typical industry practices

4. Only if both parties agreed to the term in writing

The correct answer is: When it is unclear or incomprehensible to an average person

A risk-shifting clause in a contract can be considered unconscionable when it is unclear or incomprehensible to an average person. Unconscionability is a legal doctrine that addresses situations where terms of a contract are so unfair or harsh to one party that they shock the conscience. In this context, a risk-shifting clause that is ambiguous or difficult to understand can create an unfair advantage for one party, typically the one drafting the contract, thereby placing the other party at a disadvantage without a clear understanding of their obligations or liabilities. If the average person cannot comprehend the risk or understand how it affects them, it undermines the principle of mutual assent which is fundamental to contract law. A risk-shifting clause should be clearly articulated so that all parties can understand the risks they are agreeing to take on. Contracts must be fair and intelligible; if they fail to meet that standard due to complexity or vagueness, they may be struck down as unconscionable by courts. The other options do not adequately capture the conditions under which such clauses can be deemed unconscionable. Shifting risk in itself is not problematic as it commonly occurs in contracts. Furthermore, the inclusion of typical industry practices does not inherently lead to uncon