A Comparative Study of Unconscionability of Contracts as an Abstract Mechanism for Controlling Contractual Fairness in Iranian and American Law

Abstract

The fundamental transformation of contract law from classical formalism to modern justice-oriented approaches has challenged the principle of the binding force of contracts in the face of structural inequalities embedded in unconscionable and adhesion contracts. The present study adopts a comparative-analytical approach to examine the doctrine of unconscionability in light of § 2-302 of the Uniform Commercial Code (UCC) and evaluates its effectiveness in comparison with the traditional institutions of Iranian law. The findings indicate that the American legal system, through a sophisticated distinction between procedural unconscionability (the absence of meaningful choice resulting from oppression or unfair surprise) and substantive unconscionability (one-sided and oppressive contractual terms), and by employing the sliding-scale theory, has established a dynamic mechanism for judicial intervention and contractual adjustment. In contrast, the findings reveal that although Iranian law possesses institutions such as the option of gross disparity (khiyār al-ghabn) and the doctrine of necessity (iḍṭirār), it remains incapable of effectively controlling imposed and oppressive terms due to the absence of a general theory and its reliance on an all-or-nothing approach to invalidity. Critiquing the fragmented nature of existing protective legislation, this article proposes that the Iranian legislature, drawing inspiration from the UCC model while adapting it to the jurisprudential principles of lā ḍarar (the prohibition of harm) and the negation of hardship (nafy al-ʿusr wa al-ḥaraj), should establish a general rule prohibiting unconscionable terms. The cornerstone of such reform could be the conferral of judicial authority to modify contracts and declare partial invalidity, thereby enabling courts to remove or restrict oppressive provisions while preserving the contract itself. This approach would create a sustainable balance between legal certainty and commutative justice.