Unconscionability, Smart Contracts, and Blockchain Technology: are consumers really protected against power abuses in the Digital Economy?
This work discusses the doctrine of unconscionability in smart contracts involving consumers, as implied by the Supreme Court of Canada in its Uber v Heller decision of 2020. Finding an arbitration clause, whereby Uber required a Toronto driver to bring his labour complaint to an arbitration tribunal in the Netherlands, unenforceable, the Supreme Court required the presence of inequality of bargaining power and improvident bargain for a contract to be unconscionable. This approach to unconscionability also applies to standard form contracts or contracts of adhesion involving consumers. This work focuses on the implications of such an approach for protecting consumers in standard form contracts that take the form of smart contracts. The doctrine of unconscionability may curb abusive practices by companies (particularly global platforms), mitigate the problems associated with the immutability of smart contracts, and incentivize companies to encode fair terms and conditions in smart contracts. This paper, however, raises concerns about the effectiveness of the enforcement of the doctrine of unconscionability in smart contracts implemented within blockchain technologies. Companies’ apparent unwillingness to encode fair terms and conditions in smart contracts and consumers’ inability to detect unfair terms and bring an action in response along with the limitations of regulators and courts to enforce fairness standards in the digital economy may render the doctrine of unconscionability ineffective. Consideration should be given to supplementing regulators and courts with mandatory auditing of smart contracts under public scrutiny, in order to encourage companies to remove unfair terms and conditions together with bias, discrimination, and technical failures. This corporate auditing of smart contracts may greatly mitigate the enforcement problems associated with the doctrine of unconscionability and ensure that consumers are effectively and conveniently protected in the digital economy. Although lessons may be drawn for other nations, attention should also be paid to local contexts and the institutional strengths and weaknesses of a particular country.
Salazar V, Alberto R.
"Unconscionability, Smart Contracts, and Blockchain Technology: are consumers really protected against power abuses in the Digital Economy?,"
International Journal on Consumer Law and Practice: Vol. 9, Article 2.
Available at: https://repository.nls.ac.in/ijclp/vol9/iss1/2