Why “Unfair” Clauses Are Still Enforceable Under the Contract and at Law

Many people assume that if a clause feels unfair, unreasonable, or one-sided, it cannot be enforced. In commercial contracting, the opposite is usually true.

1. Freedom of Contract

The core principle in most legal systems (common law + civil law) is freedom of contract. Parties are free to:

  • allocate risks,
  • impose obligations,
  • set procedures and consequences,
  • shift responsibilities,
  • decide payment and entitlement structures.

As long as both parties agreed to the clause (even if one negotiated poorly), the law assumes the risk allocation was intentional.

Conclusion: A clause is enforceable even if harsh, even if it favours one party, and even if it would not be agreed to in a perfect world.

2. Courts Do Not Rewrite Contracts

Judges generally do not rescue parties from a bad bargain. Their job is to interpret and apply the contract, not redesign it.

A court will not say:

  • “This clause is too strict — we’ll make it more balanced,” or
  • “It feels unfair — let’s ignore it.”

If parties freely signed, courts presume the commercial terms reflect the bargain.

Conclusion: The clause stands unless it breaches a legal exception.

3. Only Specific Legal Grounds Can Invalidate a Clause

For an “unfair” clause to be unenforceable, it must fall into a recognised legal defect, such as:

a. Illegality

Clauses that violate statute, licensing laws, or public policy cannot be enforced.

b. Unconscionability

Extremely rare in commercial contracts. Requires:

  • severe imbalance, and
  • evidence of exploitation, and
  • lack of meaningful choice.

Courts rarely apply this where both parties are businesses.

c. Statutory Prohibitions

Certain industries or consumer transactions may have laws banning unfair terms — BUT commercial construction contracts rarely fall under consumer protection laws.

d. Ambiguity interpreted against the drafter (Contra proferentem)

This does not void the clause — it merely interprets ambiguity against the party who drafted it.

Conclusion: Outside these narrow grounds, the clause is enforceable even if commercially unreasonable.

4. Commercial Parties Are Presumed to Understand What They Sign

In B2B contracting, courts assume:

  • parties had legal advice,
  • parties were capable of negotiating,
  • parties intended to allocate risks as written.

Even if one party felt pressured, rushed, or did not fully read the document — that is not a legal defence.

Conclusion: Failure to review or understand the clause does not make it unfair at law.

5. Construction Contracts Are Built on Risk Allocation

Construction law specifically recognises:

  • liquidated damages,
  • notification time-bars,
  • pay-when-paid clauses (in some jurisdictions),
  • strict variation procedures,
  • strict claim timelines,
  • exclusive remedies.

These often feel unfair — but they are intentionally designed to shift risk.

The law respects this design unless it breaches statutory restrictions.

THE REALITY

Unfair clauses are enforceable because:

  • The parties agreed to them.
  • The law respects commercial bargains.
  • Courts avoid interfering unless there is illegality or extreme abuse.
  • Commercial entities are presumed to negotiate knowingly.
  • “Unfair” is not the same as “unenforceable.”

THE PRACTICAL LESSON FOR CONTRACT MANAGERS

The time to fight an unfair clause is:

❌ NOT during the dispute ❌ NOT at final account ❌ NOT in arbitration

The only effective time is:

✅ Before signing — during contract review and negotiation.

✅As After signing it is too late.

After signature, the clause becomes part of the legal bargain and will always be enforced as written and agreed..