XYZ Corporation and ABC Ltd. enter into a contract for the supply of specialized machinery. The contract includes a clause that allows XYZ Corporation to unilaterally increase the price by 50% if ABC Ltd. decides to terminate the agreement. XYZ Corporation has a dominant position in the industry and pressured ABC Ltd. to accept this term without negotiation. ABC Ltd. now seeks to have this clause declared unenforceable. What is the best defense for ABC Ltd. to argue the clause should not be enforced?
The clause imposed by XYZ Corporation is excessively one-sided and was imposed under conditions where XYZ had superior bargaining power, making it unconscionable. Unconscionability occurs when a contract term is so unfair to one party that it undermines the contract's fairness, thereby shocking the conscience of the court. Therefore, the best defense is unconscionability.
Illegality is not applicable as the contract does not involve illegal activities. Public policy does not directly apply here since the issue is primarily about fairness and bargaining power rather than societal norms. Fraud is irrelevant because there is no deception involved in the contract formation.
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