Eighty-eight Pacific Northwest public utilities in 1976 contracted with the Washington Public Power Supply System ("WPPSS") for the construction of two nuclear power plants. The contract, or Participants' Agreement, contained a so-called "hell-or-high-water" clause which obligated the utilities to pay for the construction of the nuclear plants whether or not any electricity was ever produced. This article explores the possibility that such a clause might be unenforceable because of its unconscionability. The article demonstrates that, contrary to popular belief, unconscionability has often been found in non-consumer commercial settings. It considers several common avenues to finding substantive and procedural unconscionability and shows that the most likely defect in the Participants' Agreement was a failure to disclose vital information to the utilities—not about technical details of design and construction, but about the risks involved. Thus the utilities may have been ill-prepared to make a rational judgment to assume the risk of noncompletion. This distinction between technical information and risk information mirrors a similar distinction in such public-policy areas as deciding whether to permit nuclear weapons testing. The relevant inquiry when determining whether procedural unconscionability exists is whether one party failed to disclose facts not reasonably available to the other party, and whether that failure prevented the other party from properly assessing the risks involved. This is true with both public policy and private contract concerns. If WPPSS failed to disclose the risk of noncompletion to the utilities, and if the hell-or-highwater clause is found to place virtually all risk on the utilities, then the clause should be found unconscionable.
Unconscionability in a Commercial Setting: The Assessment of Risk in a Contract to Build Nuclear Reactors,
58 Wash. L. Rev.
Available at: https://digitalcommons.law.uw.edu/wlr/vol58/iss2/5