Unconscionable conduct is conduct that is not in agreement with what is considered reasonable. It is where one party knowingly takes unfair advantage of the other partys disability. This concept of unconscionability first arose in the early eighteenth century and was developed by the English Court of Equity. Since this time it has been used for a variety of uses, such as protecting expected heirs from fraud and people who are poor and ignorant from falling victims to unconscionable conduct.It allows a judge to strike down a clause of a contract or the whole contract on the grounds that it is unconscionable.However in modern times it has been used far less as judges are much less inclined to let a party use this concept as a grounds for relief or to change a contract simply because one party feels that the rules of the contract are harsh, but not, in the eyes of the judge or the law, unconscionable.
There is a long history behind the concept of unconscionable conduct. It has been a cause for intervention on the grounds of equity in various circumstances, such as fraud. This stance was commonly used by expectants in the eighteenth century. These were typically the sons of aristocracy, who had no occupation and no, or little income. They would usually wait until the death of a relative and expected...
some inheritance. Thus came the name expectants. So many expectants would borrow money against this expected inheritance, with high interest rates that were substantially disadvantageous to them. For this reason these kinds of cases were set aside for unconscionability, giving the lender the borrowed amount and reasonable interest.1Slowly the courts came to protect persons who had simply been paid an inadequate price.The courts also started to give relief to persons who were sick, weak-minded, illiterate, drunkenness, emotion infatuation, lack of education, economic duress, youth and those who had not the advantages of independent advice.Equity was however approached with cation and costs were not often awarded in favour of the party that had been granted relief.
In the early seventies there were efforts to revive this old jurisdiction with the new defence of inequality of bargaining power, which was developed by Lord Denning MR in Lloyds Bank v Bundy2, however the case was eventually decided on the basis of undue influence.Inequity in bargaining power had no support in England with the House of Lords often ruling for the party accused of inequity, as in National Westminster Bank pic v Morgan3 which involved the relationship between a husband and a wife.The Trade Practices Act 1974 was also implemented around this time. It comments on unconscionable conduct with section 51aa and 51ab devoted to this concept. Section 51ab states that A corporation shall not, in trade or commerce, in connection with the supply or possible supply of goods or services to a person engage in conduct that is, in all circumstances, unconscionable.Victoria has simply legislation in s89 of the Good Act 1958. Other states and territories also have
similar acts however by reasons of metal disability or drunkenness a person still must pay the necessaries which are goods suitable to a persons station in life.
A victim of unconscionable conduct may be denied relief on equitable grounds ie. Laches. In Barburin v Barburin (1991) 2 Qd R 240 the plaintiff sought to set aside a transfer of shares after 14 yrs was denied relief on the basis that there had been unreasonable delay in commencing proceedings, & in view of what had occurred in the period which lapsed since the transfer it would have been unjust to grant relief.
The history of unconscionability also shows the making of basis for relief of unconscionability. Such as in the case of Commercial Bank of Australia Ltd v Amadio4 were the Amadios son heavily overdrawn his accounts and owed a large sum of money to the bank. The Amadios, who knew only a little English and had no knowledge that their son was in such a bad position, agreed to be liable for $50,000 to a period of six months. However the bank disagreed and when the sons business collapsed. The bank then demanded their money. The Amadio claimed unconscionable conduct and ask that the contract be set aside, which the court granted as it saw that the bank had know about their illiteracy but when ahead with the contract regardless.However since this time unconscionable conduct is rarely a reason itself to set aside a contract.
In recent times the shift towards not accepting unconscionable as a basis of relief is becoming more evident, with judges repeatedly warning against it, as Lord Radcliffe stated in Bridge v Campbell Discount Co Ltd, Unconscionable must not be taken to be a panacea for adjusting any contract between competent persons when it shows a rough edge to one side or the other highly sceptical of the courts duty to apply the epithet unconscionable or its consequences to contracts made between persons that did not fall within the familiar categories of fraud, surprise, accident, et.
When dealing with a case on unconscionability the concern for the judge is to see whether and in what circumstances the court may set aside the contract on this concept. .
Following From Guidebook To Contract Law In Aust,
- To appreciate its relevance a number of focal points maybe distinguished.
- Persons may unconscionably seek to depart from a promise, representation or assurance made, but has no contractual significance.
- Unconscionability may be relevant to the decision to contract. This is say a contract maybe entered into because one party has engaged in unconscionable conduct in order to influence the other to enter into the contract.
- Terms of contract maybe unconscionable in that sense that it is unfair to one of the parties.
- Enforcement of the contract may in circumstances be unconscionable.
- Unconscionability maybe a statutory justification for re-opening a contract.
The concept of unconscionability as a basis for relief may be established by evidence of, inter alia, inequity of bargaining power in particular cases but unconscionability does not lend itself to specification. It is an error to equitable fraud can be specially defined, or that classes of case in which it
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