Unconscionable bargain

Question 1

• reckless young man who was in need of money was able to set aside a sale of his inheritance
• the plaintiff was destitute and had sold his inheritance to his brother-in-law for a low consideration and without having received adequate professional advice.
• The brother-in-law was the commercially wiser of the two parties, and was found to have taken advantage of the plaintiff’s reckless ways.
• As a result, the plaintiff was successful in setting aside the sale.

Answer 1

Slator v. Nolan (1876) IR 11 Eq 367

Question 2

• following four factors as a useful guide
  
  • The party seeking to set aside the transaction must have been labouring under a bargaining impairment which placed him at a serious disadvantage vis-a-vis the other party at the time the transaction was entered into;
  • The party seeking to enforce the transaction must have exploited this disadvantage;
  • The resulting transaction must have been manifestly improvident for the party seeking to set it aside;
  • The complaining party must have lacked the benefit of adequate advice prior to entering into the transaction

Answer 2

Boustaney v. Piggott (1995) P& CR 298

Question 3

• pregnant women in delicate health went to a moneylender in order to get a mortgage for a house which she got with a 60% interest rate
• Court of Appeal set the bargain aside and substituted an interest rate of 5%
• traditionally, English courts used this concept to protect by establishing a bargain that was actually a fair one

Answer 3

Rae v Joyce 1892 - “textbook example”

Question 4

• plaintiff was an elderly farmer, mentally deficient, difficult, intransigent and almost illiterate
• The plaintiff invited the defendant to visit and agreed to assign to the defendant his farm absolutely on his death, subject to a life interest. The defendant would have a right of residence and would work without reward on the farm.
• set aside - the solicitor did not know all the material facts and did not give plaintiff a complete explanation of the nature and effect of the deed.- bad for him

Answer 4

Grealish v. Murphy [1946] IR 35

Question 5

• a widow had signed away her statutory right in her husband’s estate to her son
• The widow had made the agreement in 1969 and obtained independent legal advice in 1973.
• But it was not until 1977 that she brought proceedings to set aside the transaction. The lapse of time here was substantial. This was not, of itself, sufficient to bar relief. - The defendant had invested 10 years’ of his life into working the farm in the belief that the widow had no intention of bringing any such claim, and to force him to sell it at that stage would be unfair.

Answer 5

JH v. WJH (Unreported)

Question 6

• the plaintiff suffered a brain injury in an accident and settled his claim against the defendant for $60,000 without independent representation and in reliance upon the advice of the defendant’s own loss adjuster, who obviously had a conflict of interest.
• That loss adjuster had advised the plaintiff he would be better off not retaining a lawyer as the lawyer would take a cut of 25% and that the plaintiff was getting in the sum of $60,000 a whole $20,000 more than he should be.
• In fact, the defendant’s own baseline for the case was $120,000.
• The Supreme Court of British Columbia invoked unconscionable bargain to set aside the agreement.

Answer 6

Doan v. Insurance Corporation of British Columbia (1987) 18 BCLR 286

Question 7

• Mr Pelosi ran a small business and had an overdraft facility with its bank to an agreed limit of £250,000. Mr Pelosi sought an increase of that facility to £270,000
• Pelosi gave the bank an unlimited “all-moneys” guarantee given by a Miss Burch at his request.
• Burch was a junior employee of the company in receipt of a modest wage, neither a director nor a share-holder.
• Her guarantee was supported by a second charge on her home.
  
  • She understood the unlimited nature of the guarantee (in terms of time and amount), but had not taken independent legal advice.
• The transaction was not merely to the manifest disadvantage of Miss Burch; it was one which, in the tradition phrase, ‘shocks the conscience of the court’. Miss Burch committed herself to a personal liability far beyond her slender means, risking the loss of her home and personal bankruptcy, and obtained nothing in return beyond a relatively small and possibly temporary increase in the overdraft facility available to her employer, a company in which she had no financial interest. The transaction gives rise to grave suspicion. It cries aloud for an explanation. - got nothing in return

Answer 7

Credit Lyonnais v. Burch [1997] 1 All ER

Question 8

• plaintiff, a Hungarian immigrant to Canada who was elderly, impoverished and illiterate, with a poor command of English, sold his land to the defendant commercial developer for $3,300 without receiving independent advice, when the property was in fact worth between $11-13,000
• The elderly man had even attempted to pay “taxes” on his house after the completion of the transaction only to be informed that he could not do so as it was no longer his.
• The Alberta District Court found that the defendant had tendered no evidence to show that the transaction was fair, just and reasonable, and it rescinded the sale.

Answer 8

Fusty v. McLean Construction Ltd (1978) 6 Alberta LR (2d)