Unconscionable Bargain Flashcards
(11 cards)
Unconscionable Bargain
Where one party to a contract is under a significant disadvantage or disability of which the other party knew or ought to have known. That disadvantage must have existed at the time the agreement was entered into.
Carroll v Caroll
Three criteria established by Shanley J:
- One party at a serious disadvantage
- The transaction was at an undervalue
- There was a lack of independent legal advice.
Slator v. Nolan
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.
Boustaney v. Piggott
English equivalent of the principles outlined by Shanley J in Carroll v Carroll.
They are interdependent.
Rae v Joyce
- McDermott considers Rae to be a “textbook example” of unconscionable bargain, and its facts provide a useful introduction to this area.
- A pregnant woman in delicate health had mortgaged a reversionary interest in property at a serious undervalue. The mortgagee was a moneylender who was more commercially aware of the two parties, and imposed a whopping 60% fixed interest rate.
- The disparity of advantage between the two parties is such that equity is required to intervene and set aside the deal struck, because it is unconscionable that it should stand.
- The Irish Court of Appeal set aside the “bargain” and substituted an interest rate of 5%. Walker C pointed to the helplessness of the parties, including the husband on his knees to the solicitor; it is the role of the Courts of Equity to protect the distressed.
Grealish v Murphy
Leading Irish case. Like the Field in real life.
- The plaintiff was an elderly farmer, mentally deficient, difficult, intransigent and almost illiterate. He lived on his own in an isolated rural area.
- 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, and on the plaintiff’s death, would inherit the property.
- The plaintiff successfully established (a) his own weakness of mind; (b) the deficiencies in his legal advice; and (c) his general lack of awareness of the situation. Once the onus of proof had been thrown on him, the defendant could not establish that the transaction was fair. This allowed the court to set aside the transaction on grounds of unconscionable bargain.
- Gavan Duffy J reiterated the principle that equity intervenes when the parties have not met upon equal terms.
Doan v. Insurance Corporation of British Columbia
- In this Canadian case of the plaintiff suffered a brain injury in an accident and settled his claim (outside of court) 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 defendants, privately, had placed a reserve on the case of $120,000. The Supreme Court of British Columbia invoked unconscionable bargain to set aside the agreement.
Credit Lyonnais v Burch
A junior employee made an unlimited “all-moneys” guarantee to the bank to secure an extended overdraft facility for her employer.
The Court of Appeal found that the transaction ‘shocks the conscience of the court’.
Fusty v. McLean Construction Ltd
- The 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. Didn’t understand the transaction they’d entered at all. Had even tried to ‘pay taxes’ on his house after the transaction.
- 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.
JH v. WJH
- A widow had signed away her statutory right (legal right share) 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.
Keane J found that the lapse of time was substantial. This was not, of itself, sufficient to bar relief, but 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.
Meagher v Dublin City Council
Equity and the common law are not (yet) substantively fused. While laches may bar a claim for equitable relief, it has no applicability to a claim at common law for damages for breach of contract.
Delay can also defeat duress (even though it is CL) as the delay can be seen as demonstrating the party’s acquiescence to the contract.
