Case 1
Facts
Peter wants some money to boost his new business he therefore asks his uncle for help in acquiring a loan from the bank. His uncle who migrated from china some twenty years ago does not understand English too well and relays on peter for financial and legal advice. His uncle agrees to take up the loan for peters sake and uses his house as collateral. The bank manager is well aware or Mr. Ji financial position but does not offer him advice before allowing him to sigh the contract. Peter is unable to repay the loan contract and the bank wants to sell his house to recover their money as per the contract. Under the law, there is no legal contract between Mr. Ji and the bank and in fact the bank manager did perform unconscionable conduct toward him.
The law
Unconscionable conduct
The law on unconscionable conduct[1] usually deals with transactions between dominant and weak parties to a contract. The Australian law provides for certain remedies available for Mr. Ji under both equity and common law.
Under Equity
Equity usually intervenes when one party to a contract takes advantage of a special disability of the weaker party. When looking at special disability, the courts usually consider factors such as illiteracy or age, lack of education or a combination of all these factors. However for equity to consider this defense the resulting transaction must be oppressive to the weaker party and the weaker party must prove that the disability was evident to the stronger party who took advantage of this fact (Vuot, 2009). Australian case law recognizes the position of the weaker party to the contract in the case of Commercial Bank of Australia Ltd v. Amadio (1983) 151 CLR 447[2] where the case was set aside due to unconscionable dealings.
Under common law
Recently, common law has established laws against unconscionable conduct in trade as a way to protect consumers. The Australian consumer law[3] strictly prohibits unconscionable conduct under part 2-2 of the act. The law which incorporates equity into common law provides under section 20 provides for corporations not to engage in unconscionable conduct within the ‘limit of unwritten law’[4]. The law goes ahead to note that for any person or corporation that contravenes this law will be liable to a pecuniary penalty.
Under sections 21 and 22, the Act prohibits the engaging in unconscionable conduct with regards to goods or services[5] and sets out the conditions which the court may rely on to consider whether indeed the defense brought by the weaker party is valid[6]. With regards to Mr. Li, the bank manager had a legal obligation to inform him of the terms and foreseeable consequences[7] of the breach of the contractual terms.
Case 3
Facts
There was a sponsorship contract between Emanuel and Roo-oil ltd that he would display their trademark on the front of his vehicle for four years when he was competing and when not he was to publicly display the car. The terms of the contract were that he was to display the colors of the trademark. The company terminated the contract due to breach of the terms of the contract. It is therefore to be determined whether there was a breach of contract by Emmanuel and if the sponsors had a legal right to terminate the contract due to breach.
The law
Breach of contract
Under contract law, a non-breaching party to a contract may terminate the contract due to breach of the contract by the other party. Under contract law, obligations are created by the terms of the contract are usually promissory in nature which thus warrants for the creation of obligations. The courts mostly consider the conditions/warranty that creates legal obligations when determining whether there was a breach of contractual obligations[8]. Therefore the court will determine whether the breach of the conditions of the contract by Emmanuel were right. It should be noted that the company was sponsoring him in exchange for his displaying of their logo and no other conditions were set by the company.
Contact law expressly gives the promisee the right to terminate a contract either expressly or by law. However there is no express right given to the promisor to terminate a contract that was being performed by the promisee unless there was repudiation[9] on the part of the promisee (Latimer, 2011). Therefore can it be implied that breach of contract Emmanuel was in fact choosing to terminate the contract? Yes, a promisee may chose co terminate a contract through his actions[10]. Therefore it can be concluded that though the company has no right to terminate the contract that Emmanuel was performing unless stated in the contract, by breaching the contract, Emmanuel was terminating it.
References
‘Unconscionable conduct’. Australian Competition and Consumer Commission (ACCC) from http://www.accc.gov.au/business/anti-competitive-behaviour/unconscionable-conductLATIMER, P. S. (2011). Australian business law 2012. North Ryde, N.S.W., CCH Australia.
RADAN, P., GOOLEY, J., & VICKOVICH, I. (2009). Principles of Australian contract law: cases and materials. Chatswood, N.S.W., LexisNexis Butterworths.
VOUT, P. T. (2009). Unconscionable conduct: the laws of Australia. Pyrmont, N.S.W., Thomson Reuters.
[1] Unconscionable conduct is a defense under contract law that stops the enforcement of a contract based on a flawed consideration. This means that there was unfairness on one party by the other party to the contract that has superior bargaining power.
[2] Which was an affirmation of the terms set up in Blomley v Ryan (1956) 99 CLR 362
[3] Trade Practices Amendment (Australian Consumer Law) Act No. 2 of 2010 which was an amendment to the Trade Practices Act 1974 and the Australian Securities and Investments Commission Act 2001
[4] Meaning as provided for in equity.
[5] Currently there is no conclusive evidence that provides for the courts position on these defence in common law, however, a recent case of Australian Competition and Consumer Commission v Lux Distributors Pty Ltd [2013] FCA 47 in which one party is challenging the others contravention of section 21 of the act may set precedence to other cases. [6] ‘Unconscionable conduct’. Australian Competition and Consumer Commission (ACCC) from http://www.accc.gov.au/business/anti-competitive-behaviour/unconscionable-conduct[7] Provided for under section 22(1)(g -h)
[8] Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd [1962] 2 QB 26
[9] The Hansa Nord in Reardon Smith Line Ltd v Yngvar Hansen-Tangen [1976] GB 44 at 59
[10] Stocznia Gdynia SA v Gearbacks holding ltd [2010] QB
