Blaw204 Business Law- Case Commercial Assessment Answers

Unconscionability and how it may mean a contract cannot be enforced.

Unconscionability can mean many things and may arise from a number of circumstances. In your essay you are to explain and comment on the following as a result of your reading:

Introduction

Unconscionability defines the facts of unconscionable conduct, which present doctrine in the contract law of Australia. It is described those terms, which are extremely unjust. It always establish for the party who belongs the superior bargaining power and related to good conscience. It is only formed when the contract is unenforceable and no reasonable person who will agree with this.

Discussion

The person who is the perpetrator has no rights to get the benefits as per the consideration, which have the enforcement to the contract.  In this process, it can be use as defense when itdeals with the fairness of the formation of the contract and substantive terms of contract (Browne and Biksacky 2013). When those terms represented the oppressive or the bargaining process conflict with the terms then court may strike down the contract as unconscionable (Browne and Biksacky 2013). The court must look at the facts of determining of the contract when it is unconscionable. if the court found any gross  inequity of bargaining power then the contract will unreasonably favorable to the stringer party as per the valid claim of unconscionability.

In the Unconscionability, confirm the terms of the parties at the time of the formation of the contract. It includes the major issues like bargaining powers, age and mental capacity of the parties whereas, other issues like the superior choice, knowledge and obligations related to the bargaining process (Browne and Biksacky 2013). It is also the process where misrepresentation of facts established. When one party takes advantage of unconscionable contract, then it will treat as a criminal offence. The defense party always defenses himself of unconscionable contract when it is formed. In cannot be changed after the formation of the contract and will be irrelevant by one side. In this contract, the judgment must be made by the judge not the jury and applicable as per the judicial system for the enforcement. Here is the duty of the court that it will find the remedies as per the flexibility of the contract (Browne and Biksacky 2013).

In a famous Australian, case Commercial Bank of Australia Ltd vs. Amadio where an Italian migrant couple uses the builder’s son as the guaranteed in the Commercial Bank (Brody and Temple 2016). When they mortgaging the property, the bank manager knows the financial situation of his son and Amadio who are using the debs that they did not know the English language. Here, the bank also not informs the parties about the no limit of the liability as per the guarantee. When the builder’s son failed in the business, the innocent party set aside the contract as because of the unconscionable. In this case, the judge stated that when the bank manager knows about the disability of the parties hey still make the contract. There are lack of advanced age, lack of business acumen, lack of fluency and the financial condition of the builder’s son.

The unequal bargain only establishes the facts in the unconscionable contract when the one party establishes any unreasonable facts to another party. It is include those facts where one the party is aware that the other parties will obviously did not understand the contract terms. in the contract the consideration of the agreement only recognize by the common law jurisdiction through the bargaining process.

In the Doctrine of Inequality of Bargaining Power the court had stated some facts in one of the famous case of Suisse Atlantique Société d’ Armement Maritime SA v NV Rotterdamsche Kolen Centrale. According the case the court describes the facts of the bargaining that when the party read the agreements he might misunderstood some facts and sometimes they missed. Freedom to contract must applied in some choice or room for bargaining. In the Inequality of bargaining power one party will bargain in the agreement for better alternativeness that the other party (Browne and Biksacky 2013). The outcome is the parties who bargain the alternative have more powers that the other party and use those powers at the time of formation of the deal. In Inequality of bargaining power, give the freedoms of contract to cease the real freedom (Bryan et al. 2016). In some situation where the bargaining powers is unequal the idea of Inequality of bargaining power presents the justification for the implication of important applications into contracts through law or the non-enforcement of a contract by the courts.  

Schroeder Music Publishing Co Ltd v Macaulay is another case where the music company made a contractual term in restraint of trade contained in a standard form of contract with a young songwriter (Brody and Temple 2016). In this case, the court stated that there might be some good reason for respecting contracts ‘made freely by parties as per the bargaining on equal terms’ or ‘moulded under the pressure of negotiation. There was no evidences are found in this case that the contract fitted such description. Negotiation is the processes where bargaining process have powers to use it as per the terms of the contract (D'agostino 2014). An unequal bargain it is demonstrated to indicate unconscionability and most of the contract and cases are involved with the bank guarantees and debts as per the transaction. In some issues, the court finds that parties failed to satisfy the equal terms (Bryan et al. 2016).

It is necessary that parties must understand the facts of the contract. The must understand the facts and agrees with it. If it is find that, the contract formed from one side party then that will unenforceable against that person. It will only allow the facts when the party is minor and  have some mentally difficulties.  It must prevent that the aggrieved party will not take any advantages from the innocent party as per the lack of the ability (Beh 2015).

For the unconscionability contract, the included terms represent the unfairness of the agreement. If court find any unfairness it might be unequal bargaining power from one side or had any difficulties to understand the facts of the agreement (D'agostino 2014). Sometimes it also unfair when terms are failed to represent the unequal bargaining between the parties. When the terms of the contract are unconscionable, the parties may avoid the contract and rework on the terms of the contract. There have been always fraud or illegal facts establish in the unconscionable contract. In the unconscionable contract, the damages are usually not awarded, as there is no establishment of the facts (Friedman 2015).

According the Inequality of bargaining power, the banks are the aggrieved party who always involved with such facts of bargaining. When the contract formed, generally, the terms of the contract are pre-drafted by one of the strong parties and the other party will sigh or accept the terms of the contract (Hedlund 2016). The second party will accept the terms without having any time or opportunity to get the terms changed by their choice. One of the parties who is in the  bargaining position, generally mentioned the terms, which will useful to him  and at times tries to exclude or limit his liability, without caring for the interest of the other side, who is in a weaker bargaining position (Friedman 2015). Therefore, bank is one of the strong parties in Inequality of bargaining power. When the other party takes his property as per the terms of mortgage or lease (Murray Jr 2014), bank gives the loan and they have the knowledge of the parties who enter in the contract (D'agostino 2014).

The use of standard terms and conditions is not described to contracts made with consumers. Many contracts between business people like the majority of such contracts are formed as per the basis of one person’s standard form of agreement or based on a standard form of document (Hudson 2016). In the process  the  order form, confirmation of order, catalogue or price list, put forward by one party, or which incorporate by reference the standard terms and conditions of trade associations (Beh 2015).

As per the terms of unequal bargaining power present the two parties, the courts and the legislature have evolved certain rules to protect the interests of the weaker party. Despite an absence of a specific legislation, courts always interfere with standard form of contracts where there is evidence of unequal bargaining power (Hedlund 2016). Courts have given reliefs in cases where weaker party has been burdened with unconscionable, oppressive, unfair, unjust and unconstitutional obligations in a standard form contract (Leeming 2016). Unequal bargaining power is not merely a form of procedural unconscionability, but one of the most common forms of unconscionability employed by the courts (Hudson 2016). Courts sometimes find unequal bargaining power based on evidence that the seller is a large company and the buyer is a small company or individual. Unequal bargaining can be the result of a situation-specific monopoly (Leeming 2016).

Parties can protect themselves against enforcement of an unconscionable provision in a contract, but cannot obtain damages for having been subject to an unconscionable offer. a party cannot seek restitution for compliance with an unconscionable contract (Hudson 2016). The doctrine of unconscionability allows courts either to deny enforceability of such contracts or to modify the terms of a contract to alleviate unconscionable portions. The unconscionability doctrine ensures that parties can actually contract freely and fairly (Marrow and Penn 2014). The opponents of unconscionability suggest that in finding contracts unfair, courts essentially alter the overall meaning of specific contracts. The remedies of the unequal unconscionability considered appropriate by courts, reformation of the single offending term in a contract is the least disruptive method of correction (Marrow and Penn 2014).

The Financial and Consumer Rights Council (FCRC) – Victoria is the professional association for financial counselors in Victoria (Murray Jr 2014). It provides the supports and assistance the different agencies those assist the vulnerable Victorians experiencing financial difficulty (Nehf  2017). FCRC works directly with government, the banking works, utilities, debt collection and other stakeholders for improve the approaches to financial difficulty for vulnerable consumers. The unfair terms always make it sure that the consumers who are involved with the unfair practices have confidence to enter in to the contract as per the protection by the Australian Consumer Law (Rajapakse and Gardner 2014). The FCRC confirm such benefits, which will, banned from being included in the contract (Serpell 2016).

Financial and Consumer Rights Council (FCRC) focuses towards the different segments related to the consumer protection along with the practices related to financial counseling (FCRC, 2016, p. 1). This group gives protection to the party that has faced the major problem due to the unfair agreement. This group also provides the legal advices to the party that can help the plaintiff to bring sue against the defender or the party which has used the used the unfair processes to make the contract. On the other hand, this group also provides the information to the consumers against the unfair contract, which can be formed by the parties without the use of an equal bargain. This group also encourages consumers to raise the voice against the defender to secure the rights (FCRC, 2016, p. 1). After the research, there are several other advocating bodies, but they do not work as like FCRC because this organization has a team of skilled people and lawyers who provides the consultancy to its users and helps them to file the lawsuit in the court, to prove the use of unfair practices and secure the rights of equal bargaining power.

Consumers from who are not able to speak English in households, those with a disability, single parents, and the elderly or low-income earners are more susceptible to being intimidated into paying debts owed through the act of repossession by the supplier. The FCRC always took helps from the court or tribunal. The FCRC give that such terms are banned from standardized contracts, as they are instrumental in lowering the bargaining power of vulnerable consumers (Serpell 2016).  

Consumers with poor English skills and low literacy levels may have the terms of the contract communicated to them in orally and trust that the written contract will mirror the terms that have been discussed as per the conversation (Rajapakse and Gardner 2014). The benefits of banning such terms of the contracts are that consumers will be given the opportunity to express their understanding of the contract that was agreed orally and dispute any discrepancies that arise within the written contract (Leeming 2016). The FCRC deem such terms in standardized contracts as being unfair due to the onus on consumers to pay a portion of the arbitrator’s costs and on the basis that this would confirm the constitute the denial of natural justice (Swain 2014) .

Conclusion

In the majority of circumstances with low-income earners, this will become a further hardship and an option they would not pursue thus resulting, to the detriment of both parties, in the dispute remaining unsettled. Therefore, the business law of Australia has different grounds where courts can relate to unconscionable conduct of dominant and weaker parties. it also protects the consumer rights against the seller of such productions. The advocacy process also define those several groups which are related the security of the rights of weaker party against the strong party.  

Reference

Beh, H.G., 2015. Curing the Infirmities of the Unconscionability Doctrine. Browser Download This Paper.

Brody, G. and Temple, K., 2016. Unfair but not illegal: Are Australia's consumer protection laws allowing predatory businesses to flourish?. Alternative Law Journal, 41(3), p.169.

Browne, M.N. and Biksacky, L., 2013. Unconscionability and the contingent assumptions of contract theory. Mich. St. L. Rev., p.211.

Bryan, M., Degeling, S., Donald, S. and Vann, V., 2016. A Sourcebook on Equity and Trusts in Australia. Cambridge University Press.

D'agostino, E., 2014. Contracts of adhesion between law and economics: Rethinking the unconscionability doctrine. Springer.

Friedman, D., 2015. Arbitration Revisited: Preemption of California's Unconscionability Doctrine after Concepcion. Duke J. Const. L. & Pub. Pol'y Sidebar, 11, p.21.

Hedlund, R., 2016. Conscience and Unconscionability in English Equity (Doctoral dissertation, University of York).

Hudson, A., 2016. Conscience as the Organising Concept of Equity. Can. J. Comp. & Contemp. L., 2, p.261.

Hudson, A., 2016. Principles of Equity and Trusts. Routledge.

Leeming, M., 2016. Equity and Statute: a commentary.

Marrow, P.B. and Penn, C.E., 2014. Policing Unfair Arbitration Clauses.

Murray Jr, J.E., 2014. The Judicial Vision of Contract: The Constructed Circle of Assent and Unconscionability. Duq. L. Rev., 52, p.263.

Nehf, J.P., 2017. The Impact of Mandatory Arbitration on the Common Law Regulation of Standard Terms in Consumer Contracts.

Rajapakse, P. and Gardner, J., 2014. The Unconscionable Conduct and Consumer Protection in Subprime Lending in Australia. Banking & Finance Law Review, 29(3), p.485.

Schroeder Music Publishing Co Ltd v Macaulay [1974] 1 WLR 1308

Serpell, A., 2016. Financial products and services: Consumer rights and remedies. Precedent (Sydney, NSW), (134), p.4.

Sherborne, A.K.E., 2017. Restitution in the conflict of laws: characterization and choice-of-law in Australia. Journal of Private International Law, 13(1), pp.1-34.

Suisse Atlantique Société d’ Armement Maritime SA v NV Rotterdamsche Kolen Centrale [1967] 1 AC 36

Swain, W., 2014. Unjust enrichment and the role of legal history in England and Australia.

Webb, E., 2016. Statutory Unconscionability in Australia.

Young, P., 2016. Unconscionability and promissory estoppel. Australia Law Journal, 90(12), pp.878-888.