Lloyd's Maritime and Commercial Law Quarterly
UNCONSCIONABILITY AS A VITIATING FACTOR
Nicholas Bamforth*
Unconscionability is now recognized as an independent vitiating factor—applicable to contracts and arguably gifts—in several Commonwealth jurisdictions. This vitiating factor has developed from two lines of cases dealing, respectively, with bargains made by particular, vulnerable groups of contractors, and with mortgages. Four elements—special disadvantage, fraud, lack of independent advice, and disadvantageous terms—are habitually invoked in determining whether a transaction should be set aside as unconscionable. It is argued that this vitiating factor is an example of restitution for unconscientious receipt, and that its relationship with the Consumer Credit Act 1974, ss 137–140 requires clarification.
1. Introduction
In recent years, the Privy Council has twice reaffirmed that contractual arrangements may be set aside as unconscionable bargains. In Hart v. O’Connor,1 an appeal from New Zealand, the Judicial Committee refused on the facts to strike down an agreement for the sale of land, but clearly treated the two grounds on which the agreement was challenged—incapacity on the part of the vendor and unconscionability—as independent vitiating factors. This approach was taken further in Boustany v. Pigott, an appeal from Antigua and Barbuda, where the Privy Council struck down a lease as an unconscionable bargain and set out a number of criteria for determining when a transaction should be treated in this manner.2 Both cases built on a wealth of authority from Commonwealth jurisdictions—principally Australia, New Zealand and Canada—where unconscionability3 has long been seen as an independent, free-standing ground on which contracts and arguably gifts4 can be set aside. In these jurisdictions, unconscionability has been found
* Lecturer in Laws, University College London. I should like to thank Peter Birks, Mindy Chen-Wishart, Alison Clarke, Jeffrey Hackney and Roger Halson for their helpful comments relating to earlier drafts.
1. [1985] A.C. 1000, 1027–1028.
2. (1993) 69 P. & C.R. 298. While essentially a property right, it has been suggested that a lease of real property possesses certain contractual attributes: see K. Gray, Elements of Land Law, 2nd edn (Butterworths, London: 1993), ch. 17; Hussein v. Mehlman [1992] 2 E.G.L.R. 87 (repudiation).
3. Principal cases include, in Australia: Commercial Bank of Australia v. Amadio (1983) 151 C.L.R. 447. In New Zealand: K v. K [1976] 2 N.Z.L.R. 31, 36–39; Archer v. Cutler [1980] 1 N.Z.L.R. 386, 402–404; Moffat v. Moffat [1984] 1 N.Z.L.R. 600; Hart v. O’Connor [1985] A.C. 1000; Nichols v. Jessup [1986] 1 N.Z.L.R. 226. In Canada: Morrison v. Coast Finance (1965) 55 D.L.R. (2d) 710; Knupp v. Bell (1968) 67 D.L.R. (2d) 256.
4. Cf. Louth v. Diprose (1992) 175 C.L.R. 621 (H.C.A.); Langton v. Langton [1995] The Times, 24 February.
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