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INTRODUCTION

‘Will Theory’ was supposedly the objective on which the English Contract Law was based on. Parties associated with the contract made agreements as per their own terms and will. Therefore, the contract law’s purpose was to setup the legalized framework for making these types of agreements certain, as well as, possible. As a result, the ‘Freedom of Contract’, along with ‘Sanctity of Contract’ doctrines are fixed at the core of the objective – ‘Will Theory’. ‘Will Theory’, however, failed to give explanation of the ‘duress’ doctrine.

In my opinion the terms are unconscionable’, ‘unfair’, unequitable’, and ‘unconscientious’ as synonyms. This is because, as per my definition, ‘unfairness’ is a vital moral factor that contributes to contract violation. In my essay’s first part, I portray that nowadays contract law is inclusive of doctrines that is a prohibition of conduct that’s ‘unfair’ in negotiations, but deficient. A ‘doctrine of unconscionability’ is capable of solving this dilemma. I, therefore, show in the 2nd part extent to which, ‘unfair’ conduct the doctrine should prohibit.

1. Duress

The ‘doctrine of common law duress’ is a combination of ‘duress to goods’,  ‘duress to the person’ and ‘economic duress’[. The underlying principle of ‘duress’ is on the basis of ‘will theory’ and supposedly should be ‘the compulsion of the will of the victim’ that “vitiates” the consent of the victim to both ‘freedom of contract’ and the contract of the victim. However, as per Atiyah it is revealed that this is a fiction as the victim still as the option to choose under ‘duress’ for entering the contract for avoiding greater harm (Bigwood, 1996). Lord Scarman, therefore, in Pao On, referred to “alternative remedies” without any consideration, when he attempted to find ‘coercion of the will’; which called for the consideration of the ‘legitimacy of pressure’.

Beale and Atiyah, consequently concluded that Lord Scarman, in fact, was assessing and analyzing the ‘fairness’ of the negotiations. As per the claims of Poh, while giving reference to The Evia Luck, which the, courts look majorly to the ‘illegitimate pressure’ and not the ‘coercion of will’ to locating duress today (Devenney , 2007). Philips – for this very reason – argues that the consideration of relevant factors for ‘duress’ and ‘illegitimate pressure’ without  ‘coercion of the will’ fiction is nothing but the ‘doctrine of unconscionability’, which is established in  Amadio – the Australian case – where establishment of ‘unconscionability’ is made via the reference to  affirmation ‘alternatives’ and ‘protest’.

2. Undue Influence

The ‘Doctrine of undue influence’ equally deals with the one party’s unacceptable influence. It is does not involve threats and ‘illegitimate pressure’, but common law does not give any explanation, regarding the objectionable aspect of ‘undue influence’. For the establishment of a presumption concerning ‘undue influence’, there should be an identification of a ‘relationship of confidence and trust’, along with the fact that transaction cannot be explained by the relationship only. Australian judge – Isaac J and Chen-Wishart doubts that the influence is subnormal legally because it is also usable in a helpful, judicious and wise manner (Elvin, 2007).

The argument of Philips is that long-term client relationships that is capable of establishing ‘relationships of both confidence and trust’, like in Lloyds v Bundy, doesn’t resemble practices of modern banking that involve frequent personnel changes. The court – in Burch – quite artificially determined that the relationship between the employee and the employer “ripened into” a relationship of confidence and trust. Lord Nicholls’ code and the above mentioned case for ‘surety-ship’, enables the assumption on the basis of cover that of ‘undue influence’, implied consideration and acceptance to ‘fairness’ is given by the court, though the ‘inequality of bargaining powers’ doctrine’s terminology is rejected.

German courts – in contrast to the criticized British development – adopted the doctrine of ‘unconscionability’ for the whole contract law basing within the common law approach, because of the changes in business customs, Unfair Terms in Consumer Contracts Regulations’ adoption and the direct horizontal effect of human rights’ ever growing importance. The interpretation of ‘Freedom of contract’ often has been made with  ‘Legal transaction contrary to public policy’s’ general clauses in ‘Performance in good faith’ and in the light of ‘Freedom of action’ based in Art. Prohibition of unusual burdensome contracts is in 2 I GG, which is due to unequal bargaining of powers. It is a positive freedom – ‘human rights freedom of contract’ – that obligates the state to provide its support to the ability to create and make contracts by individuals. The Unfair Terms in Consumer Contracts Regulations, in 1999are inclusive of English law. The definition of ‘Unfairness’ is based on the regulation of 5(1) Consumer Contracts Regulations – 1999/2083 – unfair terms referring to the fact, whether it causes a significant amount of imbalance in the obligations and rights of the parties arising because of the contract – contrarily to the need of good faith – and with the English courts’ interpretation. The human rights court of Europe has acknowledged a ‘freedom of contract’ in the Article 6(1).  English ‘freedom of contract’, since Wilson has become subject to the 1998’s Human Rights Act. Thus, some signs do direct to a new and refined interpretation of ‘freedom of contract’ by Europe.

3. Mistake

The principle behind ‘mutual mistakes’ – in contrast to the ‘acceptance and offer mistakes’ – is one that states it will “no longer be just or fair to hold the parties on the basis of their agreement”. This is because the contract fundamentally is rendered by mistakes in a different manner. The ‘fundamental difference test’, according to the establishment made in Bell v Lever, caused problems in the adaptation of the test that to the facts of the particular case. Philips further argues that a ‘test of unconscionability’ can solve the confusion present in the concept of ‘fundamental difference test’, as well as, bring in line the ‘doctrine of mutual mistake’ with other relevant doctrines. Cartwright supports this view and portrays that the mistake induced via misrepresentation and one that is known to the party about the other party, but where he is unable to point out the error  are on the basis “unconscientiousness”, since they suffice the criteria of a legal advantage that has been acted on, to make it unfair.

Interim Findings:

The court is reluctant to reason on the basis of ‘fairness’ but in spite of this, the doctrines of ‘undue influence’, ‘duress’, ‘estoppel’ and ‘mistake’ concern contractual negotiations within the contours of unfair conduct. However, the vitiating doctrines – with the exception of estoppel – are either outdated or incoherent principle wise. Introducing the doctrine of unconscionability, will be the most logical solutions, because the ‘will theory’ (an all-embracing doctrine) is full of doubt in modern contract law.

4. ‘Doctrine of unconscionability’ – objection against it:

Lord Scarman – while rejecting the doctrine of bargaining power and the inequality present in it – stated that it was Parliament’s task to restrict ‘freedom of contract’ for relieving mischief. The thought of McKendrick was summarized into 4 major objections against ‘doctrine of unconscionability’ in the following:

  1. The courts experience difficulty in the identification of contracts that are unfair because of the litigation’s adversarial nature that doesn’t make it easier for them to go about setting the transactions that is prior to them on the basis of the market where the parties have their operation.
  2. Creation of uncertainty can take place because of a general doctrine.
  3. The courts are averse generally to the creation of general and broad principles.
  4. It is not contract law’s function to engage in wealth redistribution.

4. The prohibition of unfairness and its extent and its objections is quashed because:

According to Thal’s argument, there are 2 types of ‘unconscionability’: “unfairness of bargain that is based on the identification by rules and unfairness of outcome that is not easy to define. Added to this, he suggests that the basis of contract law is on bargaining’s reciprocal processes as the ‘principle of reciprocity’ not on ‘will theory’ but on ‘consideration’. Bargaining causes the reduction of ‘unfairness’.

He also limits the ‘unfairness’ to a complete lack of bargaining. But, there has been bargaining in Bundy or Hughes, however, without all the requisite factors. Therefore, the real issue is over the concept, whether ‘effective bargaining’ can take place, where the weaker party can express informed will. The ‘doctrine of unconscionability’ – which is an Australian doctrine – established in Amadio portrays uncertainty is capable of getting reduced by an approach of the common law that identifies the trigger for presuming effective bargaining weakness for example, ‘age’, business experience’ or ‘lack of command in  English’.

With the exception of cases where the stronger party diminishes the alternatives of the weaker party, actively, thereby, triggering the need for rebuttable, for avoiding an encouragement or paternalism of willful ignorance. Doctors inform patients about the various risks, prior to a dangerous surgery, enabling the patient to make a more informed decision. For respecting the  autonomy of an individual, a stronger party should proceed and make the information related to the risks of the weaker party for a reasonable reasonably accessibility by weaker party for rebutting a presumption of ‘unfairness’, when bargaining of an effective order has taken place.

There is no uncommonness in general and broad principles. Gilmore proves that consideration doctrine was developed by the creation of an artificial line of argument as a general principle that of the selective cases, like, Stilk v Myrick, Foakes v Beer and Dickinson v Dodds. The recent example is a representation of test reasonableness for exclusion clauses in Unfair Contract Terms Act of 1977 in section 11, which has been successfully interpreted by the courts for more than 35 years. Duress – via the duress chapter – is not a certain concept. Clark has also researched the doctrines and concluded that they are same as the unconscionability that was in existent before the 20th century.

Unconscionability exists with the argument that it will promote wealth redistribution is not conceived properly. It will prohibit unfair redistribution – that to the contrary – of a strong party’s advantage (Bigwood, 1996). Like, the courts protected market competition under inequality of bargaining powers’ doctrine those in cases of Clifford Davis and Macaulay, allowing contract’s positive freedom that monopolies restricted.

Conclusion:

English law concerns ‘unfair’ prohibition of conduct in the negotiations of contracts. However, because of doctrines’ deficiencies, unfair conduct should be instead, prohibited by ‘doctrine of unconscionability’. Law’s analysis shows objections against these doctrines are weak enough to be quashed.

 

Cases

Abbey National Bank v. Stringer (2006)

Annulment Funding Co Ltd v Cowey (2010)

Davies v AIB Group (UK) Plc (2012)

Dickinson v Dodds (1876) 2 Ch D 463

Gill v Woodall (2011)

Foakes v Beer [1884] UKHL 1

Kolmar Group AG v Traxpo Enterprises (2010)

Lloyds Bank Ltd v Bundy [1974] EWCA Civ 8

Mahon v FBN Bank (UK) Ltd (2011)

Opel v. Mitras Automative (UK) Ltd (2007)

Padden v Bevan Asford Solicitors (2011)

Pao On v Lau Yiu Long [1979] UKPC 2 i

Progress Bulk Carriers v Tube City IMS LLC (2012)

Royal Bank of Scotland v Chandra (2011)

Richards v The Law Society (Solicitors Regulation Society) (2009)

Stilk v Myrick [1809] EWHC KB J58

Articles

Atiyah, “ Economic Duress and the Overborne Will”, 98 Law Quarterly Review 197, (1982)

Beale, “Inequality of Bargaining Power”, 6 Oxford Journal of Legal Studies 123, (1986)

Birks, ‘The Travails of Duress’ [1990] LMCLQ 342,

Bigwood, ‘Undue Influence: “Impaired Consent” or “Wicked Exploitation”’ (1996) 16 Oxford Journal of Legal Studies 503

Devenney and Chandler, ‘Unconscionability and the Taxonomy of Undue Influence’ (2007) Journal of Business Law 541

Elvin, ‘The Purpose of the Doctrine of Undue Influence’, in P. Giliker (ed.), Re-examining Contract and Unjust Enrichment: Anglo-Canadian Perspectives (Leiden: Martinus Nijhoff Publishers, 2007)

Enman, ‘Doctrines of Unconscionability in England, Canada and the Commonwealth’ (1987) 16 Anglo-American Law Review 191

Devenney and Chandler, ‘Unconscionability and the Taxonomy of Undue Influence’ (2007) Journal of Business Law 541.

Devenney and Kenny, ‘Unfair Terms, Surety Transactions and European Harmonisation: A Crucible of Europeanised Private Law?’ (2009) Conveyancer and Property Lawyer 295.

Koh, “Economic duress and a drop of fairness – a Singapore perspective”, Journal of Business Law 572, (2003)

Smith, ‘Contracting Under Pressure: A Theory of Duress’ [1997] Cambridge Law Journal 343, 371

Trebilcock, ‘Economic Criteria of Unconscionability’ in Reiter and Swan (eds), Studies in Contract Law 390-396, 404-408

Waddams, ‘Unconscionability in Contracts’ (1976) 39 Modern Law Review 369


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