Inequality of bargaining power CASES
In English law, inequality of bargaining power refers to situations where one party in a contractual relationship has significantly greater strength, knowledge, or leverage, potentially resulting in unfair or oppressive agreements.
Definition and Principles
Inequality arises when one party cannot negotiate effectively due to weaker economic position, limited information, or constrained choices, leading to potentially unjust terms imposed by the stronger party.
Legal Implications
Courts may intervene to protect weaker parties, often scrutinising contracts for fairness, reasonableness, and potential coercion or undue influence.
Common Contexts
- Consumer contracts with businesses.
- Employment agreements.
- Contracts involving vulnerable or inexperienced parties.
Practical Importance
Understanding inequality of bargaining power highlights the necessity for fair negotiations, promoting equitable terms and reducing exploitation in contractual relationships.
Home » Inequality of bargaining power
An elderly farmer guaranteed his son's company's debts to a bank, using his farmhouse as security. The Court of Appeal set aside the transaction, finding a relationship of confidentiality had been breached, establishing the principle of undue influence through inequality of bargaining power. Facts Mr Herbert Bundy, an elderly farmer, was a long-standing customer of Lloyds Bank, as was his son’s plant-hire company. The company fell into severe financial difficulty. Over time, Mr Bundy had provided increasing guarantees for his son’s business overdraft, secured against his sole asset, his farmhouse. Finally, the bank’s assistant manager, Mr Head, visited Mr Bundy
Two poor, ignorant men sold their reversionary interests for a significant undervalue without independent legal advice. The court set the sales aside as an unconscionable bargain, establishing that equity will protect poor and ignorant persons from such exploitative transactions. Facts The plaintiffs were two brothers, John Bennett Fry (a plumber’s assistant) and George Fry (a laundryman). Under a will, they were each entitled to a one-fifth share of a trust fund, contingent on them surviving their aunt, who was the life tenant. This type of future inheritance is known as a reversionary interest. In 1878, J. B. Fry sold his
Facts The plaintiffs, a family-owned company, Alec Lobb (Garages) Ltd, and its directors, Mr. and Mrs. Lobb, were in severe financial distress. To avoid insolvency, they entered into a complex transaction in 1969 with the defendant, Total Oil (GB) Ltd. The agreement consisted of a lease and lease-back arrangement for their garage premises. The plaintiffs leased the freehold of the property to Total for a term of 51 years in return for a premium of £35,000. Simultaneously, Total leased the property back to the company for a 21-year term. A crucial component of this arrangement was a ‘solus tie’ agreement,
