Unconscionable bargain CASES
In English law, an unconscionable bargain refers to a transaction so fundamentally unfair or oppressive due to one party’s exploitation of the other’s vulnerability that it may be set aside by the courts.
Definition and Principles
An unconscionable bargain arises when one party, taking advantage of a significantly stronger position or the other party’s weakness, enters into a contract that grossly favours them.
Elements of Unconscionability
- Unequal Bargaining Power: Clear disparity in parties’ power or position.
- Exploitation: Advantage taken of the weaker party’s vulnerability or distress.
- Grossly Unfair Terms: Contractual terms significantly disadvantage one party.
Remedies
Courts may intervene to rescind or adjust unconscionable contracts to restore fairness and protect vulnerable parties.
Practical Importance
Recognising unconscionable bargains protects vulnerable individuals from exploitation, promoting fairness and equity in contractual relationships.
Home » Unconscionable bargain
Homeowners in financial difficulty entered a 'sale and rent back' scheme, selling their property at a significant undervalue. They sued the lenders, alleging they had constructive notice of undue influence. The court held one lender was put on inquiry, but another was not. Facts The claimants, Mr and Mrs Beesley, were homeowners in financial difficulty facing repossession. They entered into a ‘sale and rent back’ scheme promoted by New Century Group Limited (‘NCG’). In December 2005, they sold their property, valued at £325,000, for a stated price of £180,000 to Ms Wilkinson, a nominee for NCG. The Beesleys only received
During lease renewal negotiations, a rent review clause was mistakenly omitted by the landlord. The tenant knew of the landlord's mistake but did not point it out. The court ordered rectification of the lease to include the rent review clause. Facts The plaintiffs (landlords) and the defendants (tenants) entered into negotiations for the renewal of a business tenancy for a term of 14 years. A previous arbitration between the parties had determined the rent for the existing lease. During negotiations for the new lease, both parties proceeded on the common understanding that the new lease would contain provisions for rent
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,
