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Unconscionability & Frustration - Coggle Diagram
Unconscionability & Frustration
Unconscionability
general position:
no duty of parties to look out for each other's interest
when negotiating contracts
Walford v Miles
: parties are in
adversarial
positions
no general prohibition
on party w stronger bargaining position taking advantage of weaker bargaining position
National Westminster Bank v Morgan
Source
Earl of Aylesford v Morris
: expectant heirs
young heirs need protection of equity
money lender bought right to inheritance at low sum
Fry v Lane
"where a purchase made from poor, ignorant person at considerable undervalue"
and "not independently advised"
Elements
1) Weakness/disadvantage
Party B must have some
special or serious weakness/disability
Cresswell v Potter
ignorant
: "less highly educated"
burden of proof on D
: in this case D can't prove that the sale is fair just reasonable
poor
: "member of the low income group"
2) Unconscionable behaviour of the stronger party in exploiting the other’s weakness
Party A must
behave unconscionably in knowingly taking advantage
of B's weakness/disability
3) Terms of the transaction must be
‘overreaching and oppressive
’ (?)
substantively unfair/disadvantageous term of contract
evidence to infer wrongful exploitation
NOT ESSENTIAL
lack of
adequate independent advice
evidence of B's weakness & A's unconscionable behavior
Cresswell
not conclusive
vs. undue influence
undue influence = focus on weaker party
uncon: looking at act of stronger party
uncon different from duress also
Frustration
Definition
the occurrence of something,
after
the formation of contract, render
performance impossible, illegal, or something radically different
from that which was in the contemplation of parties at the time of entering into the contract
a supervening event
limited use
J Lauritzen As v Wijsmuller BV
: very narrow
tenant of farm dispossessed for 2 yrs, dont wanna pay rent
court: no u ned to pay
must be
impossible to perform
- difficult to meet this
might take longer, more expensive, etc but not impossible
have to be something "radically different"
whether contract is frustrated
Davis Contractors v Fareham Urban District Council
"radical difference" test
in the center of debate
something happen that does not allow they do what they do because of a supervening event
neither party is responsible for supervening event
labor shortage, builder's cost increase, builder say contract frustrated
court: claim failed, performance is more onerous INSUFFICIENT to frustrate
must be a
change in the significance of the obligation
that th
e thing undertaken would be different
from what is contracted for
just because
more hardship ≠ frustration
O'Sullivan: the test is
2) performance of obligation
radically different
3) occurrence of event
not due to fault of either party
1) contract must not allocate the risk of event occuring
the express/implied terms of contract
do NOT deal w the frustrating event
look at clause first, then frustration
e.g. we will pay u more for u to do the work
Great Peace Shipping v Tsavliris Salvage
difference b/ mistake and frustration
mistake: already occur at time of contracting
frustration: unforeseen event after contract formed
issue of timing
circumstances where contract is void due to
common mistake less common than frustration
if parties DD well, can find out common mistake before entering
but CANT find out future (frustration)
Radical difference test
seen in
Davis Contractor
the Sea Angel
not likely to be just onerous or more expensive
must be difference in performance given new circumstances
multi-factorial approach
there are a range of factors -
length of delay is only one factor
merely
postponed
the return of ship
e.g. provision in contract says hire fee at daily rate continues if ur late --> allocation of risk
Frustration of common purpose
Krell v Henry
"room v view" for king's coronation, cancelled
Court: Frustrated, common purpose was to rent for the coronation
surrounding circumstances: Krell dont normally rent out that flat, flat advertise for the coronation etc
Herne Bay Steam Boat v Hutton
Court: NO Frustration
steam boat rent to H to enjoy naval view
Herne bay is in business, they regularly charge ppl for boat
even if no naval view can still view river etc
in
Krell
if not for coronation WONT arrange that
for
Herne Bay
they do business regardless
Brexit?
Canary Wharf v European Medicines Agency
EMA HQ in canary wharf, argue brexit frustrate contract
court: no common purpose
Canary wharf wants money
EMA focus on premises, want flexibility + low rent
the lease
not a outcome of common purpose
but result of negotiations
Subject matter of contract cease to exist
Taylor v Caldwell
the parties SHALL be excused in case performance becomes impossible
from the
perishing of the thing
without default of the contractor
if there is something so
fundamental
, if that
cease to exist then impossible to perform
D agree to hire premise, premise burned down, not the fault of either party
both parties excused from performing
Self induced frustration
J Lauritzen AS v Wijsmuller BV
(Super Servant Two)
owner have 2 ships, contract w 2 ppl
super servant 1 sunk, owner decide super servant 2 give to one party, the other party no ship
self-induced frustration - u make the choice, can't claim frustration
frustrating even must be some
outside or extraneous change of situation
frustrating event need to be without fault
on the side of the party rely on it
parties' own conduct is responsible
or e.g. you
broke chain of causation
b/ frustrating event and the impossibility of performing
court make it
narrow
, dont wanna encourage frustration
Effects of Frustration
Common law
contract end automatically
parties released from obligations due after occurrence of frustrating event
NOT released from obligation that should have been performed before the occurrence of the event
Party A only
recover the value of benefit they had transferred**
if
B had performed none of their obligations
(
"total failure of basis"
)
quite
unfair
e.g. concert venue burned down, but party have already spend cost advertising
Law Reform (Frustrated Contracts) Act 1943
s 1(2): obligation in respect to money pay/payable
if party incurred expenses
court can let them recover money
Gamerco SA v ICM
court has
broad discretion to do what was just
permit to do concert withdrawn, party incurred promotion cost --> frustration
s 1(2) apply here, party already spend money
in this case entitled to prepayment
s 1(3): obligation other than money
valuable benefit
(other than money)
not all monetary aspect covered
to prevent unjust enrichment
BP Exploration v Hunt
Mr H own oil conferred by Libya gov
contract w BP, Libya gov took away oil, BP claim frustration
Goff J's interpretation of s 1(3)
1) focus on
valuing end product
("valuable benefit") where it exist
2)
just sum = taking into account factors in (a) and (b) of s 1(3)
at the earlier stage of valuing benefit
rather than later (when working out whether this figure needs to be reduced)
value benefit not at the time that it was received
but after frustrating event
e.g. i build extention, house burnt down,
value my work after house burnt down => value of benefit = 0
O'Sullivan:
problematic
what
sum
would be
just to award C?
guiding principle =
prevent "unjust enrichment
of D at C's expense"
CA: trial judge had
broad discretion
in deciding whats "just"
controversial
:
court applies (a) and (b) to value benefit
instead of determining just sum
e.g. contract frustrated by fire, can claim cost of advertising - since
concert did not happen, no end product --> can't claim money?
real concern w this kind of thinking
worry that
if no end product left w no compensation
Summary
Very narrow
Test
radically different test
common assumption of parties
self induced frustration
limited practical significance: compare w
common mistake
Effect of frustration in common law/statute
1943 Act s 1(3): non-monetary
WORK ENDS HERE
1943 Act s 1(2) money