#2208 - Should We Have A General Doctrine Of Unfairness - Contract Law

Should we have a general doctrine of unfairness?

Why hasn’t the law adopted one?

• Cautious incremental extensions are better than wider reform

  • Chen Wishart: garbage, this must be weighed against the desirability of recognising a general principle which highlights the similarities underpinning discrete categories

    • Such as the neighbourhood principle in tort law under negligence

    • COUNTER: but the neighbourhood principle (proximity) is liable to change in different circumstances – in different situations it will be different, not the same.

      • Shows that while you can have a general concept, you need to tailor it specifically to a situation – which is what is done at the moment.

• General doctrine would lead to uncertainty

  • Piecemeal doctrines also lead to uncertainty

• A general principle against unfairness would undermine freedom to contract

  • Chen Wishart: there are already loads of restrictions on the freedom to contract

    • E.g. consumers, tenants, employees all protected by Statutory regulations and restrictions

    • Vitiating factors such as duress and undue influence tend to have this function as well

    • Judges will use backward reasoning to avoid an unfair result anyway

    • Remedies are also concerned with fairness to the contract breaker.

Suggested means of implementation

• Undue influence

  • Lord Scarman in Pao On v Lau Yiu Long [1980]:

  • Royal Bank of Scotland v Ettridge

    • Doctrine of undue influence is wide enough to assimilate the various doctrines of duress, unconscionability, undue influence etc.

      • Chen Wishart: however, this only seems to target relationships of influence, not anything else.

• Inequality of bargaining power

  • Lord Denning in Lloyds Bank v Buddy

    • Thread running through doctrines is inequality of bargaining power – we look to unfair results, parties who enter into transactions without independent advice, whose bargaining power is impaired and who is put under pressure

      • We’re not looking at proof of wrongdoing, only the result

      • Lord Scarman in Pao On v Lau Yiu Long [1980]:

• Unconscionability

  • Per US Law – anything the court thinks it shouldn’t give effect to

    • Potentially very wide indeed.

• Good faith

  • Ugh, French and European Law quite like this.

• General doctrine?

  • Chen Wishart: Law tends to cluster around three areas

    • Substantive Unfairness – Moi – not necessarily for duress or undue influence.

    • Bargaining Weakness

      • Whether a personal impairment – disability, romance, relationship of influence

      • Or circumstantial disadvantage – e.g. susceptibility to illegitimate pressure (duress) or being in need of rescue (relief) or belonging to a protected class

    • Exploitation of that weakness

      • Party exploiting that weakness either actively and confrontationally or passively and emotively.

  • Chen Wishart:

    • Cases should be allowed to develop around these principles on a case-by-case basis

      • A sliding scale may operate between the factors, being given different weights in different circumstances

    • Controversial issue = whether substantive unfairness is a legitimate target for the law

      • Chen Wishart: no right, not even the freedom to contract, is absolute

        • Contract powers need to be restrained to preserve maximum freedom for all participants rather than just some.

        • Court should support giving community values and preventing social cohesion in this way.

No thankyou!

• The focus of the doctrines are all slightly different

  • They shock the conscience of the court in different ways

    • Duress: Illegitimate Pressure

    • Undue Influence: Failure to protect

    • Unconscionable Bargains: Exploitation of a known weakness

    • Non Es Factum: Exploitation of a known weakness

  • They are related, this is true. But only in the sense that they are part of the ethical dimension of contract law, rather than its adversial bargaining side

    • Counter Thal: fact that idea of fairness has been rejected in name does not mean they don’t continue to make evaluations of fairness in the course of applying the well recognised doctrines of duress and undue influence

      • Atiyiah: real issue is not whether the pressure vitiated consent but whether the pressure is legitimate (Thal: or fair)

    • Moi: legitimate is not the same as fair – or at least a...