UNCONSCIONABILITY IN CONTRACTS

AuthorS. M. Waddams
DOIhttp://doi.org/10.1111/j.1468-2230.1976.tb01462.x
Publication Date01 Jul 1976
THE
MODERN
LAW
REVIEW
Volume
39
July
1976
No.4
UNCONSCIONABILITY IN CONTRACTS
There
is
the vigilance of the common law which, while allowing
freedom
of
contract, watches to
see
that it is not abused.”
INTRODUCTION
Several generations of common lawyers have been educated in the
belief that the common law of contract admits no relief from
contractual obligations on grounds of unfairness, or inequality of
exchange.2 The rule might seem hard, it is said, in an individual case,
but it is justified by the need for certainty and commercial stability,
for
‘‘
the Chancery mends no man’s bargain.”
a
My view is that the law of contract, when examined for what the
judges do, as well as for what they say.’ shows that relief from
contractual obligations
is
in fact widely and frequently given on the
ground of unfairness, and that general recognition of this ground
of
relief is an essential step in the development of the law.
The law of contract, like thc legal system itself, involves a balance
between competing sets of values. Freedom of contract emphasises
the need for stability, certainty, and predictability. But, important as
these values are, they are not absolute, and there comes a point where
they
face a serious challenge.” Against them must be set the value
of
protecting the weak, the foolish, and the thoughtless from imposition
and oppression. Naturally, at a particular time, one set of values tends
to be emphasised at the expense of the other. We have just passed
through a period in which the values of Certainty and predictability in
contract law have been emphasised over all others, and we now seem
1 Denning J. in
John
Lee
&
Son
(Granfham) Lfd.
v.
Railway Executive
[1949]
2
All
E.R.
581,
584.
2
See
e.g.
Cheshire and Fifoot,
Law
of
Conrracf,
8th ed., p. 69.
8
Lord Nottingham in
Maynard
v.
Mosely
(1676)
3
Swanst. 651, 655. But
Powell
on
Conrracfs
(1790) has a long chapter entitled
Of the Equitable Jurisdiction in
relieving against unreasonable contracts or agreements.”
1 Lord Diplock has suggested that one should look at what the judges said
in
the
light
of
what they did, see p. 389,
infra.
5
The phrase was used by Palmer,
Misfake and
Unjusf
Enrichment,
37. The
problems
of
mistake and frustration also involve
cnses
where contract values arc
outweighed by another set
of
values, namely the values that favour restitution
of
benefits conferred by mistake. The word
unconscionable
might possibly be
applied
to
these cnses as, indeed, to cases
of
fraud, misrepresentation, estoppel, and
inequitable conduct in general. But such
a
broad use deprives the word
of
specific
meaning.
This
article is concerned only with
cases
where the terms of an agreement
are thcmselves unfair.
369
VOL.
39
(4)
1
370
THE
MODERN
LAW REVIEW
[Vol.
39
to be entering a period in which opposing values are beginning
to
reassert themselves.
I
would maintain, however, that even at a time
when the judges, by their words, refused to countenance any breach
in the notion of sanctity of contracts, relief was, in practice, frequently
afforded. For no civilised system of law can accept the implications
of absolute sanctity
of
contractual obligations.
FORFEITURES
The equitable relief given by the Court of Chancery against forfeitures
of various kinds seems to be the earliest example of the courts’ refusal
to enforce contractual obligations, however clearly and unequivocally
expressed.
The cases on mortgages show the repeated, but unsuccessful.
attempts of mortgagees to draft their documents in such a way as to
achieve the quite simple result they wanted, that
is.
forfeiture of the
land on the mortgagor’s default. The Courts
of
Chancery consistently
refused
to
enforce this result. Whatever form of words was used, even
if
the conveyance was
on
its face absolute, with a collateral promise
to reconvey> the court,
if
convinced that the conveyance was, in
substance, made as security, treated the transaction as a mortgage and
permitted the mortgagor to redeem.’
There can, surely, be no doubt that this equitable jurisdiction
amounted to a direct interference with freedom of contract.s In
Howard
v.
Harris
the court said:
So
in every mortgage the agreement of the parties upon the face
of the deed, seems to be, that
a
mortgage shall not be redeemable
after forfeiture.
. .
and a mortgage can no more
be
irredeemable,
than a distress for rent-charge can be irrepleviable. The law itself
will control that express agreement of the party; and by the same
reason
equity
will
let a man loose from his agreement, and will
against his agreement permit him to redeem a mortgage.”
The reason for this interference was suggested in
Vernon
v.
Bethell:
The court, as a court of conscience, is very jealous of persons
taking securities for a loan, and convcrting such securities into
purchases. And therefore
I
take it to be an established rule that
a
mortgagee can never provide at the time of making the loan for
any event or condition on which the equity of redemption shall
be discharged, and the conveyance absolute. And there is great
reason and justice in this rule, for necessitous men are not. truly
speaking, free men, but, to answer
a
present exigency, will submit
to any terms that the crafty may impose upon them.”
lo
In
other cases the agreements struck down were described as
unreasonable
l1
and
unconscionable.”
l2
0
Mmdove
v.
Bale
(1688) 2
Vcm.
84.
7
See Turner,
The
Equiry
of
Redemptiotz
(1931).
9
(1683) 1
Vern.
191, 192.
8
Ibid.
p.
175.
10
(1762) 2
Eden
110, 113.
11
‘Talbor
v.
Braddilt (1683) 1
Vcm.
183
and
394.
12
Jetiriings
v.
Ward (1705)
2
Vcm.
520.

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