Previous: Undue influence
Both undue influence and unconscionable bargains attempt to provide equitable remedies to abuse from stronger parties under contract law. The doctrine of undue influence protects people where there is a relationship of trust and confidence, whereas where unconscionable bargains are concerned, no relationship of trust is required, there is instead protection from victimisation.
Hart v O’Connor [1985, New Zealand] sums up the doctrine effectively:
Bargain…made by a poor or ignorant person acting without independent advice which cannot be shown to be a fair and reasonable transaction…It is victimisation..either…the active extortion of a benefit or the passive acceptance of a benefit in unconscionable circumstances.
There are three elements to an unconscionable bargain:
- The claimant must show that they were at a disadvantage
- The stronger person must know of this disadvantage
- The stronger person must use this knowledge to victimise the claimant
In Nichols v Jessup [1986, New Zealand], general mental incapacity was deemed a disadvantage capable of an unconscionable bargain in the sale of land such that drives of the defendant’s property could be amalgamated with the claimant’s. Meanwhile, the presence of cancer in Gustav v Macfield [2008, New Zealand] was not deemed to be a disadvantage capable of constituting an unconscionable bargain: at the time of the transaction, the claimant was capable of conducting her affairs.
Finally, in the aforementioned case of Hart v O’Connor [1985, New Zealand], a contract was not set aside for reasons of unconscionable conduct as the defendant did not know that the claimant was suffering from senile dementia. However it was set aside due to mental incapacity.
Claims of unconscionable bargains are all judged on their own facts, and can involve a concurrent claim for undue influence.