Chapter 9 Guidance on answering the questions in the book

Unfairness: undue influence, non-commercial guarantees, unconscionable bargains

1. 'Undue influence, the doctrine in Etridge, and unconscionable bargain deal with quite different problems; it is impossible and pointless to find one justification for them all.' Discuss.

See especially 9.7 A general doctrine of unfairness?

This is another way of asking the same questions as in 2 below, except that the starting point is the type of unfairness addressed (eg procedural unfairness comprising of either claimant disability or defendant unconscientiousness,  substantive unfairness) rather than the burden of proof.

2. 'Royal Bank of Scotland v. Etridge (2001) has clarified the role of independent advice, manifest disadvantage and notice in the law on undue influence and non-commercial guarantees.' Discuss.

See 9.2.4 Failure to protect by omission (old presumed undue influence) and 9.3.2 The legal response.

This question requires detailed knowledge of the restatement of undue influence and non-commercial guarantees given in Etridge.  The sub-questions you should address include:

  • What problems do the doctrines on undue influence and non-commercial guarantees seek to address?  What policies are in play?
  • What is the role of independent advice, manifest disadvantage and notice in either doctrine prior to Etridge?  What difficulties remained? 
  • What clarification was introduced in relation to each by Etridge (eg what does 'notice' really amount to?)?  What uncertainties, if any, remain?
  • How should the clarifications and any remaining uncertainties be assessed in the light of the relevant policies in these areas?  Is any reform desirable?

3. 'If a contact is stigmatised as "unfair" it may be unfair in one of two ways. It may be unfair by reason of the unfair manner in which it was brought into existence; a contract induced by undue influence is unfair in this sense. It will be convenient to call this "procedural unfairness". It may also, in some contexts, be described (accurately or inaccurately) as "unfair" by reason of the fact that the terms of the contract are more favourable to one party than to the other ... it will be convenient to call [this] "contractual imbalance". The two concepts may overlap' (Hart v. O'Connor (1985)).

How far does and how far should contract law give relief against either sort of unfairness?

See 9.7 A general doctrine of unfairness?

This is another way of asking the same questions as in 1 and 2 above, except the starting point is at a higher level of generality, that of procedural and substantive unfairness.  You must first define these terms, explain their relationship to each other and address what the quotation says about the legitimacy of controlling each. 

  1. In addition to the points made in 1 (on the specific doctrines of duress, undue influence, improvident guarantees and unconscionable bargains), you can broaden your discussion to other areas of contract law which can also be perceived as addressing the problems of unfairness (eg misrepresentation, the penalty rule, the control of exemption clauses, restraint of trade, UCTA, CRA, incorporation).  This will deal with the descriptive part of the question (the does question). 
  2. As for the normative part of the question (the should question), this requires you to critically analyse the policy considerations for and against legal intervention in cases of procedural or substantive unfairness (eg certainty, justice, inequality of bargaining power and so on).  State your conclusion and reasons.  Avoid being too one-sided.

4. Advise the Law Commission on: (i) whether English law should recognize a general doctrine of unfairness in contract formation, and (ii) what such a general doctrine might comprise.

See 9.7 A general doctrine of unfairness?

This is another way of asking the same things as question 3 above but the focus is normative and law reform. 

  1. See question 4.
  2. (ii) See 9.7.1 The policy arguments

9.7.2 The form and substance of a doctrine of unfairness

5. Uriah, a retired businessman with a reputation for toughness and independence, dies after a brief but crippling illness. Viv, Uriah's executor, discovers that in the year before his death, Uriah had become friendly with his new gardener Wayne and invited him to move into Uriah's house. Uriah had given Wayne lavish gifts totalling £30,000 and guaranteed a loan of £500,000 to Wayne from Xerxes Bank for an unlimited duration. When Xerxes Bank advised Uriah to get independent advice, Uriah refused saying 'It's a waste of money, I trust Wayne totally. Anyway, it's only for six months.' On Xerxes' insistence, Uriah saw Zak, a solicitor who stressed the disadvantageous nature of the guarantee, but Uriah was quite obviously dozing off. Wayne has defaulted on the loan and Xerxes Bank seeks to enforce Uriah's guarantee. Advise Viv.

As Uriah's executor, Viv would want to set aside the gifts to Wayne and the guarantee to the Bank. 

  • Can the gifts be set aside for undue influence by Wayne?  Has Wayne been guilty of unconscionable conduct?  What must Viv prove? What evidence points that way?  What further facts do you need to know?
  • Can the guarantee be set aside against the Bank?  What must Viv prove? Does the evidence support her case?  What further facts do you need to know?  Has the Bank done enough in response to its 'notice'?