Doctrine of Unconscionability: Its Development and Possibilities

Topics: Common law, Contract, Contract law Pages: 26 (9787 words) Published: June 9, 2013
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Malayan Law Journal Articles/2007/Volume 3/DOCTRINE OF UNCONSCIONABILITY: ITS DEVELOPMENT AND POSSIBILITIES [2007] 3 MLJ xliv Malayan Law Journal Articles 2007

DOCTRINE OF UNCONSCIONABILITY: ITS DEVELOPMENT AND POSSIBILITIES Zahira bte Mohd Ishan LLB (Hons) (IIUM); LLM (London) Lecturer, Faculty of Economics and Management, Universiti Putra Malaysia Introduction The term `unconscionability' is protean and used in different ways by different judges and commentators to address a fundamentally similar problem1 that is unfairness2. The issue of unfairness in the law of contract is important due to the nature of modern contracts, which are no longer simple or straightforward but of multifarious types and purposes. Although the application of the doctrine of good faith appears to be more popular in the common law courts than the doctrine of unconscionability, it should be noted that both doctrines are still vague and have different reasons for their existence and application in the common law system. The positive development of unconscionability in common law jurisdictions, such as in the United States and Australia, currently resists uniformity in formulating the doctrine due mainly to the varying legislative approaches in both countries. In Malaysia, the development of unconscionability as an independent doctrine is still debatable3. The reasons apparently related to the uncertainty over the definition or scope of the doctrine4as well as the reluctance of the English courts to develop it into a wider doctrine of general application. 3 MLJ xliv at xlv In relation to this matter, the development of unconscionability from the historical point of view and the influence it received from the contract theories is considered important. The aim of this paper is to propose that there can be an independent doctrine of unconscionability and that the doctrine of good faith is insufficient to deal with the problem of unfairness. It is also agreed that good faith can be subsumed under the general doctrine of unconscionability5. The Early Doctrine of Unconscionability According to JR Peden, the early stage of unconscionability dates from the second half of the seventeenth century. He also states that the following philosophies provide the basis for the Chancery court's discretionary powers in dealing with all kinds of unfair transactions: the Aristotelian concept of justice; the Roman law concept of `lesio enormis'; and the medieval church's concept of a just price and condemnation of usury6. The doctrine was first developed by the Chancery court to provide relief to a party in usurious transactions7. According to Lord Ellesmere LC in the Earl of Oxford's Case:

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The cause why there is a Chancery is, for that men's actions are so diverse and infinite, that it is impossible to make any general law which may aptly meet with every particular act, and not fail in some circumstances. The office of the Chancellor is to correct men's consciences for frauds, breach of trusts, wrongs and oppressions, of what nature soever they be, and to soften and mollify the extremity of the law, which is called Summum Jus8.

This statement served to justify the cause for equity to develop doctrines to provide relief to individuals. Correcting men's consciences is the reason for the doctrine's existence. Two commentators appear to lend their views on this statement. One view refers only to the word `oppressions' as unconscionable transactions9. This view, however, could be viewed as very narrow and selective 3 MLJ xliv at xlvi because the notion of unconscionability is subjective and `oppressions' is one of its categories. Another view relates to the aim of equitable doctrines. According to Mason, those developed equitable doctrines, which were known as `the rules of equity and good conscience' aimed to prevent or to remedy unconscionable conduct10. In other words, the focus of the early equitable doctrines was upon remedying conducts or...

References: were made to Earl of Aylesford v Morris (n13) and Fry v Lane (n 30). 114 [1963] MLJ 63 at p 65. 115 (1900 & 1901) 6 SSLR 6. 116 Chia Keng Beng (n 115) pp 9 and 11. 117 The 1899 Enactment was applicable to four states: Perak, Selangor, Pahang and Negeri Sembilan, and the operative dates varied from state to state. See SMN Alam (n 37) p 3. 118 [1984] 1 MLJ 222 at p 224. See ibid pp 1-5; A Phang 1998 (n 74) pp 31-35 for the historical development of the Malaysian contract law. 119 (1919) LR 47 IA. 1 120 AIR 1924 PC 60. See ibid p 240. 121 as referred to by Lord Scarman in National Westminster Bank plc v Morgan [1985] AC 686 122 [1994] 3 MLJ 127. 123 (1918) 1 FMSLR 348.
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124 LA Sheridan (1961); SMN Alam (n 37) p 239; A Phang 1998 (n 74) p 533. 125 Ibid. 126 [2001] 3 CLJ 98. 127 [2002] 4 CLJ 49. 128 [2001] 1 LNS 43. 129 (1976) 70 DLR (3d) 192. This case was referred by Gopal Sri Ram in Saad Marwi at p 109. 130 Ibid at line 15. 131 [1975] QB 326 at p 329. 132 D Tiplady (n 45) 611; JR Peden (n 6) p 23; Carter and Harland (n 5) only focus on the first three basis. 133 DC Ford and EEJ Ford (n 9) p 314. 134 Ibid 613. 135 PH Clarke (n 45) p 229. 136 R Bigwood `Contracts by Unfair Advantage: From Exploitation to Transactional Neglect '(2005) 25 OJLS 65: the commentator use this term which subsume the exploitation concept only for undue influence and unconscionable dealing cases as the prevailing justification for interference with apparent contracts in pure `unfair advantage ' situations. 137 [2004] 6 CLJ 320.
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