The doctrine of unconscionability prevents a contracting party from exploiting their full contracting rights when the courts feel that it is inequitable for them to do so. This essay shall examine the juristic basis of unconscionability with reference to the basic principles expounded in the classic case of Fry v Lane. It will conclude that there is no need for a doctrine of unconscionability because most of these cases can be explained on the basis of common law principles such as duress, undue influence, unilateral mistake, capacity and misrepresentation.
Basis of the doctrine
Fry v Lane involved plaintiffs who were ignorant and living in poverty. They sold their property to the D at 440 pounds who then subsequently resold at 3000 pounds. The court held that the contract could be rescinded because of unconscionability because 3 conditions had been satisfied. The P were poor and ignorant, the deal was at a gross undervalue, and the vendor has no independent legal advice. It was held that once these 3 conditions were satisfied, the burden shifted onto the D to prove that the deal was fair, just and reasonable. As the D could not show that, the contract was rescinded.
Fry v Lane has been modified and adopted by the local courts. The requirement of ‘poor and ignorant’ has been expanded to include people living in the low income group who are not educated (Cresswell v Potter) as well as any infirmities such as age that affects the ability of the D to understand the nature of the contract, Fong Why Kong v Chan ah Tong. The requirement of a ‘sale at gross undervalue’ refers to any transaction where consideration is so inadequate as to give rise to a suspicion that the contract was not fairly made, Fong Whye Kong v Chan ah tong. The requirement that the D had received independent legal advice is strong evidence that he understands the nature of the contract he enters into.
The 3 requirements of Fry v Lane