Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447

1
Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447.
Student’s Name
Course
Professor’s Name
University
Date

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Fact
An Old Italian immigrant couple Mr. and Mrs. Amadio signed bank documents as
underwriters against a loan that was taken by their son, with the intention of boosting his
construction firm from the Commercial Bank of Australia. The bank management, which was
in close contact with Vincenzo Amadio had a better understanding of the business and knew
better than the Mr. Vincenzo Amadio has possibly misrepresented key facts in an effort to get
his parents as the guarantors.1 Moreover, the construction business botched, the bank was
compelled to implement the guarantor’s terms by mortgaging the structure owned by the
elderly couple. However, the bank representative did clearly point out that, the guarantee
wasn’t limited to a period of six months after he heard about the misrepresentation made by
Vincenzo Amadio. The days that followed the signing of the guarantee and mortgages,
Vincenzo Amadio’s overdraft rose from $190,000 to more than $270,000.2 Vincenzo’s
business continued to fail and it eventually went into liquidation. The bank then requested
that the elderly couple make good of the guarantee that they signed and pay the amount lent
to their son. However, the couple wasn’t able to meet the obligations they signed and thus
they were provided with a notice that the power of sale under the mortgage would be
enforced.3
Decision
In coming to the final determination, the court made a consideration of the special
disadvantage that the elderly couple suffered due to their limited understanding of the English
language, lack of formal education or knowledge about business. Due to their inability to
speak in English and lack of experience in business was integrated with the bank’s failure to
1 Stephen Graw,
An introduction to the law of contract. Thomson Reuters, 2012.
2 Ross Cranston.
Principles of banking law. Oxford University Press, 2018.
3 Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447.

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disclose important facts that could have allowed the Amadio’s to make there sound decisions
regarding the transaction. This was held amounting to unconscionable conduct. Ultimately
the old couple could not have approved of the documents, had they been made aware of the
impact of the terms that they approved.4 Justice Mason argued that Relief on the basis of
unconscionable conduct would be granted once it is revealed that a party exploited
unconscientious advantage against innocent individuals, whose ability is overborne in order
to ensure that it is voluntary. Justice Mason further expounded that a normal disparity in the
bargaining powers of the involved parties did not qualify for special disadvantage. For either
of the parties to be considered for special disadvantage, there has to be enough evidence that
would make the jury believe that the ability to make informed decisions is severely affected
by the party. 5
The verdict given by Mason is based on the idea that if the terms and conditions of a
contract are harsh, it is not the sole reason for the impeachment of such a contract under the
unconscionability alone. The terms of entering into a contract are drawn upon the
establishment of unconscionable conduct within the terms of a contract before both parties
can agree to it. In cases the court determined “unconscionable conduct”, the jury can either
for the contract to be rescinded , decline to order specific performance or even award
damages if it is determined that there was a statutory breach.6
4 Wenette Jacobs, Philip N. Stoop, and René Van Niekerk. "Fundamental consumer rights
under the Consumer Protection Act 68 of 2008: A critical overview and
analysis."
Potchefstroom Electronic Law Journal/Potchefstroomse Elektroniese
Regsblad 13, no. 3 (2010).
5 Corlia Van Heerden, and Jacolien Barnard. "Redress for consumers in terms of the
Consumer Protection Act 68 of 2008: a comparative discussion."
J. Int'l Com. L. & Tech. 6
(2011): 131.
6 Roger Johns, and Mark . Blodgett. "Fairness at the Expense of Commercial Certainty:
The International Emergence of Unconscionability and Illegality as Exceptions to the
Independence Principle of Letters of Credit and Bank Guarantees."
N. Ill. UL Rev. 31
(2010): 297.