Unconscionable Conduct in Contract Law

This assignment delves into the concept of unconscionable conduct within contract law. It presents a hypothetical case involving Rofi, a refugee with limited English proficiency, entering into a contract with Bolton Connect Pty Ltd through their agent, John. The analysis examines whether John's actions constituted unconscionable conduct by exploiting Rofi's language disadvantage and lack of understanding during the contracting process. Key legal provisions, landmark cases (Blomley v Ryan, Commercial Bank of Australia v Amadio, Kakavas v Crown Melbourne Ltd, Louth v Diprose), and the Australian Competition and Consumer Act 2010 are used to evaluate the situation and determine whether Rofi has grounds to rescind the contract.

Running head: BUSINESS LAW
Business Law
Name of the Student
Name of the University
Author Note

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Issue
The issue which needs to be determined in relation to the given case study is that whether
there has been a valid contract formed between Rofi and The Bolton Connect Pty Ltd in the light
of unconscionable conduct.
Rule
As defined by Knapp, Crystal & Prince (2016) statement or action which is considered so
unreasonable that it is in defiance of good conduct is known as unconscionable conduct. The
definition in relation to the concept is general as no exact meanings in relation to the concept
have been provided through law.
In Australia the concept of unconscionable conduct is dealt with by the provisions of
Australia Consumer Law as provided by schedule 2 of the Australian Competition and
Consumer Act 2010 as well as the provisions of common law.
Section 21 of the ACCA deals with unconscionable conduct in relation to consumers in
Australia and provides that until the consumers have totally understood the terms of a written
contract she should not sign it.
It is stated through the section that while indulging in trade and commerce a person in
relation to supplies of goods or services or acquisition of goods or services engage in a conduct
that is unconscionable in all circumstance.

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According to subsection 3 for the purpose of determining whether subsection (1) has
been violated the court has to give regard to only those circumstances which are reasonably
foreseeable when the allegation of contravention had been made.
According to subsection 4(c) whether a contract entered upon by the parties includes
unconscionable conduct or not is to be determined by the court by taking into consideration the
terms of the contract and the way and degree to which the contract was performed. In addition
the court also considers the circumstances of the parties upon the formation of the contract.
In common law equity intervenes in situation where an advantage of a special disability
held by the other person is taken by a party such as education, lack of understanding, age or a
combination of these factors. The transaction has to be so harsh that it leads to oppressive results
for the other party. In case such a situation is established by the other party they may seek to
rescind the contract.
There a few land mark cases which have been trialed by the court in relation to
Unconscionable conduct. In the case of Blomley v Ryan (1956) 99 CLR 362 the defendant had
entered a contract of buy a farm from the plaintiff who was 78 years old. The plaintiff used to be
regularly under the influence of alcohol. The court in this case ruled in favor of the plaintiff that
the contract was not valid as the consideration was well below market price and the plaintiff did
not gave capacity to make a rational judgment at the time the contract was formed.
In the case Commercial Bank of Australia v Amadio (1983) 151 CLR 447; [1983] HCA
14 the court also had to address an issue in relation to unconscionable conduct. In this case the
plaintiffs were the parents of the defendant who were induced by him to act as the guarantor of

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loan. The parents were Italians and did not have much command over English, in addition they
were uneducated and did not have business knowledge. It was held by the court in this case that
the contract entered upon with the plaintiff can be rescinded by them based on the concept of
unconscionable conduct. This was because the transaction defied the norms of good conduct and
equity had to intervene.
In the case of Louth v Diprose High Court of Australia (1992) 175 CLR 621; [1992]
HCA 61 the plaintiff was infatuated towards the defendant. The defendant asked the plaintiff to
purchase her a house as her house was taken because of outstanding debts. She said that she is
going to commit suicide if she does not get the house. The plaintiff therefore purchased her a
house. However things fell out between them and the plaintiff brought proceedings to recover the
house. The court in this case held that the plaintiff has the right to recover the house form the
defendant. This is because the defendant has created an 'atmosphere of crisis' which as not
actually present in the situation. The plaintiff was dependant on the defendant emotionally and
therefore he disregarded his own interest. The actions of the defendant were unconscionable and
inductive to carry out an improvident conferring the benefit upon herself.
In the recent case of Kakavas v Crown Melbourne Ltd [2013] HCA 25 (5 June 2013)
(High Court of Australia) the issue which had to be addressed was in relation to unconscionable
conduct of the parties to a contract. The case had to apply section 51AA of the Trade Practices
Act 1947 (Repealed by the ACCA section 2o) which dealt with unconscionable conduct. In this
case it was held by the court that the pathological interest of the plaintiff in gambling did not
establish a special disadvantage which was utilized by the defendant and thus there was no
unconscionable conduct

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Application
In the given situation it has been provided that Rofi is a refugee who has settled in
Australia and does not have a very good understanding of English Language. He has entered into
a contract with John who is the agent of Bolton Connect Pty Ltd. In the given situation the court
would analyze the surrounding circumstances where the contract had been entered into along
with the way in which it was carried out. It was provided to him that if he breaks the contract
before a period of two years he would have to pay a penalty of $1200. The terms of the contract
were explained by John to Rofi in a technical language which was not understandable to Rofi.
There were also translation services available but it had not been used by John. In addition John
was in a hurry to get into the contract for meeting his targets.
It the given situation it is clear through analyzing the circumstances in the light of above
discussed provisions and cases that there is an unconscionable conduct on the part of John
towards Rofi. This is because John had misused the disadvantage which was held by Rofi in
relation to language and understanding for the purpose of inducing him into the contract. This
can be established through the application of section 21(4)(c) of the ACL where the court is
required to consider the circumstances which were present at the time of contract formation. In
addition upon the application of the principles of Ryan, Diprose and Amdio case in the given
situation it can be provided that as Rohi had been subjected to a detrimental position in relation
to the contract he has the right to rescind the contract. The position was unfairly detrimental
because he was under the impression that he could rescind the contract and there were many
hidden cost in relation to the contract which he could not understand during the time of

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formation. Thus it can be stated that Rofi can rescind the contract based upon the concept of
unconscionable conduct
Conclusion
The contract which have been entered upon by Rofi with The Bolton Connect Pty Ltd can be
rescinded upon the option of Rofi as per the provisions of unconscionable conduct

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References
Australian Competition and Consumer Act 2010
Blomley v Ryan (1956) 99 CLR 362
Commercial Bank of Australia v Amadio (1983) 151 CLR 447; [1983] HCA 14
Kakavas v Crown Melbourne Ltd [2013] HCA 25
Knapp, C. L., Crystal, N. M., & Prince, H. G. (2016). Problems in Contract Law: cases and
materials. Wolters Kluwer Law & Business.
Louth v Diprose High Court of Australia (1992) 175 CLR 621; [1992] HCA 61