Unconscionability in Common Law and Statutory Law of Australia

Business Law Assignment

2 Business Law Assignment
Unconscionability, also referred to as unconscionable conduct, is usually found under the
contract law; though, these are not restricted to the contract law and can also be found in
statutory laws like the Australian Consumer Law. So, unconscionability is not limited to the
common law and is also present in the statutory laws (Vout, 2009). Unconscionability is
basically such term in the drawn contract whereby one of the parties to the contract is dominated
by the other party of the contract. This is possible due to the other party holding a superior
bargaining power against the person who is at a weaker position (Latimer, 2012). This is
particularly wrong as it is not ethically correct. Unconscionability is present in such relationship
where there are two parties, in which one is the dominating one and the other is the weaker one.
As a result of this, unconscionability is often mixed with the vitiating factors like undue
influence and duress. Under the contract law, unconscionability allows the dominating party to
take advantage of the weaker party due to the special disability held by the weaker party. Some
of the special disabilities include age, less education, illiteracy and the combination of these.
This special disability allows for the weaker party to be oppressed and to be dealt in a harsh
manner (Clarke, 2018a). This discussion is focused on highlighting the different facets of
unconscionability particularly in context of the common law and the statutory law of the nation.
In doing so, the established case laws and the use of this in the commercial world would be
highlighted.
When a case of unconscionability is present under the common law of contract, the
contract becomes voidable at the request of the weaker party. As a result of this, the undertaken
transaction is set aside and the dominating party is no longer able to take advantage of the
situation (Clarke & Clarke, 2016). There are a number of case laws which prove to be an
example of unconscionability not being tolerated. Particularly in context of Australia, the leading

3 Business Law Assignment
example of unconscionability is the case of Commercial Bank of Australia v Amadio (1983) 151
CLR 447. The reason for the significance of this case is not just because this case involved
unconscionability but also because this case became an important lesson for the banks in the
nation, to not be indulged in such conduct, which could prove costly for them. This case had a
mortgage being signed for securing the loan for the son of A by them. A were never informed of
what was going on or even about the details of this mortgage. A did not know English that much
due to them being Italian and this made them almost illiterate. When an attempt was made by the
bank for seizing the home which had been kept as a mortgage, A challenged the validity of this
mortgage. The court analysed the entire case and gave the ruling in A’s favour due to
unconscionability being present here. The special disability which led to the presence of
unconscionability in this case was the almost illiteracy of A (Clarke, 2018b).
There is another prominent case law which shows the court taking a strict approach
against unconscionability and this is the case of in Louth v Diprose (1992) 175 CLR 621; [1992]
HCA 61. Diprose in this case had been infatuated towards Louth and to show his affection, he
used to give Louth a number of gifts. When Diprose proposed to Louth, she did not accept the
proposal. After some time had passed, Louth told Diprose that she was very upset due to her
inability in paying the money for her home. As a result of this, she was facing eviction. This
would mean that she would not have a home to live in, and ultimately she would end her life.
However, most of this was false. Due to the emotional pressure exerted by Louth on Diprose, he
agreed to purchase the house for Louth; and due to instance of Louth, the name of Louth was put
on the documents. After some years lapsed, the relation between the two was damaged and
ended. Diprose then asked Louth to transfer the home which he had brought for her in his name,
as he had made the payment for the house. However, Louth denied to do so and this led to