Unconscionable Conduct and Misrepresentation in Contract Law

Question one
Issue: The issue that arises on the facts of this question is if John can avoid his liability under the
guarantee provided to the EastWest Bank. This issue arises due to the unconscionable conduct of
Isobel, who had misrepresented the facts to John and made him sign the guaranteed under the
belief that it was not financially disadvantageous for him.
Rule: according to the common law, a particular contract can be described as unconscionable if
it results in an unfair dispute between a dominant and the weaker party. In such a case it is
required that certain advantage should have been taken by the dominant party of the 'special
disability' from which the weaker party was suffering. Some of the examples of such special
disability in case of a contract can be described as an elderly, poorly educated or illiterate, drunk
or disabled person is involved. An example of unconscionable conduct can be given from the
facts of Commercial Bank v Amadio (1983). This case provides a good example of
unconscionable contract. The effects of this case are that the Commonwealth Bank tried to
enforce mortgage guarantee against an elderly couple who had provided personal guarantee
regarding the loan taken by the company owned by their son. In this case, the elderly couple was
not very fluent in English language and the result was that they did not fully understand the
effect of the guarantee that was signed by them. Under these circumstances, the guarantee was
set aside by the court. It was stated by the court that under these circumstances, it will be
unconscionable to give effect to the terms of the guarantee against the elderly couple,
particularly due to the reason that in this case, the bank was aware of the limitations in English
language as well as their advanced age and infirmity. Still, the bank failed to take any steps in

order to make sure that the elderly couple had received independent advice regarding the
transaction they were going to enter into.
In this way, unconscionable conduct is related in the transactions that take place between
dominant and weaker parties. As a result, it overlaps with duress and undue influence.
Unconscionable conduct has been to war, and also by statute (ACL). Therefore,. Under the
common law, equity intervenes where advantage has been taken by one party regarding this
special disability from which the other party was suffering (Louth v Diprose, 1992). Normally,
the resulting transaction is harsh and oppressive for the weaker party. Where the weaker party is
able to establish the unconscionable conduct of the other party, it is for the weaker party to select
to avoid the transaction (Blomley v Ryan, 1956).
Regarding the issue of misrepresentation by nondisclosure, it was stated by the court in Amadio.
The duty of the ring to disclose information to a customer in such cases arises only if a special
agreement is present between the bank and the customer of the nature, which would not be
expected by the surety. In the present case, this was the case and the bank had failed to this close
the presence of such special arrangements, misrepresented. Regarding civilian part of the
transaction and the result was that the guaranteed was not binding (Kakavas v Crown
Melbourne Ltd., 2013). Among the certain circumstances that were present in this case were the
fact that the arrangement between the bank and Vincenzo to increase the overdraft and require
Vincenzo to considerably limit the overdraft in a short period.
Another relevant fact was deselected dishonoring of the cheques by the bank in an effort to
maintain the facade of prosperity of the company. However, Gibbs J was not ready to find
express misrepresentation made by the bank. Even if there was such misrepresentation it was
made by their son and not by the bank.

Application: In the present case also, it can be claimed by John that East West Bank should not
be allowed to enforceability on account of below mentioned reasons:
That the bargain was unconscionable
That it was reviewed by undue influence; and
The bargain had been induced by misrepresentation or 'concealing facts' which the bank was
under a duty to disclose.
It is revealed by the effects of the present question that Isobel was working as an employee
content and she was in a de facto relationship with John for the last two years. While Isobel is an
employee accountant in an accounting firm in Sydney for the last five years, John is working as a
carpenter. John is infatuated with Isobel. Therefore he obediently follows the orders given by
Isobel. The couple was living in a rented apartment and did not have any joint assets. However,
John has a holiday house, which was left to him by his grandparents. When Isobel decided to
start her own accounting practice, she may be a loan of $150,000. Therefore, Isobel asks Mark,
the manager of the bank to bank will provide a loan of $150,000 if she finds the guarantor, who
has sufficient assets for providing security. The holiday house owned by John was worth
$800,000. Isobel asks John if he would sign a bank guarantee. She makes a misrepresentation
that the guarantee is going to be for $50,000 only and it would be repaid in six months. When
John visits Mark at the bank, he shows the guarantee documents, but does not read them to John.
In fact, the guarantee covered for security over the holiday house and it was not restricted to
$50,000. John also tells Mark that he is relying on Isobel that he will not be disadvantaged by the
guarantee. Under the circumstances, the guarantee is signed by John without reading it.
Now, the bank wants to enforce the guarantee. However, John can claim that the contract is
made by unconscionability and as a result, he is not bound by the contract.