Business Law Assignment: Promissory Estoppel and Case Analysis

This assignment delves into key concepts of business law, focusing on the signature rule and promissory estoppel. It discusses the signature rule, explaining that a signed contract binds the individual to its provisions, referencing the case of L'Estrange v F Graucob Ltd. Exceptions to the signature rule, ...Read More

BUSINESS LAW
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Question 2
As per the signature rule, when an individual represents his/her consent by putting the
signature on the contract, then all the provisions of this contract would be applicable on the
concerned individual irrespective of the fact whether the various provisions were read and
understood or not. Hence, in case of signed contracts, if there are certain provisions such as
exclusion clause which have an adverse impact would also be legally enforceable. A relevant
case in this regards is L'Estrange v F Graucob Ltd [1934] 2 KB 394.
In accordance with this case, there was a contract between the claimant (L'Estrange) and
defendant (Graucob) with regards to sale of a machine. The contract had an express clause
where any implied or express condition not highlighted in the contract would not be
applicable. The machine bought was found to be faulty and hence the claimant brought legal
action against the defendant owing to breach of Sale of Goods Act. The claimant highlighted
that she had not read the express clause before signing. However, the court upheld the
enforceability of the signed contract and decided in favour of the defendant since express
clause made the statutory provisions irrelevant.
There are some exceptions to the signature rule. A person is not bound by his/her signature
when there is fraud or misrepresentation. Additionally, in case the document is not a correct
representation of the agreement, then also the signature rule would be invalid. Further, in
cases where the contract has a condition precedent then the signature would be invalid if the
condition precedent is not fulfilled. Also, the signature rule is not applicable in case of non-
contractual documents. Further, in case of oral promises, even without signature contractual
relation may arise on account of promissory estoppel.

Question 3
Issue
The primary issue in the given scenario is to determine whether the contract related to
guarantee enacted between Roberta (Daniel’s mother) and EasyLoans is legally enforceable
or not especially considering that the conduct of the lending officer could be potentially held
as unconscionable.
Rule
One of the key requirements for a legally enforceable contract is that neither of the parties
must engage in unconscionable conduct. Such a conduct is the conduct which is in violation
with good conscience and thereby could lead to the contract being declared void. This is
highlighted in the Commercial Bank of Australia v Amadio (1983) 151 CLR 447; [1983]
HCA 14 (referred to as “Amadio Case”).
In this case, financial guarantee was given to a bank by Mr. And Mrs. Amadio for the debts
of their son, Vicenzo Amadio. The couple has migrated from Italy when they were more than
70 years old and hence had limited English skills and business experience. The bank officer
incharge of enacting the mortgage guarantee with the parents (Mr. And Mrs. Amadio) did not
take effort to explain them the guarantee document and the underlying purpose for the same.
Later, there was failure on the part of their son Vicenzo to clear his debts and hence the bank
revoked the guarantee, thereby wanting to liquidate the house of the parents to recover their
dues.
The honourable high court highlighted that the bank had engaged in unconscionable conduct
and thereby declared the guarantee as legally unenforceable. It was highlighted that in regards
to dealing with bank, the couple suffered a “special disadvantage” because of lack of English

skills and also limited understanding of business. Hence, the bank was in a position to take
advantage of the couple and therefore could not enforce the guarantee. The topic of
unconscionable conduct is also dealt with Australian Consumer Law (ACL). As per s. 21 of
ACL, any individual engaged in trade or commerce must not engage in unconscionable
conduct with regards to supply of goods and services. Violation of this clause results in
remedies such as refund and claiming of damages.
Application
Based on the given scenario, it is apparent that Roberta has a “special disadvantage” owing to
the fact that her English language skills are poor and also because she does not know
anything about guarantee. On the other hand, the lending officer from EasyLoans did not
explain her about the guarantee document and instead insisted her to sign the guarantee
document. In accordance with the verdict in the Amadio case, it can be concluded that there
is unconscionable conduct on the part of representation of EasyLoans. As a result, the
guarantee would not be enforceable. A similar conclusion can also be derived on the basis of
ACL where the conduct of EasyLoans (which is offering financial services) is clearly
unconscionable and hence in violation of s. 21.
Conclusion
Based on the above discussion, it can be concluded that Roberta would be able to terminate
her guarantee agreement with EasyLoans on account of unconscionable conduct.