Cambridge University Press Protecting the Vulnerable ...assets.cambridge.org/97805211/90534/index/9780521190534_index.pdf · liability in fraud cases317–18 Australia Blomley v Ryan119–20,

INDEX

A New Regulator for a New Millennium232–3

abusive clauses, intervention by courts303–5

academic literature 26–9actual undue influence 174–5adjustment of contract 14Administration of Justice Act 1970 (AJA)

courts’ jurisdiction as to mortgages187–8

mortgage repossession, as to 185advertisements

control of 353misleading actions as to 353–4

advicesuitability of 218–19TCF Outcomes, and 218–19

agency contracts 10–13aggressive practices

concept 358CPUTR provisions 220, 358effect on choice 360–7effect on decision making 360–4freedom of choice, and 361–2meaning 358, 359overview 358–60uninformed decision making, and

360–1Allcard v Skinner 175annuities for the life of the seller,

regulation 152–4annulment of contracts 14, 15Anson, Sir William, academic literature

26–9Arden, Master of the Rolls,

judgment 163Argentina, bonds cases 321

Atiyah, Professor P. S., academicliterature 173

Attorney-General for England andWales v R 176

auditorsliability for misinformation 314–24liability in fraud cases 317–18

AustraliaBlomley v Ryan 119–20, 166Commercial Bank of Australia

v Amadio 119–20, 126–7suretyship cases 119–20unconscionable dealing, doctrine 166Yerkey v Jones 180

autonomous action approach to definingflawed contracts 82–3, 86–7

autonomybalanced with social justice 386–8constitutional rights, and 387–8right to 387–8social state principle, and 259

‘average consumer’ in benchmarking367–71

average consumer test 217Aynès, Professor L., academic

literature 76

Bacon, Francis, academic literature 149‘bad loans’ case 308–10Ballow, Henry, academic literature 39,

160–1bank guarantees, use of 293bank loan contracts

bank-client relationship,development 290

mortgages as security 296–300overview 290–2, 305–7

400

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protection of weaker parties 289–307scope for unequal protection 289security for loan 292–6succession law as to 301–3

Banking Code 2008aggressive practices 358misleading actions as to 353–4misleading omissions, as to 356–7responsible lending 219role of 209–10, 352unfairness, as to 208

Banking Code Standards Board (BCSB)209–10

banking competition, CruickshankReport 214

banking foreclosure, use of 294–6banking legislation, overview 310–13banking risk management 292–6banks and kickback payments see

kickback paymentsBarclays Bank v O’Brien 116–17Batty v Lloyd 158Baxton, John, academic literature 147Becks, U., ‘reflexive individual’

concept 390behavioural economics

consumer rights informationprocessing 357–8

research on decision making 215–16,340–1

transactional risk, and 123–5Bellot, Hugh, academic literature 156Benbrigge, John, academic literature 149benchmarking, ‘average consumer’ in

367–71Benston, G. J., academic literature 215Better Regulation Executive, report on

information provision 215Bigwood, Professor R.

academic literature 167transactional neglect theory 177

Bill v Price 157bills of exchange, use of 293Bingham, Lord Justice, judgment 207Birks, Peter, academic literature 120–1Blackstone, Justice, judgment 151Blackstone, William, academic

literature 148

Blomley v Ryan 119–20, 166bond issues

actors 311–12brokers 311–12case law framework 310–11managers 311–12rating agencies 312–13retailers 311–12underwriters 311–12

bondscases 320–1post-obit bonds 157–8

borrowing on expectation of futureownership 32

Bowen, Lord Justice, judgment 175–6Bramwell, Lord Justice, judgment 31Briault, C., academic literature 212brokers

bond issues 311–12duty of disclosure 312–13liability for misinformation 320–3

Brown, Lord Justice Simon,judgment 181

Browne-Wilkinson, Lord, judgment 116burden of proof

usurious contracts 13–14wrongful conduct 111–12

Bürgschaft caseconstitutionalisation of

unconscionability, as 251–6,381–3

fundamental rights, and 387–8horizontal effect, and 261–2importance 247judicial harmonisation of private

law, as 381overview 249–51

Campbell, David, academic literature101–2

cancellation, right of, and informeddecision making 363

canon law, prohibition of usury 147–8catching bargains

cases 32transactional risk, and 113–15

Chen-Wishart, Mindy, academicliterature 178

index 401






choice see freedom of choiceCirio bonds case 308, 320–1civil law approaches to

unconscionability,effectiveness of 379, 393

class actions 325clauses abusives legislation 64–5codification of private law

challenges to private law approachesto unconscionability 380

harmonisation through 384–6coercion

domestic infringement, as 359factors in 360freedom of choice, and 361–2

Committee of European SecuritiesRegulators (CESR),recommendations 331–3, 337

Common Frame of Reference for aEuropean Contract Law(CFR) 7–8, 42–5

common lawprotection of weaker parties

overview 166–8, 182–3‘vitiating factors’ 166

torts see tortstransplant of 276

common mistake 168‘Community infringement’, Enterprise

Act provisions 350–1company financial statements, auditing

of 313compliance, FSA’s expectation of

240–1compromise agreements, employees’ 115Comyn, Robert, academic literature 150conduct of business rules

conformity of contract law to 268direct invocation 268growth of 247pros and cons 268–71protection of weaker parties 262–6,

388–9shift of emphasis to 266–8

Conduct of Business Sourcebook(COBS) 208

Conduct of Mortgage Business(MCOB) 191–2

conflicts of interestinformation provision, and 392kickback payments 327–9, 337management 342–3

consent approach to unconscionabilitydefining flawed contracts 82, 84overview 36–7relational contract theory, as to 103shortcomings 90usefulness 89–90

constitutional challenges to privatelaw approaches tounconscionability 379–80

constitutional freedom of contractacknowledgement of 19substantive freedom as

constitutional principle9–17

constitutional rightsautonomy, and 387–8EU fundamental rights, as 25

constitutionalisation of contract law,vertical and horizontalconstitutionalisation 18

constitutionalisation ofunconscionability

Bürgschaft case 251–6, 381–3overview 381–4tripartite approach to

harmonisation, as part of398–9

consumer benchmarks, ‘averageconsumer’ in 367–71

consumer contractsdistributive theories of flawed

contracts 84–6protection measures 114–15protection of weaker parties

53–5, 61standard terms and conditions,

unfairness 55–7consumer credit

compliance regime 240–1economics approach to

unconscionability, as to133–5

harmonisation Directive 384–5regulation 208

402 index






setting aside legislation 34statutory provisions 34

Consumer Credit Act 1974 (CCA)aggressive practices, as to 358equitable mortgages 186misleading actions, as to 353–4mortgages, as to 185, 192–4unfair contracts terms, as to 195,

198–9unfair credit relationships, as to 352

Consumer Credit Act 2006aggressive practices, as to 221regulation under 208revised unfairness provisions 198–9

consumer lawCCA see Consumer Credit Act 1974

(CCA)clauses abusives legislation 64–5consumer rights Directive 48–9CPUTR see Consumer Protection

from Unfair TradingRegulations 2008 (CPUTR)

FSMA see Financial Services andMarkets Act 2000 (FSMA)

mortgages, as to 185Unfair Contract Terms Directive 54UTCCR see Unfair Terms in

Consumer ContractsRegulations (UTCCR) 1999

consumer legislation, overview 81, 129‘consumer outcomes’ (FSA)

consumer expectation, as to 221, 222disclosure requirements 216guidance 236–7measuring outcomes 218, 219, 222–3overview 212–13post-sale conduct, as to 224suitability of advice, as to 218–19suitability of products, as to 219suitability of targeting, as to 219

Consumer Protection from UnfairTrading Regulations 2008(CPUTR)

aggressive practices, as to 220consumer benchmarks 367–71misleading information, as to

217–18mortgages, as to 185

overview 207–13, 350–1, 371–3regulation under 350–73

consumer rightsbehavioural research on information

processing 357–8information provision 357

consumersaverage consumer test 217benchmarking, in 367–71decision making, behavioural

economics research 215–16expectation 221–3kickback payments, and 330–1mortgages, and see mortgagesrecognition of importance of

information 216responsibility for decisions 219risk, and 389–93routes to redress 185, 225‘taking advantage’ of 219, 220–1views on TCF Initiative 213

contra proferentem, application of 48contract law

coherence, need for 272–3conduct of business rules,

conformity to 268constitutionalisation 18consumer protection measures 114–15EU Common Frame of Reference

(CFR) 7–8, 42–5horizontal effect of fundamental

rights 259–62neo-classical 100–7norms in relational contract theory

102, 103protection of weaker parties 256–9relational contract theory, and 100–7unconscionability, and 104–7UNIDROIT Principles 140

contract legislation 81contractual risk

contextual nature of risk 110types 100, 107, 109–10

contractual risk modeldescription 109relational contract theory, in 107–8,

109–15contractual unfairness see unfairness

index 403






Control of Misleading AdvertisementRegulations (CMAR) 353

convergence of public and private lawapproaches, overview 246–9,273–4

‘cooling off’ periods 114core terms in contracts 196, 206–7corrective justice theories of flawed

contracts 84cost-benefit approach to defining

flawed contracts 83Cotton, Lord Justice, judgments 175Council of Mortgage Lenders,

mortgage exit fees Statementof Good Practice 224

courtsabusive clauses, intervention 303–5duties as to unequal bargaining

power 387–8jurisdiction as to mortgages

187–8, 201unfair contracts terms, intervention

303–5‘cradle to grave’ approach to regulation

351–2credit agreements 13–14credit crunch see global financial crisiscredit institutions Directive, meaning

of mortgage value 299–300Credit Lyonnais v Burch 32–3, 35, 121,

180–1Cruickshank Report on banking

competition 214

damageseconomic analysis 136–8misrepresentation 171misrepresentation, for 170use of 130

Davidson, J. J., academic literature 207Day v Newman 163De Castro, F., academic literature 47,

57–9deceit, tort of 170‘decentred regulatory’ approach to

mortgage regulation 188–90decision-making see also informed

decision making

aggressive practices, effect of 360–4behavioural economics 215–16, 340–1effect of information 341–2psychology of 340–1uninformed 360–1

Denning, Lord, judgment 34Director General of Fair Trading v First

National Bank Plc 196, 207directors

duty of disclosure 311liability for misinformation 314–24

disclosure see information provisiondiscrete contract (‘one shot’)

academic literature 101–2meaning 101relational character 101–2

discriminationGender Directive as to insurance 223Law Review 223prohibition of 223unfairness, and 223–4

distributive theories of flawed contracts84–6

dolo in contrahendo (pre-contractualfraudulent misrepresentation)55

dolus (fraudulent misrepresentation),prohibition of 49–50

domestic infringement, Enterprise Actprovisions 359

duressproblem areas 173types 172–3vitiating factor, as 166, 172–3

Earl of Chesterfield v Janssen 159–64economic analysis of remedies

choice of remedies, question of 131consumer credit 133–5damages 136–8design of standard, question of 131efficiency, question of 131invalidation of contract 138–40model 136–42overview 129–32, 142–3questions 131replacement of unfair terms 141–2rescission of contract 140–1

404 index






economics approach tounconscionability 132–5

economy of contracts principle 22Edelman, Dr J., academic literature 171efficiency theories offlawed contracts 87–8elderly persons, cases 111–12employees’ compromise agreements 115employment contracts, distributive

theories of flawed contracts84–6

enforcement of contractsacademic literature 26–9reasons for non-enforcement 39

Enonchong, Professor N., academicliterature 167

Enterprise Act (EA)aggressive practices, as to 359‘Community infringement’ 350–1domestic infringement, as to 359

Epstein, R., academic literature130–1

equitable mortgagescomparison with Regulated

Mortgage Contracts 187–8enforcement 200–1overview 186routes to redress 199

equitymortgages, and 195usurious contracts, and

Earl of Chesterfield v Janssen 159–64overview 154–9

Erskine, Thomas, academic literature152–3

Etridge case 115–22, 126–7EU Common Frame of Reference

(CFR) 7–8, 42–5, 272European Commission

Framework Programmes 1–2priorities for financial services

regulation 384–5European Convention on Human

Rights (ECHR)application of Article 8 17, 18–19,

24–5Convention rights as EU

fundamental rights 25direct horizontal effect, and 18–19

European debt market, size of 385European law

adoption of Directives 289challenges to private law approaches

to unconscionability 380Lisbon strategy 384–5priorities for financial services

regulation 384–5prohibition of kickback payments 328

expectant heir cases 32expectation, consumer 221–3

fair dealinginformation provision, applied

to 323standard 195

Fairfax v Trigg 156–7fairness see also ‘Treating Customers

Fairly’ (TCF) Initiative,unfairness

concept 205–6conflict with freedom of contract

73–7consumer credit, and see consumer

creditconsumer perception 213expectation 221–3‘fairness-oriented’ regulation 351–3freedom of contract, and 386–7FSA’s approach see Financial

Services Authority (FSA)indicator of unconscionability, as

106–7information provision, and see

information provisionlegislation 206–8overview 225–6regulatory regimes 208–13‘responsibalised’ firms 394self-regulation, banking 209–10suitability, and see suitabilityunderstanding of 213–25

false and misleading information 216–18family members in suretyships,

protection of 387–9fees, kickback payments 333–4Filmer, Robert, academic literature 150financial scandals 320–3

index 405






Financial Services and Markets Act2000 (FSMA)

enactment 231–2mortgages provisions 185, 190–2objectives 232–3Regulated Mortgage Contracts 186responsibility for decisions 219

Financial Services Authority (FSA) 205–6coordinated action 188Conduct of Business Sourcebook

(COBS) 208‘consumer outcomes’ see ‘consumer

outcomes’ (FSA)enforcement by 190–1expectation of compliant outcome

240–1fairness model

overview 227–9rationale 229–31

global financial crisis, and 390–1‘grey list’ terms, guidance 207guidance 218–19, 222handbook 191–2, 210, 265information sharing 188licensing of mortgage lenders 190MCOB regime 191–2, 201–3mortgage exit fees Statement of

Good Practice 224mortgages, as to 185, 186–7A New Regulator for a New

Millennium 232–3post-Turner approach 194presumption of unfairness 238–43‘Principles for Businesses’ 211–12,

218–19, 233–4regulatory powers 231–2research on consumer perception 213‘responsibalised’ firms, approach

to 394Retail Distribution Review (RDR)

219–20, 222risk-based approach to regulation

232–3role of 352rules 190TCF Initiative see ‘Treating Customers

Fairly’ (TCF) InitiativeTurner Review 194

Financial Services Ombudsman (FSO)coordinated action 188complaints handling 200, 210–11, 225dispute resolution service 185information sharing 188

financial services regulationEuropeanCommission priorities 384–5harmonisation, approaches to 385–6

first mortgages see Regulated MortgageContracts

flawed contractsautonomous action approach to

defining 82–3, 86–7common features 82consent approach see consent

approach tounconscionability

corrective justice theories, problemsof 84

cost-benefit approach to defining 83defining, approaches to 82, 83–4, 88distributive theories, problems of 84–6efficiency theories, problems of 87–8plural theories approach to defining

88–9types 82–3unequal bargaining power approach

to defining 82value of choice theory see value of

choice theorywrongful conduct approach to

defining 82floating charges, use of 293Fonblanque, John, academic literature

160–1foreclosure, use of 294–6forfeiture, reliefs 29–30‘framed’ choices in value of choice

theory 91–2, 93France

academic literature 22–3cases 65–6, 68–7clauses abusives legislation 64–5Clin v Boucher 70–3ConstitutionalCouncil, judgments 21–3constitutional freedom of contract,

development 25consumer law, penalty clauses 64–5

406 index






economy of contracts principle 22Fromont v Verdier 73–7Human Rights Declaration 1789,

application of 22–3la cause, application of 64–5la lesion, application of 63–4la reticence dolosive

application of 67–73concept 379

loyalty as protection againstunfairness 62–78

penalty clauses, legislation 64–5Plessis v Glas 69Point Club Video cases 65–6remedies 129–30rescission of contract, use of 140substantive freedom of contract,

development 23Theuillon v Destemberg 70, 71, 72–3unconscionability doctrine in

French law 62–3unfairness

loyalty as protection against 62–78measures against 63–73

void contracts 129–30fraud

auditors’ liability 317–18la reticence dolosive, application of

67–73Lord Hardwicke’s five heads of 160meaning 28–9

fraudulent misrepresentation (dolus)pre-contractual (dolo in

contrahendo) 55prohibition of 49–50

freedom of choice see also value ofchoice theory

aggressive practicesand 361–2effect of 360–7

uninformed decision making, and360–1

freedom of contractbroadening concept 383–4conflict of principles 7–8conflict with other principles 73–7constitutional issues 19constitutional limitation 387–8

constitutional principle, as 9–17development 24, 25distinction of formal and substantive

freedom 7–9 see also specificjurisdictions

ECHR basis 24–5European fundamental right, as 24–5fairness, and 386–7guiding principles 8horizontal effect of fundamental

rights, and 18–19human right, as 9–17negative and positive freedom 9protection of weaker parties, and 7solidarity, and 386–7substantive understanding 8, 386–7unconscionability, and 7–25, 386–7unconscionability as exception to 379

freedom of economic initiative 19Fry v Lane 111–12, 181–2fundamental right, substantive

freedom of contract as 17,24–5

fundamental rightscases, in 387–8EU, of the 25family suretyship cases, role in 256–9growing influence as to

unconscionability 247horizontal effect 18–19, 247, 259–62private law, and 249–62protection of weaker parties 249–51shift of emphasis to 256–9suretyship cases, and 381unconscionability, and 251–6

GE Capital Bank 240–1Gender Directive as to insurance 223General Guidance on Fitness of

Licensed Lenders (OFT)193–4

Germanyautonomy see autonomyBürgschaft case see Bürgschaft caseCommercial Agent case 10–13conduct of business rules 264, 267, 268constitutional freedom of contract,

development 25

index 407






Germany (cont.)constitutional rights 9–10

autonomy, and 387–8protection of weaker parties 251–6

courtsduties 12–15, 387–8presumption and procedure

337–9family members in suretyships,

protection of 271, 388–9freedom of contract, constitutional

limitation 387–8fundamental rights, horizontal

effect 247good faith

courts’ duty to intervene 387–8principle 280–1

good morals see good moralsinducements, further changes in law

343–4information disclosure 264‘junk title’ cases 330–1kickback payments see kickback

paymentslife insurance cases 12limitations to freedom of contract

12–15MiFID

harmonisation under 344–8implementation 337–9Implementing Directive,

implementation 387non-professional investors,

protection of 271, 388–9prenuptial agreement case 12presumption and court procedure

337–9private law, concepts 267protection of weaker parties by

constitutional rights 251–6remedies 129–30social state principle 387–8substantive freedom of contract,

development 9–13, 25Suretyship case, 12–15 see Bürgschaft

casesuretyship cases 249–51, 381, 387–8void contracts 129–30

Giddens, A., ‘reflexive individual’concept 390

global financial crisisimpact 227–9, 390–1mortgage lending and 194

good faithapplication to freedom of contract

16–17, 46–9, 60concept 246courts’ duty to intervene 387–8defining 67–8principle 280–1standard 195unconscionability, and 67–8, 379UNIDROIT Principles 278–82

good moralsapplication to freedom of contract

16–17concept 246, 379courts’ duty to intervene 387–8unconscionability as 379

Gower, L. C. B., academicliterature 269

Gowland v de Feria 164Great Peace, The 168Greece

cases 15–17civil courts, duties 16–17constitutional rights 16–17limitations to freedom of contract

16–17substantive freedom of contract,

development 15–17suretyships 16–17

‘grey list’ terms in contractsFSA guidance 207UTCCR, as to 206–7

gross disparity principle 282–3Gwynne v Heaton 162–3

Halsbury, Lord, judgment 29–30Halsbury’s Laws of England,

commentary in 26–9Hammond v Osborn 177harassment

factors in 360freedom of choice, and 361–2preventive control 359–60

408 index






Hardwicke, Lordfive heads of fraud 160judgments 150–1, 153, 161–2

harmonisationapproaches to 385–6Bürgschaft case as judicial

harmonisation of privatelaw 381

codification of private law, through384–6

constitutional harmonisation as partof tripartite approach 398–9

consumer credit harmonisationDirective 384–5

judicial harmonisation of private lawas part of tripartite approach398–9

kickback payments 344–8multi-dimensionality of 275–6regulatory harmonisation as part of

tripartite approach 398–9regulatory harmonisation, case for

384–6tripartite approach, overview 398–9voluntary approach 275–88

Heathcote v Paignon 163Hoffmann, Lord, judgment 176‘honestly, fairly and professionally’

requirement in MiFID 331–3horizontal effect

acknowledgement of indirecteffect 25

ECHR, direct effect and 18–19examples of direct effect 18–19examples of indirect effect 18freedom of economic initiative,

direct effect and 20–1fundamental rights, and 259–62substantive freedom of contract, and

18–19human right, substantive freedom of

contract as 9–17Hurley, S., academic literature 96husband and wife cases 35–6, 116

imbalance between parties seeprotection of weaker parties

immoral contracts 14

inadequate consideration, relief for26–9

indirect horizontal effect of human rights,acknowledgement of 25

individual conduct modelconception of unconscionability

108–9description 108neo-classical, as 108relational contract theory, in 107–9

inducementsallowable 334–7CESR recommendations 331–3conflicts of interest, management of

342–3distinction of formal and substantive

unconscionability in 339–43further changes in law 343–4information, limited use for clients

340–2kickback payments 331–7MiFID 331–7

information provision see also adviceasymmetry 215–16, 391–2behavioural research on consumer

rights informationprocessing 357–8

bond issues 311–13conflicts of interest, effect of 392consumer recognition of

importance 216consumer rights 357Cruickshank Report as to 214disclosure 215–16, 264duty to disclose

brokers 311–12directors 311managers 311–12overview 309–10rating agencies 312–13retailers 311–12

effect on decision making 341–2fair dealing, applied to 323fairness, and 214false and misleading information

216–18inducements, as to, limited use for

clients 340–2

index 409






information provision (cont.)inherent gap in 309–10kickback payments

decision making 341–2disclosure 329, 334–5

liability for misinformationauditors 314–24brokers 320–3directors 314–24overview 324–5rating agencies 320–3

misleading omissions, as to 356–7mortgages

as to 189Key Facts Illustration 191–2

needs test 356–7report on 215risk, as to 356–7

informed decision makingcancellation right, and 363risk, and 363–4transparency model 363

insolvency law issues 41–2insurance

Gender Directive as to 223payment protection insurance (PPI)

238–43invalidated contracts

economic analysis of invalidation138–40

use of 130‘invisible hand’ theory (Adam Smith) 132Ireland, constitutional rights 24Italy

academic literature 20Argentine bonds cases 321auditors see auditors‘bad loans’ case 308–10banking legislation 310–13bond issues, case law framework

310–11brokers see brokerscases 19Cirio bonds case 308, 320–1class action suit, adoption of 325class actions 325CONSOB (financial regulator), role

of 313, 323–4

constitutional direct horizontaleffect 20–1

constitutional rights 19–20duty of disclosure see information

provisionfinancial scandals 320–3fraud, auditors’ liability 317–18‘junk title’ purchases 308liability for misinformation see

information provisionlimitations to freedom of contract

19–20Parmalat bonds case 321precontractual liability 322public placements, auditing of

company financialstatements 313

substantive freedom of contract,acknowledgement of 20–1

void contract declaration 308

James, R., academic literature 210Jeffreys, Lord Chancellor, judgment

157–8Jessel, Master of the Rolls, judgment

171–2Jones v Morgan 181judicial harmonisation

challenges to private law approachesto unconscionability 381

tripartite approach to harmonisation,as part of 398–9

‘junk title’ purchasescases 330–1information provision 308

Kahneman, D., academic literature 95–6Kay, Justice, judgment 33–4Key Facts Illustration 191–2kickback payments

client fees 333–4conflicts of interest 327–9, 337consumer protection 330–1decision-making 340–2description 326–7disclosure 329, 334–5distinction of formal and substantive

unconscionability in 326–49

410 index






fees and costs 333greater harmonisation, need for

344–8hidden costs 329–30inducements see inducementsinformation provision 329, 334–5,

341–2meaning 326–7medicines 328MiFID and 326–49, 387overview 326, 348–9prohibition of

overview 328medicines 387

quality improvement withoutimpairment 335–6

reimbursement claims 328–9Kitto, Justice, judgment 166Korobkin, R., academic literature

130–1, 134Kouwenberg v Rabobank 264–5

la cause, application of 65–7la lesion, application of 63–4la reticence dolosive

application of 67–73concept 379

Lamfalussy processeffectiveness of 337MiFID 331–3

Land of Leather 238–40Law of Property Act 1925, enforcement

of mortgages 201Lawley v Hooper 162lease agreements 283legal fees cases 71, 72–3Lehman Brothers collapse, impact 378liability

misinformation see informationprovision

modified proportional liability 324precontractual liability 322

life insurance cases 12Lisbon strategy 384–5Lithuania

common law elements 276good faith 278–82gross disparity principle 282–3

harmonisation of financial law,overview 275–88

lease agreements 283private law reform 276–8standard terms and conditions

283–5unfairness provisions 277UNIDROIT Principles, transplant of

275–6voidable contracts 285–8

loan securities 292–6loans disguised as sales, 156–7Lodge, Thomas, academic literature 155loyalty

protection against unfairness, as62–78

unconscionability, and 67–8Lushington, Doctor, judgments 38–9

Macneil, Ian, relational contracttheory see relational contracttheory

managers, bond issues 311–12Mansfield, Lord, judgment 150–1maritime salvage cases,

unconscionability in 38–9Markets in Financial Instruments

Directive (MiFID) 380effectiveness as harmonisation

measure 344–8‘honestly, fairly and professionally’

requirement 331–3implementation 337–9Implementing Directive

implementation 387overview 331–3

importance 247inducement regime 331–7kickback payments 326–49Lamfalussy process 331–3Level 1 and Level 2 Directives 331–3overview 265–6

Mazeaud, Professor D., academicliterature 77–8

McKaay, Professor E., academicliterature 68

medicines, prohibition of kickbackpayments 328, 387

index 411






Mikelenas, Valentinas, academicliterature 277

Millet, Lord Justice, judgment 32–3,176–7

minor’s contracts, personal characteristicrisk and 110–12

misleading actions, concept 353–4misleading information 216–18misleading omissions, overview 354–8misrepresentation

Act of 1967 170damages 170, 171rescission of contract 171torts see tortsvitiating factor, as 166, 170–2

misselling of unsuitable products, TCFenforcement decisions 242–3

mistakecommon mistake 168concept 246relief for 256–9unconscionability as 379unilateral mistake see unilateral

mistakevitiating factor, as 166, 168–70

modified proportional liability 324Morris, P., academic literature 210mortgage cases, overview 29–30, 57–9mortgage lenders

global financial crisis, and 194licensing 190OFT guidance on 193–4

mortgage value, meaning 299–300mortgages

AJA provisions as to repossessions 185CCA provisions 186comparison 187–8courts’ jurisdiction 187–8, 201debt level 188divided market 186–7enforcement 200–3equitable mortgages see equitable

mortgagesequity, and 195exit fees Statement of Good

Practice 224financial education of borrowers,

and 189

FSMA provisions see FinancialServices and Markets Act2000 (FSMA)

information provision seeinformation provision

Key Facts Illustration 191–2legislation 185lending 189–90market regulation

aims 188–90‘decentred’ approach 188–90licensing 190overview 188–94, 201–3

MCOB regime 191–2, 201–3post-Turner approach 194Regulated Mortgage Contracts see

Regulated MortgageContracts

repossessionAJA provisions 185Protocol 185

routes to redress 185, 199–203security bill of sale, by 293–4security for bank loan, as 296–300Turner Review 194unconscionability and, overview

184–5Multiservice Bookbinding Ltd v Marden

181–2Murray v Harding 151

National Commercial Bank (Jamaica)Ltd v Hew 176–7

National Consumer Council, report oninformation provision 215

needs test for information 356–7negligence, tort of 267negligent misstatement, tort of 170Netherlands

academic literature 17conduct of business rules 264–5, 268contract law, protection of weaker

parties 256–9Convention rights 17courts, power to test legislation 17family members in suretyships,

protection of 256–9,271, 389

412 index






fundamental rights and familysuretyship cases 256–9

good faith, concept 379Kouwenberg v Rabobank 264–5mistake

concept 379relief for 256–9

non-professional investors,protection of 271, 389

private law, concepts 267protection of weaker parties,

contract law 256–9Snijders, H. J. 17substantive freedom of contract,

development 17suretyship cases

approach to protection in 383fundamental rights, role of 381overview 17

Nicholls, Lord, judgments 35, 117–18Nobles, R., academic literature 211non-professional investors, protection

of 387–9North, Lord Keeper, judgment 157, 158–9Northington, Lord, judgment 29–30notice of wrongdoing, cases 117–18Nott v Hill 158–9Nottingham,Lord, judgment156–7, 158–9nullity see annulment of contracts

Office of Fair Trading (OFT)bulletins 195–6coordinated action 188consultations 193–4guidance 195–6guidance on licensed lenders 193–4information sharing 188licensing of mortgage lenders 190mortgages, as to 185, 186–7role of 208‘watch-dog’ role 195–6

Office of Fair Trading v Abbey NationalPlc 196–7

Ombudsman see Financial ServicesOmbudsman (FSO)

‘one shot’ contract see discrete contract(‘one shot’)

Ord, Mark, academic literature 150

pactum commissorium, prohibition of49–50, 60

pacta sunt servanda, application of47, 50

Pareto efficiency of contracts 132–5Parmalat bonds case 321payment protection insurance (PPI), TCF

enforcement decisions 238–43penal bonds, relief from 31penalty clauses

clauses abusives legislation 64–5efficiency of 134penal bonds 31

personal characteristic riskcontractual risk, as 107unconscionability, as to 110–12

personal securities 292–3‘plain and intelligible language’

requirement for contractterms 196–7

Plowden, F., academic literature 153plural theories approach to defining

flawed contracts 88–9Poland

adoption of Directives 289bank-client relationship,

development 290bank guarantees, use of 293bank loan contracts see bank loan

contractsbills of exchange, use of 293cases 23–4constitutional freedom of contract,

development 25constitutional rights 23–4courts’ intervention

abusive clauses 303–5unfair contracts terms 303–5

floating charges, use of 293foreclosure, use of 294–6growth of financial market 289–90limitations to freedom of contract

23–4loan securities 292–6mortgage value, determining 300mortgages

security bill of sale, by 293–4security for bank loan, as 296–300

index 413






Poland (cont.)registered pledges, use of 293substantive freedom of contract,

development 24succession law 301–3sureties, use of 292–3tenancy agreement case 23–4unfair contracts terms, provisions

303–5Pollock, Sir Frederick, academic

literature 26–9, 32‘poor and ignorant persons’, cases 111–12Portland Building Society v Dusangh 181Posner, E., academic literature 130–1post-obit bonds, cases 157–8post-sale conduct 224–5Powell, John Joseph, academic

literature 28Pre-Action Protocol for Possession

Actions based upon MortgageArrears (Protocol) 272–3

courts’ jurisdiction as to mortgages187–8

overview 185precontractual liability 322prenuptial agreements 12pressure, use of 220–1presumed undue influence 174, 175–8presumption and court procedure 337–9‘Principles for Businesses’ (FSA)

211–12, 218–19, 233–4Principles of European Contract Law

(PECL)overview 272–3standard terms and conditions 284–5transplant of provisions 277voidable contracts 287

Principles of European Law on ServiceContracts (PEL SC) 272–3

private lawapproaches to unconscionability

areas of challenge 379–81challenges to 379–86codification challenges 380constitutional challenges 379–80contrasted with public law 379–81convergence with public law 246–74European law challenges 380

judicial harmonisationchallenges 381

codification 380concepts of unconscionability 246conduct of business rules, and

262–73fundamental rights, and 249–62reform 276–8

products, suitability of 219project

aims 377problems of research 377–8propositions 395–6

property salescases 68–73disguised as loans 156–7

Protection from Harassment Act(PFHA) 1997, ‘stop noworders’ 359–60

protection of weaker parties see alsounequal bargaining power

approaches to 386–9common law, under see common lawconduct of business rules 262–6, 388–9consumer contracts 53–5, 61contract law 256–9differing levels 388–9extent of protection 246, 256–9, 387family members in suretyships 387–9fundamental rights, and 249–51identifying vulnerable groups

217–18limitations to freedom of contract

49–50, 60non-professional investors 387–9overview 7, 26–45risk, and 389–93usurious contracts 50–2

psychology of decision making 340–1public law

approaches to unconscionabilitycontrasted with private law 379–81convergencewith private law 246–74

growing influence as tounconscionability 246

public placements, auditing ofcompany financialstatements 313

414 index






quality improvement withoutimpairment, kickbackpayments 335–6

Race Relations Act 1976 as toprovision of goods andservices 223

Ramsay, I., academic literature 53,215–16

rating agenciesbond issues 312–13duty of disclosure 312–13liability for misinformation 318–20

real securitiesoverview 292use of 293

Redgrave v Hurd 171–2‘reflexive individual’ concept 390registered pledges, use of 293Regulated Mortgage Contracts

comparison with equitablemortgages 187–8

overview 186routes to redress 199

relational contract theoryapplication of 101, 102common contract norms 102consent and agreement in 103contract law, and 100–7degree of necessary protection from

unfair terms, issue of 106development 100individual conduct model 107insights as to unconscionability 102meaning of relational contract 101non-doctrinal basis 103–4peripheral nature of

unconscionability 105social dimension of contract norms,

and 103transactional focus 104transactional risk, and 125–6unconscionability, as to 100–7unconscionability models 107–15

relational riskcontractual risk, as 107unconscionability, as to 112–13undue influence and 112–13

reliefsforfeiture, from 29–30penal bonds, from 31

remedieseconomic analysis of see economic

analysis of remediestypes 130variation between jurisdictions 129–30

replacement of unfair termseconomic analysis 141–2use of 129–30

rescission of contracteconomic analysis 140–1misrepresentation, for 171use of 130

‘responsibilised’ firms, overview 394responsibility

allocation 394models 394–5self-responsibility, emphasis on 393–4unconscionability, and, overview

393–5responsibility and choice in value of

choice theory 92–3, 95–7‘responsible lending’ concept 219Retail Distribution Review (RDR)

219–20, 222retailers, bond issues 311–12Richards v Brown 150–1Rigby, Lord Justice, judgment 31risk

information provision as to 356–7informed decision making and 363–4risk-based approach to regulation by

FSA 232–3systemic risk and presumption of

unfairness 238–40unconscionability, and 389–93

risk management by banks 292–6Romilly MR, judgment 114Royal Bank of Scotland v Etridge (No. 2)

115–22, 126–7, 176, 178–9

sale of property see property salesSale of Reversions Act 1867 114sale of reversions legislation 114Scanlon, T.M., academic literature 89Scarman, Lord, judgment 173

index 415






scope of work 2–3second mortgages see equitable

mortgagessecurities for loans 292–6security bill of sale, mortgage of goods

by 293–4Selborne, Lord, judgment 37–8Select Committee on Usury Laws

(1818) 164–5self-regulation, banking 209–10self-responsibility see responsibilitysetting aside

academic literature 26–9consumer credit transactions 34unconscionable transactions 33–4undervalue 32, 34undue influence 32–3

share sales cases 73–7Sheridan, L. A., academic

literature 157Shiffrin, Seana, academic literature

86–7Slovenia

academic literature 15cases 11, 13constitutional rights 14–15courts’ duties 14–15credit agreement case 13–14, 15formal and substantive freedom of

contract distinguished 15limitations to freedom of contract

14–15remedies 14, 15substantive freedom of contract,

development 12–15usurious contracts 13–14

Smith, Adam, ‘invisible hand’theory 132

social justice, balanced with autonomy386–7

Social Justice Manifesto, overview7–8

social policy reasons for non-enforcement 40–2

social state principle and autonomy259, 387–8

solidarity and freedom of contract386–7

Spain 59–61constitutional rights 24consumer contracts

protection of weaker parties53–5, 61

standard terms and conditions55–7

good faith provisions 46–9, 60legislation as to unconscionability,

overview 46, 59–61mortgages 57–9protection of weaker parties

consumer contracts 53, 60limitations to freedom of contract

49–50, 60overview 50–2

unfair contracts terms 57–9unfairness

forbidden contracts 49–50mortgages 57–9standard terms and conditions

55–7usurious contracts provisions

50–2, 61Spurgeon v Collier 29–30standard terms and conditions

core terms 196PECL provisions 284–5‘plain and intelligible language’

requirement 196–7use of 195UTR as to 196–8

‘stop now orders’ as to harassment359–60

Story, Joseph, academic literature 34succession law as to bank loan

contracts 301–3suitability

advice, of 218–19fairness, and 218–20products, of

mis-selling of unsuitable products242–3

overview 219targeting, of 219

suretiesapproach to protection 383family members, protection of 387–9

416 index






fundamental rights, role of249–51, 381

transactional risk, and 115–22use of 292–3

‘taking advantage’ of consumers 219,220–1

targeting, suitability of 219taxonomy of unconscionability 81tenancy agreement case 23–4third parties, guarantors as

cases 35–6CFR provisions 42–3undue influence see undue influence

Thurlow, Lord, judgment 161, 162–3torts

deceit 170misrepresentation, for 170negligence 267negligent misstatement 170

transactional neglect theory(Bigwood) 177

transactional riskbehavioural economics and 123–5catching bargains, and 113–15contractual risk, as 107identifying, approaches to 122–6identifying common elements 123identifying role of 100implications 122–7incidence 122–6nature 122–6overview 127–8regulation 121–2relational contract theory see

relational contract theoryrelational contract theory and 125–6suretyships, and 115–22theory 99–100unconscionability, and 99–128undue influence and 115–22

‘Treating Customers Fairly’ (TCF)Initiative

aggressive practices 358‘consumer outcomes’ see ‘consumer

outcomes’ (FSA)consumer views 213‘cradle to grave’ approach 352

development 231–5enforcement decisions 238–43evidence of breach 207FSA’s approach 212–13importance 205measuring outcomes 218, 219misleading actions 353–4misleading omissions 356–7move to 212overview 231–8, 243–5publications 234–5regulatory regime 211–12requirements 235–8

Tudor, O. D., academic literature159–60

Turner Review 194Tversky, A., academic literature 95–6

unconscionabilityapplication of 129approaches to 36–45, 82–9causes 309CFR provisions 42civil law 393common law approaches 379commonality of elements 397concept 1, 246conference 1–2constitutionalisation 381–4contract law see contract lawcourts see courtsdefining

problems of 79–81reasons for haziness in 80–1

distinction of formal and substantive80, 105–6, 326–49

economic analysis of remedies129–43

economic approaches 132–5enforceability 129exception to freedom of contract,

as 379fairness as indicator 106–7fragmented approaches 246, 397–8freedom of contract see freedom of

contractfundamental rights see fundamental

rights

index 417






unconscionability (cont.)good faith see good faithharmonisation of approaches see

harmonisationindividual conduct model

conception 108–9justifications 79–98, 130–1key themes 386–95loyalty see loyaltymistake see mistakemodels 107–15‘mopping up’ role 89mortgages see mortgagesnetwork of approaches, development

of 398overview of approaches 82peripheral nature in relational

contract theory 105polycontextual nature 396private law and see private lawproblems of researching 377–8public law and see public lawreason for non-enforcement, as

39–40relational contract theory, as to

100–7relational contract theory insights 102relational risk as to 112–13remedies see remediesresponsibility, and see responsibilityrisk see riskstandard 130–1taxonomic issues 81transactional risk, and see

transactional riskunfairness, as 62–3value of choice theory see value of

choice theoryunconscionable dealing as vitiating

factor 166, 180–2unconscionable financial transaction,

meaning 247–9unconscionable transactions, setting

aside for 33–4undervalue

cases 111–12setting aside for 32, 34statutory provisions 32

underwriters, bond issues 311–12undue influence

academic literature 120–1actual 174–5cases 117–18concept 246domestic infringement, as 359factors in 360overview 174presumed 174, 175–8relational risk, and 112–13setting aside for 32–3transactional risk, and 115–22uninformed decision making, and

360–1vitiating factor, as 166, 174–80

unequal bargaining powerapproach to defining flawed

contracts 82courts’ duty to intervene 387–8gross disparity principle 282–3

Unfair Commercial Practices Directive(UCPD)

aggressive practices see aggressivepractices

context 351–3coverage 351–3‘cradle to grave’ approach 351–3implementation 198, 350–1misleading actions 353–4

Unfair Contract Terms Act (UCTA)1977

enactment 81overview 206

unfair contracts terms, courts’intervention 303–5

unfair credit relationships, CCAprovisions 352

Unfair Practices Regulations (UPR)2008, provisions 198

unfair termsCCA provisions 195, 198–9Consumer Credit Act 2006

provisions 198–9legislation 206, 303–5

unfair terms regulationscore terms, as to 206–7fair dealing standard 195

418 index






fairness, as to 196–8good faith standard 195‘grey list’ terms, as to 206–7impact 195–6making of 81mortgages, as to 185overview 129, 195–8, 206–7standard terms and conditions, as to

196–8unfairness test 197

unfairness see also fairness;replacement of unfair terms

aggressive practices 220commercial practices, legislation

207–13CPUTR provisions see Consumer

Protection from UnfairTrading Regulations 2008(CPUTR)

degree of necessary protection, issueof 106

discrimination see discriminationforbidden contracts 49–50information provision, and see

information provisionloyalty as protection against

62–78measures against 63–73mortgages 57–9, 195–9post-sale conduct 224–5pressure, use of 220–1presumed 238–40standard terms and conditions see

standard terms andconditions

‘taking advantage’ of consumers 219,220–1

transplant of provisions 277unconscionability as 62–3, 379UTR test 197

UNIDROIT Principles of InternationalCommercial Contracts

good faith 278–82gross disparity principle 282–3rescission of contract, use of 140standard terms and conditions 284transplant of 275–6voidable contracts 286, 287

unilateral mistakeoverview 168unconscionability, and 168–70

uninformed decision making, aggressivepractices and 360–1

United Statesclass action suit 325Community Reinvestment Acts 224modified proportional liability 324remedies 129–30replacement of unfair terms 129–30unconscionability, enforceability

of 129Uniform Commercial Code

(UCC) 129void contract declaration 129–30

unjust enrichment approach tounconscionability 38–9

usurious contractsequity, and see equityoverview 13–14post-obit bonds, 157regulation 50–2, 61sales disguised as loans 156–7

usury lawscanon law 147–8development 147–51history of regulation 147–65Middle Ages 147–8repeal 164–5Select Committee of 1818 164–5Tudor 148–9

value of choice theoryaccountability for choices 91advantages over other theories 89,

90–1determining responsibility under 95–7factors in applying 94–5‘framed’ choices 91–2, 93overview 94, 97–8principle of value of choice 92–3‘reflexive individual’ concept, and 390relationship between choice and

responsibility 92–3, 95–7responses to flawed contracts, and

93–4unconscionability, and 79–98

index 419






video hire cases 65–6‘vitiating factors’ for common law

relief 166void contracts 14, 129–30, 168, 308–9voidable contracts 168

PECL provisions 287UNIDROIT Principles 286, 287

vulnerability see protection of weakerparties

Weatherill, S., academic literature 54White, F. T., academic literature

159–60Williams v Bayley 32–3

Wilson, Thomas, A Discourse uponUsury 148

Wiseman v Beake 158wrongful conduct

academic literature 99avoidance 118–19burden of proof 111–12cases 117–21flawed contracts, defining 82notice, doctrine of 117–18overview 37–8role of 120–1

Yerkey v Jones 180

420 index






Documents

Cambridge University Press Protecting the Vulnerable ...assets.cambridge.org/97805211/90534/index/9780521190534_index.pdf · liability in fraud cases317–18 Australia Blomley v Ryan119–20,