Frustration Cases- Frustration operates in narrow limits; courts reluctant to invoke doctrine of frustration because they

don’t want parties to escape bad bargains. It is not hardship, inconvenience or material loss that invokes the doctrine – must be something radically different that changes the obligation.

Taylor v Caldwell*- Impossibility – subject matter of contract destroyed – contracts subject to implied condition that the

parties are excused where performance of the contract becomes impossible without fault of the parties – music hall burnt down performance impossible as subject matter destroyed

Appleby v Myers- Unilateral contract – work done prior to frustrating event – loss sustained cannot be recoverable if

contract was for complete job

Gamerco SA v ICM/ Fair Warning Ltd- Impossibility – subject matter of contract becomes unavailable – payment made before frustrating event

– prepayment returned because of frustration event – concert hall hired out but declared unsafe

Jackson v Union Marine Insurance*- Impossibility – unavailability – subject matter of contract becomes unavailable – chartered ship took too

long to repair and missed fruit season – main purpose of contract undermined

Morgan v Manser - Contracted to perform but called for army duty – contract frustrated

Pioneer Shipping v BTP Tioxide (The Nema)- Delay – charter party frustrated because of strike at port of loading

Tampline Steamship Co v Anglo Mexican Petro*- Delay – Ship requisitions for WWII – courts speculated that war would not last long – many months

would be left on the charter – no frustration even when the war was prolonged

Nichol and Knight v Ashton, Edtrudge & Co- Method of performance impossible – ship ran around – contract stated that a ship would be used –

frustrated

CIF = Cost, Insurance, Freight Contract; FOB = Fee on board contract (buyer’s expense when cargo loaded)

Impossibility v Impracticability

Tsakuroglau v Noblee*- Method of performance impossible – Suez Canal – parties expected to use the canal but closed due to

hostilities – used longer route and resulted in higher cost – no frustration where there is no fundamental difference in performance

Tennants v Wilson- Consideration – that someone can be excused from a contract due to commercial impracticability is

dangerous

Davis Contractors v Fareham**- Made claim on quantum meruit – hardship and inconvenience does not invoke frustration – contracted to

build X houses – shortage of labour and materials took longer than expected – no frustration

Krell v Henry*- Coronation case – room hired for viewing coronation – coronation cancelled – wider scope of frustration

to the facts of the case – purpose of room is to watch coronation – cab to Epsilon analogy

Herne Bay Steam Boat Co v Hutton*- Coronation case – chartered boat for naval review amongst other purposes – no frustration where only

one of the many common purposes of the contract is impossible – inability to not achieve one purpose is not frustration

Illegality

Fibrosa Spolka Akcynja v Fairburn Lawson Combe Barbour*- Contract formed when legal to trade with Poland – frustration where war makes trading with a country

illegal – entitled to get original payment back if payment was paid BEFORE the start of the illegal frustrating event – but if there is some benefit obtained then you can’t get it

Partial or temporary illegality- Would depend on whether main purpose is frustrated – when it is temporary illegality the courts would

look at the proportion of time – EG war is said not to frustrate a 99 year lease

Public consent withheld- Where you need a license first before contracting, and license denied, not frustration – can avoid liability

with condition precedent

Force Majeure Clause- Limits scope of frustration – preclude operation of frustration – cannot limit frustration based on

illegality

Metropolitan Water Board v Dick Kerr- Force Majeure Clause to make an application to the engineers for delays ‘however so caused’ –

government order to stop work – held that contract frustrated – clause only intended to apply to temporary situations, not a fundamental change to contract – exception to the rule that force majeur clause enables you to override frustration

Walton Harvey v Walker and Homfrays - Foreseeable events – no frustration where risk of breaching is foreseeable – hotel ad space rented for 7

years but building demolished by compulsory government purchase order

Davis Contractors v Fareham UDC**- Foreseeable events – no frustration where additional costs did not reflect the price negotiated at time of

contract – originally agreed on a price at time of contract but incurred more cost – cannot claim on quantum meruit

- The contract was radically different from the original obligation – objective test of whether it is radically different or not.

Edwinton Commercial Corp v Tsavliris Russ (Worldwide Salvage & Towage)- The less that an event in its type and its impact is foreseeable, the more likely it is to be a factor which

may lead to frustration

Self Induced Frustration is no frustration at all

Maritime National Fish Ltd v Ocean Trawlers Ltd*- Self induced frustration – no frustration where the party’s own action prevented themselves from

completing the contract – chartered ships from D, didn’t get enough licenses, used licenses on own ship instead of chartered ships – in this case they could have not breached any contract by assigning the license to the other ships

J. Lauritzen AS v Wijsmuller BV (Super Servant Two)***- Self induced frustration – no frustration where the frustrating event is not an outside event – if the event

is within the party’s control – guaranteed to be a breach of at least one contract – breach not caused by frustration but instead by the decision to allocate SS2 to perform SS1’s job

Effects of Frustration

Whincup v Hughes*- Partial failure of consideration – not frustrated and not recoverable – common law rule: only recoverable

when failure of consideration is total

Law Amendment and Reform Consolidation Ordinance (LARCO) S16- Statute deals with effects of frustration – common law deals with frustration itself- S16(2): Sums payable before frustrating event ceases to be payable. Sums paid before frustrating event

prima facie recoverable- S16(3) Payee can recover a just sum for obtained benefit or expenses incurred on reliance

o Cannot exceed the amount of expenses actually incurredo Cannot exceed the total amount of money already paid or owedo It is always evaluated AFTER the benefit obtained. Not on a quantum meruit basis. So if it is a

half built house and it burns down, cannot recover under this section because the other party did not get any valuable benefit from the half finished house.

- S17 – Scope of the Legislation – does not apply to insurance contracts revert back to the common law. If a ship is contracted for 10 years and sinks in its 3rd year, cannot recover the insurance premiums paid for the remaining 7 years.

- Doesn’t apply to insurance, charterparty***- Payment in kind?

BP Exploration Co v Hunt***** look at Mason’s slides- BP’s decision identification of the benefit AND THEN valuation of the benefit- Measure of Recovery – brought claim under S16

o Identification and valuation of the benefit obtained – problem is that the statute refers to an end product and not all statutes result in an end product

EG: if a house is partly built, and it burns down, CANNOT RECOVER under S16(3). It only takes into account the end product in which the just sum would be assessed.

o Assessment of the just sum (quantum meruit)- Problem: the phrase ‘having regard to the circumstances of the case in S16(3) is attached to the

valuation of the benefit in this case, not to the assessment of the just sum.o In effect the courts look at the circumstances to valuate the benefit instead of looking at the

circumstances to assess the just sum.o It is always the END product which is used to evaluate the damages.

- Mason argues that it should attach to the assessment of the just sum. o Lord Tritel

Appleby v Myers – look at the facts immediately before the frustrating event S16(3)B – look at the facts immediately before the frustrating event

o The only logical reading is that it attaches to the benefit before the frustration as S16(3) refers specifically to the value of the benefit before the discharge.

o If the current state of the law was applied to Appleby v Myers today, he would not get anything because the fire has reduced the construction to nothing, so there is no benefit obtained in this situation. This is why S16 should apply to the just sum and not the valuation of benefit.

- The effect: LARCO and BP Exploration – Limits and loopholeso Does not take into account pre-frustration payments in kind (payments other than money) which

were payable (EG payment in goats)o Common law rule only deals with money when there is a TOTAL FAILURE of considerationo Only considers ‘valuable benefit’ as the only end product and expenses incurred not recovered.o Goff’s view (in CFI, and reaffirmed in CA and HL) does not consider recovery of reliance loss.o Could argue that HK courts need not follow UK

Frustration v Mistake

Krell v Henry; Griffith v Brymer- Coronation cases – on the same set of facts, can plea frustration or common mistake – Krell plead

frustration – Griffith plead common mistake so contract was ‘never formed’

Expanding FrustrationNational Carriers v Panel Pena

- Consideration of expansion – land leases usually not frustrated because land is always there – but in this case courts considered expansion of frustration – EG radioactive spillage on land

Duress Cases- Illegitimate pressure which induces someone to enter into a contract.- Common law defense, if successful in proving that contract vitiated by duress, then it is voidable and

may be rescinded.

Duress to the Person

Barton v Armstrong*- Enough that threats were ‘a’ factor in influencing one party to contract – doesn’t have to be the main

reason for inducing one to enter into contract – suggests that burden of proof switches to defendant on disproving duress (that it is entirely not a factor in influencing the party to enter into a contract) – more relevant for causation

Tap Lup Wai Franky v Vong Shi Ming Nicholas- ‘Illegitimate and unfounded accusations of impropriety which left him with no practical choice’ enough

to amount to duress

Duress to Goods

Astley v Reynolds- Money paid under economic compulsion could be recovered in an action for money had and received –

the compulsion had to be such that the party was deprived of ‘his freedom of exercising his will’

Skeate v Beale- Plea of duress rejected – tenant threatened by landlord of rent owed – tenant only paid debt because of

threats – duress rejected where money is owed

Economic Duress- Higher threshold than duress to the person. Must show that duress is a significant cause- Threat of legal proceedings – no duress as court settlements legitimate

R v Attorney General for England and Wales*- Elements of duress – (1) Pressure amounting to compulsion of the will of victim; (2) Illegitimacy of that

pressure – Unlawful threat – threat to commit a tort/ crime/ breach of contract – contrary to public policy consideration

Thorn v Motortrade. - Lawful threat - blackmail though lawful can be illegitimate pressure

Huyton SA v Peter Cremer GmbH*- Causation – but-for test – pressure must have been decisive and clinching – court likely to consider

whether practicable alternative was open to P

Dimskal Shipping Co v International Workers Federation (The Evia Luck)*- Causal link – pressure applied must be a significant cause

Universal Tankship of Monrovia v International Transport Workers Federation (The Universe Sentinel)*- Practicable alternative – not appropriate to talk about duress as absence of choice and involuntary

agreement – innocent party always has the option to choose between two unpleasant/impracticable alternatives – to pay union dues to end strike or to lose profit from delay

Establishing Duress- Huyton: but-for test; Evia Luck: significant cause- Old test – Pao On: duress is the coercion which vitiates consent – wrongful nature of the threats made

which brought about that consent

DSND Subsea Ltd v Petroleum Geo Services*- Factors to take into account when determining illegitimate pressure

o Whether there was an actual or threatened breach of contracto Whether the party asserted the pressure was acting in good or bad faitho Whether there was any realistic practicable alternativeo Whether the victim protested at the time or just mere acceptanceo Whether the victim affirmed and sought to rely on the contract

- Illegitimate pressure must be distinguished from rough and tumble of commercial bargaining

Carillion v Felix*- It was not in good faith – Felix was threatening not to supply the cladding – distinguish from DSND

DSND is regular rough and tumble of commercial pressure – no practicable alternatives available for P in this case – there is no affirmation in the contract in this case as well after Felix’s threat to Carillion – immediately after the cladding was supplied P did not reaffirm the contract – held that there is duress in this case

CTN Cash and Carry Ltd v Gallagher Ltd- Threats to vary the terms of a future contract for payment is not illegitimate – for policy reasons refused

to introduce the concept of ‘lawful act duress’

Valid consent does not require complete freedom from pressure

Barton v Armstrong- There may be some pressure so long as it is not illegitimate

Occidental Worldwide Corp v Skibs AS Avanti (The Siboen and Sibotre)*- Relief available on grounds of economic duress – essence of duress is compulsion of the will – D took

advantage of the situation to say that they were broke in order to force P to lower charter rates

Pao On v Lau Yiu Long*- Have to distinguish between mere commercial pressure and duress – it has to be illegitimate commercial

pressure and this is a question of fact – a promise to indemnify as a result of duress – also talks about practicable alternative

Universal Tankships of Monrovia v International Transport Workers Federation (The Universe Sentinel)*- To establish duress: (1)Coercion or compulsion of will; (2) Coercion or compulsion must be brought

about by pressure which the law regards as illegitimate

Atlas Express Ltd v Kafco*- Economic duress and mere commercial pressure a question of fact

Tung Wing Steel v George Wimpey International- No economic distress where commercial pressure is normal – D regularly purchased steel from P, P

increased prices and D reluctantly purchased

Estinah v Golden Hand Indonesian Employment Agency- Economic duress does not need to take the form of express threat or coercion – so long as victim has no

practicable choice

Esquire Electronics v HSBC- Economic duress must be proof of illegitimacy and suggested pressure – commercial activity often

involves overwhelming pressure but that itself is not illegitimate

Threatened Breach of Contract

Williams v Roffey Bros- Williams genuinely incompetent and did not have enough money – no duress pleaded here – Roffey

insisted to pay more themselves – element of bad faith needed to establish duress

Remedies- Duress not an actionable tort for damages – it is actionable as a tort only if it causes damage or loss- Rescission is the remedy for duress

North Ocean Shipping Co v Hyundai Construction Co*- Pressure of this nature amounted to duress – compulsion of the will can arise from economic pressure –

P contracted D to build a ship, exchange rate changed and D wanted to raise the price and provided valid consideration for raising it, P feared losing a lucrative charter deal so agreed to it

Economic Duress v Consideration- Consideration need only be sufficient, not adequate – may not be enough to take the place of duress.- Williams v Roffey – Practicable benefit obtained – liberal approach

Stilk v Myrick*

- Why is it not a practicable benefit in this case to get the ship safely back to England? Why was it found under duress rather than valid consideration?

Undue Influence Cases- Similar to duress, but duress a common law doctrine whereas UI is an equitable doctrine (entering

into a contract due to pressure). Wider jurisdiction than duress subject to court’s discretion. - Does not require illegitimate threats whereas duress does.- Gives a person who enters into a disadvantageous transaction relief be it a gift or contract.- Two types of UI: Actual (Class I); Presumed (Class II)

Actual UI- There are no circumstances for UI to be presumed so the party alleging UI must prove it- Plaintiff must prove actual UI: that UI existed and was exercised + that influence was ‘a’ factor in the

plaintiff’s decision to enter into the transaction

Royal Bank of Scotland v Etridge**- Undue influence is an equitable wrong committed by the dominant party to the other which makes it

unconscionable for the dominant party to enforce legal rights against the other

Williams v Bayley*- Undue influence – bank threatened to prosecute son for forged cheques – father agreed to mortgage

property

Causation

UCB Corporate Services v Williams*- UI test – that pressure was ‘a’ factor to cause the party into entering the agreement – no need for but-for

test

CIBC Mortgages v Pitt- UI means that a transaction can be set aside as of right because the UI was a species of fraud

Presumed UI- Relationship of trust and confidence + Transaction calling for an explanation (Rebuttable)

presumption of UI- Under presumed UI, there are 2 classes:

o Class 2A – relationships of trust and confidence as a matter of law Relationship of trust and confidence and irrebutable presumption of influence (not

presumption of UI) EG: parent/child; doctor/ patient Does not include husband and wife

o Class 2B – relationships falling outside class 2A, the victim must show evidence to establish the existence of a relationship of trust and confidence

Need to show evidence to establish influence EG: financial advisor/ customer relationship Husband and wife in class 2B – no presumption of influence at all

Establishing Trust and Confidence

Barclays Bank v O’Brien*- Set out the categories of UI – (1) actual UI; (2A) presumed UI from a special relationship; (2B)

presumed UI from facts raising suspicion of UI

- No presumption of influence between husband and wife – treated as one – sexual and emotional ties

Class 2A examples

Allcard v Skinner- Religious leader/ disciple relationship is class 2A

Dent v Bennett- Doctor/ patient relationship is class 2A

Wright v Carter- Lawyer/ client relationship is class 2A

National Westminster Bank v Morgan- Bank and customer does not have a presumed relationship of trust and confidence so presumption of

influence cannot arise

Class 2B examples

Tate v Williamson- Financial advisor/ customer relation – held that there was presumption of influence and contract was set

aside – FA influenced student to sell his inheritance for half the price and drank himself to death

O’Sullivan v Management Agency & Music Ltd- Manager/ music artist relationship

Banco Exterior International SA v Thomas- Sufficient evidence for presumption of influence – close friends where one is in a difficult financial

position – promised to pay the other in exchange for acting as his guarantor

Re Craig- Even if you can establish a presumption of influence, you must also show that there was a transaction

which called for an explanation

A transaction which calls for an explanation

Allcard v Skinner*- Old test – a transaction which calls for an explanation is one that can’t be accounted for – prima facie

does not seem quite right

Relationship of trust and confidence (Class 2A/2B) + Transaction which calls for explanation (not readily explicable on the grounds of friendship/relationship/charity) = rebuttable presumption of undue influence Evidential burden shifts on D (can D show evidence to rebut the presumption?)

Rebutting the presumption- Evidential burden of proof shifts to the defendant- The defendant has to show that the plaintiff exercised his free and independent will

Royal Bank of Scotland v Etridge*- Wife stands as surety against husband’s debts – bank had solicitors present for paper signing – appeal

failed because nothing abnormal about wife standing as surety – banks are put on inquiry when wife

stands as surety for husband solely to husband’s advantage – once on enquiry banks must ensure that the spouse had independent advice and evidence of a truly independent decision

Remedies- If UI can be shown for the contract, it is voidable. There is a right to rescind the contract but the right

may be lost if:o Affirmation of the contracto Delay in bringing an action – relief must be sought in a reasonable time

- Third party rights- Impossibility of restitution- Damages are not available. But when rescission is no longer possible, the court may make a remedy for

damages. But the primary remedy for UI is rescission.

Allcard v Skinner*- The right to get an equitable remedy may be lost even if there is UI if it takes too long to make a claim

Undue Influence in the Common Context- Where there is a relationship between the husband, wife, and bank- Spouse surety usually the wife will stand as surety for the husband’s debt. In practice, they will not

have opposing interests and where the husband gets a loan it indirectly helps the wife.

Royal Bank of Scotland v Etridge*- The guarantee by the wife to the husband for his debts is not necessarily undue influence. The wife may

have an interest in helping him out too.

Undue influence and 3rd parties- 2 ways to exercise UI to third parties

o A exercises UI to B B transfers property to A then A sells it to C A can set this purchase aside unless C can show he is a bona fide purchaser

o A exercises UI to B to make B enter into a contract with C Common for a husband to exercise UI to get a wife to contract with a bank. If the wife

says she was under UI, look at whether the bank was put on enquiry.

Put on inquiry- Put on enquiry means putting on notice to investigate

o ‘Reasonable steps’ no need for investigation- A bank is put on enquiry whenever a wife offers to stand surety for her husband’s debts. If it is a joint

loan, she would be obtaining a benefit. If not, then she may not be obtaining one.- Whether the bank is put on enquiry depends on the nature of the transaction.

o EG: if a wife guarantee’s her husband’s debt; married vs unmarried couples;

Royal Bank of Scotland v Etridge*- Whenever a person stands as guarantor for another’s debts in a non commercial context, that will

put the bank on enquiryo 3 factors

There is a vitiating factor against the wife There is a non commercial relationship Prima facie the transaction isn’t beneficial to the wife

- Bank would still be put on enquiry if wife has a commercial interests in husband’s business (ie. shares) – if she is a director she may not be the person who is actually running the business – these cases cannot be equated with joint loans

- A modest burden for banks to ask the wife to get independent advice from a solicitor. Bank entitled to presume that solicitor advising the wife has done his job appropriately.

- If the bank is not willing to provide the financial information to the guarantor itself, then the bank should advise the solicitor of the financial information for them to make an informed decision.

Hewitt v First Plus Financial Group- Husband cheated on wife – wife stood as surety before she found out about the cheating – after finding

out about cheating she claimed UI- Held that husband breached duty of candor and this constitutes undue influence as if she knew the truth

she would not have stood as surety for him

Hong Kong Cases

Li Sau Ying v Bank of China*- Confirms the applicability of Royal Bank of Scotland v Etridge in Hong Kong – bank is put on

enquiry for transactions where the relationship between guarantor and mortgager is non commercial- Relationship between suretor and principal debtor must be looked in the eyes of the bank. But not

necessary for bank to make inquiries about their relationship as it would be unwarrantable impertinence. - The bank needs to take reasonable steps satisfy itself that the wife understands the basic elements of the

transaction concerned- UI connotes no more than a shift in the evidential burden of proof – whether the debtor unconscionably

abused the trust and confidence of the guarantor

Re Lai Yin Shan- Absolute rule that a bank is put on enquiry whenever a wife stands as surety for her husband’s

company’s debts, even if she has a commercial interest in the debtor company- That a wife is a shareholder and director did not render it a commercial relationship- Even if the wife has a commercial interest in the business for which the husband seeks a loan, the bank

would still be put on inquiry

Dao Heng Bank v Ho Yin Yuk- Look at the relationship as a whole (EG: if there is both a commercial and non commercial relationship)

and the predominant purpose of the loan (EG: to finance personal investments; activities of the couple)

Yien Yieh Commercial Bank v Hung Oi Wah- There is nothing to cause the bank to question the transaction between a mother as a guarantor and the

daughter as the debtor – normal for parents to confer a benefit to a child – Portman Building Society case does not require parents to be wise in trusting their children

Two views looking undue influence- Undue influence can be plaintiff/victim focused or defendant focused- Recent cases suggests that there needs to be some sort of wrongful conduct

R v AG for England and Wales- Consent obtained by unacceptable means – unfair exploitation

National Commercial Bank v Hew- Where there has been some unconscionable conduct – influence must have been abused

Pesticcio v Huet- Transactions may be set aside by the court even though the actions and conduct of the person who

benefits from it could not be criticized as wrongful

Undue influence RECAP- Actual undue influence existed and was exercised (ie No means of forming independent judgment) +

Causation: the UI was ‘a’ factor in victim’s decision making process = Actual undue influenceo Overlap with duress, but wider

- Presumed undue influenceo Relationship of trust and confidence

Class 2A: automatic presumption of influence – irrebuttable presumption of influence Class 2B: Plaintiff must establish relationship of trust and confidence (or domination)

which then gives rise to rebuttable presumption of influenceo + Transaction calling for explanation

Or not readily explicable on the grounds of friendship/relationship charity or other ordinary motives on which ordinary men act

o = Rebuttable presumption of UIo Shift in the evidential burden of proof

Can D show evidence to rebut the presumption? Yes – No UI No – UI

o Effect on 3rd party- Question: Can 3rd party enforce the contract

o Was C put on inquiry? IE did C have constructive notice of UI?

Yes did C take reasonable steps (EG did C obtain a solicitor’s confirmation that B had been appropriately advised?)

o Yes B’s contract with C is valid/ enforceableo No B’s contract with C is VOIDABLE and can be set aside

No B’s contract with C is valid/ enforceable- If bank doesn’t get solicitor’s confirmation, they proceed at their own risk

o If guarantor can show that they are under UI, the bank would lose out- If the bank manager takes the person aside and explain things himself, there is a danger here:

o Danger of: the bank manager gave faulty advice/ misrepresentation

Unconscionability – exploitation of weakness- English courts have no general doctrine of unconscionability. Courts prefer more established doctrines

such as duress and undue influence. But they do take fairness into account. - General principle of unconscionability not adopted in English law

Softer attitudes vis-à-vis unconscionable bargains

Earl of Aylesford v Morris- Expectant heir is young and lacks experience borrowed money at 60% APR – courts amended the

bargain but this is extremely rare – took interest rates down

Fry v Lane*- Court thought it was equitable to set aside transaction if it concerned a considerable undervalue of the

subject matter and executed without independent advice – this case involved poor and ignorant person who may be defrauded

Inequality of bargaining power

Lloyds Bank v Bundy*- Decision based on UI under class 2B – father mortgaged house as security for son’s debts and relied on

bank manager as advisor – son defaulted payment and bank repossessed house- Denning tried (but was rejected) to advance a relief for people who, without independent advice enters

into a contract upon terms which are very unfair or transfers property for a consideration which is grossly inadequate, when his bargaining power is grievously impaired by reason of his own needs or desires, or by ignorance

Pao On v Lau Yiu Long- Criticized Denning – agreements are not voidable simply because they have been procured by an unfair

use of dominant bargaining position

National Westminster Bank v Morgan- Disapproved Denning – Parliament has already undertaken task of placing such restrictions upon

freedom of contract as are necessary – would render law uncertain with such a general doctrine

Modern attitudes toward unconscionability- There has to be substantial and procedural unfairness and an abuse of the position as well

Hart v O’Connor- Unconscionable conduct by a stronger party with substantive unfairness and procedural unfairness as

well

Credit Lyonnais Bank v Burch- Considered that the principle in Fry v Lane was capable of being adapted to different transactions

entered into in changing circumstances – the charge could be set aside as an unconscionable bargain – but this was not considered as no argument for this was made in the court below

Portman Building Society v Dusangh*- Father unduly influenced by son to mortgage house for a loan – son defaulted – alleged that it was an

unconscionable bargain as he entered into the agreement unduly influenced – held that the requirements to establish undue influence and unconscionability were similar – but none was established in the case

The Hong Kong position

Union Eagle v Golden Achievement*- Time was said to be of essence in the contract – failed to adhere to time deadline – purchaser argued that

the time deadline was unconscionable and wanted relief – Hoffman said that the strict term should be strictly adhered to – in a commercial contract if there is an express term it means it should be adhered to exactly

- Qualification: the same need for certainty is not present in all transactions – there MAY be some exceptions to this strict rule

Semana Bachicha v Poon Shiu Man*- Exploiting domestic worker by making her clean multiple houses – had to work on Sundays – verbally

attacked – employer took advantage of worker’s ignorance and made her enter into a deal whereby damaged would be limited to 975 – held that it was an unconscionable bargain as they took advantage of her ignorance and socioeconomic status – awarded damages

Lo Wo v Cheung Chan Ka Joseph*- Three elderly sisters inhered a flat and sold it for 1/3 the market price to big developers – developers

knew that they were simpletons – held that the agreement was unconscionable – developer’s solicitors were used to help the sisters – contract set aside

A clear endorsement of unconscionability in Hong Kong

Min Shiu Chung v Ming Shiu Sum*- Ribeiro cites with approval the High Court of Australia decision which clearly acknowledged a doctrine

of unconscionability

Commercial Bank of Australia v Amadio*- Unconscionable conduct looks to the conduct of the stronger party in attempting to enforce, or retain

the benefit of, a dealing with a person under a special disability in circumstances where it is not consistent with equity or good conscience

- Test for unconscionabilityo Special disadvantage + the other party knew or ought to have known about this +

unconscientiously takes advantage of it = unconscionable conducto Mere difference in bargaining power is not enough – disabling condition must seriously affect

the ability of the innocent party to make a judgment for his best interest- Disabling condition seriously affects the ability of the innocent party to make a judgment to his own best

interest- Onus on the stronger party to show that the transaction was fair, just, and reasonable if these tests

establish unconscionability

Unconscionable Contracts Ordinance (Cap 458)*- Only applies to consumer contracts – does not apply in commercial context and sale of land (but sale of

land is where people most often get ripped off)- Unconscionability is a matter left for the courts – does not have a definition of unconscionable

Section 5(1)*- Court’s power- Courts power to refuse to enforce the contract; to enforce the remainder of the contract without the

unconscionable part; to limit the application of or revise or alter any unconscionable part; theoretically the court can alter the price (never been exercised by court)

Section 5(2)*

- Onus of proof – it is for the person claiming that a contract or part of the contact is unconscionable to prove it

Hang Seng Credit Card v Tsang Nga Lee- Person alleging unconscionable conduct failed to appear at court – BUT it does not preclude the court in

a proper case from looking at all available circumstances to decide whether the provision is unconscionable

- In applying UCO, the court is not shackled by the traditional or classic theories in law

Section 6(1)*- Circumstances relevant to determining unconscionability- Look at the relevant bargaining strengths of the parties; whether the consumer was able to understand

the documents relating to the supply of goods and services; whether UI or pressure was exerted; the amount the consumer could have acquired the goods or services from another person for

Shum Kit Ching v Caesar Beauty Centre*- Held that under UCO, the courts only need to take into account the circumstances relating to the contract

at the time it was made – defendant was not aware of plaintiff’s disabilities- Knowledge in this respect is not restricted to actual knowledge but would include constructive

knowledge or knowledge that a person should have reasonably possessed – constructive knowledge of the disability is enough to determine unconscionability