John Calvin

Research Writing Essay on Contract Law Unconstitutionality

Contract Law Unconstitutionality


The subject of unconscionability of the Australian law is drawing in a considerable measure of consideration from professionals and researchers in the lawful circle, indeed Horrigan made a production on the theme of unconscionability. What is unconscionability? It could be explained as a vile, unreasonable, deceitful, onerous, cruel or irrational behavior when making an agreement. It is essential to bring up that it obliges three principle components, which are abuse, exceptional weakness and a significant deficiency of thought. It is obvious that the idea of unconscionability influences contracts between two gatherings. It takes after that this idea includes a general viewpoint on additions or misfortunes to the gatherings bound by the agreement. This paper disks the degree to which the Australian Law gives insurance to defenseless persons in the region of unconscionability and contradicts the thought that it prevents the capacity of contracting gatherings to control their own particular monetary issues.

Proposals to the Australian Unconscionability

As per Horrigan, Lieberman, and Steinwall, the Senate Economics Committee proposed concerns of utilizing a rundown of cases that would go about as a standard for distinguishing instances of unconscionability. It is striking that, few statutory administrations identified with unconscionable behavior or practically equivalent to sets of behavior have samples that are utilized as a part of illuminating procurements. For example, “segment 36 of the Tourism Service Act 2003” encases a posting of points that show unconscionability. In any case, not the samples or matters are hypothetical or comprehensive essentially. The advisory group proposed the utilization of an announcement of standards in distinguishing instances of unconscionability. These standards would give rules to deciphering unconscionability  , furthermore bolstered for the utilization of non-administrative arrangements to enhance it. This owes to reality that expanded utilization of industry codes and urging controllers to give more prominent direction on unconscionability would enhance its proficiency.

Elements of Unconscionability

The current Australian Law requires that courts used exploitation, special disadvantage and a considerable shortage of consideration for making decision on matters of unconscionability. To begin with, exploitation calls for the presence of misuse of the special disadvantage by the superior party in situations that add up to equitable or actual fraud. The superior party must have obliged the objectionable terms in an ethically culpable manner that is influencing the conscience. Therefore, it is evident that the strong should not be permitted to mistreat the weak. This element requires the plaintiff to prove that the defendant exhibited an unacceptable level of impropriety. It follows that the defendant the plaintiff must prove that the defendant was aware of a disadvantage and used it to manipulate the plaintiff.

Another element of unconscionability is the special disadvantage. This includes a need of any kind, poverty, sickness, sex, age, drunkenness, infirmity of body or mind, illiteracy, or inadequate English. It is notable that it is impossible to catalogue or define circumstances amounting to material disadvantage or disability. The magnitude of disadvantage or disability necessary for equity to intervene must be determined. The relationship between the conflicting parties must be unequal. Therefore, when the parties involved have a disadvantage, then the special disadvantage would not be sufficient. Ultimately, Yee reveals that the disadvantage involving two conflicting parties must be special or serious . This implies that a mere fact of one party having a superior bargaining position than the other is insufficient.

The third element required to prove a malevable conduct is the substantial inadequacy of consideration. Substantive unfairness is necessary when challenging a contract is based on unconscionability. This element is important in two major ways because it can support the preposition that a disadvantage existed. Additionally, it can support the argument that an unfair use was present in the conflicting occasion. The Australian Law does not require striking a transactional imbalance. This owes to the reality that in the case involving Gustav & Co Limited v Macfield Limited,Arnold J argued that an imbalance in consideration is always present in unconscionability cases but it is not a necessity. It is crucial to point out that a transaction may be unconscionable even when adequate consideration moves from the superior to the weaker party.

Limitations of Unconscionability

Kaihokohoko reveals that, unconscionability has a number of limitations under the Australian Law.  For instance, it exclusively applies as a corrective action in courts by protecting the weaker side from manipulation by the stronger party. This implies that there is an absence of a positive obligation on parties to act ethically. In simple terms, unconscionability does not hinder superior parties from weaker parties devoid of filing a lawsuit. Furthermore, unconscionable conduct is only considered by courts.  Consequently, such cases usually involve highly valued transactions where the prevailing party to the agreement is taking action. Clearly, the value of the disagreement should be proportional to the expenses of litigating. This lessens on the doctrine’s applicability for usual consumer law circumstances because suppliers seldom litigate lower price law issues.

Brown argues that, even though unconscionability cases may be taken to court, most of the cases are never successful.  The author further affirms that low value disputes have minimal chances of qualifying disability or other vital facets of unconscionability defense. Finally, unconscionability is limited to conduct of the contracting parties prior to signing of the contract. It does not focus on actions that occur after signing of the contract.  As a result, it sufficed to mention that unconscionability is absent in the course of the contract. Impliedly, the actions of a supplier in interpreting, applying, or exercising its liberties is not covered under unconscionability. However, the contracting parties must exhibit any discretion when drafting the terms of the contract.

Extent of Providing Protection to Vulnerable Persons

As aforementioned, the law of the Australian government does not define the meaning of unconscionability. It only provides guidelines that help the courts in determining whether a case constitutes unconscionable conduct.  Even though a report recommended using examples as a standard measure for determining unconscionability, a number of factors limit the implementation of this suggestion.  For example, there is a risk of misapprehension because creating examples can lead to misdiagnosis. In addition, using a list of examples can lead to reputable presumptions. This risk is likely to arise if the provided examples are shed as reputable presumptions. A nonprofessional reader is not ready to make correct interpretations when the provided examples are presumptions however, he can make correct interpretations when the examples are illustrative.  Another risk is that developing examples lies in ensuring that such examples are comprehensive and cannot alter or hinder the validity of the unconscionability doctrine.

The Australian unconscionability law provides protection to vulnerable persons by creating guidelines under Trade Practices Act. Koegh reveals that, the Australian government was compelled by the “Australian Fair Trading Inquiry” to address claims levied against landlord’s actions and big enterprises.  Thus, the Australian government inserted section 51AC in the Trade Practices Act 1974. This section was a provision against unconscionable conduct, which was wider than the principle of unconscionability. “Section 51AC efficiently extends the operation of S.51AB of the Act”.  Consequently, the law goes beyond the factors that a court must consider when identifying whether a contract is unjust; hence, the Australian law on unconscionability protects vulnerable persons by providing guidelines on three main elements. These elements are exploitation, special disadvantage, and considerable shortage of consideration.

Unconscionability and Socio-Economic Equality

The doctrine of unconscionability is meant to protect vulnerable persons from extortion by stronger parties. This leads to the inquiry of whether this doctrine promotes equality in terms of social and economic wellbeing of vulnerable persons. One of the limitations stated above highlights that it promotes social and economic inequity.  This is because of the difficulty experienced in proving vital elements under the doctrine, which frequently leads to loss of cases by weaker parties. Evidently, the fact that the weaker parties frequently loose cases is an indication that unconscionability promotes social and economic iniquity. Pascoe reveals that it requires a special disadvantage such as drunkenness, sickness, poverty, illiteracy, and lack of adequate knowledge in English. Most of these disadvantages affect the lower class members of the society.

Another limitation of this doctrine also promotes social and economic iniquity because its cases usually involve highly valued transactions.  In fact, suppliers rarely litigate lower price issues of unconscionability. What should the poor do? Clearly, this limitation also supports the strong because of the amount of expenses involved in litigating unconscionability cases. Thus, the doctrine promotes social and economic iniquity because of the expenses and the fact that such cases are easily lost.

Does Unconscionability Hinder the Capacity of Contracting Parties to Regulate Their Own Affairs?

The doctrine of unconscionability does not hinder the capacity of contracting parties to regulate their own affairs. This owes to the fact that the doctrine allows the contracting parties to negotiate the terms of their contract without interference. Yee argues that the doctrine of unconscionability properly if the terms of the contract are deemed unfair for the weaker party.  This reveals that it allows the contracting parties to make negotiations as they wish, and may only be called upon after the two parties disagree on the subject of fairness. Therefore, the idea of saying the doctrine of unconscionability hinders contracting parties from conducting their own private affairs is a misplaced opinion in the legal industry.


This paper discuses the extent to which the Australian law provides protection to vulnerable persons in the area of unconscionability and opposes the idea that it hinders the ability of contracting parties to regulate their own financial affairs. The doctrine of unconscionability is found in section 51AC and 51AB of the Trade Practices Act 1974 . It is evident that the Australian Law uses three main elements that help courts in interpreting matters related to this doctrine. These elements include special disadvantage, exploitation, and substantive inadequacy of consideration. It is also clear that it promotes social and economic iniquity that result from the limitation of the doctrine. Ultimately, the doctrine this paper clarifies that unconscionability does not hinder the capacity of contracting parties to conduct their own private affairs.

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