Unconscionable conduct as a basis for relief has a long history in English law, indeed

it is regarded as one of the oldest2 heads of equity. Sir Frederick Jordan3 notes that the

Court of Chancery in the 15th century comprised, inter alia, an equitable jurisdiction

preventing people from making an unconscientious use of their legal rights and that

this included the granting of relief against fraud, mistake and accident. In Earl of

Aylesford v. Morris Lord Selbome L.C.’s words reflected the late nineteenth-century

narrow view of unconscionable conduct:4

There is hardly any older head of equity than that described by Lord

Hardwicke in Earl of Chesterfield v. Janssen 2 Ves. Sen 125, at 157 as

relieving against fraud "which infects catching bargains with heirs,

reversioners and expectants".

But in Earl of Chesterfield v. Janssen5 Lord Hardwicke had identified five categories

of fraud.6 As noted above, his fifth, "that which infects catching bargains with heirs,

reversioners or expectants" was narrowly based. It is apparent from Lord Hardwicke’s

five categories that equitable fraud had a reach wider than catching bargains with heirs

and the like. Equitable fraud assumed willing consent brought about by an abuse of the

stronger party’s position or power. John Fonblanque in notes to Henry Ballow’s

volumes on equity also identified a wide rule but focussed on attributes of the weaker

party:7

the real object which the rule proposes is, to restrain the anticipation of

expectancies, which must, from its very nature, furnish to designing men

an opportunity to practice upon the inexperience or passions of a

dissipated man. And that being the object of the rule, its operation is not

confined to heirs, but extends to all persons, the pressure of whose

wants may be considered as obstructing the exercise of that judgment,

which might otherwise regulate their dealings, Smith v Burrows 2 Vem

346.

In later judgments, the focus shifted to the abuse of power by the stronger party. Lord

Haldane L.C. in Nocton v. Lord Ashburton declared that:8

In Chancery the term "fraud" thus came to be used to describe what fell

short of deceit, but imported breach of a duty to which equity had

attached its sanction.

This distinguished fraud in equity from fraud at law which was "descriptive of the

dishonest mind of a person who knowingly deceives".9 Lord Selbome L.C. in Earl of

Aylesford v. Morris had explained the view of fraud in equity as one therefore of

constructive fraud:10

Fraud here does not mean deceit or circumvention; it means an

unconscientious use of the power arising out of these circumstances and

conditions; and when the relative position of the parties is such as prima

facie to raise this presumption, the transaction cannot stand unless the

person claiming the benefit of it is able to repel the presumption by

contrary evidence, proving it to have been in point of fact fair, just and

reasonable.

Lord Selbome’s words referred specifically to relief against fraud in relation to

expectant heirs. As has been noted, equity intervened when the stronger party had

taken advantage of an expectant heir,11 and also those at a disadvantage by reason of

old age, youth, ignorance, illiteracy, lack of education, drunkenness, ill health or

poverty.12 The wrong identified and remedied was not the bad bargain per se, but the

unconscientious use of bargaining strength.13 Lord Thurlow identified it as:14

an inequality so strong, gross and manifest that it must be impossible to

state it to a man of commonsense without producing an exclamation of

the inequality of it.

Standing apart from the expectant heirs, was a group of cases15 following the South-

Seas Bubble debacle involving the sale of land at prices agreed before the crash where

the would-be purchasers had failed to complete the sale. A unifying feature with the

more typical unconscionability cases was the notion of "delusion". Lord Macclesfield

L.C. in Saville v. Saville in declining to order specific performance16 held that:17

a court of equity ought to take notice under what a general delusion the

nation was at the time when the contract was made.

The House of Lords in Kien v. Stuckley also referred to "the general delusion",18

holding that the agreement19 made when:20

lands as everything else, were raised to an extravagant price . . . under

such circumstances, and upon such hard and unequal terms, ought not to

be aided or carried into execution by a Court of Equity.

Although equity following the work of Lord Nottingham (1673-1682) and in particular

that of Lord Eldon as Chancellor21 (1801-1820) had moved from being a court of

discretion dependent on the conscience of the Chancellor to one based on a body of

principles22 it remained a court capable of flexibility. This progressive refinement was

noted by Jessel M.R. in Re Hallett’s Estate:23

16

...

the rules of the Courts of Equity are not, like the rules of the

Common

Law,

supposed
to

have

been

established

from

time

immemorial. It is perfectly well known they have been established from

time to time . . . We can name the Chancellors who first invented them,

and state the date when they were first introduced into Equity

jurisprudence . . . The doctrines are progressive, refined, and improved.

But Jessel M.R. in the late nineteenth century did not see a place for equity in

interfering with contracts between parties who were not under any disability and who

had entered into a contract at arm’s length subject to legislative exceptions.24 Equity

did however recognise such vitiating elements as misrepresentation or undue influence

as grounds for rescission or for the refusal to grant specific performance.

Legislative changes during the mid-nineteenth century reflected the dominant laissez

faire25
approach to business and left equity and the principle of unconscionability,

based not on a bad bargain, but on the abuse of bargaining position, as the only

avenue for redress in matters of credit. Until the Usury Laws Repeal Act 1854 (U.K.)

money lenders had been severely restricted in the terms, such as interest rates, which

they could impose.26 With the passage of the Sale of Reversions Act 1867 (U.K.)27

undervalue alone was not a ground for re-opening a bona fide sale. Nor had this been

a basis in equity:28

unless the inadequacy of price is such as shocks the conscience, and

amounts in itself to conclusive and decisive evidence of fraud in the

transaction, it is not itself a sufficient ground for refusing specific

performance.

However, once it could be shown of the circumstances that one of the parties was at a

significant disadvantage vis k vis the other and there was undervalue then equitable

relief was possible.29 Additionally there was the issue whether a contract could be

regarded as unconscionable, not because of a special disability of one party at the

outset, but because of events arising during the life of the contract. Lord Thurlow L.C.

in Adams v. Weare30 held that in judging whether a contract was unconscionable regard

must be taken only of circumstances at the time when the contract was made and not

events arising during the life of the contract which change the nature of the contract.

This point will be returned to later. Foreshadowing the view of later commentators,31

Lord Thurlow was an early voice for certainty:32

Rules ought to be fixed, and it would be calamitous that the matter

should rest upon such loose expressions as hard and unconscionable;

which expressions unless they are properly applied, mean little or

nothing.

It will be argued that Lord Thurlow’s view continues to have currency. While

unconscionability is a valid conclusion to draw from behaviour which clearly

transgresses the acceptable, it is inappropriate as a bare standard of behaviour in the

absence of indications of what behaviour is required. In order to use a standard as

apparently

uncertain

as

"unconscionability",
it

must

rest

on

clear

principles.

Accordingly the issue will be explored as to whether it is possible to distil principles

from a broad body of law which uses the epithet "unconscionable" and whether the

principles are clear enough to provide the certainty apparently required by commerce.