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Unconscionable Conduct in private transactions

Unconscionable Conduct in private transactions

For many years the legal protection for private individuals against transactions, contracts and the making of gifts in unfair circumstances was patchy. Fortunately, over time the law has developed and now offers greater protection, particularly in commercial settings where consumer rights legislation seeks to exclude unfair contract terms and provides cooling off periods and the like. In private situations, the law has long recognised the need to offer protection from transactions and the making of gifts, subject to undue influence.  In fact the law is quite well developed in that area and offers rights of redress (perhaps more than protection in the usual sense) for people who have been taken advantage of by those in whom trust and confidence has been placed.

Unfortunately this protection is not always enough, particularly for people who fall outside of recognised relationships. Where this arises the law relating to “unconscionable bargains” may be of assistance.  It is known as an esoteric subject, which is legal code for complicated and uncertain. It is often misunderstood, but on a positive note progress is being made.

An unconscionable bargain is normally a contract made by someone at a special disadvantage, which is so oppressive to him/her that it should, in effect, shock the conscience of the court and the morally reprehensible behaviour of the other party. In the 1800’s the courts spoke of “poor” and “ignorant” people being exploited, although that has now been modernised and will cover those who, for any reason, are at a special disadvantage. Deciding in what circumstances the other party has acted unconscionably is difficult. 

One of the big questions that, historically has never been satisfactorily answered, is whether unconscionability covers gifts.  Often gifts will be caught under the law of undue influence, but not always, because the relationship may not be one of trust and confidence and the recipient may not have actively taken any steps in the transaction.  

In Evans v Lloyd (2013) the High Court decided that gifts were covered, in a case where a man named Wynne Evans had lived with another family on a Welsh Farm (known as a “Gwas”) since he was aged 14, and in later life gave to them two properties he had inherited. After Wynne’s death, the beneficiaries of his Will sought to set aside the gifts arguing that he had a special disability through his subservience to the family and that the gifts were inexplicable and oppressive. In short it was alleged that the family had taken advantage of him and it was for them to show that the gifts were fair, just and reasonable.

The Judge accepted the broad position relating to the law on unconscionability, but broke new ground by stating that gifts must be covered as well as contracts.  However, on the facts of the case the claim failed, as he found Wynne was an intelligent man who had a close relationship with the family and that it was perfectly understandable that he would wish to give them his property. In addition they had not acted in a way that was morally reprehensible in accepting the gifts.

It seems to me this is an important development. It must be fair that gifts are covered as well as contracts, as they are normally more disadvantageous than contracts, depending on the terms.  I think it complements the law on undue influence and provides greater protection against exploitation in a wide variety of circumstances.  However, the law still does not offer protection for people making bad and foolish decisions. Those who are not subject to any special disadvantage and decide to give money or property away and later regret their actions, may have no remedy.

If you would like to discuss your matter with one of our team, contact our Wills, Trusts & Estates Disputes team by filling out the form below or call us on 01722 426 976.

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