First Principles of Business Law
Circumstances that may invalidate a legal transaction

4. Unconscionable dealing

4.2. Unconscionable dealing in the general law

 

 

 

Read the facts and the question and then choose the best answer.

Y, who owns a small retail business, asks X Bank for a loan. X Bank agrees to provide the loan and gives Y some documents, telling him to read and sign them if he wants the money. Y takes the documents away with him and returns them the next day, duly signed. Unknown to X Bank, Y has dyslexia, a disability which makes it impossible for Y to read complex documents. Y knows the documents he signed give the bank a mortgage on his house, but has no idea that the agreement contains strict repayment terms. When Y fails to repay the loan on time, X Bank seeks to enforce the mortgage.

In these circumstances, could Y have the mortgage set aside on grounds of general law unconscionable dealing?

(a) Yes. Y is put in a weak bargaining position by his reading disability and it is unconscionable for X Bank to enforce terms that Y could not understand.

(b) No. Although Y was in a weak bargaining position because of his reading disability, this was not made obvious to X Bank and so it would not be unconscionable for X Bank to enforce the contract.

 

 

 

 

 

 

 

 

 
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