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Report No. 199

Unconscionability and equity jurisdiction of Courts in United Kingdom

There is long-established jurisdiction to set aside harsh and unconscionable bargains. Courts of equity, in the eighteenth century often set aside express contractual provisions on grounds of unconscionability. However, nearly all these cases fell into certain special classes, that is, mortgages and bonds and the sale of mortgage of revisionary interests. The equity jurisdiction was used to be unduly exercised to reopen all bargains.

The equity jurisdiction was invoked to setting aside grossly unfair contracts entered into by poor and ignorant persons. Towards the end of the nineteenth century, the equitable jurisdiction fell into disuse partly because conditions changed and partly because the Moneylenders Act of 1900 gave statutory control over some of the activities formerly regulated by the equity jurisdiction. The equity jurisdiction seemed contrary to the fundamental basis of classical contract theory.

In modern times attempts have been made to revive the old equitable jurisdiction. Lord Denning in Lloyd's Bank (1974(3) All ER 757) suggested that there was a general equitable jurisdiction to set aside contracts where the parties were of unequal bargaining power and one of them had used his superior bargaining power to extract some unfair or unconscionable advantage. Equity has never proclaimed any general power to relieve from bargains and its jurisdiction to interfere has traditionally been limited to cases where it would be unconscionable for a plaintiff to rely strictly upon his legal rights.

Unfair (Procedural and Substantive) Terms in Contract Back

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