Contract law notes fully updated for recent exams at Oxford and Cambridge. These notes cover all the LLB contract law cases and so are perfect for anyone doing an LLB in the UK or a great supplement for those doing LLBs abroad, whether that be in Ireland, Hong Kong or Malaysia (University of London).
These were the best Contract Law notes the director of Oxbridge Notes (an Oxford law graduate) could find after combing through dozens of LLB samples from outstanding law students with the highest...
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Non-commercial guarantees
The problem
Chen Wishart: problem = whether Bank can enforce a loan for debts of the husband against the wife as guarantor when the husband has induced this agreement?
On one side answer = yes
Because the wife should take financial responsibility for her apparent agreement to the guarantee
The wife might stand to benefit from the loan
It is the primary debtor, not the lender, who is at fault
Such lending is socially and economically useful, especially for small businesses – banks will be reluctant to lend if they have difficulty enforcing their guarantees.
On other side = no
Marriage relationship allows scope for abuse when one party gets desperate
Lender ought to be aware of the risk of abuse here
Guarantor’s interests might be linked to that of debtors, but might not be identical – saving home rather than business might be priority of guarantor.
Requirements for the defence
Can G prove a vitiating factor against PD?
Guarantor must show a vitiating factor against the primary debtor. This may be:
Misrepresentation
Undue influence
Other legal/equitable wrongdoing
Royal Bank of Scotland v Etridge [2001]:
Lord Nicholls: a transaction should not be vitiated just because H exaggerates slightly
As a degree of hyperbole is to be expected in the circumstances.
Equally, W will often give money to H as a normal expression of love, trust and affection, and court should be careful to avoid disturbing this.
Chen Wishart: begs the question of what conduct and exaggerations are to be expected of a “reasonable husband”.
Equally, shouldn’t the law be vigilant over relationships of influence for the reason that they might be undue?
Bank is put on notice
Barclay’s Bank v O’Brien [1993]:
Lord Scarman: where relationship of sexual/emotional nature and loan is for debtor’s benefit, bank is put on notice
Royal Bank of Scotland v Etridge [2001]:
Lord Nicholls:
Quite simply, a bank is put on inquiry whenever a wife offers to stand surety for her husband's debts.
This is even so where a wife is nominally a director or shareholder.
However, the bank is not on inquiry if the mortgage is to both jointly unless the bank is aware that the money is mainly for the husband’s purposes
Lord Scott:
Where H has negotiated that W will become surety for H’s debts and no part in the negotiations having been played by W,
the bank should be aware of the vulnerability of W and the risk that her agreement might be procured by undue influence or misrepresentation by H
So they are put on inquiry - Not about the existence of undue influence,
but only to whether the wife understands the nature and effect of the transaction she was entering into.
This is not an "inquiry" in the traditional constructive notice sense
Has L taken reasonable steps?
Royal Bank of Scotland v Ettirdge [2001]
Lord Nicholls:
All a bank is expected to do is take reasonable steps to satisfy itself that the wife has had brought home to her the practical implications of the proposed transaction
So that she goes into the transaction with her eyes open.
Thus, banks not expected to insist on confirmation from a solicitor that the wife's consent has not been procured by undue influence
And Knowledge of the solicitor acquired will not be imputed to the lender
Equally, advice given need not be independent from the bank or the husband and wife either,
so long as the solicitor pays attention to the wife’s interest only and after considering whether there is any conflict of duty.
Chen Wishart: balance of power in favour of the lender over the guarantor
If solicitor is incompetent, that is nothing to do with the lender
Advice is aimed at informing the guarantor, not freeing her from undue influence
Gardner: trouble is, information will only spell out to guarantor what she already knows
Not free her from the pressure of her husband
Knowing the fact she may be repossessed will not present her with any additional choice in the matter.
Are abnormal or exceptional occasions when the lender may have to take more steps
Royal Bank of Scotland v Ettirdge [2001]
Lord Scott:
Where Bank knows facts which suggest that the wife's consent has been procured by the husband's undue influence or misrepresentation,
may be necessary for the bank to take extra steps – e.g. that wife has received advice from a solicitor independent of the husband
before bank can reasonably rely on wife's apparent consent
Chen Wishart: Here, lenders proceed at their own risk –court will determine whether reasonable steps were taken in response to heightened suspicion
Remedy
Primary relief is rescission of the guarantee, subject to the usual bars.
What is the basis of this doctrine?
Good faith purchaser?
Erm.... Is something of a fiction
An instance of undue influence
Chen Wishart: The position of current parties is generally unaffected by the wrongdoing of third parties
It begs the question why the primary debtor’s undue influence should taint the lender’s contract
Moi: Perhaps – but seems to have a lot in common with undue influence
Maybe the binding of the husband and wife necessitate this being a special case of undue influence
Contract tends to be for husband’s benefit – so abuses relationship of trust etc
C(R3P)A 1999? Contract purports to benefit him, so justified brining his influence into the equation.
Unconscionable Bargains
Requirements
C must have been under an operative bargaining impairment placing it as a serious disadvantage in relation to D
Fry v Lane [1888]: C were brothers with poorly paid jobs, persuaded into selling their revisionary interest to D for a massively undervalued price. C attempted to have the contract set aside
Kay J:
Where a purchase is made from a poor and ignorant man at a considerable undervalue,
the seller having no independent legal advice,
a court of equity will set aside the...
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Contract law notes fully updated for recent exams at Oxford and Cambridge. These notes cover all the LLB contract law cases and so are perfect for anyone doing an LLB in the UK or a great supplement for those doing LLBs abroad, whether that be in Ireland, Hong Kong or Malaysia (University of London).
These were the best Contract Law notes the director of Oxbridge Notes (an Oxford law graduate) could find after combing through dozens of LLB samples from outstanding law students with the highest...
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