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Business Law

Issue(s)

Genuine consent taken by the George entered into the loan agreement with Easy Finance under the common law or statutory law?·

Who are the parties of the loan agreement here?

Is Lily a party to the loan agreement with Easy Finance?

Who needs to avoid contract with Easy Finance?

Rule(s)

The parties of the contract (George and Easy Finance) and needs to avoid the contract (George). It is important to think of how to set aside the loan agreement? George was in the dementia state, was mentally unconscious and not sound to permit the proper consent. Geroge consent was not a genuine one[1]. As such, there is no valid contract between George and Easy Finance. As per the Gibson (2018, 275), there have been five distinctive situations which are the-:

  • Mistake
  • Misrepresentation
  • Duress
  • Undue influence
  • Unconsciousness conduct

The contract has to be set aside on the ground of the unconscionable conduct, the plaintiff has to exercise the four elements-:

  1. he was in a position of the 'special disadvantage’ at the time of the conduc[2]
  2. it has been substantially affected his ability to protect himself.
  3. the defendant knew or should have known of the plaintiff disability and took advantage of it.
  4. the action of the defendant was unconscionable which is unfair and unjust.

The Australian Consumer Law also provides the nationally consistent prohibition on conscious conduct. (Part 2-2 of the ACL).


Application

  • Apply the legal principle to particular factual circumstances.
  • Note: sometimes stating the rule and applying the rule can become intertwined. This is fine, so long as you remain clear and logical in your approach.

1) It is reasonable for the Easy Finance to assume the mistake was made as George was applying for the loan, for which he could not make their payments. Facts suggest contrary, Easy Finance has investigated the George background before they approved his loan. George owns his home outright and there has been no mortgage for it. Currently, value is at the $450,000 and it is based on George's ownership of the house[3]. Easy Finance approved the loan of the $60000. A first mortgage was identified from the security of George's property as the security. If the George is unable to pay, that would mean, Easy Fiance gets rights to sell the property an the money back. A mistake was genuinely on the behalf of Easy Finance.

2) Fraudulent Misrepresentation is due to the lack of consent. George's daughter has fraudulently misrepresented the purpose of the loan. Lily was trying to convince the father to approach the Easy Finance Company and enter into an agreement to borrow a sum of the $60,000 as a lie to start her business venture instead of operating the grandson. George here has relied on the fraudulent misrepresentation as follows-:

  1. a) False Statement of the fact
  2. b) Misrepresentation of the true
  3. c) Representation was false or did not believe in recklessly.
  4. d) acted upon
  5. e) innocent party suffered loss.

3) undue influence as the contract has been formed in between the Lily and the Geroge as the daughter and the father grounds and falsifying the information[4].

4) unconscionable Conduct is understood to be the mean of the conduct that would deem so harsh and it goes against the good consciousness. As per the general rule of the common law, is that the courts would not interfere with a contract, that would result in the un conciseness conduct by one of the parties(Gibson, 2018, 299). Equity intervenes with one party has taken the un lieu disadvantage of the special disability (common age, illiteracy, low education or a combination of the factors). If the resulting outcome would be harsh for the other party and even oppressive, it means that the stronger party has done an undue advantage over the other party. It is the type of the contract, that has bounded with the no real party and having a meaningful choice, that could majorly be on account of the bargaining power that coexists between the parties. It is an important step for the weaker party to avoid such contract.

In this case, George (Plaintiff) was in the “special disadvantage" when entering into the loan agreement with the Easy fiancé. As mentioned by the Gibson (2018, 300) that the “special disadvantage” also involves the poverty element, need sickness, age, gender, intoxications, illiteracy and there is a low education and also involve the lack of the assistance that can be interpreted where the assistance or explanation is necessary[5]. As identified-:

Age -: George is elderly (73 years old)

Sickness -: suffering dementia (mid-stages)

Reliance (Geroge relied upon as per the wife for many years, after her the death and there can be completely reliant that could be based on the daughter Lily as per the needs.

In the case, George would completely establish as per the argument that George suffers from a special disadvantage. It is also the situation that is identified in the Commercial Bank of Australia v Amadio [1983], where the plaintiffs were the Italian couple had a little understanding of written English or any sort of the formal education, where forces to sign the legal agreement by the Commercial bank by giving the mortgage on the behalf of the property. As per the case, it was confirmed that the parents faced the special disadvantage course and liability of the disagreement.

George has “dementia” which is the special disadvantage and has substantially affected the ability to provide consent and has lost the capability to protect himself. He is dependent on the daughter for the sound needs and the preferences and it is the disadvantage situation due to the loan agreement that could be a bargaining power that could have a no real or meaningful choices[6].

The Easy Finance that could be based on the disability that is identified with the special disadvantage and it was Lily who applied to George and George was not aware of the terms and still signed it. It was important to consult a solicitor here and there was a failure to provide independent advice, as Lily would be failing to provide the solution to the problem. George was not told of the condition Commercial Bank of Australia v Amadio [1983] HCA 14 case.

Conclusion

It is concluded that from the case, that the case of the special disability where the old men were not able to make a sound decision and even had the uncertain capability to take the accurate decisions. It was concluded, that the contract was falsified and it was not taken with the best of the knowledge and time.

References for Contract Law

Allen, C.H., Gregory, H.J., Varallo, G.V. and Hannigan, S.M., 2016. Proceedings of the 2016 Delaware Business Law Forum: A Review and Debate of the Public Policy Implications of Delaware Law. Bus. Law., 72, p.755.

Bird, R.C., 2018. On the Future of Business Law. Journal of Legal Studies Education, 35(2), pp.301-320.

Clarkson, K.W. and Miller, R.L., 2020. Business law: Text and cases. Cengage Learning.

Kelly, D., Hammer, R., Denoncourt, J. and Hendy, J., 2020. Business law. Routledge.

Snyder, D.V. and Maslow, S., 2018. Human Rights Protections in International Supply Chains—Protecting Workers and Managing Company Risk: 2018 Report and Model Contract Clauses from the Working Group to Draft Human Rights Protections in International Supply Contracts, ABA Section of Business Law. ABA Section of Business Law (June 12, 2018).

Twomey, D. P., Jennings, M. M., & Greene, S. M. (2016). Anderson's Business Law and the Legal Environment, Comprehensive Volume. Nelson Education.

[1] Clarkson, K.W. and Miller, R.L., 2020. Business law: Text and cases. Cengage Learning.

[2] Kelly, D., Hammer, R., Denoncourt, J. and Hendy, J., 2020. Business law. Routledge.

[3] Snyder, D.V. and Maslow, S., 2018. Human Rights Protections in International—Protecting Workers and Managing Company Risk: 2018 Report and Model Contract Clauses from the Working Group to Draft Contracts, ABA Section of Business Law. ABA Section of Business Law (June 12, 2018

[4] Twomey, D. P., Jennings, M. M., & Greene, S. M. (2016). Anderson's Business Law and the Legal Environment, Comprehensive Volume. Nelson Education.

[5] Allen, C.H., Gregory, H.J., Varallo, G.V. and Hannigan, S.M., 2016. Proceedings of the 2016 Delaware Business Law Forum: A Review and Debate of the Public Policy Implications of Delaware Law. Bus. Law., 72, p.755.

[6] Bird, R.C., 2018. On the Future of Business Law. Journal of Legal Studies Education, 35(2), pp.301-320.

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