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What is Unconscionable Conduct - the basics


Unconscionable conduct is a remedy born out of the general law (common law and courts of equity) to address impropriety in the making of contracts and instances of unequal bargaining power, unfair advantage and the exploitation of a special disadvantage.

Equitable unconscionable conduct

Think Amadio, Garcia, Yerkey - these are all common law decisions of superior courts that found a wronged person was suffering from a 'special disadvantage' and that disadvantage had been taken advantage of by an unscrupulous person.

The elements are:

  1. The presence of a disability or disadvantage that affects the individual's ability to make a judgment in his or her own best interests (illness, ignorance, inexperience, impairment, financial need, drunkenness etc, etc);

  2. that the disability or disadvantage was sufficiently evident to the alleged wrongdoer; and

  3. that the alleged wrongdoer has acted unconscionably and taken advantage of the disability - such that the benefit of that taking advantage should be removed by equity.

Statutory unconscionable conduct

However, the concept was subsequently legislated in Australia, originally under the Trade Practices Act 1974 (Cth), to become a primary tool that prevents the abuse of power within a contractual relationship. Now, it is largely a creature of statute, enforced under section 21 of the Australian Consumer Law (ACL) and under section 12CB of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act).

Section 21 of the ACL

A person must not, in trade or commerce, in connection with:

(a)   The supply or possible supply of goods or services to a person; or

(b)   The acquisition or possible acquisition of goods or services from a person;

engage in conduct that is, in all the circumstances, unconscionable.

Section 12CB of the ASIC Act

A corporation must not, in trade or commerce, in connection with the supply or possible supply of financial services to a person, engage in conduct that is, in all the circumstances, unconscionable.

What is unconscionable conduct?

Unconscionable conduct does not have a precise meaning. Instead it is an intentionally amorphous concept that can grow and adapt to novel situations on a case-by-case basis.

Over time, courts and the judiciary have developed the concept of unconscionable conduct by considering the matters set out at section 22 of the ACL (or 12CC of the ASIC Act) and anything else relevant to ascertaining the norms of society, before contrasting the actions of the impugned individual or corporation against those norms and sanctioning abuses of power or behaviour deemed to be so far from good conscience that it warrants condemnation.

To the lay-person, it should be seen a shield available to courts to protect vulnerable parties from conduct that is particularly harsh or oppressive.

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