Introduction to Business Law Business Mortgage

Question: Describe about the Introduction to Business Law for Business Mortgage. Answer: The three legal issues that have been raised in this case are- Whether the guarantee and the mortgage, given by Amadios, were not enforceable because of the unconscionable conduct of the Commercial Bank of Australia. The issue that arose in the court was whether the guarantors were bound by the contract of guarantee considering the conditions in which they marked it. The third issue arose that whether there was any misrepresentation made by the Commercial Bank of Australia (Aust Lii, 1983). The three conclusions which were made by the appellate court were: There was an unconscionable conduct on part of the bank. This was the first conclusion on which, the bank had jumped (Brisbane Lawyers, 2016). The second conclusion was that the bank had the liability to disclose the full facts to the Amadios and there was when the Bank misrepresented. Amadios felt that their liability was fixed up till $50000. The Bank knew that the Amadios were not so appraised and also that their sons business was not flourishing. As it has been stated in various cases, the bank is under no obligation to disclose the facts to the surety. It is because there is no contract between the surety and the Bank. In fact, the Bank would be breaching its obligation of maintaining the confidentiality of the information about the customer in a case it discloses any of the facts. However, the Bank is under a duty to disclose all the facts, if the bank has made any special arrangement with the customer, which the surety cannot expect reasonable or natural. In the present case, there was an arrangement made between the customer and the Bank. It was regarding the leverage in the assigning of the overdraft limit. Therefore, herein the Bank was liable for misrepresentation and should have disclosed regarding this arrangement (ACL, 2016). The two facts that persuaded Justice Gibbs to come onto the conclusion that the bank had misrepresented by not disclosing the facts are- Firstly, the Bank did not disclose the mere fact that there was a special arrangement made between the bank and Vincenzo. The special arrangement was made in order to clear all the overdrafts. An immediate overdraft limit was to be given. This limit would be reduced in a week and further, it would be cleared off. The second fact which was stated by him was that the Bank had not merely dishonored the cheques instead they themselves became a party to their selective dishonor. The Bank wore a cloak and deceived the guarantors regarding the prosperity of the company. The ratio that was given by Mr. Gibbs was that the appellant that is the Bank should not succeed, as they had made a misrepresentation to the respondent that is Amadios. It was stated by him that the onus of proof should fall on the Bank, as the Bank would have to prove that the purchase was fair and reasonable and that the conduct of the Bank could not be excused as the respondents were poor and ignorant. Therefore, there was an absence of independent advice (Zhang, 2013).Therefore, the Bank was under an obligation to disclose all the material facts. Justice Mason stated that there was an unconscionable conduct on the part of the Commercial Bank of Australia. He gave the judgment on the fact that the Bank had defied the rules of equity and good conscience in order to gain a benefit under the transaction. The Bank took the advantage of an innocent party who was in an inferior position to that of the Bank and who also due to lack of any independent and voluntary will could not take a decision of its own. According to him, there was a gross inequality of the power of bargaining between the two parties in the given case. The judgment given by Justice Mason was different from the judgment given by Justice Gibbs as Justice Mason talked about the unconscionable bargain. He stated that the principles of equity were violated by the Bank while dealing with the respondents. Also, he stated that the respondents were not only at a disadvantage but there was a special disadvantage which affected them. The special disadvantage meant that the respondents could not by any chance know the actual situation and thereby were placed at a disadvantage by the Bank. The disability was of a special type. Therefore, the appellants should be held guilty (Australian Contract Law, 2013). As stated by Justice Mason there are various factors which has led to the evidence, that there is an inequality in the bargaining power- Firstly, the party who is innocent must be at a special disadvantage. The special disadvantage meant that they were unable to know their best interests. The disclosure was to be made by the bank and if it was made, the respondents would have never executed the contract. The respondents could not understand the language and therefore, they were placed in the disadvantageous position (Law Student , 2015). There is a difference in the understanding of the two judges regarding the two doctrines that is undue influence and unconscionable bargain. Justice Mason states that the difference between the two doctrines relates to the fact that, in undue influence there is no will whether independent or involuntary. However, in unconscionable bargain there is an independent and voluntary will but it is subdued by the superior party. According to Justice Deanne, the undue influence seeks the quality of the consent of the weaker party and the other doctrine that looks towards the conduct of the stronger party while dealing with another party suffering with a special disability (Moles Sangha, 2016). Justice Deanne stated that the conduct of the bank was unfair and unreasonable and that the Bank took the advantage of the special disadvantage of the respondents and therefore, it should be liable to quash the transaction unconditionally. This setting aside of the transaction would be done due to the application of the principles of equity. Also, there was a willful ignorance on part of the Bank (John Wiley Sons, 2016). The general test or the proper circumstance in which, the Bank would be deemed liable to the guarantor would be when there is any special arrangement between the Bank and the Customer and that the special arrangement has to be brought to the knowledge of the person who is becoming the guarantor. Also, the guarantor being under a special disadvantage should be told each and every material fact which would affect his decision and this should be done keeping in mind the principles of equity and fairness. References ACL, 2016. Commercial Bank of Australia v Amadio. [Online] Available at: https://www.australiancontractlaw.com/cases/amadio.html. Aust Lii, 1983. Commercial Bank of Australia Ltd v Amadio [1983] HCA 14; (1983) 151 CLR 447 (12 May 1983). [Online] Available at: https://www.austlii.edu.au/au/cases/cth/HCA/1983/14.html. Australian Contract Law, 2013. Commercial Bank of Australia v Amadio (1983) 151 CLR 447; [1983] HCA 14. [Online] Available at: https://www.australiancontractlaw.com/cases/amadio.html. Brisbane Lawyers, 2016. Unconscionable Conduct Under the Australian Consumer Law and Commercial Bank of Australia v Amadio. [Online] Available at: https://www.awbrisbanelawyers.com.au/unconscionable-conduct-under-the-australian-consumer-law-cba-amadio-lawyers-brisbane.html. John Wiley Sons, 2016. Commercial Bank of Australia Ltd v Amadio and another. [Online] Available at: https://www.johnwiley.com.au/highered/blaw/content110/case_summaries/bank_of_australia_vs_amadio.pdf. Law Student , 2015. Commercial Bank of Australia v Amadio. [Online] Available at: https://lawstudent.com.au/case/commonwealth/high-court-of-australia/commercial-bank-of-australia-v-amadio-1983-151-clr-447/. Moles, R.N. Sangha, B., 2016. Recent developments in unconscionability. [Online] Available at: https://netk.net.au/Contract/10Unconscionability.asp. Zhang, M., 2013. Commercial Bank of Australia Ltd v Amadio. [Online] Available at: https://globali.com/ro4xjujiiawj/commercial-bank-of-australia-ltd-v-amadio/.