Blomley v Ryan - An intoxicating victory - Part 2
May 24th 2008 06:39
Blomley v Ryan: The Decision
In the majority, McTiernan and Fullagar JJ (the JJ after their names means “Justices” Mctiernan and Fullagar) ruled that the contract should be set aside. This meant that Ryan won the case and he didn’t have to sell the property to Blomley at an undervalue. Kitto J dissented, but he was in the minority, so his judgement didn’t affect the outcome.
Why should the contract be set aside?
To cut a long story short, McTiernan and Fullagar JJ found that equity should set the contract aside because this was a case where:
(1) one party (the drunken Ryan) was at a disadvantage in relation to the other party (the exploitative Blomley); and
(2) Blomley had taken unfair advantage of that weakness.
In this case, Ryan’s special disadvantage was a product of his drunkenness, infirmity of mind and lack of education. Blomley exploited this disadvantage by fuelling Ryan’s drunken inclinations with a bottle of rum, keeping him at the negotiating table for hours on end and forcing him to sign a complex legal contract without any independent advice.
What are the implications of this case?
McTiernan and Fullagar JJ also noted a number of factors that might help to establishing this kind of ‘special disadvantage’ in future cases:
• Poverty or need of any kind;
• Sickness;
• Age;
• Infirmity of body or mind;
• Drunkenness;
• Illiteracy or lack of education; and
• Lack of assistance or explanation where necessary.
While it is not necessary for a party to suffer loss or detriment from the bargain, ie to be ‘ripped off’ as Ryan was in this instance, they also noted that inadequacy of consideration (ie a bargain where the wrongdoer pays less than the asset’s fair value or market price) can contribute to establishing a claim for unconscionable dealing.
A further consideration established by Mason J in Commercial Bank of Australia v Amadio is that the special disadvantage must be something that “seriously affects the ability of the innocent party to make a judgement as to his own best interests.”
So now for a little piece of practical advice. To all those who are thinking about getting somebody drunk before they sign a contract: learn from somebody else’s mistakes, and don’t do it. It’s really not worth it.
In the majority, McTiernan and Fullagar JJ (the JJ after their names means “Justices” Mctiernan and Fullagar) ruled that the contract should be set aside. This meant that Ryan won the case and he didn’t have to sell the property to Blomley at an undervalue. Kitto J dissented, but he was in the minority, so his judgement didn’t affect the outcome.
Why should the contract be set aside?
To cut a long story short, McTiernan and Fullagar JJ found that equity should set the contract aside because this was a case where:
(2) Blomley had taken unfair advantage of that weakness.
In this case, Ryan’s special disadvantage was a product of his drunkenness, infirmity of mind and lack of education. Blomley exploited this disadvantage by fuelling Ryan’s drunken inclinations with a bottle of rum, keeping him at the negotiating table for hours on end and forcing him to sign a complex legal contract without any independent advice.
What are the implications of this case?
McTiernan and Fullagar JJ also noted a number of factors that might help to establishing this kind of ‘special disadvantage’ in future cases:
• Poverty or need of any kind;
• Sickness;
• Age;
• Infirmity of body or mind;
• Drunkenness;
• Illiteracy or lack of education; and
• Lack of assistance or explanation where necessary.
While it is not necessary for a party to suffer loss or detriment from the bargain, ie to be ‘ripped off’ as Ryan was in this instance, they also noted that inadequacy of consideration (ie a bargain where the wrongdoer pays less than the asset’s fair value or market price) can contribute to establishing a claim for unconscionable dealing.
A further consideration established by Mason J in Commercial Bank of Australia v Amadio is that the special disadvantage must be something that “seriously affects the ability of the innocent party to make a judgement as to his own best interests.”
So now for a little piece of practical advice. To all those who are thinking about getting somebody drunk before they sign a contract: learn from somebody else’s mistakes, and don’t do it. It’s really not worth it.
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