''Hart v O'Connor'' [1985
UKPC 1
is an important case in New Zealand, also relevant for

English contract law English contract law is the body of law that regulates legally binding agreements in England and Wales. With its roots in the lex mercatoria and the activism of the judiciary during the industrial revolution, it shares a heritage with countries ...

, regarding mental capacity to enter into contract as well as regarding Unconscionability, unconscionable bargains, which made it as far as the

Privy Council A privy council is a body that advises the head of state of a state, typically, but not always, in the context of a monarchic government. The word "privy" means "private" or "secret"; thus, a privy council was originally a committee of the mon ...

Facts

Jack O'Connor was the trustee of a trust that owned the family farm in

Waimate Waimate is a town in Canterbury, New Zealand and the seat of Waimate District. It is situated just inland from the eastern coast of the South Island. The town is reached via a short detour west when travelling on State Highway One, the main No ...

since their father died in 1911. Jack and his two brothers Dennis and Joseph both worked and lived on the farm owned by the trust. By the mid 1970s, the brothers were in their 70s and 80s, and given their advanced age, their solicitor recommended that something be done about the farm ownership. Jack essentially had three options: to lease out the farm, but that was ruled out as only delaying an inevitable sale; to sell the farm to his two nephews, which he ruled out, as he did not think his nephews could make a success out of the farm; and the third option, a sale to a third party. As it turned out, a neighbour, Mr Hart was interested in buying the property and after negotiations with Jack and his solicitor, they arranged for the farm to be leased to Mr Hart, with a clause of right to purchase. Within a month, Mr Hart, unhappy with leasing the farm, contacted the vendor's solicitor to obtain an outright sale of the farm, and they later agreed to a sale at an unspecified price to be determined by a valuer. However, unknown to either Mr Hart or even Jack's own solicitor at the time, Jack was suffering from senile dementia. It was also later discovered that the sale conditions were arguably unfair, as the property was later sold for $180,000 (rounded up from a valuation of $179,780), when a subsequent valuation was $197.000, and the purchaser only had to pay for the farm two years after he had taken possession, giving Mr Hart the benefit of any rise in farm prices in those two years. Jack subsequently died. After the two surviving brothers retained new solicitors, they subsequently took legal action to set aside the sale. While they were unsuccessful in the High Court, they were later successful in the

Court of Appeal of New Zealand The Court of Appeal of New Zealand is the principal intermediate appellate court of New Zealand. It is also the final appellate court for a number of matters. In practice, most appeals are resolved at this intermediate appellate level, rather t ...

, which set aside the sale. Mr Hart then appealed to the

Advice

The Privy Council advised that the contract was not an unconscionable bargain. The Court said there were two types of "unfair" contracts: "procedural unfairness", where a benefit is obtained through undue influence, i.e., victimisation, and "contractual imbalance", where one party gets a more favourable outcome than the other party, i.e., a bargain. For such a contract to be set aside for unfairness, the second party had to be active in obtaining an unfair contract. In this case the Privy Council held that Mr. Harts conduct was "beyond reproach", emphasising that most of the sale terms and conditions were proposed by the trust's own solicitor, which Mr Hart merely accepted. Accordingly, the Court rescinded the Court of Appeals ruling to set aside the sale contract for the farm.

Notes

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External links

Link to full text of case
Judicial Committee of the Privy Council cases on appeal from New Zealand 1985 in case law 1985 in New Zealand law New Zealand contract case law English contract case law Waimate

Facts

Advice

See also

Notes

External links