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Director Disclosure of Interest

Discussion: The purpose of the Municipal Conflict of Interest Act (the Act) is to prohibit members of councils and local boards from engaging in the decision-making process in respect to matters in which they have a personal economic interest.

City Council members have an obligation to disclose any pecuniary interests they may have. This concept of the requirement for disclosure of conflict of interest is applicable in many scenarios, including the disclosure of an interest for a non-arms length transaction to fellow board members or shareholders of private and publicly held corporations, or not-for-profit corporations.

In Tuchenhagen v. Mondoux, the council member’s pecuniary interest was vested as soon as he became interested in making a bid on a property being sold by the City. Although there is a saving provision in the Act for errors of judgement, this was found to be inapplicable to the council member given his 12-year tenure as a council member the court found that he was aware or ought to have been aware of the need to avoid placing himself in a position of conflict. Background

  • Robert Tuchenhagen, then a member of the Thunder Bay City Council for 12 years, became aware of a proposed tax sale by the City.
  • He did not disclose his interest in buying the property or the fact that he had made an appointment to view it at meetings of the Committee, which took place before he submitted the bid.
  • After submitting the bid, he disclosed his pecuniary interest in the sale as required by the Municipal Conflict of Interest Act.

  • The respondent (Gilles Mondoux,) who submitted the only other bid, applied successfully for a declaration that the appellant had contravened the Act.
  • Tuchenhagen appealed.

Issue

  • Did Robert Tuchhagen have a pecuniary interest?
  • When did Robert Tuchhagen’s pecuniary interest crystalize?
  • Was his breach of s.5 of the MCIA saved under s. 10 (2) of the act, due to inadvertence or by reason of an error in judgment?

Rule

  • Pecuniary interest is not defined by the MCIA. Generally, it is a financial interest, an interest related to or involving money. A decision to buy, or offer to buy, the property is demonstrative of a pecuniary interest.
  • The obligation to disclose interest is found in the MCIA, s. 5(1), which states:

5 (1) Where a member, either on his or her own behalf or while acting for, by, with or through another, has any pecuniary interest, direct or indirect in any matter and is present at a meeting of the Council or local board at which the matter is the subject of consideration, the member,

(a) shall, prior to a consideration of the matter at the meeting, disclose the interest and the general nature thereof;

(b) shall not take part in the discussion of, or vote on a question in respect of the matter; and

(c) shall not attempt in any way whether before, during or after the meeting to influence the voting of any such question.

(2) Where the meeting referred to in subsection (1) is not open to the public, in addition to complying with the requirements of that subsection, the member shall forthwith leave the meeting or the part of the meeting during which the matter is under consideration. (3) Where the interest of a member has not been disclosed as required by subsection (1) by reason of the member’s absence from the meeting referred to therein, the member shall disclose the interest and otherwise comply with subsection (1) at the first meeting of the council or local board, as the case may be, attended by the member after the meeting referred to in subsection (1).

  • The MCIA, s. 10 provides the penalties that may be imposed where there has been a breach of s.

    5(1), (2) or (3):

10(1) Subject to subsection (2), where the judge determines that a member or a former member, while he or she was a member, has contravened subsection 5(1), (2) or (3), the judge,

(a) shall, in the case of a member, declare the seat of the member vacant; and

(b) may disqualify the member or former member from being a member during a period thereafter of not more than seven years; and

(c) may, where the contravention has resulted in a personal financial gain, require the member or former member to make restitution to the party suffering the loss, or, where such party is not readily ascertainable, to the municipality or local board of which he or she is a member or former member.

10(2) Where the judge determines that a member or a former member, while he or she was a member, has contravened subsection 5(1), (2) or (3), if the judge finds that the contravention was committed through inadvertence or by reason of an error in judgment, the member is not subject to having his or her seat declared vacant and the member or former member is not subject to being disqualified as a member, as provided in subsection (1). Analysis

  • The appellant’s pecuniary interest crystallized as soon as he became interested in making a bid.
  • From that moment, he was no longer looking at the sale only from the perspective of a member of the Council; he was examining the situation to see how it could advantage his private interests.
  • The appellant should have disclosed his interest at the meetings of the Committee after he became interested in submitting a bid and before he actually did so.
  • The saving provision in s. 10(2) of the Act did not apply as the appellant did not breach the Act through inadvertence or an error in judgment.
  • At the time he became interested in making a bid, he already knew more than others who might wish to purchase the property.
  • The appellant had been a member of the City Council for almost 12 years and therefore aware or ought to have been aware of the need to avoid placing himself in a position of conflict.
  • Conflict of interest: The municipality would seek to get the best price. His interest would be to pay as little as possible.
  • The four-year disqualification for the breach of s. 5(1) of the Act was the minimum punishment available

 

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This article is provided for informational purposes only and does not create a lawyer-client relationship with the reader. It is not legal advice and should not be regarded as such. Any reliance on the information is solely at the reader’s own risk. Clausehound.com is a legal tool geared towards entrepreneurs, early-stage businesses and small businesses alike to help draft legal documents to make businesses more productive. Clausehound offers a $10 per month DIY Legal Library which hosts tens of thousands of legal clauses, contracts, articles, lawyer commentaries and instructional videos. Find Clausehound.com where you see this logo.

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Breaking the law could breach your insurance agreement

This case highlights what it means to act reasonably when defending against a strict liability offence.

The defendant violated a statutory condition of his car insurance policy by driving the automobile without legal authorization — he had a blood alcohol level above 0 (The policy indicated that, the insured shall not drive or operate or permit any other person to drive or operate the automobile unless the insured or other person is authorized by law to drive or operate it).

Since this statutory condition was found to be a strict liability offence, the defendant was afforded the defence of due diligence. The judge found that the defendant had an honest and reasonable belief that his blood alcohol content was 0. The judge’s finding was supported by the fact that witnesses who observed the defendant on the morning of the accident saw no evidence that he had alcohol in his system, and by the fact that the defendant had slept for a number of hours before driving.

The judge found that the defendant had an honest and reasonable belief that his blood alcohol content was 0. The judge’s finding was supported by the fact that witnesses who observed the defendant on the morning of the accident saw no evidence that he had alcohol in his system, and by the fact that the defendant had slept for a number of hours before driving.

 

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This article is provided for informational purposes only and does not create a lawyer-client relationship with the reader. It is not legal advice and should not be regarded as such. Any reliance on the information is solely at the reader’s own risk. Clausehound.com is a legal tool geared towards entrepreneurs, early-stage businesses and small businesses alike to help draft legal documents to make businesses more productive. Clausehound offers a $10 per month DIY Legal Library which hosts tens of thousands of legal clauses, contracts, articles, lawyer commentaries and instructional videos. Find Clausehound.com where you see this logo.

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Errors in your filing can lead to stress

Discussion: This case emphasizes the importance of knowing who your counterparty is, in the event that you decide to litigate.

Although the plaintiff in this case was permitted to add the correct party as a defendant after the limitation period had expired, unnecessary litigation expense could have been avoided had the initial filing been done correctly.

The plaintiff was driving a Lexus that had been leased from the defendant, who was carrying on business as Scarborough Lexus Toyota (SLT).

At one point the vehicle suddenly hesitated and lurched forward. The driver lost control of the vehicle and got into an accident, which caused her significant physical injuries. In the Statement of Claim, the plaintiffs commenced an action against three defendants: Toyota Canada Inc. (TCI), Toyota Credit Canada Inc.

(TCCI) and SLT, seeking damages in the amount of $1,100,000. The plaintiffs alleged that TCI was engaged in the business of manufacturing, servicing and selling automobiles and was the manufacturer of the plaintiff’s motor vehicle. However, TCI was not engaged in the business of manufacturing automobiles and did not manufacture the plaintiff’s vehicle.

The car was manufactured by the Toyota Motor Corporation (TMC).

The Court of Appeal for Ontario has made it clear that a plaintiff’s pleading concerning a misnomer will be correct where it is apparent (1) that the plaintiff intended to name the defendant; and (2) that the intended defendant knew it was the intended defendant in relation to the plaintiffs claim. Moreover, such a misnomer can be corrected after the expiry of the limitation period. Limitations Act, 2002 s.21(1): If a limitation period in respect of a claim against a person has expired, the claim shall not be pursued by adding the person as a party to any existing proceeding. s.21(2): Subsection (1) does not prevent the correction of a misnaming or misdescription of a party.

 

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This article is provided for informational purposes only and does not create a lawyer-client relationship with the reader. It is not legal advice and should not be regarded as such. Any reliance on the information is solely at the reader’s own risk. Clausehound.com is a legal tool geared towards entrepreneurs, early-stage businesses and small businesses alike to help draft legal documents to make businesses more productive. Clausehound offers a $10 per month DIY Legal Library which hosts tens of thousands of legal clauses, contracts, articles, lawyer commentaries and instructional videos. Find Clausehound.com where you see this logo.

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Is there a duty of good faith bargaining in the context of an RFP?

Duty to Bargain in Good Faith:

It is well established that there is NO duty to bargain in good faith unless:

(a) a duty expressly arises through contract; or (b) in the commercial tendering process under which there is a requirement for fair dealing with respect to the consideration of all bids (termed Contract A/Contract B under which the tendering process is called Contract  and the actual agreement entered into between the successful bidder and the party seeking the bids is called Contract B)

.

In Oz Optics Ltd. v. Timbercon, Inc. (2011, Ont CA), the judge concluded that there was no obligation on the part of defendant to treat the plaintiff fairly in the tendering of the bids because there was no actual contract governing their relationship (ie. the Contract A/Contract B model did not apply).

Background In this case, the plaintiff (Oz) was a manufacturer of attenuators. Initially, Oz manufactured ten manual attenuators, which were delivered to and paid for by the defendant (Timbercon). After this delivery, Timbercon sent Oz a purchase order for 500 more manual attenuators with a consignment agreement. Oz did not sign the purchase order or the consignment agreement, but fulfilled the order by sending out the required number of attenuaters.

The plaintiff did not sign the purchase order or the consignment agreement, but nonetheless fulfilled the order requested by the defendant.

Since the plaintiff did not expressly object to the consignment order and sent the product to the defendant, the judge found that he agreed to the terms of the order. Since it was found that the order was on consignment, the defendant was not required to pay for any products that were not purchased from him by his client.

Apart from the consignment issue, Timbercon also entered into discussions with the Oz to have automated attenuators incorporated into a product that was to be sold to Lockheed Martin. Although Timbercon told Oz on numerous occasions that Oz was the sole bidder to supply the attenuators, Timbercon was also in discussions with another attenuator manufacturer.

Ultimately, Timbercon presented both attenuator options to Lockheed Martin, and Lockheed selected Oz’s competitor for the project. Oz alleges that Timbercon had misrepresented the lack of other bidders, and had breached a duty of good faith towards Oz.

 

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This article is provided for informational purposes only and does not create a lawyer-client relationship with the reader. It is not legal advice and should not be regarded as such. Any reliance on the information is solely at the reader’s own risk. Clausehound.com is a legal tool geared towards entrepreneurs, early-stage businesses and small businesses alike to help draft legal documents to make businesses more productive. Clausehound offers a $10 per month DIY Legal Library which hosts tens of thousands of legal clauses, contracts, articles, lawyer commentaries and instructional videos. Find Clausehound.com where you see this logo.

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Shoppers Drug Mart Inc. v. Ontario (Minister of Health and Long-Term Care) (2011, Ont CA)

Discusssion: This was an appeal of two orders of the Divisional Court declaring that the provisions in the Drug Interchangeability and Dispensing Fee Act (the DIDFA) and the Ontario Drug Benefits Act (the ODBA) that attempted to ban pharmacies from selling private label generic drugs, were ultra vires and of no force and effect.

The economic implications of the impugned provisions were considered by the court in determining their judgment. The pharmacies’ commercial freedom and right to trade were considered against the long term affects on market dynamics and drug costs for consumers. Although the judgment highlights that the provisions are regulatory and not prohibitory, the regulations effectively prevent pharmacy private label generic drugs from being privately and/or publicly sold in Ontario.

At the same time, however, the regulations have the effect of reducing the price that consumers pay for generic drugs.

The Court of Appeal granted the appeal and upheld the regulations. Background: Pharmacies often use their own private label generic drugs instead of purchasing generic drugs from arm’s length third parties. Pharmacy private label generic drugs are considered identical to other generic drugs, and identical in formula to brand-name drugs. In Ontario, pharmacies who sold private label generic drugs would often earn rebates from drug manufacturers, but not pass these savings on to customers.

As a result, the price of generic drugs in Ontario was viewed as more expensive in comparison to other provinces and countries.  In 2006 and 2010, amendments were made to the DIDFA and the OBDA that prevented pharmacy private label generic drugs from being designated as interchangeable or reimbursable under the Ontario Public Drug Programs.

Initially, the Division Court Judge struck down the regulations on three grounds:

1.

They fell outside the regulation-making authority;

1. They fell outside the regulation-making authority;

2. They were not consistent with the purposes of ODBA and DIDFA; and

3. They were an unwarranted interference with commercial freedom and the right to trade.

Issue:  Whether the regulations under the OBDA and the DIDFA were ultra vires and of no force or effect. Decision: The legislation is intra vires and the ODBA and DIDFA, taken together, constitute a specialized legislative scheme in health and economics.

Although it was argued that the provisions were an unauthorized prohibition on the lawful activities of drug companies in Ontario, they were regulatory — not prohibitory. Pharmacies are not precluded from engaging in the purchase and sale of drugs in Ontario so long as they did so in accordance with the legislative and regulatory scheme.  It was also found that the Divisional Court’s analysis was misplaced and too narrowly focused on the profits to be made by pharmacies, and not on the long term affects of market dynamics, incentives and drug costs.

 

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This article is provided for informational purposes only and does not create a lawyer-client relationship with the reader. It is not legal advice and should not be regarded as such. Any reliance on the information is solely at the reader’s own risk. Clausehound.com is a legal tool geared towards entrepreneurs, early-stage businesses and small businesses alike to help draft legal documents to make businesses more productive. Clausehound offers a $10 per month DIY Legal Library which hosts tens of thousands of legal clauses, contracts, articles, lawyer commentaries and instructional videos. Find Clausehound.com where you see this logo.

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Shoppers Drug Mart Inc. v. Ontario (Minister of Health and Long-Term Care) (2011, Ont CA)

Discusssion: This was an appeal of two orders of the Divisional Court declaring that the provisions in the Drug Interchangeability and Dispensing Fee Act (the DIDFAâ) and the Ontario Drug Benefits Act (the ODBA) that attempted to ban pharmacies from selling private label generic drugs, were ultra vires and of no force and effect.

The economic implications of the impugned provisions were considered by the court in determining their judgment. The pharmacies’ commercial freedom and right to trade were considered against the long term affects on market dynamics and drug costs for consumers. Although the judgment highlights that the provisions are regulatory and not prohibitory, the regulations effectively prevent pharmacy private label generic drugs from being privately and/or publicly sold in Ontario. At the same time, however, the regulations have the effect of reducing the price that consumers pay for generic drugs. The Court of Appeal granted the appeal and upheld the regulations. Background: • Pharmacies often use their own private label generic drugs instead of purchasing generic drugs from arm’s length third parties. Pharmacy private label generic drugs are considered identical to other generic drugs, and identical in formula to brand-name drugs. In Ontario, pharmacies who sold private label generic drugs would often earn rebates from drug manufacturers, but not pass these savings on to customers. As a result, the price of generic drugs in Ontario was viewed as more expensive in comparison to other provinces and countries. • In 2006 and 2010, amendments were made to the DIDFA and the OBDA that prevented pharmacy private label generic drugs from being designated as interchangeable or reimbursable under the Ontario Public Drug Programs. • Initially the Division Court Judge struck down the regulations on three grounds: 1. They fell outside the regulation-making authority; 2. They were not consistent with the purposes of ODBA and DIDFA; and 3. They were an unwarranted interference with commercial freedom and the right to trade. Issue: • Whether the regulations under the OBDA and the DIDFA were ultra vires and of no force or effect.

Decision: • The legislation is intra vires and the ODBA and DIDFA, taken together, constitute a specialized legislative scheme in health and economics. • Although it was argued that the provisions were an unauthorized prohibition on the lawful activities of drug companies in Ontario, they were regulatory — not prohibitory. Pharmacies are not precluded from engaging in the purchase and sale of drugs in Ontario so long as they did so in accordance with the legislative and regulatory scheme. • It was also found that the Divisional Court’s analysis was misplaced and too narrowly focused on the profits to be made by pharmacies, and not on the long term affects of market dynamics, incentives and drug costs.

At the same time, however, the regulations have the effect of reducing the price that consumers pay for generic drugs. The Court of Appeal granted the appeal and upheld the regulations. Background:  Pharmacies often use their own private label generic drugs instead of purchasing generic drugs from arm’s length third parties. Pharmacy private label generic drugs are considered identical to other generic drugs, and identical in formula to brand-name drugs. In Ontario, pharmacies who sold private label generic drugs would often earn rebates from drug manufacturers, but not pass these savings on to customers. As a result, the price of generic drugs in Ontario was viewed as more expensive in comparison to other provinces and countries. • In 2006 and 2010, amendments were made to the DIDFA and the OBDA that prevented pharmacy private label generic drugs from being designated as interchangeable or reimbursable under the Ontario Public Drug Programs. • Initially the Division Court Judge struck down the regulations on three grounds: 1. They fell outside the regulation-making authority; 2. They were not consistent with the purposes of ODBA and DIDFA; and 3. They were an unwarranted interference with commercial freedom and the right to trade. Issue: • Whether the regulations under the OBDA and the DIDFA were ultra vires and of no force or effect. Decision: • The legislation is intra vires and the ODBA and DIDFA, taken together, constitute a specialized legislative scheme in health and economics. • Although it was argued that the provisions were an unauthorized prohibition on the lawful activities of drug companies in Ontario, they were regulatory — not prohibitory. Pharmacies are not precluded from engaging in the purchase and sale of drugs in Ontario so long as they did so in accordance with the legislative and regulatory scheme. • It was also found that the Divisional Court’s analysis was misplaced and too narrowly focused on the profits to be made by pharmacies, and not on the long term affects of market dynamics, incentives and drug costs.

As a result, the price of generic drugs in Ontario was viewed as more expensive in comparison to other provinces and countries.  In 2006 and 2010, amendments were made to the DIDFA and the OBDA that prevented pharmacy private label generic drugs from being designated as interchangeable or reimbursable under the Ontario Public Drug Programs.  Initially the Division Court Judge struck down the regulations on three grounds: 1. They fell outside the regulation-making authority; 2. They were not consistent with the purposes of ODBA and DIDFA; and 3. They were an unwarranted interference with commercial freedom and the right to trade. Issue: • Whether the regulations under the OBDA and the DIDFA were ultra vires and of no force or effect.

Decision: • The legislation is intra vires and the ODBA and DIDFA, taken together, constitute a specialized legislative scheme in health and economics. • Although it was argued that the provisions were an unauthorized prohibition on the lawful activities of drug companies in Ontario, they were regulatory — not prohibitory. Pharmacies are not precluded from engaging in the purchase and sale of drugs in Ontario so long as they did so in accordance with the legislative and regulatory scheme. • It was also found that the Divisional Court’s analysis was misplaced and too narrowly focused on the profits to be made by pharmacies, and not on the long term affects of market dynamics, incentives and drug costs.

1. They fell outside the regulation-making authority; 2. They were not consistent with the purposes of ODBA and DIDFA; and 3. They were an unwarranted interference with commercial freedom and the right to trade. Issue: • Whether the regulations under the OBDA and the DIDFA were ultra vires and of no force or effect. Decision: • The legislation is intra vires and the ODBA and DIDFA, taken together, constitute a specialized legislative scheme in health and economics. • Although it was argued that the provisions were an unauthorized prohibition on the lawful activities of drug companies in Ontario, they were regulatory — not prohibitory. Pharmacies are not precluded from engaging in the purchase and sale of drugs in Ontario so long as they did so in accordance with the legislative and regulatory scheme. • It was also found that the Divisional Court’s analysis was misplaced and too narrowly focused on the profits to be made by pharmacies, and not on the long term affects of market dynamics, incentives and drug costs.

2. They were not consistent with the purposes of ODBA and DIDFA; and 3. They were an unwarranted interference with commercial freedom and the right to trade. Issue: • Whether the regulations under the OBDA and the DIDFA were ultra vires and of no force or effect. Decision: • The legislation is intra vires and the ODBA and DIDFA, taken together, constitute a specialized legislative scheme in health and economics. • Although it was argued that the provisions were an unauthorized prohibition on the lawful activities of drug companies in Ontario, they were regulatory — not prohibitory. Pharmacies are not precluded from engaging in the purchase and sale of drugs in Ontario so long as they did so in accordance with the legislative and regulatory scheme. • It was also found that the Divisional Court’s analysis was misplaced and too narrowly focused on the profits to be made by pharmacies, and not on the long term affects of market dynamics, incentives and drug costs.

3. They were an unwarranted interference with commercial freedom and the right to trade. Issue: • Whether the regulations under the OBDA and the DIDFA were ultra vires and of no force or effect. Decision: • The legislation is intra vires and the ODBA and DIDFA, taken together, constitute a specialized legislative scheme in health and economics. • Although it was argued that the provisions were an unauthorized prohibition on the lawful activities of drug companies in Ontario, they were regulatory — not prohibitory. Pharmacies are not precluded from engaging in the purchase and sale of drugs in Ontario so long as they did so in accordance with the legislative and regulatory scheme. • It was also found that the Divisional Court’s analysis was misplaced and too narrowly focused on the profits to be made by pharmacies, and not on the long term affects of market dynamics, incentives and drug costs.

 

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This article is provided for informational purposes only and does not create a lawyer-client relationship with the reader. It is not legal advice and should not be regarded as such. Any reliance on the information is solely at the reader’s own risk. Clausehound.com is a legal tool geared towards entrepreneurs, early-stage businesses and small businesses alike to help draft legal documents to make businesses more productive. Clausehound offers a $10 per month DIY Legal Library which hosts tens of thousands of legal clauses, contracts, articles, lawyer commentaries and instructional videos. Find Clausehound.com where you see this logo.

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“Unfair” agreements may be rejected by the court

Obtain independent legal advice to ensure that you are not entering into an unconscionable transaction/agreement.

Generally, when a signor signs a contract, they are bound by it. However, courts have created exceptions to set aside a contract if they are unconscionable (when there is unequal bargaining power between the contracting parties). The courts have created some categories of unconscionability:

1. Duress of Goods: when a person in possession of goods is in a position of stronger bargaining power because of the urgent need of the goods by the other weaker party;

2.

Unconscionable Transaction: when a stronger party takes advantage of a weaker party who is in need of some special care and protection by obtaining the weaker party’s property for a grossly under valued amount;

3. Undue influence: a) when the stronger party is guilty of some fraud or wrongful act to gain some gift or advantage; or b) because of a special relationship between the parties (relationship of power/confidence/fiduciary), the stronger party has gained a gift or advantage for themselves over the weaker party;

4. Undue pressure: a party exerts pressure to obtain some gift or advantage which the weaker party would not have otherwise consented to; and

5. Salvage agreement: when the weaker party is in a vulnerable situation in need of rescue/assistance and submits to the requests of the stronger party. In Lloyds Banks Limited v Bundy [1975 EWCA], looks at the concept of unconscionability. Bundy only had one asset, his home. His son operated a business that was in financial trouble.

He asked his father to provide a collateral so that he could get loans from Lloyds Banks. After speaking to a lawyer, the father signed an agreement providing collateral for a smaller amount of money. Later on, the son required a larger collateral amount. Workers from Lloyds Banks and Bundy’s son told Bundy that the son was in great financial trouble and required Bundy’s help by providing his home as collateral. Bundy signed the document agreeing to do this. Five months later, the bank foreclosed on the son’s business and seized Bundy’s home. The court held that this was an unconscionable agreement for the following reasons:

1) Consideration moving to the bank was grossly inadequate (Bundy received no benefit);

2) the relationship between Bundy and his son was one of trust and confidence-Bundy’s affection for his son had great influence on him;

3) There was a lack of independent legal advice-the bank should have suggested that the father receive independent legal advice;

4) There was clear unequal bargaining power.

 

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This article is provided for informational purposes only and does not create a lawyer-client relationship with the reader. It is not legal advice and should not be regarded as such. Any reliance on the information is solely at the reader’s own risk. Clausehound.com is a legal tool geared towards entrepreneurs, early-stage businesses and small businesses alike to help draft legal documents to make businesses more productive. Clausehound offers a $10 per month DIY Legal Library which hosts tens of thousands of legal clauses, contracts, articles, lawyer commentaries and instructional videos. Find Clausehound.com where you see this logo.

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Knowledge is treated differently than action for public policy

Generally, the courts have stated that they will not lend their aid to a person whose claim is based upon an immoral or illegal act.

However, the courts may lend aid to a person whose contract has some immoral/illegal aspect where such person is not themselves involved in the immoral/illegal act. For example, in Holman v Johnson (1775 ), the Plaintiff contracted and delivered tea to the Defendant knowing that it was being bought for the purposes of smuggling. The Plaintiff sues for the breach of contract after the Defendant failed to pay for the tea. The Defendant argued that this contract was void as against public policy. The court held in favor for the Plaintiff who was entitled to recover. The plaintiff had not committed an offense as delivery and sale of the tea were legal activities that occurred prior to the proposed smuggling plan, and the plaintiff’s contract was complete once the goods had been delivered. The Plaintiff was not involved in the smuggling operation post-deliver, and therefore had not entered into a contract for an illegal/immoral purpose.

 

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This article is provided for informational purposes only and does not create a lawyer-client relationship with the reader. It is not legal advice and should not be regarded as such. Any reliance on the information is solely at the reader’s own risk. Clausehound.com is a legal tool geared towards entrepreneurs, early-stage businesses and small businesses alike to help draft legal documents to make businesses more productive. Clausehound offers a $10 per month DIY Legal Library which hosts tens of thousands of legal clauses, contracts, articles, lawyer commentaries and instructional videos. Find Clausehound.com where you see this logo.

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