This simply refers to a situation where in a transaction, one party to the transaction is in a more privileged position that affords him more alternatives, as opposed to the other party.

This results in one party having greater “power” than the other to choose not to take the deal, and makes it more likely that this party will gain more favourable terms and grant them more negotiating power (as they are in a better position to reject the deal)[1]

This principle was pointed out by Lord Denning in the case of Lloyds Bank Ltd v Bundy, where he attempted to deduce the principle as an underlying general concept in cases relating to ‘unconscionable bargains’ as well as cases of duress and undue influence.

The principle of inequality of bargaining power does not mean that the court will merely grant relief based on the differences in the position of the parties involved in relation to power, but on the abuse of such position.

Therefore, the inequality in the bargaining power of the parties to a contract is of no much concern to the court until it is abused by one of the parties.

Simply, the rationale behind this principle is to see to it that no party to a transaction abusively exerts his alternatives, power, or rights accorded him, to the detriment of the other party. This is to the end that the interest of the ‘freewill’ of both parties is secured, and that the power of one is not abusively disadvantageous to the other.

Inequality of bargaining powers can be manifestly seen in cases arising between artistes and their manager or production companies.

In Clifford Davis Management Ltd v WEA Records Ltd,[2] A contract by a manager who took advantage of the lack of business experience of musicians to negotiate the contract on grossly unfair terms was set aside due to unconscionable conduct.[3]

The presence of Inequality of bargaining power may result in the non-enforcement of a contract by the court.
However, the merit of the concept of inequality in bargaining power is no wise diminished by criticisms against it by Lord Scarman in two of his judgements – Pao On v. Lau Yiu Long and National Westminster Bank Plc v. Morgan.

 

About the author: Inioluwa Olaposi is a student of the faculty of law, Obafemi Awolowo University, Ile-Ife. He is the founder of LawHub NG (https://www.lawhub.com.ng), a law-based blog that publish academic posts, and laws of the Federal Republic of Nigeria.

Thank you.

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[1] Wikipedia. Inequality of Bargaining Power. Retrieved November 18, 2019 from https://en.wikipedia.org/wiki/Inequality_of_bargaining_power
[2] [1975] 1 WLR 61.
[3] (modified by the writer of this work) StuDocu. Duress, Undue Influence & Unconscionable Conduct Case Summary. Retrieved 18 November, 2019, from https://www.studocu.com/en-au/document/victoria-university/business-law/summaries/duress-undue-influence-unconscionable-conduct-case-summary/2262718/view