Case Study on "Case Note and CAE Law"

Case Study 12 pages (3545 words) Sources: 1+

[EXCERPT] . . . .

international business law, there are a number of different issues that are constantly being wrestled with. To spell out the different terms and agreements that are made during the course of business, requires the use of various contracts. This has given rise to the study of contractual law, where various legal scholars, attorneys and judges will determine how as well as when the law would apply to different cases. Once such case where this can clearly be seen is Lloyds Bank Ltd. v Bundy, as this case would provide a unique interpretation of contractual law. To fully understand the impact of this case along with how it applies to the law requires: that you examine the case itself, conduct your own research on this subject and then provide an annotated bibliography. This will provide the greatest insights as to how Lloyds Bank Ltd. v Bundy, provided a precedent for contractual law that is followed to this very day.

Lloyds Bank Ltd. v Bundy

Court / Brief Statement of Material Facts

This case took place in the Court of Appeals. What happened was: Herbert James Bundy was a farmer. His son, Michael, formed a corporation called MBJ Plant Hire Limited. During the course of Michael's business, he was beginning to face a number of different financial difficulties. To overcome these different setbacks, Michael used his father credibility with the bank (Lloyds Bank Limited) to receive overdraft protection on his accounts. Where, Michael would receive the equivalent of 1,500 pounds of overdraft protection. As the company fell deeper into a number of financial difficulties, Michael continued to receive increased amounts of overdraft protection from the bank. After doing this a few more times, the bank refused to provide any more overdraft protection to Michael. At which point, the assistant manager explained to Herbert that additional overdraft protection of 11,000 pounds is required. During the conversation, the bank placed increasing amounts of pressure on the senior Bundy to engage in such actions (in exchange for the Herbert's farm as collateral). Using his credibility at the bank along with his farm, Herbert signed the agreement and the charge form. As Michael's company fell deeper into financial difficulties, meant that he could not repay the money. The bank immediately foreclosed upon the farm (which is where Herbert lived). During the legal proceedings, Herbert had a heart attack while giving a deposition on the witness stand. This would lead to the underlying question, as to if the bank engaged inappropriate behavior, because of the undue amounts of pressure that it placed on Herbert. According to the arguments made by the defense, they felt that the undue amounts of pressure to sign the note; meant that the actions engaged in by the bank were not legal. At the heart of this argument, was the fact that Herbert Bundy relied on Lloyds to provide him with financial advice. Where, the defense claimed that they engaged in a conflict of interest by: using the senior Bundy's credibility with the bank to provide overdraft protection to his son. This would allow Lloyds would exert influence on Herbert Bundy to engage in such actions, as they were his sole trusted financial advisor for several years. According to Bundy's lawyers, this complicated relationship that the bank had with Herbert Bundy was illegal. Therefore, the court has no choice but to rule in favor of the Bundy's.

Procedural History

Lloyds Bank Ltd. v Bundy was originally heard in Her Majesty's Courts of Justice in England and Wales. During the lower court proceedings, Bundy was refusing to leave his farm because of the undue amounts of pressure that was placed on him. While, the court understood his dire financial situation, they ruled in favor of the bank. With the lower court judge saying, "There is nothing which takes this out of the vast range of commercial transactions." (Waddam, 2006) According to the lower court, Bundy's transaction with the bank was no different than any of the other transactions that they engage in everyday with customers. Therefore, Bundy is responsible for his contractual obligations, just like everyone else.

Grounds for Appeal or Issues to be Decided

There were several key points that the defense used in the appeal that they felt were overlooked by the lower court theses include: duress of goods, an unconscionable transaction, undue pressure and the salvage principal. The grounds for appealing the case were a precedent of several previous court decisions. These would include: Astley v Reynolds, Cartwright v Rowley, Steele v Williams, Maskel v. Horner and Green v Ducket, to show duress of goods. According to the Bundy's lawyers, each of these different cases showed how Lloyds exerted undue influence, because of the fact that they were his sole financial advisor. This relationship had lasted for many years and gave Lloyds undue amounts of influence, to place pressure upon the senior Bundy to do what they demand.

To show that this was an unconscionable transaction the defense cited a number of different cases that were relevant these include: Evans v Llewellin, Fry v Lane, Morrison v Coast Finance Limited, Knupp v Bell, Allcard v Skinner and Tate v Williamson. Because of the unique relationship that Lloyds had with Herbert Bundy, meant that they were obviously in position of strength. As someone who was relying on them for their advice, this caused this relationship to be brought into question. Where, Bundy's lawyers would argue that he was under the special care of Lloyds.

To prove that the bank used undue amounts of pressure, the defense would cite a number of different rulings as precedent these include: Williams v Bayley, Ormes v Beadel and D&C Builders Ltd. v Reese. These different cases were relevant because they showed how a transaction that is placed under undue amount of pressure is invalid. As the party under pressure, has no option but to submit to the demands of the other party. In this case, Herbert Bundy had no choice other than to do exactly what the bank demanded of him.

To show salvage conditions; the defense would compare Bundy' situation to that of sinking ship. Where, there is an unfair relationship between the party on the sinking ship that needs help and the one that provides rescue assistance. According the defense counsel, they said that Bundy was in a similar situation, as Lloyds was the only way that he could save himself. Because such conditions existed, meant that the actions undertaken by Lloyds were wrong. The precedent that was cited was The Port of Caledonia v The Anna. Under this case, the rescuer refused to throw a rope to a sinking ship unless he was paid 1,000 pounds. The courts ruled that such contracts are not enforceable, when such an obvious disadvantage existed between the two parties. Bundy's lawyers argued that a similar situation existed in the relationship between Lloyds and Bundy.

Summary of Court's Analysis of the Law

The court felt that all of the different case sand issues cited all pointed to one single principal that interconnected everything, the inequality of bargaining power. Under English common law, a debtor can have relief from their obligations that they agree to: if they enter into the agreement or transfer property without the having independent advice. In several instances, the bank exerted the principal of inequality of buying power upon Bundy. To include: the fact that moving to another bank was not possible; the relationship between the bank with that of Bundy was one of trust; Bundy was naturally influenced by his relationship with his son and there was a conflict of interest between the bank with that of the senior Bundy. Together, these different factors allowed the bank to use the inequality of bargaining power on Bundy.

Principals of the Law to be Applied

The principal of law that is being applied in this case is the undue amounts of influence that Lloyds exerted over Herbert Bundy. This is because, he did not receive independent advice regarding the note and that the bank used unusual amounts of pressure to influence Bundy. To illustrate this point, the court cited three different principals of law that were relevant in this case to include: duress of goods, unconscionable transactions and undue pressure. The duress of goods would apply to this case, because one party has an obvious advantage over the other. In this case, Lloyds has an advantage over Bundy by having the goods that he needs (money). This would qualify as an unconscionable transaction, where someone in special care could easily be manipulated to obtain their property. Because Bundy was much older and not in good health, meant that the bank would force him to engage in such a transaction to obtain his farm. Undue pressure is: when the stronger party will force the weaker party to comply with their demands or face the consequences. Since the banks placed pressure on Bundy to sign the note in his weakened mental state, meant that they would… READ MORE

How to Reference "Case Note and CAE Law" Case Study in a Bibliography

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