The idea that a contract that you are a party to is ‘unconscionable’ was pretty far-fetched, until the supreme court of Canada recently decided Uber Technologies v. Heller. An Uber Eats driver in Toronto decided to sue Uber calling himself an ’employee’ of Uber. He wanted his vacation pay and his two weeks notice pay. He and some others got together in a class action and sued Uber for $400M. The supreme court flirted with the idea that Heller was in fact an employee and said that he can argue the question in court because the Uber contract was ‘unconscionable’.
I thought I would explain the first important ‘unconscionability’ case in Ontario so that you would get a sense of what ‘uconscioinability’ used to mean:
Waters v. Donnelly [1884] O.J. No. 294 is how Ontario courts first came to the doctrine of unconscionability in contract
In 1883, Waters was a peach farmer in Niagara having inherited from his peach farmer father.
[9] The plaintiff is a man of about twenty-seven or twenty-eight, and there is a great mass of evidence which would lead one to the conclusion that he is very far from being intelligent; not only that he is not a business man, but is a man of a lower degree of intelligence than most men. He is a man whom I should describe as decidedly weak minded and very easily led;
Donnelly on the other hand:
[9]…is a man who, should say from his appearance and manner in the box, is rather above the average of the capacity of business men, and I should call him a remarkable shrewd intelligent man. I do not mean for a moment to suggest, nor do I think he is a man who would deliberately and willfully take any advantage of his neighbour, but still he is a man with whom the plaintiff would be by no means on equal terms. While the plaintiff cannot be described as imbecile, he would be very much like wax in the hands of a man like the defendant.
Waters asked Donnelly for a loan. Donnelly said no. Water persisted, using the intermediary of Hutchison who held a mortgage of $800 on Water’s Peach farm. Donnelly still said no.
Water persisted asking Secord to intervene with Donnelly. Secord was a sort of ‘half lawyer’ who had acted for Water’s father on occasion. (11)
Donnelly knew a sucker when he saw one. Donnelly and Waters entered discussions with ‘half-lawyer’ Secord present. What ended up happening was not a loan of $200, but rather an exchange of real property: Waters would give Donnelly the peach farm (worth $7000) and Donnelly would give Water a livery stable in town (valued by Donnelly at the low! low! price of $7000)
The high court sitting in Chancery, noted that there was no independent valuation. When the bailiff gave evidence that suggested equality of value, the court flatly rejected the bailiff’s evidence. (15)
Now for the best part:
After writing up their agreement on a memorandum, the parties proceeded the next day to the office of Donnelly’s lawyer to have an actual agreement drawn up. ‘Half-lawyer’ Secord was present with Waters but concedes to giving no advice. (16)
Donnelly’s lawyer ultimately writes up an agreement whereby the peach farm is exchanged for Donnelly’s livery and Donnelly gets a further mortgage against Waters of $2029 and Waters agrees to throw in two more properties belonging to Waters’ sisters.
At trial the court dismissed Waters’ attack on the contract. Waters merely wanted the original memorandum of exchange of properties carried out. (1)
On appeal Osler J.A. (who had done the trial) though better of his own ruling at trial, overturning himself
A man of Waters intelligence couldn’t possibly have understood the lawyer’s written agreement (18). He had no proper advice (18).
There was a material difference in the value of the two properties (21).
My Thoughts:
The reader can see why the court voided the transaction. This is an important tool in the courts, used to protect extremely vulnerable people. The recent supreme court of Canada case greatly expands the kinds of situations where one could argue ‘unconscionability’.
