Alec Lobb (Garages) Ltd v Total Oil (GB) Ltd [1984]
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Alec Lobb (Garages) Ltd v Total Oil (GB) Ltd [1984] EWCA Civ 2 revolves around Mr Lobb, the managing director of a small petrol station in Essex, facing financial difficulties in 1969. Despite advice to the contrary, he entered into a lease and lease-back arrangement with a new tie agreement with Total Oil, the only supplier for his petrol station. A decade later, seeking to set aside the agreement as a restraint of trade and unconscionable, Mr Lobb claimed financial recovery.
The High Court initially ruled against Mr Lobb, stating the agreement could not be set aside. On appeal, Dillon LJ held that it was not a restraint of trade or an unconscionable bargain. Even if it were, the claim would be barred by laches. The argument was rooted in the unequal bargaining power during the negotiations, as per Lord Denning MR's concept in Lloyds Bank Ltd v Bundy [1975]. However, the judgment emphasised that the mere existence of unequal bargaining power does not automatically render a contract unfair. The court considered whether there was unconscionable conduct or oppressive behaviour.
Dillon LJ referred to Lord Selborne's views in Earl of Aylesbury v Morris [1873], emphasising unconscientious use of power arising from inequality in circumstances. The court required evidence proving the contract was fair, just, and reasonable. Notably, the judgment rejected the argument that any contract with unequal bargaining power should be subject to an objective reasonableness test.
In this case, the court found Total's conduct was not unconscionable, coercive, or oppressive. The judgment concluded that, even if there were initially grounds for claiming inequality in bargaining power, the delay in raising the issue barred the claim by laches. The decision underscores the nuanced approach courts take in evaluating contracts with power imbalances, requiring evidence of unconscionable conduct rather than a blanket test of reasonableness.
The High Court initially ruled against Mr Lobb, stating the agreement could not be set aside. On appeal, Dillon LJ held that it was not a restraint of trade or an unconscionable bargain. Even if it were, the claim would be barred by laches. The argument was rooted in the unequal bargaining power during the negotiations, as per Lord Denning MR's concept in Lloyds Bank Ltd v Bundy [1975]. However, the judgment emphasised that the mere existence of unequal bargaining power does not automatically render a contract unfair. The court considered whether there was unconscionable conduct or oppressive behaviour.
Dillon LJ referred to Lord Selborne's views in Earl of Aylesbury v Morris [1873], emphasising unconscientious use of power arising from inequality in circumstances. The court required evidence proving the contract was fair, just, and reasonable. Notably, the judgment rejected the argument that any contract with unequal bargaining power should be subject to an objective reasonableness test.
In this case, the court found Total's conduct was not unconscionable, coercive, or oppressive. The judgment concluded that, even if there were initially grounds for claiming inequality in bargaining power, the delay in raising the issue barred the claim by laches. The decision underscores the nuanced approach courts take in evaluating contracts with power imbalances, requiring evidence of unconscionable conduct rather than a blanket test of reasonableness.
