Inequality of bargaining power

• F Kessler, ‘Contracts of Adhesion--Some thoughts about Freedom of Contract’ (1943) 43 Columbia Law Review 629, 631-2

"In so far as the reduction of costs of production and distribution thus achieved is reflected in reduced prices, society as a whole ultimately benefits from the use of standard contracts… The use of contracts has, however, another aspect which has become increasingly important. Standard contracts are typically used by enterprises with strong bargaining power. The weaker party, in need of the goods or services, is frequently not in a position to shop around for better terms, either because the author of the standard contract has a monopoly (natural or artificial) or because all competitors use the same clauses. His contractual intention is but a subjection more or less voluntary to terms dictated by the stronger party, terms whose consequences are often understood only in a vague way, if at all."

• Lowe v Lombank [1960] 1 WLR 196, Diplock J talking about ignorant consumers getting hire purchase goods not being of equal bargaining power
• Williams v. Walker-Thomas Furniture Co., 350 F.2d 445 (CA DC 1965) a loan agreement made so no furniture bought could be paid off unless the whole lot was.
• Uniform Commercial Code §2-302
• Lloyds Bank Ltd v Bundy [1975] QB 326
• Law Commission, Second Report on Exemption Clauses in Contracts (No 69)
• Unfair Contract Terms Act 1977
• Courage Ltd v Crehan (2001) Case C-453/99, [31]-[33], regarding damages for breach of competition laws, the European Court of Justice said, "... a litigant should not profit from his own unlawful conduct, where this is proven. In that regard, the matters to be taken into account by the competent national court include the economic and legal context in which the parties find themselves and, as the United Kingdom Government rightly points out, the respective bargaining power and conduct of the two parties to the contract. In particular, it is for the national court to ascertain whether the party who claims to have suffered loss through concluding a contract that is liable to restrict or distort competition found himself in a markedly weaker position than the other party, such as seriously to compromise or even eliminate his freedom to negotiate the terms of the contract and his capacity to avoid the loss or reduce its extent, in particular by availing himself in good time of all the legal remedies available to him."

• Holden v. Hardy 169 US 366 (1898) Utah law limiting work hours upheld, Brown J

"The legislature has also recognized the fact, which the experience of legislators in many states has corroborated, that the proprietors of these establishments and their operatives do not stand upon an equality, and that their interests are, to a certain extent, conflicting. The former naturally desire to obtain as much labor as possible from their employees, while the latter are often induced by the fear of discharge to conform to regulations which their judgment, fairly exercised, would pronounce to be detrimental to their health or strength. In other words, the proprietors lay down the rules, and the laborers are practically constrained to obey them. In such cases self-interest is often an unsafe guide, and the legislature may properly interpose its authority."

• Adair v. United States, 209 U.S. 161, 175 (1908) "the employer and the employee have equality of right and any legislation that disturbs that equality is an arbitrary interference with the liberty of contract which no government can legally justify in our free land.”
• Coppage v. Kansas, 236 U.S. 1 (1915)
• United States. Commission on Industrial Relations; Francis Patrick Walsh, Basil Maxwell Manly, ‘Industrial relations: Final report and testimony’ (1916)
• Topeka Laundry Co. v. Court of Int’l Relations, 237 P. 1041, 1044 (Kan. 1925) “Each statute undertook to remedy the mischief [of substandard wages for women and minors] by fixing a standard below which wages might not be depressed . . . because of inequality of bargaining power between employer and employee . . . .”
• France v James Coombes & Co [1929] AC 496, 505–6, in a case restricting the definition of ‘employee’ for the purpose of s 8 Trade Boards Act 1909, 1918, for an order to give a minimum wage to boot workers, where the worker was not working all the time when he was in the shop Lord Atkin said, ‘the presumed necessity for fixing any minimum wage rate at all in any particular trade is due to the apprehension on the part of the Minister that in its absence workmen in that trade may have imposed upon them wages which they ought not to be asked to accept, but which, either as a result of competition in the labour market or deficient bargaining power, they are not in a position to refuse’
• National Labor Relations Act of 1935 Section 1, at 29 U.S.C. §151

"The inequality of bargaining power between employees who do not possess full freedom of association or actual liberty of contract and employers who are organized in the corporate or other forms of ownership association substantially burdens and affects the flow of commerce, and tends to aggravate recurrent business depressions, by depressing wage rates and the purchasing power of wage earners in industry and by preventing the stabilization of competitive wage rates and working conditions within and between industries."

• NLRB v. Mackay Radio & Telegraph Co. 304 U.S. 333 (1938) where the US Supreme Court held employers can replace striking workers, though workers remain employees during a strike and can get a reinstatement remedy.
• Radcliffe v Ribble Motor Services Ltd [1939] AC 215, 241, Lord Wright in a judgment restricting common employment notes ‘how little bargaining power a workman possessed’
• Rookes v Barnard [1964] AC 1129, 1219, per Lord Devlin,

"It is easy now to see that Parliament in 1906 might have felt that the only way of giving labour an equality of bargaining power with capital was to give it special immunities which the common law did not permit. Even now, when the scales have been redressed, it is easy to see that Parliament might think that a strike, whether reprehensible or not, ought not to be made a ground for litigation and that industrial peace should be sought by other means."

• Certification of the Constitution of the Republic of South Africa [1996] ZACC 26, [66], "A related argument was that the principle of equality requires that, if the right to strike is included in the NT, so should the right to lock out be included. This argument is based on the proposition that the right of employers to lock out is the necessary equivalent of the right of workers to strike and that therefore, in order to treat workers and employers equally, both should be recognised in the NT. That proposition cannot be accepted. Collective bargaining is based on the recognition of the fact that employers enjoy greater social and economic power than individual workers. Workers therefore need to act in concert to provide them collectively with sufficient power to bargain effectively with employers. Workers exercise collective power primarily through the mechanism of strike action. In theory, employers, on the other hand, may exercise power against workers through a range of weapons, such as dismissal, the employment of alternative or replacement labour, the unilateral implementation of new terms and conditions of employment, and the exclusion of workers from the workplace (the last of these being generally called a lockout). The importance of the right to strike for workers has led to it being far more frequently entrenched in constitutions as a fundamental right than is the right to lock out. The argument that it is necessary in order to maintain equality to entrench the right to lock out once the right to strike has been included, cannot be sustained, because the right to strike and the right to lock out are not always and necessarily equivalent."

• Rugby Joint Water Board v Footit [1973] AC 202, Lord Simon, landlord and tenant
• Johnson v Moreton [1980] AC 37, Lord Simon, "There was one economic and social relationship where it was claimed that there were palpably lacking the prerequisites for the beneficent operation of laisser-faire - that of landlord and tenant. The market was limited and sluggish: the supply of land could not expand immediately and flexibly in response to demand, and even humble dwellings took more time to erect than those in want of them could spare. Generally, a man became a tenant rather than an owner-occupier because his circumstances compelled him to live hand-to-mouth; the landlord's purse was generally longer and his command of knowledge and counsel far greater than the tenant's. In short, it was held, the constriction of the market and the inequality of bargaining power enabled the landlord to dictate contractual terms which did not necessarily operate to the general benefit of society. It was to counteract this descried constriction of the market and to redress this descried inequality of bargaining power that the law - specifically, in the shape of legislation - came to intervene repeatedly to modify freedom of contract between landlord and tenant. Since Maine the movement of many "progressive" societies has been reversed. The holding of a statutory or a protected tenancy is rather a status than a pure creature of contract."
• Attorney General of Canada v Nav Canada (2008) FC 71, [19] Hugessen J of the Canadian Federal Court, approved the purpose of the Residential Tenancy Act in the Northwest Territories (replicated across Canadian provinces) as follows: ‘Bearing in mind the usual disparity of bargaining power and financial resources between such tenants and their landlords, the Act is evidently intended to restore the balance of power through the public employment of a rental officer to try and mediate and, if necessary, to adjudicate disputes between them.’ The Canadian Residential Tenancy Acts say residential tenancies can only be terminated with good reasons, and limit annual rental increases to a figure set by a Central Board. It should be appreciated how this differs from rent control laws, which place inflexible ceilings on any increases.