Does anyone
know why the banks seem to be able to vary standard financial contracts at
their absolute discretion yet deny borrowers the same rights? This includes the
ability to cancel any contract at will - for no given reason.
I always
thought that a contract was a binding agreement on both parties to continue
with that agreement until the terms of the contract naturally expired either
through time or some other form of completion - a mutual obligation. In this
way each party could rely on whatever benefit they subsumed from the contract
and each other.
For example,
Mr and Mrs Bloggs bought a home with a 20 year mortgage calculated to enable
them to pay off the house and live comfortably.
The bank benefited from fees and interest - as clearly defined within
the contract. At some point the bank arbitrarily changed its lending policy and
decided to call the Blogg’s loan without reason. Nothing to do with the Bloggs and their loan
performance - just a new policy by the bank.
The Bloggs couldn’t refinance and
had to sell their home in a depressed market and lost a great deal of money
whilst the bank got all its interest and termination fees. Perhaps unjust enrichment?
Justice? I don’t think so and it brings up a number of
questions.
If a party
to a contract has the ability to cancel a contract at will, was there a
contract in the first place? I thought a contract was something which both
parties could rely on for some mutual benefit for the natural life of that
contract. If one party can vary the terms of the contract or ‘change the
agreement’ at will then surely there was no ‘agreement’ in the first place?
This is obviously
a nonsense yet all banks include ‘terminate at will’ clauses into their
standard form contracts whilst ignoring the whole concept of expectation
damages or damages wrought by breach of contract in that the injured party I thought
had a right to ‘expect’ a contract to go full term and if that is truncated by
the other party then they are entitled to expect damages equivalent to the benefit
they would have received if the contract had gone the agreed distance?
Secondly, as
far as I understand it, there are many provisions in many acts which
specifically preclude the alleged rights of banks to unilaterally and
unconscionably vary contracted terms including S12BH (1)b of the ASIC Act. It
seems the law is clear so how come the banks can and do ignore those legislated
provisions?
Thirdly, why
do the banks include such terms and indeed rely on them when pursuing innocent
borrowers? The only reason I can think
of is that banks feel the need to misrepresent their actual ability to breach a
contract through a form of unconscionable coercion. It seems they ‘coerced’ Mr
and Mrs Bloggs into believing that they had to sell their home even though the
bank knew full well that they did not have the right and that the Bloggs had
little financial or legal knowledge and that they could not deal with a gaggle of
lawyers from a multinational telling them through ‘official’ legal letters that
they had to sell their home. The Bloggs
were not capable of dealing with the banks self adduced phalanx of power and
the banks knew it and indeed depended on it!
Surly this is misrepresentative and unconscionable coercion at its worst?
Recently we
have been in a situation where we have had to take three different banks to the
Financial Ombudsman Service [FOS] for what I considered legal and contractual
breaches even though each bank incorporated within the standard terms and
conditions their ability to ignore the law and basically do whatever they liked. We have won all three with each bank found
guilty of breaching the code of banking practice. They were forced to rectify their actions and
pay damages.
But key is that
for FOS to make this determination it must have read down the bank’s own
published terms which stated that the bank could in effect do what it likes. That term and its implied power was read down
and discounted by FOS as a legal body using the intent and practice of the law.
Yet, those
sorts of clauses are still very much a part of standard form contracts.
My question
and dilemma is – ‘How can banks publish terms and conditions with impunity which
obviously breach the law knowing that those terms are indeed ‘unfair’ and will
confuse the average borrower to the advantage of the bank?’ Surely, this is ‘unjust enrichment’? The banks know that 99.99% of people will
just accept the banks terms without question just because they are a bank with
lots of lawyers and as a consequence must be right.
Perhaps they aren't right?
