Alec Lobb (Garages) Ltd v Total Oil (Great Britain) Ltd [1985] 1 All ER 303 (CA)

Facts

• Alec Lobb (Garages) Ltd, a struggling small business, entered into a tie-in agreement with Total Oil (Great Britain) Ltd, a major oil company.
• The agreement required Lobb to purchase petrol exclusively from Total Oil for a significant period.
• As part of the agreement, Lobb received a loan and guaranteed petrol supplies from Total Oil.
• Lobb argued that they did not receive independent advice before entering into the agreement.
• The agreement was later challenged by Lobb on the grounds it was unconscionable, restrictive, and oppressive.

Issues

1. Whether the disparity in bargaining power between the parties invalidated the contract.
2. Whether the absence of independent legal advice rendered the agreement unconscionable.
3. Whether the terms of the tie-in agreement were so oppressive or disadvantageous as to justify setting aside the contract under the doctrine of unconscionable bargain.
4. To what extent common law or statutory intervention, such as the Unfair Contract Terms Act 1977, should regulate unfair contract terms.

Decision

• The Court of Appeal held that the mere presence of unequal bargaining power does not invalidate a contract.
• The absence of independent legal advice did not, in this case, render the agreement unconscionable, especially since Lobb was an experienced businessman who had previously engaged solicitors.
• The terms of the agreement, while restrictive and possibly disadvantageous in hindsight, were not found to be manifestly oppressive or so unfair as to shock the conscience of the court.
• The agreement provided Lobb with real commercial advantages at the time of contracting.
• The court refused to set aside the agreement, emphasizing reluctance to interfere with contracts freely entered into by parties at arm's length.

Legal Principles

• Courts are reluctant to set aside bargains freely entered into unless the terms are clearly oppressive or unconscionable.
• Inequality of bargaining power is relevant but not sufficient by itself to vitiate a contract.
• The absence of independent legal advice may contribute to a finding of unconscionability, but only where there is other evidence of unfairness or exploitation.
• Courts distinguish between unconscionable bargains and hard bargains; commercial disadvantage does not automatically equate to unconscionability.
• Statutory intervention, such as the Unfair Contract Terms Act 1977, provides broader regulation of unfair contract terms beyond the common law doctrine of unconscionable bargain.

Conclusion

The Court of Appeal affirmed that, without clear evidence of oppressive terms and manifest disadvantage, contracts entered freely between parties—even with unequal bargaining power—will not be set aside as unconscionable. The judgment reinforces the primacy of freedom of contract, requiring strong grounds before judicial intervention, and recognizing the supplementary role of statutory protections in regulating unfair contract terms.