Gross Disparity

GROSS DISPARITY

In contracts in which both parties undertake to carry out certain actions, the value of these actions do not need to be of absolute equal value. In such cases, most of the time, the legal order does not interfere with the agreement between the parties within the scope of the freedom of contract. However, if the disproportion between the actions reaches a certain point, the provisions of gross disparity may find a place of application. These provisions may be applied especially if one party exploits the other or benefits from a difficult situation the other party is facing.

If there is a clear disproportion between the deeds in a contract, and this clear disproportion is created by taking advantage of the indiscretion or inexperience of the harmed party, the harmed party may recede from the contract by sending a notice to the other party within a year. The one-year time limit begins on the date the harmed party has obtained the knowledge about their state of indiscretion or inexperience, and if they are in a difficult situation, the time limit begins when that situation no longer applies.

Whether there is a clear disproportion between the deeds or not is decided by a judge, taking into account the fair market values of the deeds. For a judge to conclude that there has been a gross disparity as a result of this assessment, it should be determined that there is a disproportionality between the two deeds that anyone can notice. And whether one of the parties have been taken advantage of or not is determined by the certain situations said party is in; distress, the fact that one of the parties is in great difficulty; indiscretion, inability of a person to calculate their own self-interest well, to be deceived and exploited; inexperience, not understanding the functioning of business life well or not being able to access the level of experience required by the job. If any one of these situations has occurred concerning the harmed party, the judge may conclude that there has been an instance of gross disparity.

The fact that gross disparity is realized under a contract does not imply direct nullity of said contract. As mentioned above, the beneficiary must inform the other party within one year that they have receded from the contract. When making this notification, it should also be noted whether the deeds given to the other party are requested back or if the imbalance between the deeds is requested to be eliminated. If the damaged party does not notify the other party during this period, the contract becomes effective from the outset and realizes its full consequences.

Gross disparity rules also find themselves a place within the Unidroit Principles of International Commercial Contracts which is applicable in many countries. According to Unidroit Principles, a party may avoid the contract or an individual term of it if, at the time of the conclusion of the contract, if the contract or term unjustifiably gave the other party an excessive advantage. Regard is to be had, among other factors, to the fact that the other party has taken unfair advantage of the first party’s dependence, economic distress or urgent needs, or of its improvidence, ignorance, inexperience or lack of bargaining skill, and the nature and purpose of the contract. If these conditions are met, the contract may be adapted, or the party can avoid the contract altogether.

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