It can be said that most legal systems have rules relating to the performance of obligations. In both English and Australian law, this principle has its application in the doctrine that contracts are to be performed, and if they are not, the courts will either enforce them by order, or demand compensation for breach. In some instances, enforcement of contractual obligations may have little to do with the main objective of the agreement, and may be unjust, harsh, oppressive or unconscionable. Thus, although all obligations ought to be enforced by the law, such discussion is peripheral to the issue of whether, and in what circumstances, individuals who have assumed binding obligations ought to be excused from performing them. This recognition, which was probably more marked in Australia than in the United Kingdom, first manifested itself in the enactment of the Contracts Review Act 1980 (NSW) (the CRA) a state legislation of New South Wales, Australia.
This article looks at the statutory provisions of the CRA which may apply to third party bank guarantees given with inadequate understanding or consent. Although these provisions are basically derived from the common law and equitable doctrines, they provide, nevertheless, a much greater range of remedies than are available under the general law and may have a greater scope in terms of the situations to which they apply. What is argued here is whether the legislation, as applied to contracts which include guarantees, is a model for reform where such contracts are unjust, and there is a demonstrated need for relief for those who suffer as a result of their lack of bargaining and economic power.