Cases of Consideration, Promissory Estoppel, Offer & Acceptance, & Pre-Contractual Liability (PDF)

# DOCTRINE of CONSIDERATION ## US Law ### Wood v. Lucy, Lady Duff-Gordon * Defendant was an important fashion icon and she hired the plaintiff as a promoter. * Agreement gave Wood the exclusive right to place endorsement and to market the defendant's designs; the parties had to split all profits...

# DOCTRINE of CONSIDERATION ## US Law ### Wood v. Lucy, Lady Duff-Gordon * Defendant was an important fashion icon and she hired the plaintiff as a promoter. * Agreement gave Wood the exclusive right to place endorsement and to market the defendant's designs; the parties had to split all profits. Wood's obligation took effect only if he generated sales revenue. The agreement does not expressly require that he tries to generate sales revenue. He could have stayed idle (inerte) and obtained his part of profits anyway. * Defendant once decided to sell an endorsement by herself and to not give Wood half profits and for this reason Wood sued her for breaching the contract and claimed for expectation damages. **Issue:** whether the contract stipulated by parties contains consideration (and so if there is a contract) and whether the plaintiff is entitled to recover damages. **Conclusion:** Lucy said that the contract wasn't valid because there was a lack of consideration, or better, there wasn't the mutuality of obligations, since only one party has to do something, and the other party may do something. From the contract, the plaintiff didn't bind himself to anything: he could do nothing and still obtain his part of capital. However, Wood responded that the consideration was implicit since to have profits, he had to promote (do his work) Lucy's products. For this reason, the contract has consideration and it is enforceable, even if consideration it's not explicitly mentioned. **Usage:** this case can be used to show that consideration doesn't have to be explicit but it can be implied: to have a contract we must have consideration. ### Gray v. Martino * Martino got her jewels stolen by a thief and so she decided to give $500 to the one who was able to find her stolen jewels. * Gray, a policeman, decided to help her and he found her jewels, helped by his connections in the police. However, Martino refused to give him the money. He sued her. **Issue:** whether there was a contract between the parties and whether the act that the policeman did, under his public duty of policeman, can be considered as a sufficient consideration. **Conclusion:** according to the supreme court, Gray simply did his duty as a policeman and had no right to ask for a reward. Since the policeman is just doing his duty, there's no consideration. Moreover, he already had a contract (the one for his job and this creates past consideration: there was already a consideration, you can't ask for additional compensation, because the policeman is not adding anything else to the contract with Marino) **Usage:** this case can be used to show that an act which is expected to be carried out because of a public duty cannot be considered as a consideration within a contract between private individuals. # DOCTRINE of PROMISSORY ESTOPPEL ## English Law ### Central London Property Trust Limited Limited v. High Trees House Limited. * During 1937, the plaintiff company let to the defendant company (a subsidiary of the plaintiffs) a block of flats for a term of ninety-nine years from September 29, 1937, at a ground rent of 2,5001. a year * Due to the war, the majority of flats weren't occupied, since they were too expensive. For this reason, the plaintiffs and the defendants decided to make a covenant that said that from 1940 to September 1945 the price of flats would have been 1250 (this is not a contract because it doesn't have consideration). However, even after 1945, the defendant continued to pay the reduced price. The plaintiff sued to understand if they could claim for the full rent and if it was possible to claim for arrears (the difference between the reduced rent and full rent in 1940-1945). **Issue:** whether it's possible to enforce a promise without consideration and thus allowing them to request the full rent once the flats were fully occupied again. **Conclusion:** The judge said that they could start claiming for 2500 after 1945, since the reduced price was valid only for 1940-1945. However, he said no to the arrears because the plaintiffs couldn't go back on their promise (promissory estoppel). With this, the law has met equity and the courts have not gone so far as to give a cause of action in damages for the breach of such a promise, but they have refused to allow the party making it to act inconsistently with it. **Usage:** this case can be used to show that a promisor can't step back from the promise he made on which the promisee acted in reliance. Moreover it is also established (con la parte dopo il 1945) that if you owe a certain amount of money you cannot pay less even if the creditor says so. ### Combe v. Combe * A husband and wife decide to divorce and the husband, although his annual income was less than the woman's, decides to promise his wife to pay her the allowance of 100 pounds. He was unable to meet his promise and the wife sued him for not having paid 675, being arrears of payment at the rate of 1001. per year for six years. She sued him for promissory estoppel. **Issue:** whether the husband could withdraw from his earlier promise to pay the wife the sum of money and whether the wife can sue with the use of promissory estoppel **Conclusion:** the judge defines the limits of promissory estoppel.The doctrine does not decide that a promisee can sue on a promise. This doctrine may be used as a shield and not as a sword; it does not decide that a promisee can sue on such a promise. It is said for the wife that the husband's agreement to pay 100l. a year was supported by good consideration, which consisted either of an implied undertaking by the wife not to apply to the court for an order for permanent maintenance, or of an actual forbearance so to apply. However, the judge does not think an actual forbearance, as opposed to an agreement to forbear to approach the court, is a good consideration unless it proceeds from a request, express or implied, on the part of the promisor: the husband didn't ask her to not apply to the court, if she wanted to, she could do it. So there is no consideration. She relied on that promise by not asking the court for maintenance. She was not able to use the doctrine of promissory reliance as a sword, to enforce the promise and the court said that it wouldn't be right for this wife, who is better off than her husband, to take no action for six or seven years and then come down on him for the whole 6001. **Usage:** this case can be used to show that the promissory estoppel can be used as a shield and not as a reason to sue the other party. # OFFER and ACCEPTANCE ## US Law ### Akers v. J.B. Sedberry, Inc. * Akers and Whitsitt worked under J.B.Sedberry. They had a contract valid for 5 years and they were sent to work in Texas to control the manufacturing of a company. However, the business of the filial in Texas wasn't going well due to Sorenson's management. **Issue:** whether an employment contract has been rejected when the employer does not accept or continue to contemplate the offer immediately. **Conclusion:** the court established that the way in which the defendant behaved can be intended as a rejection. An offer can be accepted or declined in a number of ways, for example, when it's rejected by the offeree or it's not accepted by the offeree according to its terms and within the time fixed. An offer terminated in this way, cannot be accepted anymore. The defendant, by proposing this new contract based on an offer that no longer existed, had violated the previous contract by replacing it with a less convenient one. The plaintiffs won. **Usage:** this case can be used to show that when an offer is rejected by the offeree, it can't be reopened again. ## English Law ### Adams v. Lindsell (creation of mailbox rule) * Lindsell sent an offer to Adams by mail to a wrong address so the offer was not received by the plaintiffs in Worcestershire till September 5th. On that evening the plaintiffs wrote an answer, agreeing to accept the wool on the terms proposed. The course of the post consequently made the acceptance letter arrive late. The defendant, not having the answer arrived at that specific moment, sold the wool in question to another person. **Issue:** when an offer sent by mail is considered accepted by the offeree. **Conclusion:** the court established that the defendant was bound by the offer sent, at the exact moment in which the offer reached the plaintiff and when his answer was given, even if it didn't reach the offeror. **Usage:** this case can be used to show that, in cases in which there is an offer through post, the plaintiff, once he sent his offer by mail and the defendant mails his answer (spedisce e non deve necessariamente raggiungere l'altra parte), is bound to this offer (mailbox rule). ### Dickinson v. Dodds * Defendant signed and delivered to plaintiff a memorandum, of which the material part said that the defendant wanted to sell to the plaintiff a big part of one of his properties. The offer was valid until Friday, 12th June. * The plaintiff discovered that the defendant had been offering or agreeing to sell the property to another man. So, he decided to reach his house and gave his acceptance to the offer to his mother-in-law but this document never in fact reached the defendant.On Friday, the agent of Dickinson, found Dodds at the station, and handed to him a duplicate of the acceptance. Defendant replied that it was too late, as he had sold the property. A few minutes later plaintiff himself handed him another duplicate of the notice of acceptance, but Dodds declined to receive it. The plaintiff sued for breach of contract. **Issue:** whether an offer can be considered binding and when a party can withdraw that offer. **Conclusion:** the court established that, since an offer doesn't have consideration and a meeting of minds, it can be withdrawn at any moment. Since there is no consideration, this made it a "nudum pactum" (a promise not legally enforceable). According to the court, once the plaintiff was aware that the defendant sold the property to another person, it was too late to accept the offer. **Usage:** this case can be used to show that an offer under English law can be withdrawn at any moment before acceptance is received since there is no consideration. # PRE-CONTRACTUAL LIABILITY ## English Law ### Walford v. Miles * Two parties entered negotiations with the appellants, agreeing in principle to sell the business for £2 million, with a warranty for future profits. The defendants also agreed to terminate other negotiations if the plaintiffs provided a bank comfort letter, which they did. However, the defendants withdraw from negotiations, deciding to sell to a third party. **Issue:** whether an agreement to negotiate in good faith can be considered enforceable **Conclusion:** the court established that a “negotiation made in good faith" is not enforceable as instead it was considered under US Law (Channel v. Grossman, only with a letter of intent). In the English Law, good faith doesn't exist; a party is free to pursue their own interest, so long as there is no misrepresentation. For this reason withdrawing from negotiations is fully accepted. **Usage:** this case can be used to show that negotiations aren't enforceable contracts. Moreover, since there is no duty to behave in good faith according to common law, it's always possible to withdraw from negotiations. Se io prometto di negoziare in good faith solo con te e si va a creare un contratto con consideration, posso difendere colui che rompe il contratto negoziando con terzi, dicendo che il contratto viola le regole del public policy: si è liberi di non negoziare in good faith according to common law. ### William Lacey, Ltd v. Davis * In this case, the plaintiffs (builders) were invited by D. to submit bids for the reconstruction of war-damaged premises. The plaintiffs, believing they would be awarded the contract, provided different services that helped D. This work significantly increased the compensation D. received from the commission. However, after receiving the benefit of the plaintiffs' work, D. decided to hire another builder and ultimately sold the premises instead of rebuilding. **Issue:** whether a party, in bidding a contract, can claim for compensation for his services made in reliance on an employment contract **Conclusion:** the work performed by the plaintiffs went beyond what would normally be done for free when bidding on a contract. The court found that the plaintiffs had provided valuable services and that it would be unjust for them not to be paid, even though a formal contract was never finalized. The judge rejected the defendants' argument that no payment was owed because the services were rendered under the assumption of a future contract. Instead, he ruled that the law implied an obligation for the defendant to pay a reasonable price for the services since he had benefited from them. **Usage:** this case can be used to show that even if there is no contract, a party that benefits from the services that the other party made gratuitously in a justified reliance on the creation of a contract, has to pay for those services. # US Law ### Channel Home Centers v. Grossman (1986) * Plaintiff executed a letter of intent setting forth lease terms that included a term that Defendant would withdraw the store from the rental market and only negotiate with Plaintiff to completion of the lease. Defendant signed the letter of intent. Plaintiff undertook expensive legal efforts to get the lease and various related construction projects on the property approved for its store. Defendant began negotiation with preparing the lease in early January. In late January, Defendant started showing the property to Plaintiff's competitor and he gave the work to another company. Plaintiff said that the defendant breached the letter of intent (negotiate in good faith). Defendant said that the letter wasn't a contract and he wasn't bound to it. **Issue:** whether a letter of intent to negotiate in good faith can be considered as a binding obligation. **Conclusion:** the letter of intent must be considered not as a binding contract but as an obligation to negotiate in good faith, if both parties show the intention to be bound by it, if there is consideration and if the terms of the agreements are sufficiently definite. In this case the plaintiff acted in bad faith and so he breached the agreement. The plaintiff won the case. Ordinarily however, judges are reluctant to impose pre-contractual liability. In the present case, however, there was an express agreement executed that required both parties to negotiate a lease contract in good faith. **Usage:** this case can be used to show that in cases in which there is a letter of intent to negotiate in good faith and that letter is clear, has consideration and both parties decided to be bound by it, then that agreement is a binding obligation. ### Hoffman v. Red Owl Stores, Inc. (1965) * The complaint involves the case of Hoffman, who relied on promises made by Lukowitz, an agent of Red Owl Stores, to establish a grocery store in Chilton. Hoffman sold his bakery and grocery store, purchased land, and relocated his family based on assurances that his $18,000 investment would suffice to set him up as a Red Owl franchisee. However, Red Owl later demanded $34,000, which Hoffman couldn't raise, terminating the negotiations. **Issue:** whether the doctrine of promissory estoppel can be applied in a case of pre-contractual negotiation? **Conclusion:** the court found that Red Owl's promises induced Hoffman's detrimental actions and invoked promissory estoppel, awarding Hoffman damages to avoid injustice. In the US, promissory estoppel can be used both as a defence and as an attack. **Usage:** the case explores the limits of promissory estoppel, emphasizing that promises need not be definite contracts for legal relief, provided they induce reliance that leads to significant loss. Courts typically provide relief for broken promises or unjust enrichment during negotiations. !!: it's important to underline that in the US the duty to perform in good faith is recognized while the duty to negotiate in good faith is not recognized. For this reason, the plaintiff could recover only in certain categories: if the defendant has deceived him during negotiations, broken an express or implied promise made during negotiations, or enriched himself unjustly. # DOCTRINE of MISTAKE ## MISTAKE in AUTHENTICITY ## English Law ### Leaf v. International Galleries * The defendant sold to the plaintiff a picture that he thought to have been painted by Constable. However, 5 years later, the plaintiff discovered that it wasn't a painting by Constable as the defendant believed it was. The plaintiff sued for innocent misrepresentation. **Issue:** whether the mistake made by the defendant can be considered as misrepresentation and whether it can be considered as a breach of contract **Conclusion:** the court established that the mistake made by the defendant wasn't an essential and fundamental one. In fact, there was no mistake at all about the subject-matter of the sale: both parties agreed on the same terms on the same subject-matter and that was sufficient to make a contract. The artist who made it was just a quality of the painting. Moreover, the right to reject for breach of condition has always been limited by the rule that, once the buyer has accepted the goods in performance, he cannot thereafter reject but is relegated to his claim for damages. A buyer has accepted the goods when, after the lapse of a reasonable time, he retains the goods without intimating to the seller that he has rejected them. Here the reasonable time passed, since it took the plaintiff 5 years to bring this claim to the court. **Usage:** this case can be used to defend the party that did the mistake if the other party didn't specify a characteristic as essential or fundamental or in general if it's possible to consider the mistake made as non-essential or non-fundamental, ## US Law ### Smith v. Zimbalist * The plaintiff sold two violins that he believed were made one of Stardivarius and one of Guanerius, since this was the will of the defendant. However, it was discovered that the violins were imitations and its value decreased. The plaintiff sued for the payment that the defendant didn't give him. **Issue:** whether a valid, enforceable contract existed and whether Smith was entitled to the commission for services rendered, despite the defendant's refusal to pay. **Conclusion:** the court established the plaintiff won. First of all because the plaintiff expressly required a violin of Stradivarius and not of Smith (so no assumption of the risk) and second, the mistake was common. Both parties were mistaken. **Usage:** the case can be used to show that in case of common mistake and breach of express warranty, the rescission of the contract for mistake can be accepted. ### Firestone & Parson, Inc. v. Union League of Philadelphia * The defendant sold a painting that was generally believed to be by Bierstadt to the plaintiff. It was then discovered that the painting was by John Ross Key and its value decreased. The plaintiff sued to rescind the contract. **Issue:** whether a party can rescind the contract because of a mistake in the authenticity of the good. **Conclusion:** the court declined the claim. In fact, it was stated that the plaintiff assumed the risk when he bought the painting. First of all, it was declared that the painting was attributed to Bierstadt and so it wasn't verified, the plaintiff assumed the risk. Moreover, the market value of a painting is determined by the prevailing views of the marketplace concerning its attribution. Post-sale fluctuations in generally accepted attributions do not necessarily establish that there was a mutual mistake of fact at the time of the sale. (the market also fluctuates continuously so the plaintiff has taken the risk) **Usage:** the case can be used as an example of “assumption of the risk”. A mistake cannot be considered as such if it enters in the sphere of risk of the party. ## MISTAKE in SUITABILITY FOR A PURPOSE ## English Law ### Griffith v. Brymer * The plaintiff rented a flat to the defendant to view the coronation procession of the King. The king got operated and so the coronation wasn't made. **Issue:** whether causes of force majeure can make a contract void **Conclusion:** the court established that the contract could be considered void and the plaintiff was entitled to rescission. The reason was that the agreement was made on the supposition by both parties that nothing had happened which made performance impossible. **Usage:** this case can be used to show that if there was force majeure, the contract is not valid. ### Amalgamated Investment & Property Co. v. John Walker & Sons * The plaintiff agreed to buy a house from the defendant. The plaintiff asked if the property had been designated as a building of "special architectural or historic interest” and the vendors replied in the negative. However, the next day after the contract was signed, the property was listed as a building of "special architectural or historic interest". **Issue:** whether the contract could be set aside for common mistake or whether there was frustration of the contract. **Conclusion:** the court established that the contract wasn't void for mistake. In fact, the mistake wasn't present at the time of the contract. Moreover, since the plaintiffs asked the defendant if there was the possibility of the house getting listed as a “special architectural or historic interest", it means that they were aware of this plausible risk. By entering into the contract, they have assumed that risk. Moreover, the mistake wasn't related to the overall substance of the good. **Usage:** this case can be used to show that the mistake needs to be fundamental so as to avoid the contract and there must be no assumption of the risk. ## US Law ### Sherwood v. Walker * The plaintiff requested to purchase a cow owned by the defendant. Sherwood looked at Walker's cattle and decided to purchase a cow who was believed by both parties to be barren. This reflected an amount typically payable for cattle used only as beef and not for breeding. However, the defendant discovered that the cow wasn't barren (sterile). Thus, because she was a breeder, the cow was worth a significantly higher price and the defendant didn't deliver it. * At the subsequent trial, the plaintiff argued that title for the cow passed to him at the moment the plaintiff drafted a letter agreeing to sell her for a certain amount per pound. The defendant argued, however, that title to Rose never passed because Walker never weighed the cow and thus never confirmed a final price for her. **Issue:** whether two parties should be held to an agreement regarding a thing, if the nature of the thing changes entirely (whether the mistake made was essential or not). **Conclusion:** the court established that this mistake was a substantial one. Even if the cow is the identical animal that they thought her to be when the contract was made, the mistake wasn't of the mere quality of the animal but went to the very nature of the thing. Since the fact if the cow was barren or with a calf was an essential element established by the defendant, the mistake affected the substance of the whole consideration. **Usage:** this case can be used to show that in cases in which there is a fundamental and essential mistake (substantial mistake) in the characteristic of the good, the contract can be void. ### Lenawee County Board of Health v. Messerly * Mr. and Mrs. Pickles purchased a 600 square-foot tract of land with rental property upon it, from the defendants. Shortly after buying the property, the Lenawee County Board of Health (BOH) brought suit against the defendants of the property and condemned it because there was a defective sewage (liquame) system on the property. The association sued the defendants. **Issue:** whether a land contract can be rescinded on the basis of mutual mistake, even if there was a clause of assumption of the risk. **Conclusion:** the court established that the contract cannot be rescinded because the plaintiff, by signing a clause within the contract, (“purchaser has examined the property and agrees to accept it in its present condition”), accepted the risk. **Usage:** this case can be used when the contract can't be rescinded because there was a clause that clearly expressed the assumption of the risk by the other party. ## MISTAKE in VALUE ## English Law ### Kennedy v. The Panama, New Zealand, and Australian Royal Mail * The plaintiff bought shares of stock from the defendant, relying on a prospectus in which it was stated that the defendant had an agreement with the government of New Zealand. However, the plaintiff discovered that the agent of the government that signed the contract with the defendant had no authority to do that. The plaintiff sued for rescission. **Issue:** whether the contract can be rescinded because a mistake, that was present in the prospectus of the company, induced the party to enter into the contract. **Conclusion:** the court established that since this wasn't a substantial mistake that completely changed the substance of the contract or a breach of an expressed warranty, the contract can't be terminated. An innocent misrepresentation doesn't authorize a rescission. Rescission is not authorized even if the misapprehension may have been the actuating motive to the purchaser: contract is still binding. **Usage:** this case can be used to show that a mistake can be used to rescind a contract only if it's mutual and substantial. Even if the misapprehension/mistake was the motive that ha spinto a party to enter into a contract, the contract is still binding. ### Bell v. Lever Brothers * Mr Bell was the managing director for five years of a company that was owned by Lever Bros Ltd. Mr Bell had traded for personal profit during his employment by speculating in cocoa, which was contrary to his contract with the company. Without knowledge of this, Lever Bros Ltd made an offer of redundancy to Mr Bell, terminating his contract and offering a £30,000 payment as compensation. **Issue:** whether the contract that was created and accepted by Mr Bell, could be void by common mistake, due to later finding out about his personal trading. **Conclusion:** the court held that the contract was not void, as the mistake was not an 'essential and integral' part of the contract. In fact, it was established in any case that a fired employee would have received the liquidation. Moreover, Mr. Bell had no duty to disclose their activities to Lever Bros. There was therefore no fraud or misrepresentation involved when the pair failed to disclose their activities. The common mistake claim failed because the mistake did not relate to the subject matter of the contract. It is merely related to the quality of the contracts. A mistake will not affect assent unless it is the mistake of both parties, and is as to the existence of some quality which makes the thing without the quality essentially different from the thing as it was believed to be. **Usage:** the case can be used to show that a mistake to make a contract void has to be fundamental and mutual. ### Great Peace Shipping Ltd v Tsavliris Salvage * The defendants, Tsavliris Salvage International Ltd, were a company that offered salvaging facilities to ships in the South Indian Ocean that needed assistance. A ship required help after it had endured structural damage at sea. The defendants looked for any merchant vessels that were nearby to assist them. The complainants, Great Peace Shipping Ltd, said they were the closest to the ship, being around 30 miles away. On this information, the defendants commissioned the complainants to help the ship. In fact, this was a mistake and the complainants were around 400 miles away from the ship. Since the Cape Providence was in desperate need of help, as it was sinking, the defendants cancelled the contract with the complainants and asked another ship for assistance. **Issue:** whether the wrong distance to the ship said by the plaintiff was a common mistake and if it could void the contract. **Conclusion:** that the test for common mistake was narrow, and if a contract were to be avoided for common mistake there had to be a common assumption as to the existence of a state of affairs, no warranty by either party that that state of affairs existed and the non-existence of the state of affairs had not to be attributable to the fault of either party. Basically, the mistake was not sufficiently fundamental to void the contract. The delay for that distance was insufficient to make performance of the contract essentially different from the services the parties envisaged when the contract was concluded. **Usage:** this case can be used to show that the mistake has to be a fundamental one, in the sense that it has to be related to specific services or goods that were established in the contract, that are the central element. ### Kings Norton Metal co ltd v Edridge, Merrett & co ltd * A fraudster ordered goods from a metal manufacturer. He told the manufacturer that he was a well known business man and provided him with false details which matched the description of a wealthy businessman, leading the manufacturer to believe he had multiple factories and agents. The fraudster set up an account with the manufacturer and paid nothing for the goods upfront. The fraudster then sold the goods to Edridge Merritt. **Issue:** whether there was a contract between the two parties and it was void for unilateral mistake. **Conclusion:** Judgment was awarded to Edridge Merritt. The court held that the fraudster had made a contract with Edridge Merritt in his own capacity and identity. He had not fraudulently taken on another identity when selling the goods to Edridge. Although the contract was voidable, possessory title was held to pass from a fraudster to an innocent person, because they were led to believe the purchase they were making was bona fide. However, the contract was only voidable for misrepresentation, not for mistake. **Usage:** this case can be used to show that a person who fabricates a completely fictitious identity when engaging in a distance contract is not lying about any essential terms of the contract. A contract with such a person cannot be void due to mistake because they are merely lying about their attributes. (It's not possible to claim for mistake but for misrepresentation). ### James Cundy and T. Bevington v. Thomas Lindsay and Others * The claimant received an order for sale of handkerchiefs from a person named Blenkarn, who signed in his name in a manner resembling “Blenkiron & Co."- a reputed firm located at “123, Wood Street”. The purchaser further mentioned his address to be at "37, Wood Street, Cheapside”, to which the claimant sent the goods. Although no payment was made by Blenkarn, he sold the goods to a third person- the defendants. Later, the claimants alleged that, as they sold the goods to Blenkarn under the mistaken assumption that they were selling it to Blenkiron & Co., there was no real consent to the contract of sale. Consequently, there was no valid transfer of title, which remained with the claimants, and accordingly, they sued the defendants for conversion of goods. **Issue:** whether there was a contract between the original owner and the intermediate person. **Conclusion:** It was held that, as the claimant did not intend to sell the handkerchiefs to Blenkarn but to Blenkiron & Co., there was no consent of the claimant to the contract with the former. Accordingly, as no contract was concluded between the claimant and Blenkarn so as to constitute a valid transfer of title which the latter could rightfully convey to the defendants, the title remained with the claimant. Hence, the defendants, being in possession without a good title over such goods, were held liable for conversion. On this perspective, the court established that the defendant didn't have the authority to shift the goods, that technically he didn't have to, to another company (for the doctrine of nemo dat quod non habet). **Usage:** Where a rogue (truffatore) attempts to contract in writing by impersonating another, real person or company, no contract is formed. Modern cases have interpreted this as an early example of a contract being void for unilateral mistake. # FAIRNESS ## English Law ### Cresswell v. Potter (court of equity) * Plaintiff, having divorced the defendant, entered into a contract to convey her interest in the house they lived to him in exchange for release from mortgage liability. Subsequently, the defendant sold the property, making a significant profit. Plaintiff argued successfully that her consent to the contract was vitiated due to Mr Potter's exploitation of her weaknesses. She claimed vulnerability akin to that of a poor and ignorant person. **Issue:** whether the plaintiff is poor and ignorant; whether the sale was a considerable undervalue; whether the vendor had independent advice. **Conclusion:** the judge acknowledged that Ms Cresswell, given her occupation as a telephonist with limited means, met this criterion. The second requirement considered whether the sale was at a considerable undervalue and it was considered as such. The third focused on whether there was any independent advice. The judge noted the absence of independent advice, emphasising the significant power imbalance between Mr Potter, his solicitor, and an inquiry agent on one side, and Ms Cresswell alone on the other. **Usage:** this case can be used for cases in which there is an exploitation of the poorer or of the more ignorant party. ### Lloyds Bank Limited v. Herbert James Bundy * Herbert James Bundy owned a house, which was the extent of his estate. His son operated a business that did not do very well, and he asked his father to give him collateral for taking out loans from Lloyds. The father signed the original collateral for a smaller amount of money after considering it overnight and talking to his lawyer. Later on, the son needed more collateral, and the only way that Bundy could provide it was by using the house as collateral. When the lawyers from the bank came over with his son they explained that this was the only thing that he could do to help his son, and Bundy signed the document. Five months later the bank foreclosed on the son's assets, and as he was bankrupt they seized the house. Bundy refused to leave the house, and the bank sued to have him evicted. **Issue:** whether the contract was unconscionable and so unenforceable. **Conclusion:** The Court found for Mr Bundy. The nature of the relationship between Lloyds and Mr Bundy was such that the Court could intervene in the event of its abuse. There was conflict of interests in Mr Bundy's signing of the final guarantee and legal charge as he could lose his only asset to the bank. Furthermore, Mr Bundy received no independent legal advice by which Lloyds' fiduciary duty of care was breached. Consequently, the final guarantee and charge were set aside based on undue influence. **Usage:** this case can be used as an example in the English Law, that a contract, to be void, must be procedural and substantive unconscionable. ## US Law ### Williams v. Walker-Thomas Furniture Co. (substantial and procedural unconscionability in boilerplates) * Walker owned and operated a retail furniture store. It routinely leased items to customers under lease agreements that provided that customers would make a series of installment payments. All Walker's lease agreements contained a unique provision and its effect was that if a customer defaulted on his most recent purchase, Walker could attempt to repossess all previous purchases by that customer. Williams purchased a stereo from Walker and defaulted shortly thereafter. Walker brought suit to recover on the stereo as well as all other items previously purchased by Williams. **Issue:** whether the contracts were unconscionable, and thus unenforceable, due to the boiler plate language on back of the installment contract. **Conclusion:** the court highlighted that contracts should not be blindly enforced when one party lacks real choice and the terms are overwhelmingly one-sided. In this case, the clause that allowed for repossession of all items upon defaulting on a new purchase was deemed potentially exploitative. The court emphasized that contracts should be fair and reasonable, reflecting an equitable exchange between parties. They remanded the case back to the trial court for further proceedings to determine whether the contracts were indeed unconscionable. **Usage:** this case can be used to show that Courts may render a commercially unreasonable contract unenforceable when entered into between two parties of unequal bargaining power, especially where one party is commercially unsophisticated. ### Maxwell v. Fidelity Financial Services, Inc. (unconscionability, gross disparity in the bargaining power of parties) * The plaintiff financed the purchase of a $6,500 water heater with a loan from the defendant in 1984 at 19.5 percent interest. Elizabeth Maxwell earned approximately $400 per month and her husband earned approximately $1,800 per month. The market value of the Maxwells' home was $40,000. After making payments for three and a half years and despite the fact that the water heater never functioned properly, the plaintiff requested another loan from Fidelity. Fidelity approved the loan and the Maxwells signed an additional set of documents similar to the first set, including consenting to a lien (pegno) on the home. The total amount Maxwell was to pay on the debt was $17,000. Maxwell sustained that the contract was unenforceable because it was unconscionable. **Issue:** whether the loan contracts could be deemed unconscionable from a procedural and substantive aspect. **Conclusion:** the Supreme Court vacated the appellate court's opinion and reversed the summary judgment because it did not address the fundamental question of unconscionability as required by statute. The court refused to hold the contracts unconscionable as a matter of law because the lender (prestitore) did not have a meaningful opportunity to present evidence on the commercial setting, purpose, and effect of the earlier contract. The court had to first determine whether the underlying contract was unconscionable before it could determine if the second contract was a valid novation. The court held that if found unconscionable, the contracts were invalid for purposes of novation. The court in Maxwell elucidated that demonstrating substantive unconscionability might suffice to invalidate a contract, especially in the presence of gross price disparity or oppressive provisions. This position underscores the potential for contract terms alone to substantiate claims of unconscionability, independent of the procedural context in which they arise. **Usage:** this case can be used to show that procedural and substantial uncons