CHAPTER VI

INADEQUACY OF CONSIDERATION

169. Right of Rescission in General.

Improvident Sales or Contracts.

170.

171.

172.

Taking Unconscionable Advantage of Circumstances.
Inadequacy Combined with Fraud or Imposition.

173.

174.

Same; Duress; Undue Influence; Mental Weakness. Catching Bargains and Sales of Expectancies and Remainders.

175. Gross Inadequacy Raising Presumption of Fraud.

176.

Louisiana Law; Lesion Beyond Moiety.

§ 169. Right of Rescission in General.-Inadequacy of consideration is not sufficient ground for the rescission of a contract or other obligation in equity, when standing alone, that is, unaccompanied by circumstances of fraud, imposition, undue influence, mental weakness, or the like.1 It will be shown in a later section of this chapter that very great inadequacy of consideration (spoken of as "gross" or "shocking") may raise a vehement presumption of fraud, and that relief may then be given in equity, not on the

1 Eyre v. Potter, 15 How. 42, 14 L. Ed. 592; Brewster v. Lanyon Zinc Co., 140 Fed. 801, 72 C. C. A. 213; Rhino v. Emery (C. C.) 65 Fed. 826; Waterman v. Waterman (C. C.) 27 Fed. 827; Stephenson v. Atlas Coal Co., 147 Ala. 432, 41 South. 301; Peagler v. Stabler, 91 Ala. 308, 9 South. 157; Judge v. Wilkins, 19 Ala. 765; Stephenson v. Hawkins, 67 Cal. 106, 7 Pac. 198; White v. Walker, 5 Fla. 478; Chaires v. Brady, 10 Fla. 133; Hoyle v. Southern Saw Works, 105 Ga. 123, 31 S. E. 137; Adams v. Peabody Coal Co., 230 Ill. 469, 82 N. E. 645; Brown v. Budd, 2 Ind. 442; Wallaces v. Marshall, 9 B. Mon. (Ky.) 148; Lee v. Lee, 2 Duv. (Ky.) 134; Stewart v. State, 2 Har. & G. (Md.) 114; Hays v. Hollis, 8 Gill (Md.) 357; Holmes v. Fresh, 9 Mo. 201; Hanson v. Neal, 215 Mo. 256, 114 S. W. 1073; Powers v. Hale, 25 N. H. 145; Wintermute v. Snyder, 3 N. J. Eq. 489; Weber v. Weitling, 18 N. J. Eq. 441; Shotwell v. Shotwell, 24 N. J. Eq. 378; Leonard v. Southern Power Co., 155 N. C. 10, 70 S. E. 1061; Hodges v. Wilson, 165 N. C. 323, 81 S. E. 340; Knobb V. Lindsay, 5 Ohio, 468; Lewis v. Allen, 42 Okl. 584, 142 Pac. 384; In re Stevens, 14 Wkly. Notes Cas. (Pa.) 488; Whitefield v. McLeod, 2 Bay (S. C.) 380, 1 Am. Dec. 650; Coffee v. Ruffin, 4 Cold. (Tenn.) 487; White v. Flora, 2 Overt. (Tenn.) 426; Moore v. Lowery, 27 Tex. 541; Harrington v. Wells, 12 Vt. 505; Matthews v. Crockett, 82 Va. 394; Forde v. Herron, 4 Munf. (Va.) 316; Brachan v. Griffin, 3 Call (Va.) 433.

ground of the inadequacy, but on the ground of the fraud. But taken by itself and in cases where it is not so extreme as to be revolting to a conscientious person, inadequacy of the consideration is not a ground on which a party to a contract can successfully invoke the aid of a court of equity. Thus, for instance, the fact that land is worth only one-half or one-third as much as a purchaser agreed to pay for it is not, standing alone, a sufficient reason in equity why he should be released from the performance of his contract. Again, one who contracted to do public printing at rates less than those allowed by statute cannot repudiate the contract and recover the statutory rates, on the ground that a contract for performance for less than the lawful rate is without consideration or that the rate he agreed to accept is inadequate. So where plaintiff and defendant entered into a contract to exchange property upon terms to be fixed by arbitrators appointed by the parties, it was held that the contract would not be set aside in favor of one party for inadequacy of consideration, neither the other party nor the arbitrators having been guilty of any fraud. And mere inadequacy of consideration is not ground for relief to claimants under an outstanding unrecorded title, seeking to set aside a deed by their grantor of record to a subsequent purchaser. These principles apply also to settlements and deeds of trust. Thus, a conveyance of realty by an aged husband and wife, in consideration that the grantee will care for them for the remainder of their lives, will not be set aside on the ground of fraud and undue influence in procuring it, where it appears that they fully understood the transaction, and the inadequacy of the consideration is the sole established fact calculated in any way to bring in question the fairness of the transaction. The rule is likewise applicable in the case of public sales as well as private sales. For instance, a sale of land for delinquent taxes will not be

5

2 Peak v. Gore, 94 Ky. 533, 23 S. W. 356; Johnson v. Thornton, 54 Iowa, 144, 6 N. W. 165.

3 Quigley v. Sumner County Com'rs, 24 Kan. 293.

4 Kidder v. Chamberlin, 41 Vt. 62.

5 Booker v. Booker, 208 Ill. 529, 70 N. E. 709, 100 Am. St. Rep. 250.

6 Talbott's Devisees v. Hooser, 12 Bush (Ky.) 408.

set aside for mere inadequacy of the price,' nor a sale under decree of court or other judicial sale.

While, on the one hand, inadequacy of consideration may make a strong case for equitable relief when combined with circumstances showing fraud, trickery, or overreaching, yet, on the other hand, the rule against granting relief on this ground alone applies so much the more strongly when the evidence shows that the party complaining entered into the transaction deliberately and with a full appreciation of what he was doing, and expressed himself as satisfied with it. And so also, where he knew that the transaction was highly speculative, and took what is sometimes called a "chancing bargain," balancing the chance of large profit against that of serious loss, he will not be heard to complain that he has not received an equivalent for what he gave.10 For example, where a buyer who was competent to judge for himself bought a new invention, giving his notes for the price, the failure of the speculation does not entitle him to rescind the contract on the ground of inadequacy of consideration, especially where he acquiesced in it for a considerable time and paid one of the notes.11 In a case in Wisconsin, the subject of the sale was an uncut. diamond worth several hundred dollars. Neither party knew what it was, and it was sold for one dollar. It was held that the sale could not be set aside for the mere inadequacy of the price, there being no fraud practised.12 But where a bill was filed to annul a sale of county school property, made by the county board of public instruction, on the ground that the price received was inadequate and the board violated their trust in not trying to get a better price, it was held that a decree should be given for the defendants,

7 Rothchild v. Rollinger, 32 Wash. 307, 73 Pac. 367; State v. Sargent, 12 Mo. App. 229.

8 See, infra, § 453.

» Shepherd v. Turner, 29 Ky. Law Rep. 1241, 97 S. W. 41.

10 Breckenridge v. Waters, 5 T. B. Mon. (Ky.) 150, 17 Am. Dec. 46; Dowdall v. Lenox, 2 Edw. Ch. (N. Y.) 267.

11 Lowber v. Selden, 11 How. Prac. (N. Y.) 526.

12 Wood v. Boynton, 64 Wis. 265, 25 N. W. 42, 54 Am. Rep. 610.

where the complainant failed to show that the price paid was not a fair market price.13

§ 170. Improvident Sales or Contracts.-It is not a sufficient reason for rescinding a contract that it has proved, or has become, more burdensome in its operation upon the complaining party than was anticipated. "If it be indeed. unequal now, if it has become unconscionable, that might possibly be a reason why a court should refuse to decree its specific performance, but it has nothing to do with the question whether it should be ordered to be canceled. It is not the province of a court of equity to undo a bargain because it is hard." 14 Hence it is a general rule that if a party enters into a contract or any other legal transaction with sufficient mental capacity to understand it, and not under the influence of fraud, coercion, or imposition, the courts will not relieve him of the consequences of his act on the sole ground that the bargain is, as to him, improvident, rash, foolish, or oppressive.15 In other words, where a bill in equity is brought for relief against a sale (or other contract) if there are no suspicious circumstances connected with the transaction, and nothing in the relations of the

13 Special Tax School Dist. v. Dade County Board of Public Instruction, 61 Fla. 798, 54 South. 265.

14 Marble Co. v. Ripley, 10 Wall. 339, 356, 19 L. Ed. 955. 15 Martinez v. Moll (C. C.) 46 Fed. 724; Sheldon v. Birmingham Building & Loan Ass'n, 121 Ala. 278, 25 South. 820; Sellers v. Knight, 185 Ala. 96, 64 South. 329; Capital Security Co. v. Holland, 6 Ala. App. 197, 60 South. 495; Town of Southington v. Southington Water Co., 80 Conn. 646, 69 Atl. 1023, 13 Ann. Cas. 411; Wiest v. Garman, 3 Del. Ch. 422; Stephens v. Orman, 10 Fla. 9; Mitchell v. Mason, 65 Fla. 208, 61 South. 579; Equitable Loan & Security Co. v. Waring, 117 Ga. 599, 44 S. E. 320, 62 L. R. A. 93, 97 Am. St. Rep. 177; Ross v. Gimball, T. U. P. Charlt. (Ga.) 268, 4 Am. Dec. 711; Federal Life Ins. Co. v. Griffin, 173 Ill. App. 5; Mechanics' & Traders' Savings, Loan & Building Ass'n v. Vierling, 66 Ill. App. 621; Birke v. Abbott, 103 Ind. 1, 1 N. E. 485, 53 Am. Rep. 474; Goodwin v. White, 59 Md. 503; Bowker v. Torrey, 211 Mass. 282, 97 N. E. 770; Butterfield Lumber Co. v. Guy, 92 Miss. 361, 46 South. 78, 15 L. R. A. (N. S.) 1123, 131 Am. St. Rep. 540; Jones v. Stewart, 62 Neb. 207, 87 N. W. 12; Holland v. John, 60 N. J. Eq. 435, 46 Atl. 172; Coster v. Griswold, 4 Edw. Ch. (N. Y.) 364; Green v. Thompson, 37 N. C. 365; Hunter v. Goudy, 1 Ohio, 449; Powers v. Powers, 46 Or. 479, 80 Pac. 1058; Graham v. Pancoast, 30 Pa. 89; Kester v. Bahr, 1 Kulp (Pa.) 262. But compare McKnatt v. McKnatt (Del. Ch.) 93 Atl. 367.

parties which renders it inequitable for the purchaser to retain his bargain, it is not enough to induce a court of equity to interfere that the bargain was improvident on the one side, or hard and unreasonable on the other side, or the price inadequate.16 "The value of a thing is what it will produce, and it admits of no precise standard. One man may sell his property for less than another would. He may sell under the pressure of circumstances which may make a smaller price more beneficial than a greater would have been under different circumstances. If courts of equity were to unravel all these transactions, they would throw everything into confusion and set afloat the contracts of mankind." 17 In another case it was said: "We are clearly of the opinion that the plaintiffs failed to establish the allegations in the complaint and make a case warranting a decree of rescission. There can be no doubt that the plaintiffs paid more than the value of the property (if the evidence is reliable), and the transaction may be financially disastrous, but courts cannot relieve against the carelessness, inattention, or self-deception of parties. A failure in a speculation does not constitute ground for relief." 18 The courts are not authorized to declare contract void because it may be foolish, and a person who, with his eyes open, purchases property for a sum greatly exceeding its value, cannot obtain relief in equity on that account.2

19

20

While anything like fraud, when added to inadequacy of consideration, will give the injured party a claim to the favorable attention of equity, yet when parties deal with each other at arms' length in business transactions, courts will not relieve against improvident contracts though they were induced by arts and tricks of trade.21 And for even stronger reasons, the fact that a party made a hard or losing bargain will be no ground for setting aside the contract, when he entered into the transaction intelligently, advised

16 Dunn v. Chambers, 4 Barb. (N. Y.) 376.

17 Griffith v. Spratley, 1 Cox, 383.

18 Wheeler v. Dunn, 13 Colo. 428, 22 Pac. 827.

19 Equitable Loan & Security Co. v. Waring, 117 Ga. 599, 44 S. E. 320, 62 L. R. A. 93, 97 Am. St. Rep. 177.

20 Marshall v. Billingsly, 7 Ind. 250.

21 Storthz v. Crusoe, 88 Ark. 615, 113 S. W. 1015.