Book contents
- Frontmatter
- Contents
- List of contributors
- Introduction: conceptualising unconscionability in Europe
- PART I Conceptualising unconscionability
- PART II Conceptualising unconscionability in financial transactions
- 8 Usury and the judicial regulation of financial transactions in seventeenth- and eighteenth-century England
- 9 Protection of the vulnerable in financial transactions – what the common law vitiating factors can do for you
- 10 Borrowers as consumers: new notions of unconscionability for domestic borrowers
- 11 Conceptualising and understanding fairness: lessons from and for financial services
- 12 Open the box: an exploration of the Financial Services Authority's model of fairness in consumer financial transactions
- 13 Conceptualising unconscionability in the context of risky financial transactions: how to converge public and private law approaches?
- 14 Conceptualising unconscionability in the post-Soviet era: the Lithuanian case of legal transplants
- 15 Bank loan contracts in Polish law: the legal position of the borrower
- 16 Financial contracts and ‘junk title’ purchases: a matter of (in)correct information
- 17 Kickback payments under MiFID: substantive or procedural standard of unconscionability?
- 18 Unfairness under the Consumer Protection from Unfair Trading Regulations 2008
- Conclusions
- Index
- References
16 - Financial contracts and ‘junk title’ purchases: a matter of (in)correct information
from PART II - Conceptualising unconscionability in financial transactions
Published online by Cambridge University Press: 06 August 2010
Book contents
- Frontmatter
- Contents
- List of contributors
- Introduction: conceptualising unconscionability in Europe
- PART I Conceptualising unconscionability
- PART II Conceptualising unconscionability in financial transactions
- 8 Usury and the judicial regulation of financial transactions in seventeenth- and eighteenth-century England
- 9 Protection of the vulnerable in financial transactions – what the common law vitiating factors can do for you
- 10 Borrowers as consumers: new notions of unconscionability for domestic borrowers
- 11 Conceptualising and understanding fairness: lessons from and for financial services
- 12 Open the box: an exploration of the Financial Services Authority's model of fairness in consumer financial transactions
- 13 Conceptualising unconscionability in the context of risky financial transactions: how to converge public and private law approaches?
- 14 Conceptualising unconscionability in the post-Soviet era: the Lithuanian case of legal transplants
- 15 Bank loan contracts in Polish law: the legal position of the borrower
- 16 Financial contracts and ‘junk title’ purchases: a matter of (in)correct information
- 17 Kickback payments under MiFID: substantive or procedural standard of unconscionability?
- 18 Unfairness under the Consumer Protection from Unfair Trading Regulations 2008
- Conclusions
- Index
- References
Summary
Introduction
Financial contracts are mainly characterised by inherent risks undertaken by both parties. Investors in particular should never expect that contracts for the purchase of bonds or other financial titles would be subject to the rule (if any) of ‘adequacy of consideration’. Although issues like ‘contractual unconscionability’ are rarely discussed in relation to these types of contract, the economic balance of a financial contract might become a relevant issue for a court when the ‘consideration’ exchanged is striking in its unfairness. This was demonstrated in a case of ‘bad loans’ tendered by a Southern Italian bank: the transaction concerned loans subject to the purchase of ‘atypic’ titles – those which are expressly created and issued by the bank and unknown to the financial market – as well as the purchase of shares in mutual funds. The consideration for the loan charged to investors consisted of a 6.8 per cent interest rate. The overall economic aim of the financial transaction consisted of inducing investors to borrow money from the bank in order to purchase ‘atypic’ titles (named: ‘4 you’) issued by the lending bank itself; the loan would have a high interest rate (6.8 per cent per year), exceeding the titles' output. Once the titles proved to be false in their face value, investors sued for damages and the judge struck down the loan agreement on the basis of its ‘total failure of consideration’.
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- Unconscionability in European Private Financial TransactionsProtecting the Vulnerable, pp. 308 - 325Publisher: Cambridge University PressPrint publication year: 2010
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