This section is from the book "The Law Of Contracts", by William Herbert Page. Also available from Amazon: Commercial Contracts: A Practical Guide to Deals, Contracts, Agreements and Promises.
Inadequacy of consideration may be found in connection with circumstances of oppression which do not amount to technical duress; and the combination may justify a finding of undue influence.1 Thus a transaction entered into under great mental distress, caused by domestic calamity,2 or by threats made by a husband to his wife to take away her children so that she should never see them again,3 or by fear of a contest of her husband's will by his heirs, which could not affect the property in question,4 will be relieved against in equity. The propriety of relief is especially clear if under great mental distress due to the death of her husband, the person seeking relief is induced by threats of violence to relinquish a legacy given her by her husband's will for an inadequate and nominal consideration.5 So a transaction entered into for an inadequate consideration, by taking advantage of the financial necessities of the party seeking relief, will be relieved against in equity.6 "When a person is encumbered with debts and that fact is known to a person with whom he contracts, who avails himself of it to exact an unconscionable bargain, equity will relieve upon account of the advantage and hardship."7 Thus a pledgor agreed to pay par for certain bonds worth thirty cents on the dollar, in order to induce the pledgee to allow him to redeem certain stocks and bonds which were undoubtedly his, but which the pledgee refused to allow him to redeem on other terms. The pledgor was in such straightened circumstances that a delay for purposes of litigation would have caused his financial ruin. The contract was set aside in equity.8 So a quitclaim deed executed because the title deeds were withheld by the adversary party, who threatened to drive the grantors in the quitclaim deed from home, sue them, and ruin them financially, has been canceled in equity.9 A was in urgent need of money to take up an overdue mortgage debt. B agreed to lend him the necessary amount, two thousand, five hundred dollars, and also to lend him seven thousand, five hundred dollars more on good security; in consideration of which A agreed to repay the loans with interest, and further agreed to buy for twenty dollars an acre, five hundred ninety-three acres of land worth ten dollars an acre. The court rescinded the contract of sale and decreed that the mortgage should stand as security for the money loaned with interest.10 A sale of property, a mortgage on which is about to be foreclosed, for considerably less than its value, but for all that can be obtained for it in open market, has been upheld.11 Thus a contract by a legatee releasing rights given by will, entered into by reason of threats made by her brother and sister to contest the will and exhaust the estate, will not be enforced, specifically where the legatee was an ignorant woman and acted without any legal advice as to her rights.12 Relief will be given against a sale of a right of way caused by the threat of an agent of a railway company to institute proceedings in eminent domain if such right of way was not sold on his terms, such agent having in fact no authority to institute such proceedings;13 or a sale of land for an inadequately small consideration, together with vendee's representation that the deed under which he claims, which is really of no legal effect, gives him a paramount right to the property.14
17Odell v. Moss, 130 Cal. 352, 62 Pac. 555; Watkins v. Brant, 46 Wis. 419, 1 N. W. 82.
18Valbert v. Valbert, 282 111. 415, 118 N. E. 738; Drafahl v. Security Savings Bank, 132 la. 563, 107 N. W. 179.
19Soberanes v. Soberanes, 97 Cal. 140, 31 Pac. 910; Hester v. Sample, 95 la. 86, 63 N. W. 463. See also Valbert v. Valbert, 282 111. 415, 118 N. E. 738.
1 McLean v. Assurance Society, 100 Ind. 127, 50 Am. Rep. 779; Bruguier v. Pepin, 106 la. 432, 76 N. W. 808; Musick v. Fisher, 96 Ky. 15, 27 S. W. 812; Wolford v. Steele (Ky.), 84
S. W. 327; Hough v. Hunt, 2 Ohio 495, 15 Am. Dec. 569.
2 McLean v. Assurance Society, 100 Ind. 127, 50 Am. Rep. 779; Musick v. Fisher, 96 Ky. 15, 27 S. W. 812.
3 Kellogg v. Kellogg, 21 Colo. 181, 40 Pac. 358.
4 Bruguier v. Pepin, 106 la. 432, 76 N. W. 808.
5 Stewart v. Stewart, 30 Ky. (7 J. J. Mar.) 183, 23 Am. Dee. 396.
6 Macpherson v. McLean, 34 N. B. 361; Ritchie v. McMullen, 79 Fed. 522, 25 C. C. A. 500; Cobb v. Day, 106 Mo. 278, 17 S. W. 323; Hough v. Hunt, 2 Ohio 495, 15 Am. Dec. 569.
7 Hough v. Hunt, 2 Ohio 495, 15 Am. Dec. 569.
8 Ritchie v. McMullen, 79 Fed. 522, 25 C. C. A. 50.
9 Rothenbarger v. Rothenbarger, 111 Mo. 1, 19 S. W. 932.
10 Hough v. Hunt, 2 Ohio 495, 15 Am. Dec. 569.
11 Harrison v. Otley, 101 la. 652, 70
N. W. 724. (Sale for two-thirds of its value.) Doxtater v. Connell, 93 Wis. 113, 66 N. W. 1135.
12 Flummerfelt v. Flummerfelt, 51 N. J. Eq. 432, 26 Atl. 857.
13 Grand Rapids, G. H. & M. Ry. Co. v. Stevens, 143 Mich. 646, 107 N. W. 436.