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.
The unconscionable contract has already been discussed from the standpoint of constructive fraud and undue influence in equity.1 It may be noted here that the same doctrine has been applied by some courts of law - namely, that one class of fraud is "apparent from the intrinsic nature and subject of the bargain itself, such as no man in his senses would make on the one hand, and as no honest and fair man would accept on the other, which are unequitable and unconscientious bargains, and of such even the common law has taken notice";3 and that "if a contract be unreasonable and unconscionable, but not void for fraud, a court of law will give to the party who sues for its breach damages, not according to its letter, but only such as he is equitably entitled to."4 Some of the earlier cases have become classic. Thus in James v. Morgan,5 the contract was to pay for a horse at the rate of "a barleycorn a nail, doubling it every nail," which came to five hundred quarters of barley. The judge, Sir Robert Hyde, directed the jury to give the value of the horse as damages. In Thornborough v. Whiteacre,6 the contract sued on was that in consideration of two shillings and sixpence paid down, and four pounds, seventeen shillings and sixpence to be paid when the contract was performed, the defendant promised to give to the plaintiff two grains of rye corn on a certain Monday and double it successively on each Monday for a year. The total amount to be delivered was five hundred twenty-four million, two hundred eighty-eight thousand quarters of rye. Instead of pleading fraud the defendant demurred to the declaration. The court said that though the contract was a foolish one, the defendant ought to pay something for his folly; and so defend-ant's counsel, "perceiving the opinion of the court to be against his client, offered the plaintiff his half crown and his cost, which was accepted of, and so no judgment was given in the case." To turn to more modern examples, in Hume v. United States,7 the government prepared specifications for bids in which shucks were to be bid at so much per pound instead of per hundredweight, as was customary and intended. A inserted sixty cents opposite this item, and thus bid sixty cents a pound for shucks that were then worth thirty-five dollars a ton. The contract was awarded to him, but the officers refused to pay the contract price. He sued in the court of claims, and was allowed only the market price;8 and this judgment was affirmed by the supreme court, with the remark that "there may be contracts so extortionate and unconscionable on their face as to raise the presumption of fraud in their inception, or at least to require but slight additional evidence to justify such presumption. In such cases the natural and irresistible inference of fraud is as efficacious to maintain the defense at law as to sustain an application for affirmative relief in equity."9 The ground on which most of the cases here cited are based is fraud or mistake. Similar results have been reached on the theory of public policy. Contracts made by municipal corporations have been explained on this theory. Thus a contract to give an attorney one-third of the revenue of a ferry for twenty years, amounting to about three thousand dollars a year, for perfecting the city's title to lots worth about one hundred fifty dollars, was held void as being unreasonable and contrary to public policy.10 So a contract employing attorneys to acquire a town-site patent, under an agreement to pay them ten dollars for each lot or parcel sold and conveyed under the patent, has been held invalid, as indefinite in that there was no limitation as to the size or number of the lots, and because the lots might be made so small and so numerous that the contract might be unreasonable and unconscionable.11 Other cases are decided upon grounds akin to duress and undue influence. If a promise is supported by a consideration so inadequate that "the mind revolts at the enforcement of such a promise," the courts will "seize upon the slightest act of oppression or advantage to set at naught a promise thus obtained."12 A married woman, A, and her husband, B, had assigned an insurance policy on B's life to X for value. At maturity the insurers refused to pay the policy unless A's name were indorsed thereon; and A refused so to indorse it until X agreed in writing to pay A five hundred dollars. A subsequently brought suit on this contract. It was held that she could not recover.13
28 Church v. Spicer, 85 Conn. 579, 83 Atl. 1115; Carlson v. Ehrell, 128 Minn. 440, 151 N. W. 188; Trenton Street Ry. Co. v. Lawlor, 74 N. J. Eq. 828, 71 Atl 234; Grandin v. Grandin, 49 N. J. L. 508, 60 Am. Rep. 642, 9 Atl. 756.
29 Jacobs v. Wisconsin Nat. Life Insurance Co., 162 Wis. 318, 156 N. W. 159.
30 Ga Nun v. Palmer, 216 N. Y. 603, 111 N. E. 223.
31 Diehl v. McKinnon, 173 la. 32, L. R. A. 1916C, 384, 155 N. W. 259.
1 See Sec. 465 et seq.
2 Thorn borough v. Whiteacre, 6 Mod. 305 [s. c, sub nomine, Thornborow v. Whitacre, 2 Ld. Raym. 1164]; James v. Morgan, 1 Lev. Ill; Hume v. United States, 132 U. S. 406, 33 L. ed. 393; Leland v. Stone, 10 Mass. 459; Water-bury v. Laredo, 68 Tex. 565, 5 S. W. 81.
3Chesterfield v. Janssen, 2 Ves. Sr. 125, 155. (An opinion in equity consisting chiefly of much-quoted obiters, citing as to the common law, James v. Morgan, 1 Lev. 111.)
4 Scott v. United States, 79 U. S. (12 Wall.) 443, 445, 20 L. ed. 438.
5I Lev. 111.
6 6 Mod. 305 [s. c, sub nomine, Thornborow v. Whitacre, 2 Ld. Raym. 1164].
7 132 U. S. 406, 33 L. ed. 393.
8 Hume v. United States, 21 Ct. CI. 328.
9 Hume v. United States, 132 U. S. 406, 414, 33 L. ed. 393. The facte strongly suggest that it was a case of mistake in expression by one party known to the other, as in Moses v. Butler, 43 O. S. 166. See Sec. 280.