Unconscionability in European Private Financial Transactions: Protecting the Vulnerable

Cover......Page 1
Half-title......Page 3
Unconscionability in European Private Financial Transactions: Protecting the Vulnerable......Page 5
Copyright......Page 6
Contents......Page 7
Contributors......Page 10
Introduction: conceptualising unconscionability in Europe......Page 13
Part I: Conceptualising unconscionability......Page 17
Freedom of contract: from the form to the substance......Page 19
Germany......Page 21
Slovenia......Page 25
Greece......Page 27
The Netherlands......Page 29
Substantive freedom of contract and the horizontal effect of fundamental rights......Page 30
Italy......Page 31
France......Page 33
Poland......Page 35
Substantive freedom of contract as a common European fundamental right?......Page 36
2 Protection of weaker parties in English law......Page 38
Relief against forfeiture......Page 41
Penalties......Page 43
Undue influence......Page 44
Unconscionable transactions......Page 45
Consumer credit......Page 46
Lenders and third parties......Page 47
Conceptualising unconscionability......Page 48
Freedom of contract and the interpretation of the good faith clause in the Spanish Civil Code of 1889......Page 58
Imbalance between parties and limits to the freedom of contract......Page 61
1908 Act for the Repression of Usury: The first attempt at regulating in favour of the weaker party......Page 62
The consumer as nonxpert in mass contracting: the institutional role of the weaker party......Page 65
Standard contract terms and unfairness in consumer contracts......Page 67
Unfair terms related to financial services: rounding up mortgage interest......Page 69
Conclusion......Page 71
Introduction......Page 74
Some existing tools by which French law combats contractual unfairness......Page 75
The influence of loyalty on the development of la reticence dolosive to combat contractual unfairness......Page 79
Loyalty as a tool for the courts to combat unfairness in the context of la reticence dolosive......Page 80
The resurrection of the old debate of fairness v sanctity of contract......Page 85
Conclusion......Page 89
Some threshold difficulties......Page 91
Five-plus-one accounts of unconscionability......Page 94
The value of choice......Page 101
Conclusion......Page 109
1. Introduction......Page 111
2. Macneil\'s relational theory and the critique of neo-classical contract law......Page 112
a) The implications of relational theory beyond long-term contracts......Page 113
b) Unconscionability and the critique of neo-classical contract law......Page 116
3. Two models of unconscionability......Page 119
(a) Individual conduct model......Page 120
(b) Contractual risk model......Page 121
(i) Personal characteristic risk......Page 122
(ii) Relational risk......Page 124
(iii) Transactional risk......Page 125
4. The treatment of non-commercial sureties: the emergence of transactional risk from undue influence......Page 127
(a) The approach in Barclays Bank v. O\'Brien and Royal Bank of Scotland v. Etridge (No. 2)......Page 128
(b) The distinctiveness of the Etridge solution......Page 129
(c) The attenuated role of wrongdoing......Page 132
(d) Transactional risk and regulation......Page 133
(a) The nature and incidence of transactional risk......Page 134
(b) Transactional risk and rationales of unconscionability......Page 138
6. Conclusion......Page 139
1. Introduction......Page 141
2. Economic debates on the doctrine of unconscionability......Page 144
(a) The remedy of damages......Page 148
(b) Invalidation of contract......Page 150
(c) The remedy of rescission......Page 152
(d) Judicial modification of the unconscionable term......Page 153
4. Conclusion......Page 154
Part II: Conceptualising unconscionability in financial transactions......Page 157
The usury laws: the changing face of statutory regulation......Page 159
Annuities for the life of the seller: a case study in statutory avoidance......Page 164
Why equity intervened and early attempts at relief......Page 166
Earl of Chesterfield v. Janssen: structuring relief in equity......Page 171
The end of the usury laws......Page 176
Introduction......Page 178
Mistake......Page 180
Misrepresentation......Page 182
Duress......Page 184
Actual undue influence......Page 186
Presumed undue influence......Page 187
Third party undue influence......Page 190
Unconscionable dealing......Page 192
Conclusion......Page 194
Introduction......Page 196
The statutory overview......Page 197
The divided market......Page 198
Other distinctions and similarities......Page 199
Market regulation......Page 200
FSMA – Principles, codes and the MCOB......Page 202
CCA – Prescribed processes and unenforceability......Page 204
The Turner Review......Page 206
Unfair Terms Regulations......Page 207
Sections 140A–C Consumer Credit Act......Page 210
Borrower redress......Page 211
Enforcement of mortgages......Page 212
Conclusion......Page 215
Introducing fairness......Page 217
General statutory provisions on fairness: unfair terms......Page 218
General statutory provisions on fairness: fairness and commercial practices......Page 219
Unfair relationships and consumer credit......Page 220
Fairness and self-regulation: the Banking Code......Page 221
Fairness and the Financial Ombudsman Service......Page 222
Fairness and the FSA: treating customers fairly (TCF)......Page 223
The Financial Services Authority\'s view of treating customers fairly......Page 224
Towards understanding fairness......Page 225
Information......Page 226
Information asymmetry and disclosure......Page 227
False and misleading information and the vulnerable consumer......Page 228
Suitability......Page 230
Pressure......Page 232
Expectation......Page 233
Discrimination......Page 235
Post-sale conduct and redress......Page 236
Conclusions......Page 237
Introduction......Page 239
Rationale for fairness regulation......Page 241
1. The development of TCF......Page 243
2. The requirements of TCF......Page 247
1. Systemic risks and the FSA\'s presumption of unfairness: Land of Leather May 2008......Page 250
2. The FSA\'s expectations of compliant outcomes: GE Capital Bank January 2007......Page 252
3. Misselling unsuitable products: HFC Bank Ltd 16 January 2008......Page 254
Conclusion......Page 255
1. Introduction......Page 258
2.1 Protecting the vulnerable in financial transactions by means of fundamental rights: the Bürgschaft case......Page 261
2.2 The complexity of conceptualising unconscionability by means of fundamental rights......Page 263
2.3 Is there a need to shift the emphasis from private law to fundamental rights?......Page 268
2.4 The role of fundamental rights in conceptualising unconscionability: a plea for the weak indirect horizontal effect......Page 271
3.1 Protecting the vulnerable in financial transactions by means of conduct of business rules......Page 274
3.2 The shift in focus from private law standards to conduct of business rules......Page 278
3.3 The pros and cons of the leading role of conduct of business rules in conceptualising unconscionability......Page 280
3.4 The need for a coherent body of contract law rules for financial service contracts......Page 284
4. Concluding remarks......Page 285
14 Conceptualising unconscionability in the post-Soviet era: the Lithuanian case of legal transplants......Page 287
Unconscionability in the context of Lithuanian reform of private law......Page 288
The principle of good faith......Page 290
The concept of gross disparity......Page 294
Standard term contracts......Page 295
Legal basis for invalidation of financial contracts......Page 297
Conclusions......Page 300
Introduction......Page 301
The bank loan (credit) contract......Page 302
The means of securing a bank loan......Page 304
Mortgages as instruments of securing a bank loan......Page 308
The legal position of the borrowers heirs......Page 313
Unfair contract terms (abusive clauses)......Page 315
Conclusions......Page 317
Introduction......Page 320
The roles of subjects in financial products placement......Page 322
Legal issues after (mis)information is provided......Page 326
Conclusions......Page 336
Kickback payments......Page 338
Conflicts of interest......Page 339
(b) A customers claim to have kickback payments reimbursed?......Page 340
Hidden costs......Page 341
The investor as a consumer – or: what is not the problem......Page 342
The MiFID inducement regime......Page 343
Fees paid by or on behalf of the client......Page 345
(a) Disclosure......Page 346
(b) Quality improvement without impairment......Page 347
The German implementation of Directive 2006/73/EC......Page 349
A procedural or substantive approach to the inducement problem?......Page 351
(a) Information only of limited use for the client......Page 352
(b) Conflict of interest management at the bank......Page 354
Consequences for the law on inducements......Page 355
Room for more radical solutions?......Page 356
Conclusions......Page 360
1 Introduction......Page 362
2. Coverage, regulatory context and the general notion of unfairness......Page 363
(i) Introduction – misleading actions......Page 365
(ii) Misleading omissions......Page 366
(i) Introduction......Page 370
(ii) Aggression, choice and informed decision making......Page 372
(iii) Aggression, choice and substance......Page 376
5. Consumer benchmarks......Page 379
6. Concluding comments......Page 383
Conclusions......Page 387
1. Introduction......Page 389
Public vs. private, common law vs. civil law?......Page 391
Constitutionalisation......Page 393
Constitutionalisation and harmonisation vs. regulation and codification......Page 396
Vulnerability......Page 398
Risk......Page 401
Responsibility......Page 405
4. Conclusions......Page 407
Polycontextualism in Unconscionability......Page 408
Spectral analysis......Page 409
A tripartite approach?......Page 410
Index......Page 412