Legal Definitions - catching bargain

A catching bargain refers to an agreement or contract that is so overwhelmingly unfair or exploitative that a court might refuse to enforce it. It typically involves one party taking severe advantage of another's vulnerability, inexperience, urgent need, or diminished capacity, leading to terms that are grossly disproportionate and unconscionable.

Here are some examples illustrating a catching bargain:

• Example 1: Exploiting Vulnerability

  An elderly individual, recently widowed and suffering from early-stage dementia, is approached by a distant acquaintance. The acquaintance convinces the vulnerable person to sell their valuable antique coin collection, appraised at $100,000, for a mere $5,000. The elderly person, due to their diminished mental capacity and recent emotional distress, does not fully understand the true value of the collection or the implications of the sale.

  This illustrates a catching bargain because the acquaintance took advantage of the elderly person's significant vulnerability and lack of understanding, resulting in a sale price that is grossly unfair and disproportionate to the actual value of the assets.

• Example 2: Predatory Lending

  A small business owner faces an unexpected financial crisis and urgently needs a loan to keep their business afloat. A lender, aware of the owner's desperate situation, offers a short-term loan with an annual interest rate of 250% and demands the business owner's personal home as collateral, even though the loan amount is relatively small compared to the home's value. The terms also include severe penalties for any missed payment, potentially leading to immediate foreclosure.

  This demonstrates a catching bargain because the lender exploited the business owner's urgent financial need to impose extremely harsh and unreasonable loan terms, including an exorbitant interest rate and disproportionate collateral, which are designed to be highly profitable for the lender at the borrower's severe detriment.

• Example 3: Unfair Talent Contract

  A young, aspiring musician, fresh out of music school and eager to launch their career, is offered a recording contract by a small, unknown label. The contract stipulates that the label will provide a small upfront payment of $2,000 but will own 90% of all future royalties from the musician's work for the next 20 years, including all publishing rights and master recordings. The musician, lacking legal advice and industry experience, signs the contract, unaware of how disproportionate these terms are compared to industry standards.

  This is an example of a catching bargain because the record label capitalized on the musician's inexperience and eagerness for a break, securing an overwhelmingly favorable deal for themselves that severely limits the musician's future earnings and control over their own creative work for a minimal initial investment.