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This chapter examines the investigating techniques employed by the borrowers for identifying and selecting lenders and vice versa in creating credit relationships and transactions. It examines the terms and conditions agreed upon by creditors and lenders in their credit transactions. It discusses the quantity of the credit extended in the fourteenth-century in terms of its overall value and the average size of individual credit. It also discusses the exploitation and expropriation of the debtors through high levels of interest, loss of land, and pledging of properties in connection with the debts. The chapter also tackles the formation of credit contracts and their terms and conditions, including their effects on mobilization of capital within the creditors, the debtors, and the community as a whole.

Companies and, in particular, individuals in financial difficulties may suffer from an inequality of bargaining power with lenders. Unscrupulous lenders may exploit the debtor’s need for cash by demanding an excessive credit rate, fee, or equity. Debtors may be left with little choice but to comply if other lenders refuse to give them credit. Naturally, a high credit rate may be justified as a potential debtor with financial difficulties may be regarded as a credit risk; however, the rate charged may go far beyond that which would reflect this risk. In these circumstances, the lender is getting far more than he would have been able to obtain if the rate or terms of the transaction had been entered into fairly. This may be seen to disadvantage other creditors who have been reasonable in their dealings with the debtor. The legislation accordingly provides for such transactions to be adjusted, on grounds that they constitute extortionate credit transactions.

As an alternative, or in addition, to the avoidance provisions available under the Insolvency Act 1986 a transaction may, in an appropriate case, be challenged under provisions of the Companies Act 2006 as a transaction exceeding constitutional limitations. Other directors’ duties may also be raised in an action, such as the duty to act in good faith to promote the success of the company.

Laws dealing with the problem of debt avoidance were a feature of English law long before the enactment of laws providing for insolvency proceedings. Thus an enactment in 1376, during the reign of Edward III, provided that property given by debtors to friendly third parties remained available to be taken in execution by the debtor’s creditors, whereas the founding statute providing for a bankruptcy law was not enacted until 1542, during the reign of Henry VIII. This illustrates a point which remains equally true today, namely that transaction avoidance overlaps with insolvency law but can go wider. For example section 423, dealing with transactions defrauding creditors, can be invoked by a victim of the transaction even though no insolvency proceedings are taking place.

Baudelaire's disinterest in money, and his hatred of greed and profiteering, are complicated by his love of beautiful things. After the mid-1850s, Baudelaire often wrote to his mother to say that he was paying dearly (literally) for his love of things and his earlier extravagant expenditures. The consequences of financial expenditure are concretized in Balzac's La peau de chagrin, a novel that Baudelaire mentions more than once. In that tale, a young man finds a magic shagreen that grants wishes. But every wish makes the skin shrink. Once divested of the control of his money, Baudelaire falls into debt through endless credit transactions. He rarely keeps his side of the bargain until the creditor becomes so threatening that Baudelaire resorts to begging for small amounts of cash from his mother. In his letters to his mother, he begs through emotional extortion (he is sick, has no coat, no heat, nowhere to live).

The avoidance system applicable in Scotland differs in a number of respects from that applicable in England and Wales. The most striking difference is that in Scotland transaction avoidance laws appear both in statute and at common law. In addition, the avoidance laws in Scotland are different in content from those in England and Wales, although the underlying aims of each are broadly similar.