...and I believe that many of these subprime mortgages violated the inherent principle of good faith that is a part of contract law (emphasis mine in the citations below):
http://www.expertlaw.com/library/business/contract_law.htmlGood Faith
It is implicit within all contracts that the parties are acting in good faith. For example, if the seller of a "mustang" knows that the buyer thinks he is purchasing a car, but secretly intends to sell the buyer a horse, the seller is not acting in good faith and the contract will not be enforceable.
http://www.lawteacher.net/contract-law/essays/good-faith-contract-essay.phpThe notion of good faith
The notion of good faith undoubtedly pervades English law, but there is no single recognised doctrine of general application. The law is generally ready to strike against instances of bad faith: for example where lies are told in pre-contractual negotiations
and where the weak are exploited or pressurised the application of concepts of contract law will make such contracts void or voidable.
http://www.bowne.com/securitiesconnect/details.asp?storyID=1900Necessity's child. To mitigate the result in Smith v. Van Gorkom (1985), Delaware enacted General Corporation Law Section 102(b)(7), thereby permitting a corporation to avoid monetary liability for its directors' breach of the duty of care. Plaintiffs in factually appealing cases, writes corporate law attorney and professor Mark Loewenstein, then began urging courts to analyze directors' actions under
the duty of good faith. This concept—derived from contract theory but applied to the corporate fiduciary context—is useful from a plaintiff/shareholder's standpoint: like the duty of loyalty, it cannot be waived. In In re Caremark International Inc. Derivative Litigation (1996), the chancery court remarked that a board's abdication of its responsibility to stay informed (in Caremark, by failing to adopt any kind of information reporting system) would demonstrate a lack of good faith.