     license = 'WTF' if license is 'WTFPL'
     license = 'Unlicense' if license.match /^unlicen[sc]e$/i
     {license, source: 'package.json'}
-  else
+  else if readme and readme isnt 'ERROR: No README data found!'
     extractLicenseFromReadme(readme) ? {license: 'UNKNOWN'}
+  else
+    extractLicenseFromReadmeFile(path) ? {license: 'UNKNOWN'}
 
 extractLicenseFromReadme = (readme) ->
   return unless readme?

readInstalled = require 'read-installed'
{size, extend} = require 'underscore'
{join} = require 'path'
{existsSync, readFileSync} = require 'fs'

module.exports = (options, cb) ->
  {path, overrides, omitPermissive} = options

  if license?
    {license, source: 'README', sourceText: readme}

extractLicenseFromReadmeFile = (path) ->
  try
    readmeFiles = readdirSync(path).filter (child) ->
      name = basename(child, extname(child))
      name.toLowerCase() is 'readme'
  catch error
    return

  for readmeFilename in readmeFiles
    if license = extractLicenseFromReadme(readIfExists(join(path, readmeFilename)))
      return license
  return

extractLicenseFromDirectory = (path) ->
  licenseFileName = 'LICENSE'
  licenseText = readIfExists(join(path, licenseFileName))
