Introduction

All of these elements of unfairness: duress, overreaching, undue influence, concealment, seem to have both objective & subjective elements to them… P must prove both.

  S 197‐198 §§ 12‐16

 
 

Even though a K may meet what's legally req'd of it to be enforceable:

Assent;

Consideration;

Compliance w/ SOF

 
 

Sometimes it's not legally enforceable b/c the law refuses to.

 
 

Typical examples:

Bargaining abuses in commercial society (harder to prove); lawless threats; outright fraud

 
 

The difficulty, esp w/ Ks in commerce, is to tell how-- and to what extent-- these Ks are unjust.

It might not even been what was bargained for but who was part of the bargain… Like underages or people that are otherwise legally unfit to K.

 
 

"Policing the Bargain" is a variety of mechanisms the law uses to deal w/ bargaining abuses.

• Status of the parties-- innate v. circumstantial
  

   
   

• Behavior of the parties-- how they bargained in fact. Treatment of duress illustrates this method. (How the law should deal w/ disparities in information or in the bargaining power b/n the parties)… duress falls here.
  

   
   

• Substance of the bargain-- "opprobrium" (public disgrace) = fraud… bargains that are egregiously lop-sided= not enforced & considered to be bad behavior. Here, exchanges of highly unequal advantage are commonly enforced: The courts will not inquire in to the adequacy of the consideration but have been known to find ways to treat particularly lop-sided bargains occasionally by employing the doctrine of consideration… the ends justify the means, sort of thinking.
  

   
   

Tools the court can use:

• Rescission for fraud-- a "venerable" court tool
  
• Strict construction of harsh terms-- a more "covert" technique used
  

   
   

   
   

Rationale of the court's use of power:

Moral conviction … "no court should be req'd to be the paymaster of thieves"

Courts are reluctant to enforce agreements that fail as value-incerasing exchanges

A bargain based on fraud or mistake, when unraveled, might reveal that the parties would not have entered into the agreement in the first place & the parties' joint welfare would be reduced by enforcement…. (This is a bit slippery)

 
 

Cts work closely w/ legislative bodies & administrative agencies in setting the proper conditions for effective bargaining. …Much of the attention of the legislators & administrative agencies lies in consumer protection. ("In this matter, it is a special challenge to disentangle concerns about status, behavior & substance.")

 
 

Unconscionability:

Bargains challenged on the grounds that they threaten the interests of the not just the individual parties but society @ large. …Courts are concerned here w/ Ks that violate specific laws AND the "amorphous" (shapeless) category of public policy. (This ties in the legislature again… requires judicial & legislative coordination to create public policy)

 
 

 
 

Key distinctions:

Void v. voidable

 
 

(a transaction is always void if it is NO sense the consensual act of the party…. )

 
 

• If a shot gun is pointed at someone's head & they sign knowing what the contract says, then it's consented to and therefore VOIDABLE.
  
• If a shot gun is pointed & someone signed w/o knowing what it said, then it's NOT consented to (there's no sense consenting) and the document is VOID. --these cases are rare.
  

Market stability reqs cts NOT to "void" Ks @ the drop of a hat.

 
 

 
 

Capacity of the parties

• Kiefer v. Fred Howe Motors, Inc.
  
• Ortellere v. Teachers' Retirement Bd.
  

Thursday, October 30, 2008

8:11 PM

 
 

One policing measure attends to the status of the parties.

 
 

In the strongest form, this measure disqualifies certain classes of ppl from committing themselves by K.

Ex:	Minors & married women & the mentally infirm

 
 

Status-based policing sometimes has a differing sources.

It's innate in the cases w/ minors who are understood to be too immature & inexperienced to K

It's circumstantial w/ consumers & the protections placed around them.

 
 

Two categories of incapacity:

Minority (aka "infancy") & mental infirmity

 
 

Intoxicated ppl: Lucy v. Zehmer…. In that case D was not intoxicated to the extent of being unable to comprehend the nature or consequences of the instrument he executed. … An older test says that a transaction that is rendered voidable b/c of the drunkeness of the parties must be been such as to have drowned reason, memory & judgment and to have impaired the mental faculties to sucha n extent as to render the party non compos mentis for the time being…. (basically dragging the party down to the incapacity level)

 
 

At common-law, married women did not have rights b/c of the legal consequences of marriage. The law recognized marriage as the merging of two ppl into one legal entity & stripped the woman of her rights… This contractual incapacity based on gender was used to justify other restrictions on women at the time like barring from the legal profession. Later, these restrictions were somewhat removed by "married women property statutes" which were enacted in the middle & late 19th century.

 
 

Sometimes these minority groups and women were regarded as "legal favorites" because of the large amount of legal protection the law afforded to them.

 
 

In the 1970s, the law lowered the age of majority from 21 to 18, causing a decrease in issues related to minors' incapacity.

Problems still arose w/ child actors & car sales.

More recently there are problems w/ capacity & minors related to CDs, electronics and other products…

 
 

 
 

Necessaries & minors rule:

Minors can disaffirm Ks for non necessaries… When goods or services that are considered "necessaries" have been supplied to a minor who can otherwise disaffirm an agreement to pay for them, they must be paid for at least to the extent of their reasonable value… (???)

 
 

A minor may disaffirm a K not only during the period of his minority but also w/n a rsble time after reaching the age of the majority. … Something about credit & minors who want to ditch their right of disaffirmance (p. 304)-- the continuous act of making credit payments shows an intent on the part of the minor to K. Cts will then enforce.

 
 

Upon disaffirming a K, a minor can get restitution of the payments already made to the seller but must return the goods to the seller to prevent unjust enrichment. … However, seller may still be at a loss b/c the good might be of less value b/c of wear.

Goal is to take the parties back to status quo ante.

 
 

But, the minor does not always have to "win." The court held in Scott Eden Mgmt v. Kavovit that "The minor is not entitled to be put in a position superior to such a one he would have occupied if he had never entered into his voidable transaction." Infancy is a privilege but it is NOT to be used as a sword & a shield (so just a shield? Or just one at a time?)

 
 

But, sometimes harm does happen to the seller. The courts held for a kid who had both bodywork & painting done on his car against the car shop, justified b/c the courts wanted to discourage such Ks.

"He who deals w/ a minor does so at his own peril"

 
 

To overcome, standard-form Ks often have a statement above the buyer's isgnature that the buyer is not a minor. If the buyer signs and it turns out to be untrue, this act of signing lays a predicate for an action by the seller for deceit in the event of a disaffirmance.

But this does not always prove all of the element s of deceit (what are they?) even w/ the minor's signed statement … (prove the minor knew he was lying…?)

 
 

 
 

Protecting the elderly is the new thing. Now, there are "class-based" enhanced penalties for ppl who harm the elderly. (Think hate crimes)

 
 

 
 

Kiefer v. Fred Howe Motors, Inc.

 
 

Parties:

P is a nearly 21 year old husband & father who bought a car

D is the seller of the car

 
 

Facts:

P bought the car a few months shy of his 21st birthday. When he bought the car, he signed a K that said: "I represent that I am 21 years of age or over & recognize that the dealer sells the above vehicle upon this representation." Soon after the purchase, major problems presented themselves w/ the car. P sought to return it after turning 21, D refused. P sued to recover the price, claiming that his K was voidable since he was a minor at the time he entered it.

 
 

PH:

Held for P in lower ct

D appealed

 
 

Issue on appeal:

Is this a voidable K b/c at the time P made it even though was just a minor by a hair.

 
 

Rules:

The general rule:

The K of a minor, other than for necessaries, is either void or voidable at minor's option. (Voidable is more accurate) The exceptions to the rule permitting disaffirmance are statutory or involve Ks which deal w/ duties imposed by law such as a K of marriage or an agreement to support an illegitimate child. This rule is NOT affected by the minor's status as emancipated or unemancipated.

 
 

D's argument on appeal:

Wants court to adopt a rule that an emancipated minor (like him) over 18 years of age should be made legally responsible for his Ks.

 
 

 
 

Analysis:

The underpinnings of the general rule were for the protection of the minor.

The immaturity of the minor (mind & experience) --->necessitates protection from his own bad judgment & from adults that would take advantage of that minor.

But in today's modern society, these underpinnings have lost some of its gloss… (snipe against kids acting like adults?)

 
 

There are many "paradoxes" (inconsistencies) with the way we treat age in our country. (go to war but not drink, marry but not k, drive a car but not buy one…)

 
 

The law is good, though. The minor must be able to disaffirm his Ks for non-necessities… Question is where to draw that line.

 
 

P should go to legislature to get his desired result, not us.

 
 

Three different approaches used to lead to greater freedom to K:

CA/NY (first approach):	Submit a proposed K to the courts which would remove the "infant's" right of disaffirmance upon a finding tha thte particular K was fair.
Won't work b/c	Extremely impractical. Expense & delay would overwhelm the courts

 
 

Second approach	Establish a 'rebuttal presumption' of incapacity to replace the strict rule
Won't work b/c	This would be an open invitation for litigation

 
 

Third approach

Statutory procedure that would allow a minor to petition a ct for the removal of disabilities. Here, a minor would only have to go to court once, not every time he wants to K

 
 

Yes, this "Infancy Doctrine" is a major hurdle when a major purchase is involved, but it's a viable doctrine & the reasons supporting it outweigh those for casting it aside.

Minors need some protection from the pitfalls of the market pace.

But rsble minds will different on where that line should be drawn.

 
 

Conclusion:

Makes a crack of the nonsense of a young marriage but does not budge. A line should be drawn somewhere but this should be decided by the legislature, not the courts. Affirmed -- K is voidable. Here, P had the opportunity NOT to disaffirm the K if he didn't want to… Gives the minor some discretion.

 
 

For the court to adopt a rule that removes the K disabilities from a minor simply b/c he is married would suggest that the married minor is somehow vested w/ more wisdom & maturity than his single counterpart. It is likely that the converse is true...

 
 

Dissent:

J Hallows. A car is a major purchase… The age of 21 does not have any basis in fact or public policy. The car was not a "non necessity" … he's a parent that needs to get to work.

This dissent finds a way to enforce the K without making an exception to the rule w/o making a sweeping policy change.

 
 

Q:	Should it matter that P lied to D about his aage when he made the K? Should he have been estopped from disaffirming the K b/c he lied?
A:

 
 

 
 

 
 

 
 

Ortellere v. Teachers' Retirement Bd.

 
 

Parties:

X is school teacher who went "nuts"

P is X's surviving husband

D is school retirement system

 
 

Facts

A few months b/f her death, X took out a big loan & "upped" her monthly checks from her retirement account w/o telling her husband, pretty much draining it & leaving nothing in there for the husband after she died. P sues saying D should have known the bitch was crazy. Psychiatrist testified at trial that she was incapable of making rational decisions… "Involuntional melacholia"

 
 

Lower ct holds for P;

D appealed.

App ct held for D;

P appealed to the highest ct in NY

This ct held for P citing rule on p. 306 justifying it under guise of public policy concern.

 
 

New rule:

R2C sect. 15 1b -- Now we know that someone might appear to be OK but might not be. (1) A person incurs only voidable contractual duties by entering into a transaction if by reason of mental illness or defect… (b)he is unable to act in a rsble manner in relation to the transscation & the other party has reason to know of his condition.

Old rule:

Contractual mental capacity has been measured by what is largely a congnitive test. Under this std, the "inquiry" is whether the mind was so "affected as to render him wholly & absolutely incompentent to comprehend & understand the nature of the transaction." A req't that the party also be able to make rational J concerning the particular transaction qualified the cognitive test. Conversely it is also well recognized that the K'l ability would be affected by instance delusions intimately related to the particular trnascation...

 
 

Analysis:

The school district had actual notice that X had problems w/ mental illness. The elements for R2C 151b are met…

 
 

The court takes into acct the harm the d would suffer if the transaction would incur if the transaction was voided. Ct says it has the "barest consequences."

 
 

Ct uses social ends to justify its decision & relies on the "seriousness" of her condition.

 
 

The trial ct was wrong b/c its finding & some of the testimony tried to fit into the old rubrics. For that reason there needs to be a new trial so that the new test can be applied.

 
 

Case ultimately R&R for use of new, revised rule & std.

 
 

 
 

Dissent is better. Offers sensible explanation for X's decision to up her withdrawals: Her husband had to quit job to care for her. 200% higher expenses…

• We want to protect the security of transactions & the freedom of K (competing interests that must be blanced as a matter of policy in deciding how to test mental capacity.)
  

Voidable K protects the person whose capacity in in Q.

A void Q is indiscriminate: the K is bad no matter what.

 
 

 
 

 
 

 
 

Deceit is a notion drawn from the moral world, and in its popular sense distinctly imports wickedness. The doctrine of the common law with regard to it is generally stated in terms which are only consistent with actual guilt, and all actual guilty intent. It is said that a man is liable to an action for deceit if he makes a false representation to another, knowing it to be false, but intending that the other should believe and act upon it, if the person addressed believes it, and is thereby persuaded to act to his own harm. This is no doubt the typical case, and it is a case of intentional moral wrong. Now, what is the party's conduct here. It consists in uttering certain words, [133] so ordered that the utterance of them imports a knowledge of the meaning which they would convey if heard. But that conduct with only that knowledge is neither moral nor immoral. Go one step further, and add the knowledge of another's presence within hearing, still the act has no determinate character. The elements which make it immoral are the knowledge that the statement is false, and the intent that it shall be acted on.

 
 

Pasted from <http://www.law.harvard.edu/library/collections/special/online-collections/common_law/Lecture04.php>

 
 

 
 

Idaho law:

Minors are ppl under age 18. Emancipation does matter in Idaho. Marriage removes contractual disability… Those Ks entered into by emanci minors are enforceable.

 
 

Unmarried minors are allowed to disaffirm the Ks as a minor or for a rsble period after reaching the age of the majority.

 
 

32-104: Contracts of Minors-- Necessaries

Ks for these can be enforceable regardless of minority status if its for things necessary for his support

 
 

This is the ultimate "ends justify the means" case.

 
 

• Would it make a difference if she had retired?
  

 
 

In this case, Retirement fun was liable b/c they "had reason to know."

So, knowledge = liability

The fact ct construed him as just a "dumb electrician" probably saved his case & the fact that X paid so much into it … Equity concerns

What's the "rule" as referenced on p. 308?

 
 

Mental capacity in Idaho:

 
 

"Whether the person in Q possesses sufficient mind to undertand, in a rsble manner, the nature, extent, characted & effect of the act or transccation in which he is engaged. It sis not necess to show that a person was incompentant any kind of business, but is just req'd to show that he is incompetent to make the kind of K in Q."

 
 

Cundick

• Cundick v. Broadbent
  

   
   

Bassett v. Beam -- Idaho case from Latah county, very old. Established that married women are NOT stripped of their civil rights & that they may contract. Here, the women was suing to invalid her K. She predicated her argument in I.C. section that said "Persons deprived of their civil liberties may not K…" Court disagrees, citing it was not the intent of the legislature by citing other acts by the legislature which recognized or bestowed rights to married women.

 
 

Modern version: 29-101 (old sect 3220)

Sunday, November 02, 2008

11:22 AM

 
 

Cundick v. Broadbent

U.S. Ct of Apps, 10th Circuit

 
 

Parties:

P is wife of Darwin Cundick, a sheep rancher; she was appt'd guardian ad litem of Darwin ("legal theatre")

D is Broadbent, the guy Darwin agreed to sell his ranch to.

 
 

Background:

-Darwin agreed to sell all of his ranching property to D after one meeting in Sept. 1963. The men then both signed a one-page longhand K.

Darwin & wife later take the K to their lawyer where it was expanded & amplified into an 11-page document

In Oct. 1963, the agreement was amended, again w/ a lawyer's aid, so as to increase the price to Cundick & in another respect favorable to Cundick.

However, even under the new price, the property was sold at less than have of its value. (grossly undervalued of the worth of the estate)

(The K also sold Darwin's interest in a real estate development company, also at a grossly undervalued-figure)

 
 

February 1964: Cundick was executing documents to carry out the sale.

In March 1964, AFTER the price was paid & the sale almost complete, Cundick sought to rescind.

P then asserted that Darwin had been mentally incompetent at the time to K & that in any event he was mentally infirm & d had knowingly overreached him.

 
 

There was evidence that Darwin had had psychiatric trmet in 1961… Thereafter, his family doc had seen him multiple tiimes for various ailments but nothing was done or said about a mental condition before the law sit was commenced.

 
 

 
 

PH:

P's wife brought an action against D to set aside the agreement.

The court ordered examinations in 1964 which disclosed premmature arterioscleosis. Two neurosurgeons & a psychologist testified that Darwin had been incapable the previous Sept of transacting important business affairs & that he was condused & befuddled man w/ very poor judgment.

 
 

Trial ct held that the acts of Darwin were the acts of a person competen to manage his affairs & cognizant of the effect of his actions. Found the K NOT to be unconsiconable, unfair or inequitable.

P appeals.

 
 

Rules:

The old rule:

If a man's mind was merely confused or weak so that he knew what he was doing yet he was incapable of fully understanding the terms & effect of his agreement, he could indeed K, but such a K would be voidable at his option.

 
 

The modern rule:

The contractual act by one claiming to be mentally deficient, but not under guardianship, absent fraud, or knowledge of such asserted incapacity by the other contracting party, is NOT a void act but at the most only voidable at the instance of the deficient party; and then only in accordance w/ certain equitable principles.

The test:

Mental capacity to K depends upon whether the allegedly disabled person possessed sufficient reason to enable him to understand the nature & effect of the act in issue. (Mere weakness of the body or mind or of both do NOT constitute what the law regards as mental incompetency sufficient to render a K voidable.) But, weakmindedness is, however, highly relevant in determining whether the deficient party was overreached & defrauded.

 
 

Analysis:

-There was evidence of a change in Darwin's personality & attitude toward his business affiars during the period b/n his mental exams in 1961 & 1964.

But, the record is SILENT concerning any discussion of his mental condition among his family & friends in the community where he lived & operated his ranch.

 
 

It seems incredible that Darwin would have been utterly incapable of transacting his business affairs, yet such condition be unknown on this record to his family & friends, esp his wife whom he lived & worked with for years & she participated in the months-long transaction which she now contends was fraudulently conceived & perpetrated.

 
 

Conclusion:

The facts of this case support the trial ct's finding that D did not deceive or overreach Cundick, despite the fact that the property was sold at a grossly small price. There is evidence to the effect that after the original K, Darwin took steps to raise the price & the K was so modified (shows P's rational mind stepping in, although arguably not to a great enough extent.)

Affirmed.

 
 

Dissent:

The evidence relied upon by the majority is trivial. We should defer to the doctors & their "undisputed" medical testimony.

"It is inconceivable to me that any mentally competent person w/ a lifetime of experience as a successful rancher & stockman would dispose of his ranch interests at a price equal to less than one-half of the actual value."

Transaction @ issue in the case, NOT some global sense of mental health.

 
 

Ct wants to see that other ppl noticed this "change."

 
 

In order for a D to lose the K (for P to be able to "VOID" the K, there must be proof that D took advantage of P.) ..IS this the rule???

 
 

 
 

 
 

Notes p. 312

1. 
   

Are Ortelere & Cundick distinguishable?

D "should have known" or had "reason to know." .. In Ortelere, the Retirement fund had actual notice of Grace's condition, whereas in Cundick not even his wife knew at the time of his collapse in bargaining capacity. The equity concerns were substantial in Ortelere-- Grace had contributed to that account for decades, whereas the equity concerns were of less significance in Cundick b/c the parties amended their agreement for more favorable terms for Cundick-- a showing that Cundick was willing/able to assert himself to get a benefit out of the bargain & that D was willing to assent to that assertion. Another consideration along the lines of equity is the degree of harm P would incur if the bargain were enforced. In Ortelere, Grace's husband would be left with nothing & the relative harm to D was minor. In Cundick, however, the harm to P would be less substantial b/c the couple had known about the plan to sell the land for some time & had already rec'd payment on that land.     Is there anyway to look at Cundick's transcation that might be advantageous to him? Not really. … This argues in favor of the dissent opinion. (unlike Ortelere where there was some evidence that the decision Grace made might be advantageous to her--there was a way at looking @ Grace's decision that shows rational thought.)

 
 

 
 

Supervision: the pros & cons of supervisors & conservators:

Good, but important to remember that ppl act in their own self interests all the time. Further, the source of conservators whose values naturally align themselves with the person may be limited in some cases, like the man who may not have any kin.

 
 

1. Claims of incapacity require proof. … Jury Q sometimes.
   

 
 

 
 

Unfairness: Conventional Controls

• McKinnon v. Benedict
  
• Tuckwiller v. Tuckwiller
  

   
   

Sunday, November 02, 2008

8:19 PM

 
 

• When the inequality of the exchange is manifested in the terms of a bargain.
  

   
   

• "Parties of sufficient mental capacity for the mgmt of their own business have the right to make their own bargains."
  
  • -The core idea is the fact of the bargain, not its content.
    
    • "if the req't of a consideration is met, there is no add'l req't of equivalence in the values exchanged. (R2C sect. 79b)
      
      • …The law contains an implicit J that a promsie should be enforced whether or not something of value was given for it.
        

         
         

• However, there are a number of limiting principles
  that serve to prevent the routine enforccement of unequal bargains. For example, both the Restat & the Code impose a "duty of good faith & fair dealing." (R2C sect. 205; UCC 1-203)
  
•  
   
  • Equity has a special role in formulating opinions in these cases.
    

     
     

    • The fx of policing was traditionally a specialty of equity courts, which, relying on the element of discretion or grace associated w/ granting specific performance, often refused that remedy in cases where the exchange appeared highly disproporitionate. In cases "at law," by contrast, courts lack the inherent discretion to weigh equities & must resort to more established methods of policing, such as finding that a particularly overbearing provision conflicts w/ established public policy.
      
      
      • More commonly, however, the courts have manipulated the doctrine of consideration to serve the ideal of fairness, including determiantions about whether not any "bargain" at all has been effected.
        

         
         

  • "Test of reasonableness" = sine qua non of the enforcement of rights in an action of equity (McKinnon).
    

     
     

Key considerations:

Whether or not certainty re: the enforcement of promises in commercial affairs has been overvalued or undervalued.     "There does come a point where the add'l costs of having personalized transactions may be too great; a little injustice may be a social good."

 
 

Note on Consideration:

• In order for a valid K to exist, there must be a mutual areement (an offer & acceptance) and consideration (or some substitute for consideration). There are two essential factors in consideration:
  
  • The bargain element. In order for there to be sufficient consideration, each party to the K must have intended to secure something from the other party that he was otherwise not legally entitled to-- that is, each must be bargaining for something from the other party (an act, promise to act, etc.)
    
  • The value element. The second req't for valid consideration is that the bargained-for element to be legally sufficient.
    

Tests for legal sufficiency:

Legal detriment (majority view) imposed on the party who is to perform the act or who gives the return promise. If the act or return promise merely confers a benefit on the promisor, the majiority holds that this is NOT sufficient consideration However, som cts hold that if either a legal detriment is laid on the promisee or benefit is conferred on the promisor, there is sufficient cosnideration for the promisor's promise.

 
 

 
 

 
 

McKinnon v. Benedict

Supreme Ct of Wisconsin, 1968

 
 

Parties:

P is McKinnon, a property owner who lent D $5K for the purchase of an investment property, under certain conditions, that flopped

D is a retail jeweler who failed on his investment in a new property

 
 

Background:

P gave "help" to D in the amount of $5K & a promise to help attract business, enabling D to purchase Bent's Camp on Mamie Lake.

D used the $5K a part of the down pymt for the camp.

 
 

The Ds promised the Ps not to cut down trees b/n the camp & P's property & to make no improvements to the camp any closer to P's property than the present buildings. The term of the restrictions was 25 years. The terms did not effect the resort tract but did affect all of the most desirable portion of the camp.

 
 

The resort business did NOT prosper after D bought it.

In 1964, (4 years after they bought it), D decided to add a trailer park & a tent camp.

In the following year, D invested $9K in work to that effect.

 
 

In 1965, P came up from his winterplace in AZ & sued D.

 
 

PH:

The trial court enjoined D from continuing with their projected improvements.

D appealed.

 
 

Rules:

• Contracts that are oppressive will not be enforced in equity (equity principle- also a K principle)
  
• The principle of public policy that restrictions on the use of land are NOT favored in the law. If there's ever doubt regarding the use of real estate, it should be resolved in favor of the free use of the property. (property law principle)
  
• Although a K is harsh, oppressive, and unconscionable, it may nevertheless be enforceable at law; buti n the discretion of the court, equitable remedies will not be enforced against one who suffers from such harshness & oppression.
  

   
   

  Analysis:
  

  -The hardship imposed on the D's is apparent
  

  -Less so for P.
  

   
   

  -The value of P's loan to D or P's feeble attempts to attract business is not even close to the amount D has sacrificed for their right to make lawful & rsble use of their property.
  

   
   

P's argument:	The true value of the $5K loan could not be measured in terms of the interest value of the money, since, without this advance, D would have been unable to purchase the camp at all.
Ct's response:	This is only evidence that D was not able to "deal at arms length w/ P."… A man that is desperate is not a free man. … Obviously, D needed the $$ so badly that he was wiling to enter a K that resulted in gross inequities.

 
 

-There is no doubt that P's benefits outweigh the oppressive terms imposed on D.

-P admits to only using the property for part of the year

-The proposed trailer camp would not be visible from P's property, nor the campsite.

 
 

Thus, the detriment to the Ps that would actually be cognizable is minimal but the damage done to Ds is severe.

 
 

Ct uses the test of reasonableness to assess the applicability of an action in equity against the Ds.

Factors of the test:

• The inadequacy of the consideration
  
• The small benefit that would be accorded to the Ps
  
• The oppressive conditions imposed upon the Ds
  

   
   

Although there was no "sharp practice, dishonesty, or overreaching on the part of P, there was a wide dispartiyt b/n the business experience of the two men…"

 
 

Conclusion:

The K was unfair & based on inadquate consideration. We, therefore, have no hestistency in denying P's claim for equitable remedy of an injunction…

Reversed.

 
 

Comment:

-Highly unlikely that this case would come out the same today… Who isn't in a position of financial desperation when they buy a house? (Think mortgages… Ppl sacrifice these rights all the time in Ks)

-AB thinks this was decided on a property rationale & not a K rationale.

Comparative wealth statement?

 
 

Arms length transactions-- when they are not, the parties are too close or one of the parties is hugely disadvantaged opposed to the other party. …When it is an arms length transaction, it's two sophisticated parties dealing w/ one another… When it is, there's no inappropriate "closeness" b/n them.

 
 

Tuckwiller v. Tuckwiller

Supreme Ct of Missouri, 1967

 
 

Parties:

P is Ruby Tuckwiller, a tenant farmer's wife who lived on the property of X (Mrs. Metta Morrison) & contracted to care for X in the latter part of X's life

D is Davidson College & the executor (Marion Tuckwiller) of X's estate who now resist the demands of P

 
 

Background:

P & husband occupy & farm land owned by X, a wealthy & well-educated old lady

X develops Parkinson's Disease & ends leaving her residence in NYC to return to the farm.

X urges P (before April of 1963) to quit her job & care for X for the rest of X's life.

The discussion was brought up again in late April & expressed onto a written document in early May. Both parties signed.

 
 

May 6: P quit her job & X made an appt w/ her lawyer to change her will.

Later that day, however, X fainted & fell. X was then taken to the hospital where she pretty much remained until she died (June 14).

 
 

Before leaving for the hospital on May 6, X had the date put on the written document b/n she & P and obtained the signatures of the two ambulance attendants as witnesses.

 
 

During her final days, P spent much of her time at X's side, caring for X as P could, but much of X's care was actually handled by the hospital's special nurses.

 
 

X's will was never changed.

The will, dated 1961, provided for the sale of the farm & the proceeds to go to a student loan fund at Davidson College. The farm's inventory value = >$34K

 
 

PH:
P brought a "bill" for specific performance of the K.

The trial ct granted the relief

Ds appealed

 
 

Rules:

"In determining whether or not a K is so unfair or inequitable or is unconscionable so as to deny its specific performance, the transcation must be viewed prospectively, not retrospectively.

The same rule applies to the sufficiency of consideration…"

 
 

Analysis:

When the facts are viewed in the "prospective" light (versus the retrospective), P quit her job& committed to X, knowing full well that X's condition would worsen & that X would become increasingly onerous. The duration was uncertain, so P could have signed on for something rather unpleasant, but did so anyway, regardless of the "value" of the estate would have actually amounted to in the end.

 
 

Viewed from X's perspective, the K is not unfair either. X was appreciative of the care & attention which P had given her prior to the agreement.

 
 

D's argument:

Prior services cannot provide the consideration essential to a binding K.

Ct's response:

Such prior services & the past relation of the parties may properly be considered in connection w/ the fairness of the K & the adequacy of the consideration (Corbin on Ks). B/c X did not have any other family upon which she could dispose of her bounty, X likely felt fine with the less-than quid pro quo of the exchange. X's insistence that the K be witnessed prior to her hospitalization is clear evidence of her satisfaction w/ the bargain as was her unsuccessful effort to change her will to carry out her agreement…

 
 

D's alternative argument:	P should be obliged to forfeit the farm & instead accept payment of the rsble value of her services (& thereby denied the relief o the specific performance.)
Ct's response:	It's undisputed the monetary value of the P's services would have been a small proportion of the value of the farm, but, once the "essential fairness & the adequacy of the consideration" of the K are found, the fact that the subj of the K is real estate answers any question of the adequacy of the legal remedy of $$ damages.
Ct's cited rule:	"Whenever a K concerning real property is in its nature & incidents entirely unobjectionable-- that is, when it possesses none of those feature which… appeal to the discretion of the court-- it is as much a matter of course for a ct of equity to decree a specific performance of it, as it is for a court of law to give damages for the breach of it."

 
 

Conclusion:

Properly viewed from the standpoint of the parties @ the time of the agreement, the court found that the K was fair, not unconscionable & supported by adequate consideration.

Affirmed.

Ct says there was a fair bargain here. P promised to do something that X benefitted from…. The fact that X did not have the long-term benefit does not change the bargain.

Difference b/n prospective analysis of the bargain-- NOT retrospective. (As far as P knew, Aunt Metta could live for a long time.)

 
 

 
 

Substance of parties iii

• Black Industries, Inc. v. Bush
  

Tuesday, November 04, 2008

7:25 PM

This is a substance concern case of the three policing concerns.

Cases:

Mckinnon

Tuckwiller

Black

 
 

 
 

Black Industries, Inc. v. Bush

U.S. District Ct New Jersey, 1953

 
 

Parties:

P is Black (Ohio), a manufacturer of drills, machine parts & components-- is in a broker position.

D is Bush (NJ), DBA G.F. Bush Associates

 
 

PH:

P brings suit for 2 COAs, both BOC.

 
 

Suit 1:

P obtained an invitation to bid on certain Ks for parts w/ the Hoover Company for three parts-- anvils, holder primers & plunger supports. P assumed the task of finding a subKr for the parts. On March 22, 1951, reached an agreement w/ P via letter. The letter held that D would do the work at certain terms (p. 320) & P would handle ALL of the billing. Whatever remained after D's price was subtracted from the total value of the K would go to P. The complaint alleges that P incurred a loss of $14,625 when D failed to complete the order. P now wants this amount w/ interest for a J.

 
 

Suit 2:

P alleges "understandings" b/n the parties whereby D agreed to manufacture other quantities of plunger supports & anvils for which P made a resale K w/ 3rd party, Standby Products. D failed to comply, resulting in an alleged $4,460.95 loss for P. Again, P seeks J in that amount.

 
 

-For both COAs, D pleads several defenses-- none of them relevant here.

-D also alleges the K set forth in the complaint (the first COA?) is void as public policy.

-D moves for summ J on this ground.

 
 

D's arguments:

-P was set to receive a "profit" obscene proportions for each of these items (p. 321)

-These Ks are void as public policy b/c these "profits" of P were passed on to the gov't and the public in the form of increased prices… D cites 2 federal laws intended to prevent excessive profits on war Ks p. 321

 
 

Rules:

-In order to declare a freely-entered b/n the parties & w/o fraud K void as public policy, the K must be invalid on the basis of recognized legal principles. "…a matter of public importance that a good-faith Ks of the U.S. should not be lightly invalidated."

Three types of illegal Ks:

1. K by d to pay P for inducing a public official to act in a certain manner;
   
2. It is not a K to do an illegal act;
   
3. It is not a K which contemplates collusive bidding on a public K.
   

   (D relies on 1 &3)
   

 
 

Analysis:

The K here did not fall into these categories. 1 & 3 are Ks that "impinge" upon the gov't activities… The K's only effect on the gov't was that the gov't was the ultimate buyer of the products. Neither party had any dealings with the U.S. on account of this K & therefore P's profit was NOT earned as a result of inducing the gov't into action or interfering w/ the system of competitive bidding. This K is not void as against public policy on the basis of D's argument & precedents.

 
 

-Ct cites that it won't "touch" the value of the consideration of the parties b/c these two were dealing at arm's length w/o fraud.

-Ct feels that if it rules otherwise it would disallow compensation of middle men in gov't Ks, which would in turn impose regulartory fxs on the court.

-Ct says there are more effective ways -- like certain bidding procedures-- of insuring the gov't does not pay an unreasonable price for its supplies… Cites procedures.

 
 

Conclusion:

Ct does not want to invalid a K on the basis of its alleged insufficient consideration.

D's motion for summ J= denied.

Has this practice of intermediaries evolved since this time?

 
 

Impinge:

1 : to strike or dash especially with a sharp collision <I heard the rain impinge upon the earth — James Joyce>

 
 

Pasted from <http://www.merriam-webster.com/dictionary/impinge>

 
 

 
 

Only the K b/n Hoover & the gov't is subject to the gov't regulations & statutes re: to the prevention of excessive profiteering from govt Ks!

 
 

Ct does not want to get out of order… If changes need to be made/regulations reformed, it must originate from the legislature.

 
 

War is peace. Orwellian view. War can be economically stimulating.

 
 

Black isn't really adding any value… They are simply brokering the deal.

Intermediaries:

-May perform either an informational or search fx by bringing together buyers & sellers who would otherwise be ignorant of each other's needs.

(waiters? Similar as brokers..)

 
 

-May also perform risk-shifting fux by taking on themselves risks of mkt fluctations that would otherwise have to be brone by buyers or sellers.

-Both of these fxs are highly developed in well-organized mkts, such as commodities exchanges, where brokers clearly perform both an "informational" fx by facilitating transcations b/n buyers & sellers and a "risk shifting" fx through stabilizing foreseeable mkt fluctuations.

 
 

-Why do it? Well, it pays. "If the disperision of the prices quotes is at all large (relative to the cost of the serach), it will pay, on average, to canvass several sellers."

Thus, the optimal amt of search varies directly w. the dispersion of prices in a mkt & inversely w/ the cost of the search.

 
 

As commerce shifts from "bricks & mortar" to "dot.coms" the search fx of middle men in some industries-- travel agents, brokerage firms, auto dealers-- may diminish as customers can more easily locate their own suppliersl.

 
 

 
 

Alaska case

Wednesday, November 05, 2008

9:49 AM

 
 

Alaska Packers' Ass'n v. Domenico

US Ct of Apps, 1902

 
 

P is seamen

D is Alaska Packer's Assoc

 
 

Facts:

• In San Fran, P entered into a K w/ D to work as seamen & fishermen in a remote area of AK for $50 for the season + $0.02 per salmon caught. Ps sailed to AK but when they arrived at D's canning factory, they stopped work as a group & demanded $100 each. D's superintdent signed an agreement to pay the $100 b/c he could not get substitute workers.
  
• At the end of the season, D paid Ps according to the original K
  

   
   

  PH:
  

  P sued in admiralty for the add'l $$.
  

  The ct held for Ps
  

  D appeals
  

   
   

  Issue on app:
  

  Is a K to pay a higher salary than orig agreed entered into under threat
  of
  nonperformance, enforceable?
  

   
   

  Analysis:
  

  Ct said the new agreement was NOT supported by consideration, b/c the workers had to do no more under the "revised" agreement than the original.
  

   
   

Ct's reasoning re: P's arg of "D waived its right to sue for breach of the orig agreement when its superintedent signed th enew agreement in AK"

D didn't even know the orginal agree had been breached until the ship returned to San Fran & the superindent told the workers that he had not authority to waive the assoc's rights to enforce the orig agreement.

 
 

"A party cannot lay the foundation of an estoppel by his own wrong, where the promise is simply a repetition of an existing legal right…"

 
 

The superintendent's consent to the seamen's demands was without consideration because it was based solely upon the seamen's agreement to render the exact services they were already under K to do.

 
 

Rule emerging from this case:

"A party who refuses to perform, thereby coercing the other party to promise to pay him more for doing what he was already legally bound to do, take unjustifiable advantage of the other party. There is no consideration for the promise of the other party, and it cannot be legally enforced. This is true even when the first party has completed his duty in reliance on the 2nd K.

 
 

Equity Concerns:

It would be highly unjust to hold for Ps. It would offer a "premium on bad faith." (This amounts to almost an extortion)

 
 

 
 

 
 

 
 

Some courts find sufficient consideration in modified employment Ks b/c the employee is giving up his right to breach the first K.

(So there's a "right" to "breach" a K??)

 
 

On p 332, in Schwartzreich case, the P wanted to leave his already-contracted but not yet started employer ($90/wk contracted pay) for better pay elsewhere ($115). P called his employer & the employer promised to pay him $100 if he would reject the offer… (But he didn't say that expressly. The court constructed this. See the FN) P began work for $100 as scheduled but was discharged in November but was discharged in December. The K was supposed to be for one year. P then sued for wages.

Lower ct jury held for P.

The trial ct set aside the verdict.

Verdict was "reinstated" on appeal:

"A rescission followed shortly afterwards by a new agreement in regard to the same subject-matter would create the legal obligations provided in the subsequent agreement."

 
 

The appellate court said that while very "little difference" may appear, the principle has changed.

 
 

• I guess the "principle" would be that in addition to not breaching the K, P was asked by the employer to reject the other offers.
  

 
 

 
 

Overreaching: Conventional Controls Intro

• Intersection of substance of the K (in terms of consideration) & enforceability.
  
• This is where you draw the line in terms of modifying an existing K… How tolerable are some changes over others…
  

Wednesday, November 05, 2008

10:09 AM

 
 

Under "leadership" of equity, the cts have trad'l held that no advantage should be gained through gross unfairness in the process of bargaining:

• duress,
  
• fraud &
  
• mistake
  

   
   

 
 

Duress:

Impermissable pressure exerted by one party over another either during the initial bargaining OR during the "attempted" renegotiations of the existing deal.

 
 

Fraud:

Concerns the obligations of one party to disclose info to the other in the bargaining context (deliberate trickery & deceit)

 
 

--Even an innocent misrepresentation made in the bargaining process may be a ground for avoiding a K.

"Indeed it is sometimes req'd that a party possessed of information material to the exchange either disclose it or refrain from exploiting the ignorance of the other."

 
 

Modern courts have the power to "avoid" (void) a K without req'g an independent proceeding for rescission. (the procedure resembles equity ct in that no jury is involved oftentimes.)

• But apart from equity jxs: fraud, duress & mistake may also serve as invalidating causes in K law.
  

 
 

Actions the court can take related to "Pressure in Bargaining"

• Compel restoration ($ paid & property transferred under duress may be recovered)
  
  • The promise obtained by duress may not be enforced against the victim
    
• Counterbalance -- A number of policy considerations as wella s come "surviving technical obstacles" limit the use of duress as a commonplace defense in K actions.
  
  • One important limitation= the insistence upon a rsble degree of temerity in the fact of a threat.
    
    • There is a requirement of at least some resistance
      
      • 
        

One ct's std.	"restraint or danger, either actually inflicted or impending, which is sufficient in severity or apprehension to overcome the mind of a person of ordinary 'firmness'"
Other court's stds	Duress must deprive a person of free choice; or destroy a person's volition. (these expressions appear where relief was GRANTED & where no such total mastery over the innocent party existed

• A second limitation: the SUBSTANCE of the threat.
  
  • Threats to business interests = duress
    
  • Threats to life & limb = duress
    
  • Making someone an "offer they can't refuse"= NOT permissable business practice
    
  • The NATURE of the threat is important, not so much the OBJECT
    
    • One who yield to criminal or tortious threat of injury = entitled to relief
      
    • Threat of lawful action = NOT wrongful & NOT duress
      
      • This has particular application to cases in which a dispute is compromised under a threat of a lawsuit.
        
        • A party who is threatened with a suit will NOT succeed in claiming duress as a way to get out of the bargain.
          
          • The only limitation on a suit is one where there is NO basis for the underlying claim (Fiege v. Boehm)
            
      • However, there are exceptions to this idea… A threat of lawful actions is not always "rightful"
        
        • "An unjust & inequitable threat is wrongful, although the threatened act would not be a violation of duty in the sense of an independent actionable wrong in the law of crimes, torts, or Ks."
          
          • This view is illustrated in cases where an employer exacts a benefit from an employee, under threat of discharge & where the employee is TERMINABLE AT WILL. (CAB v. Ingram)
            

             
             

More on duress:

• Holmes' "classical" passage REJECTING the "no will" conception of duress:
  

  "It always is for the interest of a party under duress to choose the lesser of two evils. But the fact that a choice was made according to interest does NOT exclude duress. It is the characteristic of duress properly so called."
  

   
   

• On the other hand, it is acknowledged that a "perfectly honorable" agreement may be made w/ a person who must either accede to it or face some repugnant (opposed, incompatible) alternative.
  

   
   

• The question is "one of degree."
  
  

 
 

R2C:	73, 89,
UCC:	2-209(1)

 
 

• Some important concerns of the court remain in equity in deciding these cases. First, they try to separate the "sheep from the goats" by enforcing the new promise in favor of the honest Kr & refusing to enforce it in the favor of the dishonest or extortionate Kr.
  

   
   

  "The traditional rationale of the pre-existing duty doctrine is that it prevents overreaching & blackmail."
  

   
   

• The modern trend is toward recognition of promises that were doubt in terms of their legitimacy by the "strict consideration doctrine".
  

  As long as the sincerity of the obligation is clear & the commitment is freely made, the new promise is OK
  

 
 

Temerity:

unreasonable or foolhardy contempt of danger or opposition

 
 

What prevents purely opportunistic attempts to renegotiate terms?

Economists suggest several constraints:

"The party demanding modification on the threat of breach will need to take account of:

• The impact of this on future dealings w/ the other party if repeat transactions are envisaged;
  
• The reputation effects on other potential trading partners int eh mkt;
  
• Ease of substitution by the party from whom the modification is demanded;
  
• Initial K terms that may make the latter party unreceptive to a modification (for example, liquidated damage or penalty clauses);
  
• The possibility of the latter party obtaining specific relief in the form of an injunction or specific performance;
  
• Exposure to a damages claim in the event that modification is refused & breach occurs
  

 
 

Most duress cases involve voidable transactions. (As opposed to void.)

 
 

Two key differences between void & voidable transactions:

1. Good title can transferred to a bona fide purchaser for value in a voidable transaction.
   
2. A voidable transaction can be ratified.
   

    
    

A void transaction can do neither.

The Pre-existing Duty Rule:

When A & B have a K under which A is contractually obliged to perform some act, neither A's new promise to perform that same act nor his actual performance of that act constitutes consideration for a promise by B to pay a greater amount for the performance than that set by the original K. This prevents A from taking advantage of B's inability to K w/ someone else to perform the consideration.

 
 

"Performance of a legal duty owed to a promisor which is neither doubtful nor the subj of honest dispute is NOT consideration." R2C73

 
 

• This is the new version of an old rule
  
• The old rule has been said to do the most out of everything else to give consideration a bad rap
  

   
   

• 
  

Key question (as here in Alaska):

"When is the modification of an exsiting K properly seen as resulting from the genuine assent of the party to whom performance is owed, and when is renegotiated deal more likely the result of coercion?"

 
 

Exceptions to the rule:

The general rule is inapplicable where:

• A agrees to perform an act similar to, but different from, the action he was contractually obligated to perform
  
• A owes the preexisting contractual duty to someone other than B.
  
• A had a valid defense under the original K.
  
• Unanticipated circumstances arise that make modification of the terms of the first K fair & equitable.
  

   
   

 
 

Modifying the Pre-existing duty rule:

Under the common law preexist duty rule, a K cannot be modified w/o consideration for the modification, even if the parties mutually assented. (It was way stricter back then.)

 
 

It was modified later.

 
 

R2C89: "A promise modifying a duty under K not fully performed is binding if the modification is fair & equitable in view of circumstances not anticipated by the parties at the time the K was made…"

 
 

Executory Ks: applies to this kind of K

Executory

adj. something not yet performed or done. Examples: an executory contract is one in which all or part of the required performance has not been done; an executory bequest is a gift under a will which has not been distributed to the beneficiary.

 
 

-Some states have overruled this rule by statute of judicial decision and modification w/o consideration is valid in these jxs as long as there is mutual assent to the terms as modified (look at whether there was assent the change is the key. The presence of consideration takes a back seat.)

 
 

-UCC permits modification of an agreement for the sale of goods w/o consideration (2-209(1)) … Note that "extortion of a modification w/o legit comm reason is ineffective as a violation of the duty of good faith." (Bad faith = not allowed)

-But UCC does NOT req consideration for modification of a K.

 
 

Key concerns:	Autonomy of the parties to freely decide the situations… Otherwise, duress may result.
Possible solution:	One way to get around this is to offer a small consideration b/c in general, the cts don't look into the amount & substance of the consideration.

 
 

Watkins & Son v. Carrig

Thursday, November 06, 2008

9:38 PM

 
 

Watkins & Son v. Carrig

Supreme Ct of NJ

 
 

Parties:

P is excavating company

D is owner of location where work was to be done

 
 

COA:

Assumpsit (damages are sought for consensual undertaking) related to an alleged modified K (by oral agreement) between P & D.

 
 

Background:

• There was a written K initially b/n the parties where the P agreed to excavate a cellar for the D at a stated price.
  
• Soon after work commenced, solid rock was encountered
  
• The P's mgr notified the D & the two parties had a meeting
  
  • There it was orally agreed that the P will remove the rock at a higher price than the earlier K allowed (9x greater) for removal of the rock. (In all, 2/3 of the job was at this higher rate)
    

     
     

  PH:
  A ct referee found that the oral K "superceded" the written K -- Verdict for P.
  

  D appealed on the acceptance of the report & on the J.
  

   
   

  Issue on Appeal:
  

  Whether Carrig was obligated to pay the amount he agreeed to orally given the existence of the prior written K involving a lower K.
  

   
   

  P argued:
  

  Claimed there were actually 2 Ks: one written & one oral. The parties mutually rescinded the written agreement b/f entering the oral one.
  

  If there were 2 Ks, the first one was rescinded so P had NO pre-existing contractual duty to perform the work for a lower price when the parties made the oral agreement. Under this theory, when the parties made the oral agreement, they were negotiating from scratch & were free to agree to a price higher than the one in the rescinded K.
  

   
   

  D argued:
  

  There was only one agreement-- tried to bring in the Pre-Existing Duty Rule which says no consideration means NO enforceable modification for the oral agreement. (He wants to invalidate the 2nd agreement)
  

   
   

  Analysis of Supreme Ct:
  

  • When the written K was formed, neither party knew about the rock
    
    • P made no effort to investigate the ground upon which the work was to be done
      
    • P does not allege the D misled him
      
    • The written K contains no clauses or stipulations re: unexpected conditions. Instead, it provided "All material" shall be removed from the site. The language in the K is vauge-- "excavate" is unqualified as a term used.
      
  • In this case, a defense of mutual mistake is NOT available. The work to be done is clear.
    
    • If the P was unwise in taking chances, it is not relieved on the ground of mistake from the burden of incurred in being faced with them [those chances]
      
  • The referee's finding that the written K was "superceded" the oral K means that the parties agreed to rescind the written K as though it had not been made & the new oral one is like it was the only K ever formed.
    
    • When the D agreed to the terms of the oral K, it was as if he either a) thought the original K did not require the excavation of rock or b) was willing to forego his rights under the K in respect to rock.
      
      • Clearly, it was important to the D that the work NOT be delayed. Other reasons may have induced him to the concession that he made.
        
        • Regardless D consented to a special price for excavating rock, whatever his rights under the K.
          
          • The P then, because of that new promise, started on the work.
            

             
             

  • 
    

D's argument:

The facts do not support a claim of 2 independent & separate transactions (one in rescission of the written K as though it were nugatory & one in full substitution of it). D says there was only ONE transaction-- the modification of the original K involving him having to pay more for the excavating that the written K provided. D contends that there was no consideration to pay the P for a performance that P already owed.

 
 

• Whether the K was rescinded w/ a new one to replace it or whether it remained in force w/ a modification of its terms DOES NOT MATTER. It's the same thing, basically. A modification is a partial rescission… therefore, the rules requiring consideration apply to both.
  
• D chose to succumb to P's insistent requests the price be changed for him to do the work.
  
  • Ct phrases it like a "burden" was discovered by P & D granted relief from that burden by a promise to pay him more which effectively "overcame" that burden for P.
    
• The promise was not an "assumption" of the burden by D but instead was fair & the D rec'd rsble value for it.
  
  • ****THE PRESENCE OF MUTUAL ASSENT IS THE 'DECIDING' FACTOR****
    

   
   

• The issue is now whether "the grant for relief" constituted a valid K.
  
  • Basic rule= a promise w/o consideration is INVALID
    
    • Logically under this rule, a promise to pay for what the promisor already has a right to receive from the promise is invalid. (The promisee's performance of an existing duty is no detriment to him & the promisee does not give anything more than what he already owes)
      
  • But the claim here is that the original K was rescinded, either in full or in respect to some of its terms, by mutual consent.
    
    • Any rescission mutually agreed upon is a K
      
      • Therefore, the claim that the old K was still in force ("was subsisted") is wrong.
        
      • The terms of a K rescission are as valid as the K itself.
        

         
         

    • The court then goes into an "eminent authority" that the D used in his argument…. This authority restates the need for consideration in any enforceable agreement & gives the example of a modified (higher) price for an already-in place performance as lacking consideration b/c on party gives more & the other party gives the same…
      
      • Ct says in response: "this argument clothes consideration w/ insistence of control beyond its proper demands"
        
        • Pretty much narrows the necessity of consideration.
          
        • The ct recites the principle that a "naked promise" is worthless as is the performance of a already-owed duty but goes on to say that a
          

           
           

          "result accomplished by proper means is not necessarily bad because it would be bad if the means were improper or were not employed." (don't be so rigid w/ the rules) (??)
          

           
           

      • Yes, a promise w/o consideration would screw up the whole system, but it's important for the courts to recognize that parties to a contract generally recognize that it is subj to any mutual action they may take in its performance.
        
        • Changes made to meet changes in circumstances should be VALID
          
        • Remember: The law is to carry out its fx & service by rules that are CONFORMABLE w/ rsble practices & understandings in matters of BUSINESS & COMMERCE
          
      • Merger of rescission & promise into one transaction does NOT destroy them as elements composing the transaction.
        

         
         

    • This case is about the D's voluntary & intentional relinquishment of a right pertaining to "intangible personalty" … Intangible personal property.
      
      • D "gave in" & gave up his K right to the original price.
        
        • Whether or not he thought he had the right, he INTENDED & EXECUTED THAT INTENT, to forego exercising that right.
          
          • The promise of a special price for excavating rock necessarily released his right to hold the P to the original K.
            
            • It was a mutual understanding
              
            • That the old price was replaced by the new one
              
          • The totality of the transaction= D was now to pay more for less
            
            • There lied an inherent discharged of earlier obligation.
              

               
               

          • There was only a single transaction here.
            
            • But the element of discharge was distinct in precedence (replacing the old) of the NEW promise.
              

               
               

  • This holding is considered to meet the rsble needs of std & ethical practices of men in their business dealings w/ each other.
    
    • The fact that D stupidly gave in to P's bitching puts him on the hook for the new agreement.
      

       
       

  • Ct goes on to stuffy justification as to why the law needs to be flexible to establish & maintain order.
    
    • Prefers the phrase: "Law according to justice" better than old adage of "Justice according to law"
      
    • In this case where authority conflicts, the court works towards the goal of establishing fundamental justice & reasonableness … (ends justify the means)
      

       
       

• Held:
  

  Affirmed.
  

   
   

   
   

 
 

 
 

 
 

Process versus substance (consideration) of the deal….

 
 

The court found the facts showed that D did not resist the price changes demanded in the 2nd K.

 
 

Did it just fly straight up to the Supreme Ct?

 
 

Wtf does "PROPER" mean… legal? OK?

 
 

"The Pre-Existing Duty rule exists not for its own sake, but to do justice. If justice can be done w/o the rule, then it should be."

 
 

Problem p. 338

Thursday, November 06, 2008

10:51 PM

 
 

Richards is a contractor who got a bid to build housing Hawaii

SubKs w/ AC for air conditioning

By error, AC had calculated its bid on the assumption a certain kind of metal was to be used. Later learns that other, more expensive metal is req'd.

 
 

Alaskan Rule:

"A party who refuses to perform, thereby coercing the other party to promise to pay him more for doing what he was already legally bound to do, take unjustifiable advantage of the other party. There is no consideration for the promise of the other party, and it cannot be legally enforced.

• This is true even when the first party has completed his duty in reliance on the 2nd K.
  

   
   

Section 89 of R2C:

"A promise modifying a duty under an existing K.

 
 

 
 

Austin Instrument Inc. v. Loral Corp.

Friday, November 07, 2008

12:37 AM

 
 

Ct of Apps, NY 1971

 
 

Parties:

D is Loral Corp, a producer of radar sets under K w/ U.S. Navy

P is Austin, a producer of gear components needed for the radar sets

 
 

COA:

BOC case involving a subK for certain number of goods where D had to agree to modification of a K in terms of price. D brought suit to recover the price difference of what he paid from what he originally agreed to pay.

 
 

Facts:

Navy K awarded in July of 1965 to D

K contained strict schedule of delivery timeline, penalities & damages if anything goes wrong

D then soliticited bids for subKs related to production of the sets

Awarded P a subK to supply 23 sets

P commenced delivery in early 1966

 
 

(The delivery was staggered to the Navy on that strict schedule)

 
 

In May, 1966 D won a 2nd Navy K for more radar sets.

Again, started soliciting bids.

P bid again, but D told P that D would only accept bids from the lowest bidder

P refused to accept an order (for the 2nd K) for less than the total order by the 2nd K & that P would cease deliveries of the 1st K unless D agreed to the substantial price increases for BOTH Ks.

P then did stop delivery

D contacted 10 other manufacturers of the gear parts but found non who could produce the parts in time to comply with the Navy's stipulated schedule.

D then acceded to P's demands via letter for both the price increases & assented to the total quantity of the 2nd Navy K at that new, increased price. It was a really prudent letter because the lawyer for D created an evidentiary record that would later help them in ct to prove economic duress.

 
 

P filled the K in time for D to meet the schedule demands for both Ks.

 
 

 
 

PH:

• After P's last delivery under the 2nd K in July, 1967, D notified P of its intention to "seek recovery" (sue) for the price increases.
  
• September of 1967 -- P brought suit against D to recover an amount in excess of $17,750 that was still due on the 2nd K.
  
  • On that same day, D brought its action against P for damages = $22250 (the aggregate sum of the price increases under the first K on the ground of economic duress.
    
• The two actions were consolidated.
  
  • P was awarded in trial ct the sum it requested & D's complaint against P was dismissed b/c it was NOT shown that "it could not have obtained the items in question from other sources in time to meet its commitment to the Navy under the first K" (All's fair in love & war)
    
    • D appeals
      
      • "Closely divided" App Ct affirmed.
        
        • The dissent: "The difficulty lies in the application of the law to these facts."
          

           
           

  Rules:
  

  A K is voidable on the ground of duress when it is established that the party making the claim was forced to agree to it by means of a wrongful threat precluding the exercise of his free will.
  

  Proof req'd is "a threat to immediate possession of needful goods" or "that one party to a K has threatened to breach the agreement by witholding goods unless the other party agrees to some further demand."
  

  However, a mere threat by one party to breach the K by not delivering the req'd items, though wrongful, does NOT in itself constitute economic duress.
  

  It must also appear that the threatened party could not obtain the goods from another source of supply & that the ordinary remedy of an action for breach of K would NOT be adequate.
  

   
   

  Issue on Appeal:
  

  Whether D should be allowed to recover the price increases under the first K on the grounds that it was subject to economic duress?
  

   
   

  Analysis:
  

  "This evidence makes out a classic case, as a matter of law, of such duress."
  

  Court uses the word "reasonable" like, 10000 times.
  

   
   

• P's threat to stop deliveries unless D agreed to price increase deprived D of its free will.
  
  • D's relationship w/ the gov't is the most significant fact supporting this conclusion.
    
    • The rigidity of schedule
      
    • The demands of precise goods
      
      • D was forced to plan painfully ahead to avoid the heavy costs that could incur for any small default.
        
        • D did a substantial amount of business w/ the gov't & didn't want to screw up the relationship.
          

   
   

  These concerns do NOT merit the App Ct's finding that they were "self-imposed, undisclosed and subjective" to consider itself in an emergency, duress situation.
  

   
   

  These parts were needed for the October schedule, so D had to work around the close to meet its commitments.
  

  • The best alternative offer D rec'd was for delivery to COMMENCE sometime in october… way too late to meet the deadline.
    
    • This is enough to show that D had no choice but to accede to P's demands.
      

       
       

• P suggested that D should have contacted the Gov't & asked for an extension. This argument fails:
  
  • Factor= D wanted to perform "well" in the gov't eyes.
    
  • D could not be sure when it would obtain enough parts from a substitute vendor to meet its commitments
    
    • The only promise which it rec'd would break the deadline
      
  • There is authority for D's position that nonperformance by a subKr is NOT an excuse to default in the main K.
    

     
     

• D met its burden that it could not obtain the parts elsewhere w/n a rsble time.
  
  • The 10 manufacturers D contacted were 100% of the "approved vendor list" for precision gears (Approved internally by D but the Ct found that that was rsble given the nature of the goods needed. It was rsble for D to only use vendors that it new could perform.)
    
    • It would be unreasonable to hold that D should have gone with other vendors it did not know or have any experience with.
      
      • All the law requires is that D contact all manufacturers whom it believed capable of making these parts.
        

         
         

• If D were to only accept the normal legal remedy of suing P for a BOC, D would still be on the hook for filling the Navy K on time.
  
  • Therefore, D actually had no choice when the prices were raised by P, except to take the gears at the "coerced" prices & then take action to get the excess payout back.
    

     
     

• P's final argument is that even if D DID enter into a K under duress, it lost any rights by waiting too long to bring action.
  
  • D brought action three days after the final delivery for the 2nd K…. Usually this is NOT good. We don't like parties to sit on their rights.
    
    • Ct says it's fine b/c P had made itself out to be a shady character long ago. D's waiting so long was strategy to ensure the goods would be delivered & would conform.
      
      • Echoes "Perfectly Reasonable" throughout the opinion
        

         
         

  Conclusion:
  

  D's assent to price increases were only b/c of economic duress employed by P.
  

  Remanded to trial ct for computation of damages.
  

  The order appealed froms hould be modified w/ costs by reversing so much thereof as affirms the dismissal of D's case
  

   
   

  Dissent:
  

  Main bone of contention is in the difference in understanding what happened in terms of facts. P tells a very different story.
  

   
   

   
   

   
   

Unclear why D did not decide to suit on the 2nd K. It could be that they wanted the business relationship in the future.

 
 

When it's OK to lie… I was wrong. This happens all the time in business.

 
 

Pre Existing duty rule is applied to protect an entity against restraint on one party's ability to exercise free will.

 
 

 
 

Victim's Options

Saturday, November 08, 2008

12:12 PM

Threats that are empty, ("last opportunity to buy at this low price"), are NOT usually seen as duress legally.

 
 

Where the presence of duress is reasonable-- the question arises as to wehther the victim of that th threat might have resisted it & found a rsble, satisfactory remedy for any resulting injury?

 
 

Settlements. Even if a P latter brings suit for injunctive relief arising from abuses of the legal process, they can still settle to deal with what's at risk, like losing their home or getting their goods back.

 
 

Sometimes, the "victim" or the debtor is in a hurry-- think mortgage foreclosures.

 
 

If the debtor forgoes a legal remedy to which they may be entitled, it looks bad & can compromise their ability to make a subsequent complaint of duress.

 
 

Since Astley v. Reynolds, the courts have allowed an allowance for the delay that usually accompanies legal proceedings…

 
 

 
 

The freedom to litigate is prized.

To control abuses of it by injunction or tort recoveries impairs that freedom more directly than to do so through relief for duress.

 
 

Relief for duress-- "the most that is sought" is "judicial review of a settlement, after one party surrendered to the pressure." (Austin case?) The objective is NOT to transfer or prevent losses, but to cancel out the gain."

 
 

 
 

 
 

 
 

"The fundamental issue in a duress case is whether the statement that induced the promise is the kind of offer that we want to discourage-- threats--

If contractual protections are illusory, people will be reluctant to make Ks.

 
 

Allowing K modifications to be avoided in circumstances such as those in Alaska assures prospective K parties that signing a K is NOT stepping into a trap,

 
 

Ultimately, encouraging ppl to enter contracts encourages the efficient allocation of resources." (p 348)

 
 

 
 

Undue Influence

Saturday, November 08, 2008

2:22 PM

R2C sect 177:

• Two of the policing concerns, substance and status are often intertwined w/ determinations about "bad" or "unfair" bargains.
  

   
   

• Unfair persuasion or pressure in the bargaining process may point to disparities in status between the parties.
  

   
   

• Persuasion is unfair in two classes of cases:
  
  • Trust & confidence. When a person who is in a position of trust & confidence to convince the other party to enter into a transaction that is not in the best interests of th eparty who is the subject of the persuasion.
    
    • Husband-wife
      
    • Parent-child
      
    • Trustee-beneficiary
      
    • Guardian-ward
      
    • Attorney-client
      
    • Administrator-legatee
      
    • Physician-patient
      
    • Clergyman-parishioner
      
    • Fiance-fiancee
      

       
       

  • Dominance. It is also unfair where a person uses a position of dominance to induce a transaction against the best interests of the subservient party.
    

     
     

• The best indicator of the presence of undue influence is an "unnatural transaction" resulting in the enrichment of one party at the expense of the other.
  

   
   

• Undue influence is a type of "mismatch" that means unfair advantage to one of the parties.
  
  • A person of subnormal capacities has been subjected to ordinary force, or
    
  • A person of normal capacities has been subjected to extraordinary force
    

     
     

    "If will has been overcome against judgment, consent may be rescinded."
    

   
   

• The court noted the undue influence b/n the parties in McKinnon v. Benedict. McKinnon was a "man of statute in the legal field," whereas Benedict was but a "retail jeweler and a man of ltd. Financial ability."
  
  • According to the court, this contrast directly contributed to Benedict's inability to enter "an arms-length transaction."
    

     
     

• 
  

Key questions:

What degree of disparity is necessary b/f the parties are unable to bargain with another at arms length?

• Note: disparities that seem to matter are not always $$, but also may derive from the degree of influence one party has & uses over the other.
  

   
   

• Balancing test: In making these decisions, the court must strive to remedy only those bargains that were reached under oppressive conditions, not just buyer's remorse or a lapse in judgment.
  
  • "we must abide the consequences of the risks inherent in managing our own affairs."
    

Typical examples include: elderly, the sick, the senile… "weakness of spirit"

 
 

Ordorizzi

Saturday, November 08, 2008

2:57 PM

 
 

Odorizzi v. Bloomfield School Dist.

Ct of Apps, 1966

 
 

Parties:

P is Odorizzi who was arrested for homosexual activities

D is the school district, his employer

 
 

Facts:

On June 10, P was arrested.

On June 11, P resigned from his teaching position, following a visit to his home from the district superintendent and the school principal.

At his home, the official told P that unless he resigned, he would be dismissed and the charges against him publicized.

In July, the criminal charges were dismissed.

 
 

P then sough to rescind his resignation on the grounds that it was obtained by duress & undue influce.

 
 

PH:

Lower court dismissed P's complaint

P appealed.

 
 

Issue on Appeal:

[Q of whether he has valid COA] May a threat of termination for cause, made to obtain a resignation, constitute undue influence?

• P alleges both undue influence & duress
  

   
   

Rules:

• Undue influence is persuasion which tends to be coercive in nature, persuasion that overcomes the will w/o convincing the judgment.
  
  • High pressure is the "hallmark." (A pressure which works on mental, moral or emotional weakness to such an extent that it approaches the boundaries of coercion.)
    
    • AKA "overpersuasion"
      
  • Misrepresentations of law or fact are NOT essential to be present
    
  • Statutory language reads: "taking an unfair advantage of another's weakness of mind or taking a grossly oppressive & unfair advantage of another's necessities or distress."
    
  • Does NOT require a confidential or authoritative relationship b/n the parties.
    

     
     

  Analysis:
  

  The court uses two elements for "undue influence":
  

  • Undue susceptibility in the servient person
    
  • Excessive pressure by the dominating person
    

   
   

  To determine whether overpersuasion could have existed, the court used seven "certain characteristics" that "tend to create a pattern": [the red flags] --
  

  • Discussion of the transaction at an inappropriate time,
    
  • Consummation of the transaction in an unusual place
    
  • Insistent demand that the business be finished at one,
    
  • Extreme emphasis on untoward consequences of delay
    
  • Use of multiple persuaders by the dominant side against a single servient party,
    
  • Absence of 3rd-party advisers to the servient party,
    
  • Statements that there is no time to consult financial advisers or attorneys
    

  If a number of these are simultanenously present, the persuasion may be characterized as excessive.
  

   
   

  Here, the principal & the superintendent used overpersuasion & imposition to secure the P's signature, but not his consent, on the resignation form.
  

  They used a high-pressure "carrot and stick" technique when they assured the P that they were trying to assist him & he should rely on their advice & that there was not any time to consult an attorney & if he didn't resign at once, the school district would suspend and dismiss him fromhis position and publicize the proceedings & but if he did resign, the incident would not jeopardize his chances of securing a teaching position elsewhere.
  

  The threat to fire him was NOT improper (hence no duress), b/c the school district did have authority to fire him.
  

   
   

  The P pleaded both the subjective & objective elements that are req'd to enter the undue influence eqn. Further, P stated sufficient facts to put in issue the question whether his free will had been overborne by D's agents at a time when he was unable to fx in a normal manner…
  

   
   

   
   

  Conclusion:
  

• No duress because the school board's threat to dismiss was not only their legal right but also their positive duty.
  

  Although if D did file such proceedings, the effect would devastating to P's career, the injury would remain incidental, as long as the Ds acted in good faith in the performance of their duties.
  

   
   

• The court expressed NO opinion on the merits of the P's case or the propriety of his continuing to teach school or the timeliness of his rescission.
  
• Held that his pleading, liberally construed, DOES state a COA for rescission of a transaction to which his apparent consent had been obtained through the use of undue influence.
  

   
   

• Judgment is REVERSED.
  

Untoward:

difficult to guide, manage, or work with

 
 

 
 

My best guess:

Subjective= the vulnerability of the P

Objective=the use of excessive pressure

 
 

 
 

Concealment & misrepresentation

If a misrepresentation constitutes an actionable tort, avoidance is allowed, but all of the elements of tortious misrepresentation are not req'd for avoidance.

Saturday, November 08, 2008

3:26 PM

 
 

Key Question:

What does the law require (as opposed to the conscience) for the disclosure of facts in a bargaining context?

 
 

If the law were be very relax in terms of the req'd amt of disclosure, it might disencentivize the use of good faith b/c the "honest" merchant might be at a competitive disadvantage.

 
 

In general, it's understood that dealers in certain types of merchandise: rare coins, antiques, etc., trade on their expertise and they are not expected to disclose to their customers all the elements that enter into their evaluations.

Otherwise, the expense taken by a dealer to acquire that knowledge would be pointless.

 
 

A similar sort of thought-process regarding the amt of disclosure req'd by the courts applies to situations involving commercial transactions.

 
 

 
 

Misrepresentation:

An assertion that is not in accord with existing facts.

 
 

-Avoidance may be based on negligent or even an innocent misrepresentation.

 
 

-"Scienter" (knowing) is NOT required.

 
 

Intentional misrepresentations do NOT need to be material. (But of course, they can be.)

 
 

Unintentional misrepresentations MUST be material.

 
 

A representation is MATERIAL if:

1. It would influence the conduct of an RP
   
2. The person using the words knows that it would likely influence the conduct of the other party even if it might not influence a RP
   

    
    

Rationale: If the misrepresentation is intentional, the wrongdoer has accomplished his or her intended purpose even if the statement was immaterial.

On the other hand, if the misrepresentation arises by the innocent mistake of some person who innocently or carelessly misstates a seemingly unimportant fact has no reason to know that a statement will cause action.

Restatement (Second) of Torts § 551

–

Liability for Non-Disclosure

 
 

1. (1) One who fails to disclose to another a fact that he knows may justifiably induce the other to act or refrain from acting in a business transaction is subject to the same liability to the other as though he had represented the nonexistence of the matter that he has failed to disclose, if, but only if, he is under a duty to the other to exercise reasonable care to disclose the matter in question.
   

    
    

2. (2) One party to a business transaction is under a duty to exercise reasonable care to disclose to the other before the transaction is consummated,
   

   
    

   (a) matters known to him that the other is entitled to know because of a fiduciary or other similar relation of trust and confidence between them; and
   

   
    

   (b) matters known to him that he knows to be necessary to prevent his partial or ambiguous statement of the facts from being misleading; and
   

   
    

   (c) subsequently acquired information that he knows will make untrue or misleading a previous representation that when made was true or believed to be so; and
   

   
    

   (d) the falsity of a representation not made with the expectation that it would be acted upon, if he subsequently learns that the other is about to act in reliance upon it in a transaction with him; and
   

   
    

   (e) facts basic to the transaction, if he knows that the other is about to enter into it under a mistake as to them, and that the other, because of the relationship between them, the customs of the trade or other objective circumstances, would reasonably expect a disclosure of those facts.
   

    
    

   Iii. Majority Rule
   

   
    

3. Elements of Misrepresentation
   
   1. Intentional misrepresentation of fact
      
   2. Misrepresentation of fact must be material.
      
   3. Misrepresentation must be intended to induce reliance by the plaintiff.
      
   4. Misrepresentation must actually induce reasonable reliance by the plaintiff.
      
   5. Misrepresentation must have proximately caused pecuniary harm to the plaintiff.
      

       
       

       
       

   
    

   
    

   
    

 
 

Swinton

Saturday, November 08, 2008

3:37 PM

 
 

Swinton v. Whitinsville Savings Bank

Supreme Judicial Ct of Massachuetts, 1942

 
 

Parties:

P is Swinton, the buyer of a house intended to be used as a dwelling

D is Whitinsville Bank

 
 

Facts:

On September 12, 1938 P bought a house in Newton from D.

On August 30, 1940, P learned that the house was infested with termites.

 
 

PH:

P sues, asserting that the D knew the house was infested & that P could not readily observe this condition upon inspection; that D falsely & fraudulently concealed from the P the true condition of the house b/c he knew about the termites; P exercised due care but still only learned about the infestation 2 years after the sale.

P charged D w/ concealment

 
 

Analysis:

It appears the parties made a business deal at arm's length.

• There is no allegation of D lying to P or even conveying a 1/2 truth.
  
• There is no intimation that the D prevented the P from acquiring information as to the condition of the house.
  
• There is no fidiuciary relationship b/n the parties or that their relationship was one of confidence or dependence.
  

   
   

"Concealment" is the mere failure to reveal. There is no additional duty of either of the parties to speak.

The characterization of the concealment as false & fraudulent adds NOTHING without more facts.

 
 

While the P's argument is compelling in the moral sense (esp in light of the fact that there aren't many termites in Massachuetts), there is no LEGAL provision for the application of special rules for termites.

The law can hardly attempt to determine liability according to the varying probabilities of the existence & discovery of different possible defects in the subjects of trade.

 
 

The "rule of nonliability for bare nondisclosure" has been stated & followed by this court. See Rest. Torts rule.

 
 

The burden is on the BUYER (caveat emptor) to discover & inquire.

 
 

As long as D did not make affirmative representations relating to the defect, he is NOT liable for failure to disclose the defect.

 
 

Conclusion:

The order sustaining the demurrer is affirmed & J is to be entered for D.

 
 

Comments:

• A lot of courts do not like how this case was resolved.
  
  • "Does not represent our sense of justice or fair dealing."
    
  • Caveat emptor is "no longer an expression of American mores."
    
  • Now there are statutory provisions requiring a seller's disclosure of latent defects.
    

     
     

• Further, one judge said "A decision to blur the distinction b/n misrepresentation & nondisclosure can be expected to distort the real estate mkt."
  

   
   

R2C sect 161 for known latent defect disclosures….

 
 

Non liability for bare disclosure (as in here) is NOT the rule in Idaho: I.C. sect. 55-2504 Property condition disclosure req'd.

• For a list of exemptions, see I.C. 55-205 (foreclosure transfer, estate transfer)
  
  • (senile people who do not have the capacity to know; banks who repossess, etc. basically, details that are known.)
    

 
 

**This rule & the characterization of the D's actions in this case has seen been overruled by statutes & other case law.

Some courts enforce this req't by imposing warranties, like in cases of sales of new homes.

 
 

 
 

Kannavos

Wednesday, November 12, 2008

9:26 AM

 
 

Kannavos v. Annino

Supreme Judicial Ct of Massachuetts, 1969

 
 

Parties:

P is Kannavos, a Greek immigrant who responded to an ad & subsequently bought the building

D is Annino, the seller, who converted a dwelling into a multi-family bldg w/ eight apartments.

 
 

Facts:

• When D converted the bldg, she did so w/o a bldg permit & KNOWING that she was violating a zoning ordinance
  
• D hired a real estate broker to sell the property.
  
  • The broker placed the ad which specifically mentioned use of the bldg as a source of income/use as apt bldg
    
• When P responded, the broker showed him the house & gave him income & expense figures for the bldg as a rental property
  
  • W/o a lawyer, P K'd to buy the property
    
    • To do this, P took out a mortgage
      
• At the closing, attys were present for the seller & a rep from the mortgage company was present
  
• D & D's borker KNEW of P's reason for buying the property (to rent the apts)
  
• P was unaware of any violation of zoning.
  
• P did not inquire a/b zone
  
  • It was said P would not have bought, had he known b/c the bldg was worth substantially less than it was an apt bldg
    

     
     

  PH:
  

• Soon after the sale, the city started legal proceedings to abate the non-conforming use of the bldg
  
  • P then brought a bill in equity against D to rescind the purchase.
    
• The trial ct overruled a demurrer, granting a rescission on the basis of the findings of a master.
  
  • D appealed
    

     
     

  Issue on appeal:
  

  Whether P is entitled to rescind the K b/c D & her agent failed to disclose the zoning violation?
  

   
   

  Rule:
  

  Rule in Swinton: Rule of nonliability for bare nondisclosure" of material latent defects in real property
  

   
   

  Analysis:
  

  Court distinguishes from Swinton case in 2 ways:
  

  • Simpler for "vendees" (buyers) to obtain information re: zoning violations (they were a matter of public record, etc.)
    
  • There was "more" here than "bare non-disclosure."
    
    • This was a misleading representation by the seller.
      

       
       

  Held:
  

  For P….
  

   
   

   
   

   
   

  Comments/questions:
  

• What would be the result under IC 55-2508?
  

  It would have been the same result. D would have been req'd under the IC to disclose the bldg violations of… "any encumberances on the property that affect the title… including zoning violations"
  

• What about R2C sect 161 cmt D?
  

  Consistent w. the IC -- D woulod have been req'd to disclose the zoning violation b/c of expectation of a seller to disclose a known latent defect of quality or title that is of such character as would probably prevent the buyer from buying @ the K price.
  

  • Usually this could be dealt w/ by the seller reducing the price of the K by the amount it would cost P to abate the problem.
    

Master was the fact finder in lower ct

 
 

Ct's distinguishing from Swinton

Its OK to say NOTHING under the Swinton rule, but it's not OK to inaqequately & partially (& here, intentionallY) disclose information…. Partial misrepresentations are NOT allowed.

 
 

"Half truths may be as actionable as full lies."

 
 

Vokes v. Arthur Murray, Inc.

Wednesday, November 12, 2008

9:48 AM

 
 

Vokes v. Arthur Murray Inc.

Dist. Ct of App of Fla. 2nd Dist. 1968

 
 

P is Audrey E. Vokes-- a 51-year old widow & aspiring dancer

D is the franchisee of a dance studio

 
 

D convinced P that she had excellent potential as a dancer

Over the course of the next 16 months, she takes the lessons but continues to 'stack' up purchases of lessons

Amounts to 2302 hours of lessons for $31,090.45 ($212K in today's $$)

D does this by excessive flattery, compliments, etc.

D administers "tests" to gauge progress

She's always making progress but she always needs more

She's actually a terrible dancer, has NO potential

Ultimately seeks to rescind the K

 
 

PH:

Held for d in T Ct

 
 

Issue on App:

Whether P has stated a sufficient legal claim to get her day in court.

 
 

D's arg:

It was just D's opinion-- this was permissable trade puffing-- & P should not have relied on it.

There was no mirep as to a MATERIAL fact.

 
 

 
 

Rules:

"Genearlly, a misrepresentation to be ctionable must be one of fact rather than of opinion"

But, there are several "Qualifications" for this rule. The rule DOES NOT APPLY when:

• There is a fiduciary relationship b/n the parties
  
• There has been a trick
  
• The parties do not deal at arm's legnth
  
• The representee does not have equal opportunity to become apprised of the truth or falsity of the facts represented.
  

 
 

Even in K situations wehre a party to a transaction owes NO duty to disclose facts w/n his knowledge or to answer inquiries respecting such facts, the law is if he undertakes to do so he must disclose the whole truth.

 
 

Analysis:

From the facts of the situations, it should have been rsbly apparent to the Ds that P's vast outlay of $$ for 100s of hours of add'l dance lessons was NOT justified by her slow & awkward progress, which she would have been aware of it D had spoken the "whole truth."

D is in the best position to know whether P had real aptitude or not.

P was unable to be a realistic assessor of her own ability.

 
 

Usually, in cases were no inequities or inherently unfair practices @ arm's length, the court leaves the parties were they find themselves (the cts do nothing)

But here, P alleged sufficient facts in her complaint to get her day in court… "has not barred the equitable arm of the Court to her."

 
 

Held:

P gets her day in court. Reversed & remanded.

 
 

 
 

Comments:

R2C sect 169	"When Reliance on an Assertion of Opinion that is Not Justified"
Application	All three subpoints apply in Vokes.

Ct considers this transaction to be "at arm's length"

But it might be argued that bc of her age, the intimate nature of the activity -- her vulnerability, etc. might make this not @ arm's length.

 
 

 
 

Adhesion Ks

Typical characteristic of exculpatory clauses that are INVALID:

Monopolistic relationship b/n one of the parties & the other

--court in O'Callaghan

Friday, November 14, 2008

10:08 AM

 
 

Exs of adhesion Ks:

• Leases
  
• EULAS (end user license agreements…software)
  
• Insurance policies
  
• Airline tickets
  

   
   

Advantages of these Ks:

• Uniformity of terms & judicial interpretation (they eliminate uncertainty)
  
• Efficiency
  
• Make availble 'superior drafting skills' for parties who might not be able to afford their own individual agreements
  
• Clear allocation & calcultation of risk
  
  • More on risk: The uniformity of terms of Ks typically recurring in a business enterprise is an important factor in the exact calculation of risks.
    
    • Best example-- insurance companies. The standard clauses in the language of insurance policies are the most striking example of a SUCCESSFUL attempt on the part of the business enterprise to select and control risks assumed under a K.
      
      • Called "juridicial risk" -- the danger that a court or jury may be swayed by "irrational factors" to decide against a powerful defendant.
        
        • Now, these clauses are used all the time to control this "irrational factor" in litigation.
          

   
   

Disadvantages:

• One party is dominate & imposes on the servient party (calls into question the existence of mutual assent)
  
• No opportunity to bargain over terms (take it or leave it) … This calls into question the req't of "bargained-for exchange"
  
• Terms used can be complicated & numerous that the non-drafting party may not understand all of them (calling into question the existence of mutual assent… again)
  

   
   

When a court checks on an adhesion K, they are most concerned with:

ASSENT. Did the consenting party see, understand, assent and intend to be bound by these terms??

 
 

• The use of a form K does not establish a disparity in bargaining power
  

   
   

  Rules available to 'check" the power of the drafter (aka prevent overreaching):
  

  • R2C 205
    
  • R2C 206
    
  • R2C 208
    
  • R2C 211
    
    • However, enforcement of these rules varies by jx
      

       
       

  More rules:
  

  • UCC 2-719 (3)
    
  • UCC 2-316 (2)
    
  • UCC 2-302 (1)
    
  • UCC 2-205
    
  • UCC 2-201 (2)
    

     
     

  State statutes req add'l things to ensure Ks are fair & notice is provided, like colored ink & "plain language" requirements.
  

Adhesion Ks (as assessed by J Stevens in dissent of Carnival Cruise Lines)-

"Adhesion Ks are form Ks offered on a take-or-leave basis by a party w/ stronger bargaining power to a party w/ weaker power."

• Critics of adhesion Ks question whether they have the essential req't of assent (the weaker party does not show: 1) manifestly knowing or 2) voluntary consent)
  
• These came to rise with our commerical marketplace. Mass produced goods brought mass produced Ks.
  
  • These Ks signal a loss of the individuality of parties that used to "give color" to the old type of K.
    

Standardized contracts:

Those in which one party will dictate its law to an 'undetermined multiple' rather than to an individual… This resembles LAW rather than a meeting of the minds…. It appears to change usual legal rights-- like, the liability of a landlord for a slip & fall or the "right" of an aggrieved passenger to bring suit against a cruise line in the passenger's court of law.

 
 

Unconscionability:

Not a new concept in K Law. In McKinnon,the ct held that the consideration provided by Benedict was so inadequate so as to be unconscionable which served as a bar to Benedict's ability to get equitable help from the court for McKinnon defaulting on his end of the bargain.     As the court in O'Callaghan held in interpreting whether a disparity of bargaining power existed b/n the parties: …judicial decisions should rest on a durable moral basis.     In the early 1960s, the UCC embodied the concept…. And it took on new life. Now, it's not just an action in equity, but a defense in its own right.     Later, unconscionability appeared as a statutory provision, signaling another momentous shift in the development of policing measures. Now administrative agencies & the legislature are actively engaged in framing rules & providing remedies for Ks.

Relationship w/ adhesion Ks:

Unconscionability typically arises in situations involving standard-form or adhesion Ks… The characteristics of the parties: status, behavior & substance of the K remain a focus of "concern" for the courts (PP, fairness, new rules & regs, etc.)

 
 

 
 

Counter-argument:

Some argue that the "new wave" of legislation that demands dispertion of information will not really help the poor b/c it's not really about lack of info… It's the "breakdown" of the role of the consumer/marketplace. (Williams v. Walker-Thomas…)

In O'Callaghan the ct used these to balance:

Social danger of erosion of protections of people from negligence & danger

Freedom of K--we want ppl to be able to make Ks to meet their own needs

 
 

O'Callaghan

The majority takes a narrow stance on the validity of the exculpatory clause b/n a tenant & LL in this case. They hold it as valid; the dissent, however, holds as invalid pointing to facts that negate the majority's position (the existence of the tenant's choice in terms of leasing elsewhere) and other factors the court has weighed previously when confronted w/ similar issues related to PP.

Friday, November 14, 2008

10:08 AM

 
 

 
 

O'Callaghan v. Waller & Beckwith Realty Co.

Supreme Ct of Illinois, 1958

 
 

P, O'Callaghan, is an old lady tenant

D is the landlord of P's bldg

 
 

F:

P is injured in a fall on apt. premises (in common area)

P sues for negligence: defective cement

P seeks to invalidate the exculpatory clause in the lease she signed

• This clause was designed to release LL from liability from even his own negligence
  
  • This clause, effectively, attempts to shift the burden of liability, releasing the LL and its agents for any liability related to the LL's negligence
    

     
     

PH:

• P wins @ trial ct (jury/court disregard the clause)
  
• Ct of Apps-- R & R
  
• Goes to Supreme Ct, now with the adminstrator of P's estate (P died)
  

   
   

  R/A:
  

• 
  

Exceptions to the "General Rule"

In general, parties are not allowed to get out of the consequences of resulting from their own negligence…UNLESS: a) Enforcing this K is against the PP of this state; OR     b) there is something in the social relationship of the parties that "militates" against upholding the agreement.

 
 

• The exculpatory clause in front of the court is not amenable to the strict construction to which these kinds of clauses are frequently subjected.
  

   
   

O'Callaghan's argument:

Enforcement of this clause (as it appears in a lease) is against PP & should be invalid. There was a shortage of housing that led to a disparate bargaining power b/n tenants & LLs at the time she signed the lease. For proof, she points to numerous statutes that were designed to alleviate the shortage & the existence of rent control during the period of the lease.

Ct's response:

Freedom of K is "basic to our law." But here, that freedom is designed to absolve one of the parties from the consequences of his own negligence and in effect, creates a risk of diluting Tort law, or law that was developed to protect people from the wrongful acts of others. In the past, this court has refused to enforce exculpatory clauses between common carriers and shippers of freight/passangers because the public interest in these relationships is obvious + the dominant position of those seeking exculpation. However, in the past we've upheld these clauses in cases where they are b/n tenants & LLs (for both commercial & residential) in the spirit of "freedom to K" ("a matter of private concern") Same has been practiced in other jxs, unless there is a statute requiring otherwise. Further, there might be a mutual benefit for the parties in this case (LL & tenant) by the use of this liability-shifting clause for negligence. Lessens the "impact" of sanctions on tenants for failure to adhere to a req'd std of care. (Makes rent cheaper as a related other one) This "consideration" is similiarily present in contracts for insurance that indemnify against liability for one's own negligence. There no evidence that Mrs. O'Callaghan attempted to negotiate against the exculpatory clause or that she tried to rent elsewhere. There was a housing shortage which did produce an "active legislative response" HOWEVER, we must assume the legislature took all of the remedial action that it thought would be necessary or desirable. In fact, one of the things the legislature put in place was the rent ceiling-- which, by intentional design prohibits any negotiating b/n a tenant & LL for an increased month's rent price in exchange for the elimination of the LL's liability W/ this in mind, if the judiciary were to hold these clauses as invalid, we would effectively rule against the clear intent of the legislature in creating the rent ceilings. The relationship b/n the LL & tenant does not have the monopolistic characteristics that have characterized There are 1,000s of LLs who are in competition The use of a form K does not establish a disparity in bargaining power "Judicial determinations" can not be greatly swayed by sporadic & transistory circumstances. Instead, judicial decisions should rest on a durable moral basis. They should not override or overstep onto areas best left to be decided by the legislator.

 
 

Social danger of erosion of protections of people from negligence & danger

Freedom of K--we want ppl to be able to make Ks to meet their own needs

 
 

Dissent:

 
 

Justice Bristow. This holding does two things that are wrong:

1. Arbitrarily eliminates the concept of negligence.
   
2. Creates anomalies in the law & will create serious social consequences for 100,000s of people in our state.
   

    
    

• There is evidentiary proof pointing to the disparity of bargaining power b/c of the severe housing shortage.
  
• To allow this clause to stand, we are negating major portions of our own Tort law & K law.
  
  • This undermines the significance of negligence & the interests in aims to promote (discouraging dangerous conditions & deeds);
    
  • Undercuts enforcement against unfair bargaining practices like overreaching by those w/ more power to drive unfair bargains
    
• The majority failed to properly assess the factors that have been used historically in cases involving exculpatory clauses:
  
  • What was being bargained for & how important it was to the party agreeing to the release of liability
    
  • The amount of free choice actually exercised in the group agreeing to the release
    
    • That party's actual degree of bargaining power
      
    • Whether or not competition existed among the group to be exempted.
      

       
       

  • Using these factors & the subject matter herein (shelter), it's clear that this decision should have gone the other way...
    

 
 

Boiler plates

Should a consumer be on the hook for Ks he didn't read or see? (Small print on stubs..)

Friday, November 14, 2008

10:11 AM

• These are also adhesion Ks but mutual assent is certainly questionable.
  

 
 

• Coat-check case… p 374 Klar v. H.M. Parcel Room, Inc.
  
  • P sues for loss of parcel worth $1K, wins nearly all of it in trial ct
    
  • The check stub read "Contract" … cost of checking was ten cents.
    
    • Ct of Apps affirmed
      

       
       

• 
  

Notice is what turns these kinds of cases

"If the bailee wishes to limit its liability for negligence, it must at least show that it has given adequate notice of the special K & that it has rec'd assent thereto of those party to the transaction" (Klar v. H.M. Parcel Room, Inc.)

 
 

• R2C sect 211 (3) provides some relief:
  
  • "A party who effectively manifest assent to a standardized expression of agreement, and the other party has reason to believe that he would not have done so if he had known that it contained a particular term…. Then that term is NOT part of the agreement."
    
    • So, a few dickered terms + the broad type of transaction + one thing more-- which can be anything as long as it's not unrsble or indecent is what the party can be assumed to have assented to on the form…
      

       
       

• Customers will not be expected to read over these forms b/c given the nature of some enterprises, the customers have no real power of negotiation… so reading over the terms doesn't even matter.
  

   
   

• In the absence of any "plain & clear" language prohibiting otherwise, cts might choose to construe certain expectations of the parties to be "reasonable expectations" (airline insurance example p. 377)
  

"if the blanket terms are rsble & decent on the form, which do not alter or eviscerate the point of the K are tolerable (? See p 376)."

 
 

Exculpatory Clauses in Idaho

Friday, November 14, 2008

10:06 AM

 
 

Generally valid

Invalid if…

1. One party is an at obvious disadvantage in bargaining power;
   
2. A public duty is involved (utilities, carriers, etc.)
   

    
    

Add'l exception:

1. If the clause is OVERBROAD
   
   1. The language absolving the landlord of any liability for any occurrence anywhere is simply too broad…
      
      1. Very controversial. Not all of the Idaho S. Ct. agree that overbreadth is enough to invalidate an exclupatory clause.
         

Jesse v. Lindsley -- Idaho case that governs this area…. "Codifies the common law of warrant of habilitability"

 
 

Graham v. Scissor-Tail

Sunday, November 23, 2008

4:33 PM

 
 

Key Q:

Under what circumstances is a party expected/obliged to know the content of what they're signing?

 
 

Graham v. Scissor-Tail, Inc.

California Supreme Ct., 1990

 
 

Parties:

P is Bill Graham, a concert promoter & producer

D is Scissor-Tail

 
 

Facts/background:

• The two parties contract for concert tour.
  
• They have contracted for similar tours before.
  
• Contract is on mandatory union K form
  
  • Form includes an arbitration clause that mandates any conflict be arbited through the union
    
    • Conflict arises re: whether losses from one concert be offset by gains from other concerts
      
      • P files BOC
        
      • D moves to compel arbitration
        
        • Wins
          

           
           

      • Union arbitration board holds for D
        
        • P appeals
          
          • Judgment confirms union's award to D.
            

             
             

  Issue on Appeal:
  

• Under these two principles, should this K have been denied enforcement?
  

   
   

  Rules:
  

• Adhesion Ks are fine unless it breaks established legal rules.
  
  • Two "judicially imposed" limits on enforcement of adhesion Ks:
    
    • A K that does not fall w/n expectations of "adhering" party AND (either will do)
      
    • A K that is "unduly oppressive" or UNCONSCIONABLE
      
      • This will still be kicked out even if its unduly oppressive terms are consistent w/ the rsble expectations of each party
        
        • Really, though, this is just a general principle of equity, which applies to all Ks.
          

           
           

           
           

P's argument:

The whole K was unenforceable as an adhesion K because the arbitration provision was unconscionable.

 
 

D's argument:

P's success in his field as a part of the music industry gives him "considerable bargaining power" in K negotiations…

 
 

Ct's response:

Evidence shows that P was a humble adherent to this K. As a member, P was bound by uion rules to only sign union Ks (like this one) regardless of union status of other K'ing party

 
 

More of the court's analysis….

• This arbitration clause is NOT in any way contrary to the rsble expectations of either party (so it's NOT #1)
  
  • P had previously entered 1,000s of these exact Ks, w/ at least 15 w/ D.
    
  • P's actions showed that he knew about the clause
    
  • P had prev arbitrated conflicts through the union
    

     
     

• However, it is unconscionable b/c the appointed arbitrator is (presumptively) biased towards one party.
  
  • This kind of bias is contrary to PP b/c P is in a position of less power.
    

     
     

  Held:
  

  It was unconscionable.
  

   
   

   
   

 
 

Henningsen v. Bloomfield Motors, Inc.

General duty of consumers:

• Read Ks b/f you sign.
  
  • There's no relief available if you don't.
    
    • There are exceptions:
      
      • Std-form Ks that are "unintelligible"
        
      • Std-form Ks that are "physically painful" to read
        
      • Cts won't enforce if one party did not understand it
        
        • This involves drawing very fine lines. Cts stay flexible to the facts of othe case
          

Sunday, November 23, 2008

4:34 PM

 
 

Supreme Court of NJ, 1960

 
 

Parties:

P is buyer of new Plymouth-made car whose wife is injured while driving it when it's steering mechanism failed 10 days after it was delivered.

D is Bloomfield, dealership were car was purchased.

 
 

Facts:

8.5" of very fine print purported to limit the liability of breach of warranty for just parts replacement for 90 days or 4K miles… whichever first…

Font was in 6 pt.; 12 pt. on front

The terms of this form, when signed, articulated signee's assent to terms on the back, which in effect, limited the manufacturer to part replacement only.

 
 

PH:

P sues D for breach of implied warranty of merchantibility under Uniform Sale Act

P wins in lower ct

D appeals

 
 

Issue on Appeal:

Was the disclaimer that was printed on the back of the sale K enforceable?

 
 

D's argument in lower ct:

Warranty was disclaimed (as allowed under the Act) citing a provision of the back of the purchase K for the care

 
 

Rules:

• 
  

General rule:

One who chooses not to read a K before signing cannot later relieve himself of his burdens, as long as there is no fraud… (common law rule) VOLUNTARY ACTION + ASSENT = BINDING

• "Freedom to K" is a tenet held near & dear in the application of this rule.
  
• However, there are exceptions because in modern commerce, rules cannot be applied in a strict, doctrinal way.
  

   
   

Compare w/ the traditional K…

• Two parties, each w/ equal foots & free bargaining power (the "general rule" [above] assumes this to exist)
  
  • No danger that freedom of K will be a threat to the social order as a whole.
    

     
     

However, the modern standardized form K has appeared in modern commercial life.

• These are used primarily by organizations who already have "strong bargaining power & position"
  
• Weaker party is NOT in a position to shop around for better terms b/c
  
  • The drafter of the K (the stronger party) has a monopoly, OR
    
  • All of the stronger party's competitor's use the same K.
    
• So, the weaker party assents to these "voluntary terms," it's either unaware or vaguely aware of the K's real consequences.
  

   
   

Standardized contracts:

Those in which one party will dictate its law to an 'undetermined multiple' rather than to an individual… This resembles LAW rather than a meeting of the minds.

 
 

Here, the consumer must take the K or leave the car. There is NO bargaining invovled b/c this form is used by dealers across the industry (#2 above). Plus, they couldn't read it.

• Hence, b/c of this uniform practice, consumer protection & negotiation power is DISSOLVED.
  
  • Therefore, the courts MUST be very careful in a too-rigid application of the common-law rule of freedom to K.
    

 
 

Historically, cts adhere strictly to the freedom to K doctrine, but here, there was not an articulation of any general principle-- other than PP-- that condemns Ks, like this one, which limits the responsibility of the manufacturer.

To meet the "ends," cts have used these to enforce:

Strict construction; Notice & knowledgeable assent by the buyer to the attempted exculpation of the seller If it existed, fine. If it did not, no deal.     In these cases, the cts have said that a limitation on liability will not be given effect if: Unfairly procured Not brought to seller's attention; or Not clearly explicit     These are not limited to the sale of goods… Common carriers are subject to it. Typically, the trend is "public services" or "semi-public" services, but this is NOT absolute. Rationale: Usually, b/c of the public nature, the consumers have no other choice Called "The Rigid Scrutiny Rule"

 
 

Court decides to apply the "Rigid Scrutiny Rule" b/c of the ltd warranty extended by car-maker here (Plymouth) is std across the industry.

 
 

• Here, it's a combination of the lack of clear notice
  
  • Confusing language
    
  • Lack of attention drawn to it
    
  • Smallness of print ….
    

     
     

    -This is clearly unfair.
    

    • This is the kind of K that injures the PP
      

       
       

• Ct goes on to blabber about the job of the judiciary:
  
  • Administer the "spirit" AND the "letter of the law"
    
    • Here, the ct's duty was to prevent the unilateral act of one party that is detrimental to the other party.
      
      • No arms-length negotiation was present
        
      • Gross inequality of bargaining power went down
        

   
   

   
   

   
   

   
   

  Comments:
  

• The dissent in O'Callaghan thought a similar situation happened in that case, but the majority disagreed.
  
• Ct's main concerns here:
  
  • Was the K:
    
    • Agreed
      
    • Seen
      
    • Understood
      

       
       

 
 

Carnival Cruise Lines, Inc. v. Shute 

"forum selection" clause in a cruise line's K w/ its customers & whether it's enforceable…

Threshold question:	Are ANY choice-of-forum provisions enforceable
Ct's trad'l response:	Hostility, saying parties cannot "oust" a court of jx over a dispute properly presented to it
Ct's modern response:	These clauses will be given effect UNLESS determined to be unfair & unrsble

**Called an area of "conflict laws"

Sunday, November 23, 2008

4:35 PM

 
 

US Supreme Ct, 1991

 
 

Parties:

• P are the Shutes, a couple who bought tickets from their Arlington, WA travel agent for a 7-day cruise on D's ship
  
• D is Carnival Cruise lines
  

   
   

   
   

  Background:
  

• The tickets had "terms and conditions" printed all over it including a forum selection clause.
  
  • The forum selection clause purported to restrict the customers, in bringing suits over their Ks, to actions in the courts of Florida, where Carnival is based.
    
• While on their cruise, the lady Shute fell & hurt herself
  

   
   

  PH:
  

• The Shutes filed suit in U.S. District Ct for the Western District of WA for D's negligence
  
  • D moved for summ J under the choice of forum clause
    
  • D also argued that the Dist Ct did not have personal jx over D b/c the D's Ks w/ the state of Washington were not substantial.
    
    • The Dist Ct granted the motion for the 2nd reason: D's Ks w/ Washington were not constitutionally sufficient to support the exercise of personal jx.
      
      • Ct of Apps REVERSED b/c "but for" D's solitication of business in Washington, P would not have taken the cruise & Ms. Shute would not have been injured…. D had sufficient Ks w/ Washingto to justify the Dist Ct's exercise of personal jx. (D's arg #2)
        
      • D's arg #1: Used Bremen v. Zapata… Although not favored, are PF valid. However, here the clause should not be enforced b/c
        
        • It was not freely bargained-for …
          
        • The Shutes are not physically or financially capable of pursuing litigation in Florida so to hold them to this clause would be to effectively deprive them of their day in court
          
          • This contravened the US S Ct's decision in Bremen
            

             
             

          • The US S Ct granted certeriori to consider the question of whether the Ct of Apps was correct in holding that the Dist Ct should hear the case, narrowing the issues to the forum-selection clause… (b/c it was dispositive of the question)
            

             
             

  Analysis & Rules:
  

• Admiralty case-- establishes federal law as the one to use
  
• Not addressing "notice" & whether the Shutes had it.
  

   
   

Shute's argument:

The clause was NOT the product of negotiation. To enforce would deprive their day in court. Relies on the teachings of Bremen...

• Court distinguishes from Bremen
  
  • The parties in that case were business corporations from different countries (American corporation Zapata & German corporation Unterwser)
    
  • The K between the two stipulated that any disputes would be resolved in the London Ct of Justice.
    

     
     

Issue on appeal

 
 

 
 

Sunday, November 23, 2008

4:35 PM

 
 

  Douglas v. United States District Court for the Central District of California (Blackboard)

 
 

 
 

Williams v. Walker-Thomas Furniture Co.

Sunday, November 23, 2008

4:36 PM

 
 

 
 

Sunday, November 23, 2008

4:35 PM