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>
32-104: Contracts of Minors-- Necessaries
This is the ultimate "ends justify the means" case.
In this case, Retirement fun was liable b/c they "had reason to know."
So, knowledge = liability
What's the "rule" as referenced on p. 308?
Modern version: 29-101 (old sect 3220)
D is Broadbent, the guy Darwin agreed to sell his ranch to.
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's wife brought an action against D to set aside the agreement.
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. |
Transaction @ issue in the case, NOT some global sense of mental health.
Ct wants to see that other ppl noticed this "change."
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. |
Unfairness: Conventional Controls
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." |
- 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.
- 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.)
Tests for legal sufficiency: |
|
D is a retail jeweler who failed on his investment in a new property
D used the $5K a part of the down pymt for 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.
The trial court enjoined D from continuing with their projected improvements.
- 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)
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.
-AB thinks this was decided on a property rationale & not a K rationale.
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.
May 6: P quit her job & X made an appt w/ her lawyer to change her will.
PH:
P brought a "bill" for specific performance of the K.
The trial ct granted the relief
The same rule applies to the sufficiency of consideration…"
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." |
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.) |
This is a substance concern case of the three policing concerns.
Black Industries, Inc. v. Bush
U.S. District Ct New Jersey, 1953
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
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.
-P was set to receive a "profit" obscene proportions for each of these items (p. 321)
- K by d to pay P for inducing a public official to act in a certain manner;
- It is not a K to do an illegal act;
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 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?
Pasted from <http://www.merriam-webster.com/dictionary/impinge>
War is peace. Orwellian view. War can be economically stimulating.
Black isn't really adding any value… They are simply brokering the deal.
(waiters? Similar as brokers..)
Alaska Packers' Ass'n v. Domenico
- 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.
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. |
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.
|
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) |
(So there's a "right" to "breach" a K??)
The trial ct set aside the verdict.
Verdict was "reinstated" on appeal:
The appellate court said that while very "little difference" may appear, the principle has changed.
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…
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) |
Actions the court can take related to "Pressure in Bargaining"
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 |
R2C: | 73, 89, |
UCC: | 2-209(1) |
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:
A void transaction can do neither.
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?" |
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.
Modifying the Pre-existing duty rule:
Executory Ks: applies to this kind of K
Executory | adj. something not yet performed or done. Examples: an executory |
-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. |
D is owner of location where work was to be done
- 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
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.
- 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.
- P made no effort to investigate the ground upon which the work was to be done
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).
|
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?
Richards is a contractor who got a bid to build housing Hawaii
SubKs w/ AC for air conditioning
"A promise modifying a duty under an existing K.
Austin Instrument Inc. v. Loral Corp.
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
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 filled the K in time for D to meet the schedule demands for both Ks.
- 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.
"This evidence makes out a classic case, as a matter of law, of such duress."
D's assent to price increases were only b/c of economic duress employed by P.
When it's OK to lie… I was wrong. This happens all the time in business.
Sometimes, the "victim" or the debtor is in a hurry-- think mortgage foreclosures.
The freedom to litigate is prized.
If contractual protections are illusory, people will be reluctant to make Ks.
Key questions: | What degree of disparity is necessary b/f the parties are unable to bargain with another at arms length? |
Typical examples include: elderly, the sick, the senile… "weakness of spirit"
Odorizzi v. Bloomfield School Dist.
P is Odorizzi who was arrested for homosexual activities
D is the school district, his employer
In July, the criminal charges were dismissed.
Lower court dismissed P's complaint
- 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."
The court uses two elements for "undue influence":
- 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.
- 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.
- Judgment is REVERSED.
difficult to guide, manage, or work with
Subjective= the vulnerability of the P
Objective=the use of excessive pressure
Concealment & misrepresentation
Key Question: | What does the law require (as opposed to the conscience) for the disclosure of facts in a bargaining context? |
Otherwise, the expense taken by a dealer to acquire that knowledge would be pointless.
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:
Restatement (Second) of Torts § 551
Swinton v. Whitinsville Savings Bank
Supreme Judicial Ct of Massachuetts, 1942
P is Swinton, the buyer of a house intended to be used as a dwelling
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.
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.
The characterization of the concealment as false & fraudulent adds NOTHING without more facts.
The burden is on the BUYER (caveat emptor) to discover & inquire.
The order sustaining the demurrer is affirmed & J is to be entered for D.
R2C sect 161 for known latent defect disclosures….
Some courts enforce this req't by imposing warranties, like in cases of sales of new homes.
Supreme Judicial Ct of Massachuetts, 1969
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.
- When D converted the bldg, she did so w/o a bldg permit & KNOWING that she was violating a zoning ordinance
- 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.
Whether P is entitled to rescind the K b/c D & her agent failed to disclose the zoning violation?
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."
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
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
Whether P has stated a sufficient legal claim to get her day in court.
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.
"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.
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.
P gets her day in court. Reversed & remanded.
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"
Typical characteristic of exculpatory clauses that are INVALID: | Monopolistic relationship b/n one of the parties & the other |
- 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
- 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"
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?? |
Adhesion Ks (as assessed by J Stevens in dissent of Carnival Cruise Lines)-
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….
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Relationship w/ adhesion Ks: | Unconscionability typically arises in situations involving standard-form or adhesion Ks…
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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 v. Waller & Beckwith Realty Co.
P, O'Callaghan, is an old lady tenant
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
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. |
O'Callaghan's argument: |
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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.
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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
Justice Bristow. This holding does two things that are wrong:
Should a consumer be on the hook for Ks he didn't read or see? (Small print on stubs..)
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.) |
Key Q: | Under what circumstances is a party expected/obliged to know the content of what they're signing? |
P is Bill Graham, a concert promoter & producer
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….
Henningsen v. Bloomfield Motors, Inc.
D is Bloomfield, dealership were car was purchased.
Font was in 6 pt.; 12 pt. on front
P sues D for breach of implied warranty of merchantibility under Uniform Sale Act
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 |
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 |
However, the modern standardized form K has appeared in modern commercial life.
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. |
To meet the "ends," cts have used these to enforce: |
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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"
- P are the Shutes, a couple who bought tickets from their Arlington, WA travel agent for a 7-day cruise on D's ship
- Admiralty case-- establishes federal law as the one to use
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... |
Douglas v. United States District Court for the Central District of California (Blackboard)