TAINTED ASSENT
A. DURESS (2 Forms)
1. By Force
2. Duress of Goods – Business compulsion and economic threat
Contracts are voidable under duress
Analysis
1. Has there been an improper threat
2. Did it induce the assent of the victim
a. Subjective – whether victim was swayed by threat
3. Was the victim left with no reasonable alternative
a. Was saying no reasonable?
b. Going to Court?
§ 175 When Duress by Threat Makes a Contract Voidable
If a party’s manifestation of assent is induced by an improper threat by the other party that leaves the victim no reasonable alternative, the contract is voidable by the victim.
3rd Party duress – voidable unless other party in good faith did not know of duress
Restatement § 176 When a Threat is Improper
A threat is improper if
a) It is a crime or a tort, or the threat itself would be a crime or a tort & taking property is a crime or tort
b) a criminal prosecution
c) use of civil process and the threat is made in bad faith, or
d) the threat is a breach of the duty of good faith and fair dealing
The resulting exchange is not on fair terms, and
a) the threatened act would harm the recipient and would not significantly benefit the party making the threat,
b) the effectiveness of the threat in inducing the manifestation of assent is significantly increased by prior unfair dealing by the party making the threat, or
c) What is threatened is otherwise a use of power for illegitimate ends.
SP Dunham Co. v. Kudra
Selmer v. Blakeslee-Midwest Company
– in order for a threat to be a part of duress it must be an improper threat, not merely hard bargaining
– here this was amount to be paid in extra money, negotiated amount, they met in the middle
Andreini v. Hultgren
– 176 part 2
1. It needs to be shown that there were unfair terms and
2. a prior unfair dealing by the party making the threat
*Note: 3rd Party if involved in threat must be aware of the threat, if not then not voidable*
B. UNCONSCIONABILITY AND ADHESION CONTRACTS
1. Procedural Unconscionability – (Absence of Meaningful Choice)
a. Unequal Bargaining Power (Adhesion Contract)/Standard Form Contract “take it or leave it”
b. Opportunity to Understand the terms of the contract
§ Hidden terms (size and language) legalese.
c. Deceptive Practices
2. Substantive Unconscionability
Unfair terms
– General commercial background needs of the industry
– Mutuality of obligation (Circuit City – did not have to arbitrate but employees did)
*The judge will look at the agreement when it was made. If there is overwhelming unconscionability and unfair terms then may say the agreement shouldn’t be enforced*
K.D. v. Educational Testing Service
– Enforceable adhesion contract, remember to do both Procedural and Substantive
UCC §2-302
Court has 3 options
1. May refuse the contract
2.
cludes:
– Non-disclosure
– ½ truths
– Concealment
Cushman v. Kirby
– Silence may constitute misrepresentation (husband failed to speak up about wife’s false statements)
– Wife had intent to mislead
Misunderstanding and Mistake
1. Mistake in Business Judgment – you have assumed the risk this could possibly happen. This is not the kind of mistake courts would allow relief for (a contractor making a bid). We don’t allow to recover it is just something you will have to live with.
2. Mistake in Integration – this is a mistake that occurs when both parties agree on the terms, and one of the agreement is to reduce it to writing. Then somehow terms or numbers get off and it goes wrong. In the writing it is an error and the party seeks to reform it on that basis. Courts allow this if the party can show both reached an agreement on the terms, then on writing them down an error needed to be corrected.
Mistake – belief not in accord with the facts
Mistake Analysis
1. Mistake
2. Basic Assumption
3. Material Effect
4. No Assumption of Risk
a. Other party Fault or Reason to Know
OR
b. Unconscionable
