1. 1 George Mason School of Law Contracts II Duress Not to be shared © F.H. Buckley fbuckley@gmu.edu

2. The highwayman Lee Marvin, as highwayman Liberty Valance, holding up wimpy Jimmy Stewart, The Man Who Shot Liberty Valance (John Ford, 1962) 2 Stand and deliver!

3. Duress makes a contract voidable  §175(1) 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. 3

4. Duress makes a contract voidable  §175(1) 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.  §176(1) A threat is improper if what is threatened is a crime or a tort… 4

5. Physical Duress is an easy one Restatement § 174: where assent “is physically compelled by duress 5

6. The Highwaymen 1962 Steve Trott on the far left 6

7. Ninth Circuit Judge Steve Trott 7

8. The Highwaymen 1996 8

9. The Highwaymen Their Opening Act 99

10. Was that duress? 10

11. Was that duress?  Assume I have the right to do x (sue Johnny Cash) When is it wrongful to say “I will do x unless you do y” 11

12. Was that duress?  Is the general principle that, provided one has the right to do x, one is permitted to extract some advantage by a threat to do x? 12

13. What about blackmail, then? 13 David Letterman

14. Improper threats  Does the blackmailer have the right to reveal that Letterman preyed on his female staffers? 14

15. Improper threats  Does the blackmailer have the right to reveal that Letterman preyed on his female staffers?  Does the blackmailer have the right to ask Letterman for money? 15

16. Improper threats  Does the blackmailer have the right to reveal that Letterman preyed on his female staffers?  Does the blackmailer have the right to ask Letterman for money?  Does the blackmailer have the right to ask Letterman for money and to tell him he will reveal the information if he is not paid? 16

17. Improper threats  Does the blackmailer have the right to ask Letterman for money and to tell him he will reveal the information if he is not paid?  How do two rights make a wrong? What might make the threat “improper” under Restatement § 175? 17

18. Improper threats  What might make the threat “improper” under Restatement § 175?  §176(1) (1) A threat is improper if what is threatened is a crime or a tort, or the threat itself would be a crime or a tort if it resulted in obtaining property And Blackmail is a crime 18

19. Blackmail  Does blackmail usefully impose a cost on transgressive behavior? Why then is it a crime? 19

20. Blackmail: The Reality Show  How would life be different were blackmail legalized? 20

21. Blackmail  How would life be different were blackmail legalized? Blackmail Inc.: more resources expended to discover dirt. 21

22. Blackmail  How would life be different were blackmail legalized? Blackmail Inc.: more resources expended to discover dirt. Less transgressive behavior Greater effort to hide transgressive behavior 22

23. Blackmail  Is that the kind of world we want? If not, why not? 23

24. Here’s another way to think about Blackmail: Spite as Duress  Restatement § 176(2)(a): “A threat is improper is the resulting exchange is not on fair terms and the threatened act would harm the recipient and would not significantly benefit the party making the threat” 24

25. So what was the duress in Wolf v. Marlton at 403? 25

26. What was the duress in Wolf v. Marlton? 26 A white crowd gathers on the front porch at 1863 E. 70th Street in South Los Angeles, where W.H. Whitson planned to sell his home to a black family. Sept. 7, 1949, LA Weekly 26

27. Was that duress?  What did the Δ’s do in the end? 27

28. Was that duress?  What did the Δ’s do in the end? 28 4th Grade Class, Beeler Public School, Marlton NJ, 2007

29. Was that duress?  Didn’t the plaintiffs have the right to buy the house and sell it to whomever they wanted?  And didn’t they have the right to ask for their deposit back? 29

30. Was that duress?  Did the plaintiffs have the right to buy the house and sell it to whomever they wanted? “A threat may be wrongful even though the act threatened is lawful.” 30

31. Was that duress?  Did the plaintiffs have the right to buy the house and sell it to whomever they wanted? “A purely malicious motive”  Define malice 31

32. Recall Restatement § 176(2)(a)  “A threat is improper is the resulting exchange is not on fair terms and the threatened act would harm the recipient and would not significantly benefit the party making the threat” 32

33. Can there be duress without malice?  Is this case like Hochman at 407? “Further instructive is…” 33

34. Can there be duress without malice?  Is this case like Hochman at 407? “Further instructive is…” Advantage-taking? 34

35. Is Chouinard at 416 consistent with Hochman?  “mere hard bargaining” 35

36. Improper threats  The threat to bring criminal proceedings. Restatement § 176(1)(b) A threat is improper if what is threatened is a criminal prosecution 36

37. Improper threats  The threat to bring bad faith civil proceedings. Restatement § 176(1)(c) A threat is improper if (b) what is threatened is the use of civil process and the threat is made in bad faith 37

38. Austin v. Loral at 409  Why did Loral agree to the contract modification? 38

39. Austin v. Loral  A situational monopoly: Loral can’t get the equipment from anyone except Austin, and must have it 39

40. Austin v. Loral  A situational monopoly: Loral can’t get the equipment from anyone except Austin, and must have it A classic case of post-contractual opportunism 40

41. Austin v. Loral  Suppose you had been counsel for Austin? How might you have amended your pleadings? 41

42. Alaska Packers 42  Restatement § 73. Performance of a legal duty owed to a promisor which is neither doubtful nor the subject of honest dispute is not consideration; but a similar performance is consideration if it differs from what was required by the duty in a way which reflects more than a pretense of bargain.

43. Alaska Packers 43  Restatement § 89 MODIFICATION OF EXECUTORY CONTRACT. A promise modifying a duty under a contract not fully performed on either side is binding (a) if the modification is fair and equitable in view of circumstances not anticipated by the parties when the contract was made; or (b) to the extent provided by statute; or (c) to the extent that justice requires enforcement in view of material change of position in reliance on the promise.

44. Rescue at Sea  How do Admiralty Courts handle rescue claims? Post v. Jones at 417 44

45. Rescue at Sea  How do Admiralty Courts handle rescue claims? Post v. Jones What would an efficient rescue contract look like? 45

46. Rescue at Sea  How do Admiralty Courts handle rescue claims? Post v. Jones What would an efficient rescue contract look like? It would minimize all Social Costs 46

47. Rescue at Sea  How do Admiralty Courts handle rescue claims? Post v. Jones What would an efficient rescue contract look like? Social Costs = all costs associated with the possibility that the ship will be lost PLUS the rescue costs 47

48. Ex post Rescue Contracts  Let’s assume that the rescuer just happens upon victim and they bargain over a rescue. 48

49. Ex post Rescue Contracts  Ex post, rescuer happens upon victim and they bargain over a rescue.  If the parties can reach an agreement, the rescuer will attempt a rescue* provided that L > R, where: L = the cost of the loss if no rescue R = the cost of the actual rescue 49 *I assume that all attempted rescue are successful

50. Ex post Rescue Contracts  Ex post, rescuer happens upon victim and they bargain over a rescue.  The rescuer will attempt a rescue* provided that L > R, where: L = the cost of the loss if no rescue R = the cost of the actual rescue  The bargaining surplus to be divided between them is thus L – R. 50 *I assume that all attempted rescue are successful

51. Ex post Rescue Contracts  Ex post, rescuer happens upon victim and they bargain over a rescue.  The rescuer will attempt a rescue* provided that L > R, where: L = the cost of the loss if no rescue R = the cost of the actual rescue  Does the economist care how they bargain, if the rescue is made? 51 *I assume that all attempted rescue are successful

52. Rescue Contracts  Suppose that the rule of duress prevented the rescuer from bargaining for any recovery 52

53. Rescue Contracts  Suppose that the rule of duress prevented the rescuer from bargaining for any recovery How much would the rescuer invest in R? 53

54. Rescue Contracts  Suppose that the law imposed a positive Good Samaritan duty to resuce? 54

55. Rescue Contracts  One tends to assume that the rescuer scoops the entire bargaining surplus of L – R. Do you think this is what happened in Post v. Jones? 55

56. Ex Ante Rescue Contracts  Suppose that rescuer and victim could bargain ex ante for a rescue, before the victim embarked on his voyage How could such a thing exist? 56

57. Ex Ante Rescue Contracts How could such a thing exist? 57

58. Ex Ante Rescue Contracts How could such a thing exist? 58

59. Ex Ante Rescue Contracts  Suppose that rescuer and victim could bargain ex ante for a rescue, before the victim embarked on his voyage Both parties might want to invest in pre- rescue care 59

60. Ex Ante Rescue Contracts  To minimize social costs, we now have to include pre-rescue costs x and y, where: x = the pre-rescue costs born by the victim in anticipation of the loss y = the pre-rescue costs born by the rescuer in anticipation of the reward from the rescue 60

61. Ex ante Rescue Contracts  By investing in pre-rescue care x the victim can reduce the probability that he’ll need to be rescued And how would he do this? 61

62. Ex ante Rescue Contracts  By investing in pre-rescue care x the victim can reduce the probability that he’ll need to be rescued And how would he do this? 62

63. Ex ante Rescue Contracts  By investing in pre-rescue care x the victim can reduce the probability that he’ll need to be rescued He might take extra precautions or extra care He might avoid dangerous places 63

64. Ex ante Rescue Contracts  By investing in pre-rescue care y the rescuer can increase the probability of a successful rescue. He might take extra precautions or extra care He might frequent dangerous places 64

65. Rescue Contracts  Suppose that the rule of duress limited the rescuer to a recovery of R upon a rescue. How much would the rescuer invest in pre-rescue care y? 65

66. Efficient Rescue Contracts  Suppose the rescuer is entitled to L. What does that do to his investment in pre-rescue care y? 66

67. Efficient Rescue Contracts On Dry Land?  Livingston is an explorer who finds himself without food or water, alone in the desert. After a week he comes across an inn, owned by Conrad. “I’ll give you food and water,” says Conrad, “in exchange for all your money.” Livingston is a millionaire. “Think it over…,” says Conrad. 67

68. Efficient Rescue Contracts On Dry Land?  Might Conrad possibly be unhappy with this result? 68

69. Efficient Rescue Contracts Status Obligations  The optimal pre-rescue costs of the innkeeper might be 0. In that case, the rescuer is adequately compensated if he is given R for the rescue.  Enforcing a rescue contract which gives him L gives him an excessive incentive to take pre-rescue care; the victim will also take excessive care, possibly by never visiting the area. 69

70. Status obligations Hale, De portibus maris 70

71. Status obligations Hale, De portibus maris 71  There cannot be taken arbitrary and excessive duties for cranage, wharfage, [etc.,] neither can they be enhanced to an immoderate rate, but the duties must be reasonable and moderate, though settled by the king's license or charter. For now the wharf and crane and other conveniences are affected with a publick interest, and they cease to be juris privati only...

72. So who owes Status Obligations? Innkeepers 72

73. So who owes Status Obligations? 73  Physicians  Restaurants