- Unfair persuasion
- Of a party under
the domination of the other party OR
- Relationship justifies
believing that other part wouldn’t screw him
- Assent induced by
the undue influence is voidable.
- If assent is induced
by undue influence of 3rd party, it is voidable, unless the
other party in the transaction acted in good faith and had no reason
to know of the undue influence, OR materially relied on the transaction
ODORIZZI
V. BLOOMFIELD SCHOOL DISTRICT (P. 535) Teacher arrested for homosexual
activity. Co-workers go to his house and ges him to resign saying there
will be bad press if he doesn’t. P sues for duress, fraud, mistake
and undue influence. Remands on undue influence.
- Undue Influence
(Restatement § 177)
- Undue susceptibility
to pressure – he was in jail all night
- Excessive pressure
/ Over persuasion: no requirement of bad faith
- Generally accompanied
by (p. 539)
- Unusual time
- Unusual place
- Insistence that
business be finished at once
- Untoward consequences
of delay
- Multiple persuaders
- Absence of third
party advisors
- Statement that no
time to consult anyone
- Almost all present
here.
- Fraud Claim:
- Misrepresentation
- Knowledge of Falsity
- Inducement (objective
standard)
- Reliance
- Damage
MISREPRESENTATION
To
Prove Misrepresentation:
- Factual statements:
(164)
- P was induced by
fraudulent or material misrepresentation (see 162 for definitions)
- P justifiably relied
on assertions
- Opinions: (169)
- Relation of trust
and confidence
- Recipient believes
the maker has special skill, judgment or objectivity OR
- Recipient is
particularly susceptible
Restatement
§ 164, When a Misrepresentation Makes a Contract Voidable (Rules,
p. 190)
- When assent is
induced by a fraudulent or material misrepresentation
upon which recipient is justified in relying, the K is voidable.
- Unless the other
party to transaction in good faith and w/o reason to know of misrep
either give s value or relies materially on transaction.
Restatement
§162, When a Misrepresentation is Fraudulent or Material (Rules, p.
190)
- A misrepresentation
is fraudulent if the maker intends his assertion to induce
assent and
- Knows the assertion
is not factual,
- Doesn’t have the
confidence he implies OR
- Knows he has no
basis for his assertion.
- The misrepresentation
is material if
- It would induce
a reasonable person to assent OR
- The maker knows
it will induce the recipient.
Restatement
§ 168, Definition of Opinion (Rules, p. 191)
- An assertion is
an opinion if it expresses belief, without certainty.
- If reasonable, the
recipient may interpret the opinion as an assertion that
- That the maker doesn’t
know of any facts to the contrary OR
- That the maker knows
of facts to justify his opinion.
Can apply to anyone giving
an opinion. Is not limited to the circumstances of §169.
Restatement
§169, When Reliance on an Assertion of Opinion Is Not Justified (Rules,
p. 191)
If assertion is one of opinion
only, the recipient is not justified in relying unless
- Relation of trust
and confidence makes reliance reasonable,
- Recipient believes
the maker has special skill, judgment or objectivity OR
- Recipient is
particularly susceptible to this type of misrepresentation.
SYESTER
V. BANTA (P. 544) P paid a lot for dance lessons. She sued but
was persuaded to sign the release. She wants to sue on tort so first
sues to rescind the release, claiming misrepresentation.
For P.
- Carey’s statement
could be fraudulent and material (Restatement §162), but
- Was her assent induced
by it?
- Did she sign b/c
of the misrepresentation (she was a good dancer) or b/c she wanted his
friendship back?
- Was she justified
in relying on it? (Restatement §169)
- No relationship
of trust and confidence
- Perhaps believed
him to have special skill, judgment
- She was particular
susceptible to the misrepresentations.
- P would have done
better by claiming undue influence, but she is too vain to do that.
NON-DISCLOSURE
No general duty to dislose.
Restatement
§161, When Non-Disclosure is Equivalent to an Assertion (Rules, p.
189)
Non-disclosure of a fact is
equivalent to an assertion that the fact doesn’t exist if:
- Disclosure is necessary
to prevent a previous assertion from becoming a misrepresentation,
fraudulent or material,
- Disclosure would
correct a mistake as to
- A basic assumption
of the K and
- Non-disclosure amounts
to failure to act in good faith
and in accordance with standards of fair dealing
- The contents of
a writing, OR
- There is a relation
of trust and confidence.
Once you have a non-disclosure
that can be treated as an assertion (§161), you must find it:
- Fraudulent and material
(§162)
- Induced reliance
(§164)
- OR relationship
of trust and confidence, etc. (§169) – but this may already be proven
under §161(d))
HILL
V. JONES (P. 553)
P buys home from D later found to have termite damage.
Duty to disclose.
- Ps need to prove:
- Sellers have a duty
to disclose material information
- Information about
termites is material
- Court says information
material to the value of the property must be disclosed.
- Buyers relied b/c
it was a basic assumption
- Fairness requires
disclosure depending on whether:
- Degree of intelligence
of parties differs
- Relationship between
the parties
- Manner in which
information is acquired
- If serendipitously,
greater duty to disclose
- Nature of the
fact.
- If easily discoverable,
less of a duty to disclose.
- Class of person
with information.
- Sellers have greater
duty b/c more information.
- Nature of the contract.
- Importance of the
fact.
- Active concealment
of any material fact
UNCONSCiONABILITY
The absence of meaningful
choice on the part of one party, and terms unusually beneficial
to the other party. Unconscionability tries to fill in gape, where something
egregious has happened, but there isn’t any other recourse for this
abuse.
Purpose: to avoid oppression
and unfair surprise
Must have:
- Procedural Unconscionability:
Abuse of the bargaining model.
- The absence of meaningful
choice on the part of one party or some defect in the bargaining process
- Requirements
- Show an adhesion
K
- High-pressure sales
tactics
- Confusing or incomprehensible
terms
- Absence of competing
sellers
- Substantive Unconscionability:
Terms of the K.
- Terms of K unusually
beneficial to the other party
- Requirements
- Comparative claims:
how much greater the harm v. how marginal the benefit
- Look for elements
of duress, undue influence, bad faith, etc.
UCC
§2-302, Unconscionable Contract or Clause (Rules, p. 34)Very
rarely enforced.
- If K is unconscionable,
court may enforce remainder of K or it can throw the unconscionable
term out, or it may limit clause as necessary
- Parties allowed
to present evidence on the setting, purpose, and effect of a K, if it
appears that it may be unconscionable
WILLIAMS
V. WALKER-THOMAS FURNITURE CO. (P. 567) Installment agreement
contained provision that applied payments pro rata to all outstanding
leases. Ps defaulted and D sought to replevy all items they had purchased.
P isn’t barred from pleading unconscionability.
- Absence of meaningful
choice coupled with unreasonable terms.
- Terms of the K (Substantive)
- Inconsistent with
trade practice
- Not necessary to
achieve stated purpose (collateral)
- In light of circumstances
(Procedural)
- K signed at her
house
- Clause buried in
fine print
- She did not receive
copy
- Absence of competing
sellers
- Alternatives to
the Procedural/Substantive Analysis:
- Uniform Consumer
Credit Code
- Whether seller believes
buyer likely to default
- Whether buyer benefits
from transaction
- Gross disparity
with market price
- Whether seller has
taken advantage of buyer’s bargaining impairment due to
- Mental impairment
- Lack of Education
- Similar Factors
VOID
AS AGAINST PUBLIC POLICY
Judicial refusal to enforce
K b/c it is contrary to public policy.
R2
§ 178—When a Term is Unenforceable on Grounds of Public Policy
- Term is unenforceable
if legislation provides that it is unenforceable or the interest in
its enforcement is clearly outweighed by public policy
- Factors to be weighed
for enforcement
- Justified expectations
of parties
- Forefeiture that
would result in no enforcement
- Special public interest
in enforcement
- Factors to be weighed
for non-enforcement
- Strength of policy
as manifested by legislation
- Likelihood that
refusal to enforce the term will further policy
- Seriousness of misconduct
involved
- Directness b/w misconduct
and term
Covenants
Not to Compete
Pros:
- Company won’t
want to train an employee if he can take that training and immediately
turn it against employer
Cons:
- Limits individual
autonomy
- Restrains trade,
esp. if it was on its own with no other terms.
Restatement
§187, Non-Ancillary Restraints on Competition (Rules, p. 193)
Promise not to compete, if
not ancillary to another agreement, is an unreasonable restraint of
trade.
Restatement
§188, Ancillary Restraints on Competition (Rules, p. 193)
Promise not to compete, ancillary
to another agreement, is an unreasonable restraint of trade if:
- Restraint is greater
than needed to protect employer’s legitimate interest
- That interest is
outweighed by
- Hardship to the
promisor
- Likely injury to
the public
- (In cases involving
the professions, public policy concerns may outweigh any protectable
interest the remaining firm members may have)
Analyzing Covenants Not
to Compete
- Is in Ancillary?
- If so, what are
employer’s legitimate interests? Look at
- Time: how long to
find replacement, how long before employee’s knowledge becomes stale
- Geography: how far
does it extend if at all?
- Scope: Substantive
coverage
- Then look at hardships
to employee/public
VALLEY
MEDICAL SPECIALISTS V. FARBER (P. 599)
Covenant not to compete part of physician’s contract.
Covenant not enforceable.
- Must be ancillary
to another agreement: Yes. Employment agreement.
- Must be reasonable
in light of public policy
- No more restraint
than necessary to protect employer’s interest (Restatement §188)
- Duration of covenant:
3 yrs too long b/c he was treating people with chronic conditions
- Scope of activity
prohibited
- Geographic area
- Dr. didn’t learn
his skills from VMS
- Must not outweigh
interest of the employee and the public: public interest so high here
you need not consider Dr’s interests
- Patients have to
travel too far to see doctor
- Medical service
is public good
- Blue-pencil:
AZ courts “blue-pencil” restrictive covenants, eliminating unreasonable
provisions. This goes too far b/c the covenant have an in terrorem effect
on departing employees. Employers may therefore create ominous covenants,
knowing that if the words are challenged, courts will modify the agreement
to make it enforceable. Crossing out items okay, adding and rewriting
is not.
Dangers
of Public Policy Justifications
Marriage.
BORRELLI V. BRUSSEAU (P. 611)
Husband promises to transfer certain property to wife if she cares for
him after stroke. She did, but estate refuses to transfer property.
Promise not enforceable.
- No valid consideration.
- Wife is already
obligated by statutory duty to care for husband.
- Public policy interest
in marriage.
(Not in case.) If K violates
a statute, court can:
- Declare it void
- Furthers public
policy
- Easy to administer
- But may be unjust
- Refuse to do so
absent statutory requirement
- Troubling relationship
with statute – you violated, but it’s OK
- Take the middle
path – Case-by-case balancing test – FAVORED APPROACH
- Restatement
§178 (Rules, p. 193) –
If interests are outweighed by public policy. (Lists factors to consider.)
MUTUAL
MISTAKE
When some fact has been unearthed
or occurred that does violence to substance of K, courts will use these
doctrines to avoid injustice.