1. George Mason School of Law
Contracts I
Duress
F.H. Buckley

2. Physical Duress is an easy one
Lee Marvin, as highwayman
Liberty Valance, holding up
Jimmy Stewart,
The Man Who Shot Liberty
Valance (John Ford, 1962)

3. Physical Duress is an easy one
Restatement § 174

4. The Highwaymen 1962 Steve Trott on the far left

5. Ninth Circuit Judge Steve Trott

6. The Highwaymen 1996

7. The Highwaymen Their Opening Act7

8. Was that duress?

9. 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”

10. 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?

11. What about blackmail, then?
David Letterman

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

13. 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?

14. 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?

15. 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?

16. 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?
Does blackmail usefully impose a cost on transgressive behavior?

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?
Does blackmail usefully impose a cost on transgressive behavior?
Is it an answer that, if the blackmail is paid, the information is not revealed?

18. 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?
Does blackmail usefully impose a cost on transgressive behavior?
Why then is blackmail a crime?

19. Improper threats Restatement § 176(1)(a) (“or if the threat itself…”)

20. Improper threats
How would life be different were blackmail legalized?

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

22. Improper threats 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

23. Improper threats
Is that the kind of world we want?
If not, why not?

24. Improper threats Is that the kind of world we want? If not, why not?
Should we want a right to sin in private?

25. Improper threats Is that the kind of world we want? If not, why not?
Should we want a right to sin in private?
The Scarlet Letter

26. Improper threats Is that the kind of world we want?
Are the social norms blackmail would enforce always benign?
Don Murray and
Charles Laughton,
Advise and Consent
(1962)

27. So what was the duress in Wolf v. Marlton?

28. What was the duress in Wolf v. Marlton?
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 28

29. Was that duress?
What did the Δ’s do in the end? 29

30. What did the Δ’s do? 4th Grade Class, Beeler Public School,
Marlton NJ, 2007 30

31. Was that duress? Just why was the threat wrongful?
Restatement § 175 (an “improper threat”)

32. Was that duress? Just why was the threat wrongful?
Wrongful “in a moral sense”? An “outrageous purpose”? 32

33. Was that duress? Just why was the threat wrongful?
Wrongful “in a moral sense”? An “outrageous purpose”?
When does a party breach “the duty of good faith and fair dealing” in Restatement § 176(1)(d)? 33

34. Was that duress?
You’re a New Jersey judge in You’re handed Wolf, and you think segregation is an evil. What do you do? 34

35. Was that duress?
You’re a New Jersey judge in You’re handed Wolf, and you think segregation is an evil. What do you do?
What is worse? Making the threat or succumbing to it? Or is it the same?

36. Was that duress?
You’re a New Jersey judge in You’re handed Wolf, and you think segregation is an evil. What do you do?
How do the incentives cut? 36

37. Was that duress?
What’s the remedy the Π’s seek? And why should that matter?

38. Was that duress?
What’s the remedy the Π’s seek? And why should that matter?
Rescissionary relief an equitable remedy
The clean hands doctrine

39. Was that duress? Just why was the threat wrongful?
Wrongful “in a moral sense”? An “outrageous purpose”?
“malicious motives”?
Can you define malice? 39

40. Was that duress? Just why was the threat wrongful?
Wrongful “in a moral sense”? An “outrageous purpose”?
“malicious motives”?
Can you define malice?
Orson Welles and
Michael MacLiammoir,
Othello, 1952 40

41. Was that duress? Just why was the threat wrongful?
Wrongful “in a moral sense”? An “outrageous purpose”?
“malicious motives”?
Can you define malice?
Restatement § 176(2)(a) 41

42. Was that duress?
Suppose that the threat was to sell the house to a member of the mob? Would that have made a difference?

43. Was that duress? Just why was the threat wrongful?
Wrongful “in a moral sense”? An “outrageous purpose”?
“malicious motives”?
The intensity of the pressure on the Δs? 43

44. Was that duress?
Is this case like Hochman?
“Further instructive is…”

45. Improper threats The threat to bring criminal proceedings.
Restatement § 176(1)(b)

46. Improper threats The threat to bring criminal proceedings
The bad faith threat to commence a civil action.
Restatement § 176(1)(c) 46

47. Improper threats The threat to bring criminal proceedings
The bad faith threat to commence a civil action
What if the Π has no knowledge of Δs wrongdoing and asks for a settlement that is less than the cost of discovery? 47

48. Contract Modification Austin v. Loral
Why did Loral agree to the contract modification? 48

49. Contract Modification Austin v. Loral
Situational monopolies
The possibility of post-contractual opportunism
What should the courts do? 49

50. Contract Modification Austin v. Loral
Suppose you had been counsel for Austin. How might you have amended your pleadings?

51. Contract Modification Austin v. Loral
Suppose you had been counsel for Austin? How might you have amended your pleadings?
UCC §2-209(1)

52. Contract Modification Austin v. Loral
Suppose you had been counsel for Austin? How might you have amended your pleadings?
UCC §2-209(1)
Restatement § 89 52

53. Why a different result in Chouinard?

54. Why a different result in Chouinard?
Was this a situational monopoly?

55. Rescue at Sea How do Admiralty Courts handle rescue claims?
Post v. Jones

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

57. 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

58. 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 costs associated with the possibility that the ship will be lost PLUS the rescue costs

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

60. 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
*I assume that all attempted rescue are successful

61. 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.
*I assume that all attempted rescue are successful

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

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

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

65. 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?

66. 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?
Bilateral monopolies vs. competition

67. 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?

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

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

70. 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

71. 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

72. 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?

73. 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?

74. 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 74

75. 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

76. Efficient Rescue Contracts
An efficient duress rule would minimize the Social Costs of the rescue C
Adding in pre-rescue care x and y, what would the Social Cost C be?

77. Efficient Rescue Contracts
An efficient duress rule would minimize the Social Costs of the rescue C
What is the probability the vessel will go down?
What is the cost of the rescue?
What are the pre-rescue costs for rescuer and victim?

78. Efficient Rescue Contracts
An efficient duress rule would minimize the Social Costs of the rescue C:
C(x,y) = Loss if ship goes down + Rescue Costs + x + y

79. Efficient Rescue Contracts
Loss if ship goes down is pV(1-pR)L
pV is the probability that the victim will need a rescue, and
pR is the probability of a rescue 79

80. Efficient Rescue Contracts
Loss if there is a rescue is pVpRR + x + y, where
pV is the probability that the victim will need a rescue, and
pR is the probability of a rescue 80

81. Efficient Rescue Contracts
An efficient duress rule would minimize the Social Costs of the rescue C:
C(x,y) = pV(1-pR)L + pVpRR + x + y, where
pV is the probability that the victim will need a rescue, and
pR is the probability of a rescue 81

82. Efficient Rescue Contracts
An efficient duress rule would minimize the Social Costs of the rescue C:
Let x* and y* be the cost-minimizing (or efficient) levels of pre-rescue care by the victim and rescuer, respectively 82

83. 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 y?

84. Efficient Rescue Contracts
What is the rescuer awarded under Admiralty Law?
Do you think that y* > 0?

85. 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.

86. 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.
Does y* > 0?

87. 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 in this case.

88. So who owes Status Obligations? Innkeepers

89. So who owes Status Obligations?
Physicians
Cosmetic surgery vs. Emergency Medical
What’s the difference?

90. So who owes Status Obligations?
Physicians
Restaurants
Pharmacists

91. George Mason School of Law
Contracts I
Fraud
F.H. Buckley 91 91