1. 1 George Mason School of Law Contracts II Duress F.H. Buckley fbuckley@gmu.edu

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 4

5. Ninth Circuit Judge Steve Trott 5

6. The Highwaymen 1996 6

7. The Highwaymen Their Opening Act 7

8. Was that duress? 8

9. 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. So what was the duress in Wolf v. Marlton? 10

11. What was the duress in Wolf v. Marlton? 11 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

12. Was that duress? What did the Δs do? 12

13. What did the Δs do? 13 4th Grade Class, Beeler Public School, Marlton NJ, 2007

14. Was that duress? Just why was the threat wrongful? Restatement § 175 (an improper threat) 14

15. Was that duress? Just why was the threat wrongful? Wrongful in a moral sense? An outrageous purpose? 15

16. 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)? 16

17. Was that duress? Youre a New Jersey judge in 1959. Youre handed Wolf, and you think segregation is an evil. What do you do? 17

18. Was that duress? Youre a New Jersey judge in 1959. Youre 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? 18

19. Was that duress? Youre a New Jersey judge in 1959. Youre handed Wolf, and you think segregation is an evil. What do you do? How do the incentives cut? 19

20. Was that duress? Whats the remedy the Πs seek? And why should that matter? 20

21. Was that duress? Whats the remedy the Πs seek? And why should that matter? Rescissionary relief an equitable remedy The clean hands doctrine 21

22. Was that duress? Just why was the threat wrongful? Wrongful in a moral sense? An outrageous purpose? malicious motives? Can you define malice? 22

23. Was that duress? Just why was the threat wrongful? Wrongful in a moral sense? An outrageous purpose? malicious motives? Can you define malice? 23 Orson Welles and Michael MacLiammoir, Othello, 1952

24. 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) 24

25. Was that duress? Suppose that the threat was to sell the house to a member of the mob? Would that have made a difference? 25

26. 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? 26

27. Was that duress? Is this case like Hochman? Further instructive is… 27

28. Improper threats The threat to reveal an embarrassing secret? 28

29. Improper threats The threat to reveal an embarrassing secret? Cf. Restatement § 176(1)(a) (or if the threat itself…) Why is blackmail a crime? 29

30. Improper threats The threat to reveal an embarrassing secret? Cf. Restatement § 176(1)(a) (or if the threat itself…) Why is blackmail a crime? Doesnt it increase the cost of misbehavior? 30

31. Improper threats The threat to reveal an embarrassing secret? Cf. Restatement § 176(1)(a) (or if the threat itself…) Why is blackmail a crime? Doesnt it increase the cost of misbehavior? What else is going on? 31

32. 32 George Mason School of Law Contracts II Duress F.H. Buckley fbuckley@gmu.edu

33. Improper threats The threat to bring criminal proceedings. Restatement § 176(1)(b) 33

34. Improper threats The threat to bring criminal proceedings The bad faith threat to commence a civil action. Restatement § 176(1)(c) 34

35. 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? 35

36. Contract Modification Austin v. Loral Why did Loral agree to the contract modification? 36

37. Contract Modification Austin v. Loral Situational monopolies The possibility of post-contractual opportunism What should the courts do? 37

38. Contract Modification Austin v. Loral Suppose you had been counsel for Austin. How might you have amended your pleadings? 38

39. Contract Modification Austin v. Loral Suppose you had been counsel for Austin? How might you have amended your pleadings? UCC §2-209(1) 39

40. Contract Modification Austin v. Loral Suppose you had been counsel for Austin? How might you have amended your pleadings? UCC §2-209(1) UCC § 1-304. Every contract or duty within [the Uniform Commercial Code] imposes an obligation of good faith in its performance and enforcement Restatement § 89 40

41. Why a different result in Chouinard?

42. The Chicken Game in Rebel without a Cause

43. 43 SwerveStraight Swerve Tie, Tie-10, 10 Straight 10, -10-100, -100 Player 2 Player 1 Modeling the Chicken Game

44. Examples of Chicken Chouinard?

45. Examples of Chicken Chouinard? The Constitution of 1789?

46. Examples of Chicken Chouinard? The Constitution of 1789 The decision to provision Fort Sumpter?

47. Rescue Contracts 47 SS Strathclyde, 1876

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

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

50. 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

51. Ex post Rescue Contracts Ex post, rescuer happens upon victim and they bargain over a rescue. 51

52. 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 52 *I assume that all attempted rescue are successful

53. 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. 53 *I assume that all attempted rescue are successful

54. Rescue Contracts Suppose that the rule of duress prevented the rescuer from bargaining for any recovery 54

55. Rescue Contracts Suppose that the rule of duress prevented the rescuer from bargaining for any recovery How much would the rescuer invest in R? 55

56. 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? 56

57. Ex Ante Rescue Contracts Suppose that rescuer and victim had to bargain ex ante for a rescue, before the victim embarked on his voyage 57

58. Ex Ante Rescue Contracts Suppose that rescuer and victim had to bargain ex ante for a rescue, before the victim embarked on his voyage Both parties might want to invest in pre- rescue care 58

59. Ex Ante Rescue Contracts Now we 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 59

60. Ex ante Rescue Contracts By investing in pre-rescue care x the victim can reduce the probability that hell need to be rescued And how would he do this? 60

61. Ex ante Rescue Contracts By investing in pre-rescue care x the victim can reduce the probability that hell need to be rescued He might avoid dangerous places He might take extra precautions or extra care 61

62. Ex ante Rescue Contracts By investing in pre-rescue care y the rescuer can increase the probability of a successful rescue. He might frequent dangerous places He might take extra precautions or extra care 62

63. Rescue Contracts An example of y 63

64. Efficient Rescue Contracts An efficient duress rule would minimize the Social Costs of the rescue C And these are? 64

65. 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? 65

66. 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 66

67. Efficient Rescue Contracts An efficient duress rule would minimize the Social Costs of the rescue C: C(x,y) = p V (1-p R )L + p V p R R + x + y, where p V is the probability that the victim will need a rescue, and p R is the probability of a rescue 67

68. 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 68

69. 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? 69

70. Efficient Rescue Contracts What is the rescuer awarded under Admiralty Law? Do you think that y* > 0? 70

71. 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. Ill give you food and water, says Conrad, in exchange for all your money. Livingston is a millionaire. Think it over…, says Conrad. 71

72. 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. Ill 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? 72

73. 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. 73

74. 74 George Mason School of Law Contracts II Fraud F.H. Buckley fbuckley@gmu.edu