This post limits its focus to Chapter 13. The Judicial Regulation of Improper Bargaining and of Violations of Law and Public Policy. The Introduction of the chapter lists the types of improper bargaining: "misrepresentation, duress, undue influence, and unconscionability. The text described the underlying theme of all these types as the ability to enter into a contractual agreement and the right of a party to uphold to contracts that he or she has assented to voluntarily. Courts determine "if a party's apparent agreement is based on an acceptable degree of volition. They are regulatory in that they allow the court to regulate improper bargaining behavior. They are sometimes call policing doctrines" (p. 385). The second class, violations of law and public policy, differs from the one above by establishing whether "the contract violates a statute, a rule of common law, or an important public policy" (p. 385). Under these circumstances, the court will not enforce the contract.
In the discussion of remedy, the author explained the outcomes of improper bargaining. The first consists of making a contract voidable. He defined a voidable contract as "a valid contract that remains fully effective unless the aggrieved party elects to exercise the right to terminate it" (pp. 387-388). Avoidance indicates that the party subjected to improper bargaining elects to terminate the contract. In this situation, both parties share any restitution.
The aggrieved party has other options, to maintain the contract but have the terms and conditions changed to eliminate the unfairness, to keep the contract but claim damages, for the tort or injury, battery, etc.
Misrepresentation, the first type of improper bargaining, the author characterized as " an assertion not in accord with the acts. It is a factually incorrect representation made by one of the parties at the time of contracting" (p. 390). The subclasses, fraudulent, negligent, and innocent, demonstrate the degrees of severity of misrepresentation. Cases based on misrepresentation rest of "the decision on whether or not to grant relief involves a closer balancing of the relative culpability of the parties, and a stronger focus on the objective importance (materiality) of the misrepresentation and the victim's duty to verify the facts" (p. 391).
The section of the chapter, "the application of the parol evidence rule to misrepresentations made outside the written contract" (p. 391) applies to misrepresentation for numerous reasons--"to prove that a fact represented in the writing is wrong . . . [or] was allegedly made orally before or at the time of execution of the written contract, or was made in a prior written document" (p. 391). Again, consideration would be given to the severity of the misrepresentation--fraudulent, negligent, or innocent.
Fraudulent misrepresentations, either "fraud of inducement" (p. 392) the deception that acts as an enticement to enter the contract or "fraud in the factum" deception in the "nature or effect of a document to be signed" (p. 392) constitute two types of fraud. Concentrating on the first, more prevalent types, Blum explains the "false representation of fact with knowledge of its falsity and with intent to induce the other party to enter the contract" (p. 392). He distinguished fact, opinion, and prediction or a "promise of future performance" (p. 393). The author posits a general rule for the legal ramifications of these: "Only a misrepresentation of fact constitutes fraud. An opinion or a prediction should be understood as nothing m0re than an expression of opinion" (p. 393). Other types of fraud include affirmative false statement ( a lie), concealment, nondisclosure, "knowledge of falsity and intent to induce the contract" (p. 398). On the topic of materiality and its impact on fraud, the author implied that it factors into some cases and not in others.
Regarding justifiable inducement, Blum asserts from his review of cases that "One can also detect that courts apply a different degree of objective assessment depending on whether the misrepresentation was active ( a statement or concealment) or by nondisclosure. Courts are more likely to impose a tougher standard of reasonable inquiry on the victim where the fraud lies in failure to disclose facts" ((p. 400).
Although the author details quite extensively duress, contracts negotiated based on force or threats of bodily harm, this post will not address these circumstances. Another topic, unconscionability, does pertain to a small business, such as mine. As Blum acknowledged, "unconscionability is most commonly associated with consumer transactions in which a relatively large and powerful corporation supplies a standard form contract that is signed by a consumer with little or no opportunity to negotiate its terms" (p. 412). These contracts have the characteristics of being "harsh, unfair, or unduly favorable to one of the parties" ((p. 416). In adjudicating cases involving unconscionability, the courts can decide on a number of remedies--refusing to enforce the contract, nullifying, or revising the objectionable portion of the contract.
The vagueness of the unconscionability doctrine makes it difficult to argue and to predict the outcome from the courts.
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