(Disclosure: This post is probably very boring to most of you. I don’t expect anyone to read it, let alone enjoy it. I’m writing it mostly because Jason said that he thought it might be interesting to see what goes on in law school. This entry is basically a synthesis of readings I did today on contracts made under duress. Point being: I haven’t been to class to discuss it so it might be ‘completely opposite’ what I should have gotten out of it. Take it for what it’s worth. I’m writing on this not necessarily because I find it particularly interesting but simply because I just finished reading it.)
Assuming that the form is correct, courts are not in the business of controlling contracts (generally). If a contract is made, and there is consideration on both sides then typically that contract is valid. Courts enter the picture when one of the parties named breaches the terms established by both sides. It is not the role of the court (again generally) to determine which contracts are “fair.” However there are some instances that that allow courts to say that a contract was not valid to begin with and, consequently, neither party is bound by the terms. Duress is one such instance.
The doctrine of duress (in the context of contracts) is an effort to establish the boundary between proper and improper advantage-taking. Individual freedom turns on having a large degree of choice. Contracts entered under duress strain that individual freedom. If I point a gun at your head and threaten to kill you unless you make a contract, the resulting agreement is not an expression of free choice. Not surprisingly, the courts refuse to enforce such a contract.
The above example is obviously an extreme example. What becomes difficult is establishing where to draw the line of duress. The classic doctrine says that a threat to do what you are legally entitled to do cannot be duress.
Case law has changed this standard over the last 50 years. There was a case in Texas in which a truck driver named Mitchell for Herrin Transportation Company was injured in a car accident on the job. Mitchell was not at fault but Herrin wanted to secure a prompt settlement of its claim for damages to the truck. In the settlement negotiations, the insurance company of the other driver did not want to pay Herrin until it also received releases from Mitchell for any claim he might have arising out of the accident (apparently a common practice). In its desire to close the settlement, Herron threatened Mitchell that unless he signed the release, he would be fired. Mitchell signed but subsequently brought an action for his injuries. He asked the court to set aside the release on the ground that they had been secured through duress. After a series of trials and appeals, it was determined that the release (a contract) was voidable because it was made under duress.
This case changed the standard. Before, the rule was that duress could only be established if there was a threat to do some act which the party threatening had no legal right to do. Mitchell was at employee at will. Legally, Herrin could fire Mitchell for any reason with or without cause. The court determined that this type of threat can constitute duress if the threat to fire someone is employed as means to force an employee to sign a release of action. There have been several cases in addition to the Mitchell case that have similarly ruled. The rationale is that the parties are not on equal footing in such cases.
Was the court right and how far should they be entitled to go? In Professor Dalton’s words, the problem is “isolating just those kinds of impairment [of bargaining power] that the law is prepared to redress without feeling that the whole structure of bargaining between unequals is put in jeopardy.”
The Restatement on Contracts (basically what respected scholars say case law is) says the test for duress turns on “unfair exchange,” “unfair dealing,” or “the use of power for illegitimate ends.” Those words seems like very uncertain measures of appropriate conduct.
What should the rule be? Should we go back to the classic definition that hinges on legality? Should we limit it to only illegal threats and threats of employment (though many hypotheticals could be thought up that are like employment settings but not)? Or should we leave it up to the judge or jury to determine what is a “fair exchange,” and a “fair dealing”?
What instruction did you receive on this question? What insight? I'm curious to know what the discussion was like.
ReplyDeleteI think it should be the definition that hinges on legality. In the Mitchell case, I have a question: Did the company dictate that he needed to drop claims, or just that he needed to decide wether or not to drop claims? That he settle within a certain period, I think is totally fair, but what if he DID have some claim? Herrin had no right to say he couldn't claim anything. Firing him, however, I think they are totally fair in doing. I don't like the idea that an employee could drag their feet on something like that, and then force the company to keep them. If an employee isn't doing something the way you want, they should be gone. Out in the cold. We have labored the rights of employees for so long, they are well taken care of.
I don’t know if I can answer your question about the case succinctly without a lot of other information about contract formation. But I’ll do my best. Contracts are distinct from gifts in part because they require consideration (both sides giving or promising to give something). In my post, I failed to mention what Herrin was giving (and Mitchell) receiving by signing the release. The insurance company agreed to a settlement if but only if Mitchell agreed not to bring suit. As part of that settlement, Mitchell was to get $67 (in 1950). In sum, Mitchell was to promise not to sue, and—in return—would get $67. That was the contract.
ReplyDeleteThe company dictated that he sign the release forfeiting his right to bring a claim. Nobody (including Herrin) had the right to say that he couldn’t bring a claim UNLESS he signed a contract forfeiting that right. That’s what contracts do. Promises are made on both sides to do (or not do) what you are not legally mandated to do (or not do) were it not for the contract. That’s the point of this case. He could have chosen not to sign the release. It’s not an issue of Mitchell dragging his feet. Herrin basically said, “Sign this contract or we will fire you.” I don’t know all the facts, but let’s assume Mitchell DID have a legitimate claim and he wasn’t dragging his feet. Mitchell was an employee at will which means that Herrin still had the ability to fire him at any time for any reason (without getting into wrongful termination statutes). Under these circumstances, Herrin could still say, “If you don’t sign this release (and forfeit your right to bring this case) then we will fire you.” Even if Mitchell had a slam dunk case, everything done by the insurance company and Herrin was legal: (1) The contract was legal; and (2) What Herrin threatened to do was legal. Under the classic doctrine of duress, Herrin would only have put Mitchell under duress if it had threatened to do something illegal (i.e. “I’ll burn down your house if you don’t sign the release). The company didn’t say, “Make up your mind soon about whether you will bring a claim.” It said, “Enter this legal contract whereby you promise to forfeit your right to bring a claim and in return receive $67 or else we will fire you, something that we are legally entitled to do.”
That was a long response. I don’t even know if I answered your question adequately. And I didn’t even talk about our class discussion. But discussion was basically on the lines of my answer here. We also talked about whether it should constitute duress.