Coercion Contracts – Prof. Merges March 8, 2011. Where are we? 1.¢ 2.Formation – Offer/acceptance 3.“Policing” (Defenses; invalidation) Capacity Equity,

Coercion

Contracts – Prof. Merges

March 8, 2011

Where are we?

1. ¢

2. Formation – Offer/acceptance

3. “Policing” (Defenses; invalidation) Capacity Equity, Duress Fraud Unconscionability

4. Remedies

Alaska PackersAss’n v. Domenico

Alaska PackersAss’n v. Domenico

• Facts

• Procedural History

Alaska Packers

• What is admiralty?

– What is a libelant?

Consideration issue

• What was the consideration for the K signed by the individual seamen?

Alaska Packers

Sailors

The modification

Alaska Packers

Sailors

K1: SF Contract

Work hard, do what the boss says

$50 plus piece rate

Alaska Packers

Sailors

K2: Alaska Contract

Work hard, do what the boss says

$100 plus piece rate

Alaska Packers

Sailors

K2: Alaska Contract

Work hard, do what the boss says

$100 plus piece rate

Is there anything new or extra coming from the sailors?

What were the circumstances of the renegotiation?

• Where did it take place?

• What were the bargaining positions of the parties?

Quick review: Transaction Cost Economics

Oliver Williamson, Markets and Hierarchies (1975); The Economic Institutions of Capitalism (1985)

Oliver Williamson, UC Berkeley

“Asset Specificity”

• When “sunk cost” investments lock one party into a contract, make it difficult to recoup investment if the other party does not perform

Paul Jaskow: “Markets for Power”

“Objective” price escalation clauses; long-term contracts

“Take or pay” clauses

“Take or pay” clauses

A Property Rights Example

Private parcels

Could the sailors ever win?

• Mid. P. 328

• See 2000 Utah L Rev 185 “A Fish Story”

Schwartzreich, p. 332

• Novation: rescission and then re-contracting

• Disfavored: see why?

§ 89. Modification Of Executory Contract

A promise modifying a duty under a contract not fully performed on either side is binding

(a) if the modification is fair and equitable in view of circumstances not anticipated by the parties when the contract was made; or

(b) to the extent provided by statute; or

(c) to the extent that justice requires enforcement in view of material change of position in reliance on the promise.

Watson and Son v. Carrig

Watson and Son v. Carrig

• Facts

• Procedural History

Was the hardrock foreseeable?

• Stretching rescission

• For good or ill?