Coercion
Contracts – Prof. Merges
March 8, 2011
Where are we?
1. ¢
2. Formation – Offer/acceptance
3. “Policing” (Defenses; invalidation)
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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
K1: SF Contract
Alaska
Packers
$50 plus
piece rate
Work hard,
do what the
boss says
Sailors
K2: Alaska
Contract
Alaska
Packers
$100 plus
piece rate
Work hard,
do what the
boss says
Sailors
K2: Alaska
Contract
Alaska
Packers
$100 plus
piece rate
Is there
anything new
or extra
coming from
the sailors?
Work hard,
do what the
boss says
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”
“Take or pay”
clauses
“Objective” price
escalation clauses;
long-term contracts
“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 recontracting
• 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?