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George Mason School of Law
F.H. Buckley fbuckley@gmu.edu

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)

Physical Duress is an easy one
Restatement § 174

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Their Opening Act

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Was that duress?
 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”

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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

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Was that duress?
 What did the Δ’s do?

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What did the
4th Grade Class,
Beeler Public School,
Marlton NJ, 2007

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Was that duress?
 Just why was the threat wrongful?
 Restatement § 175 (an “improper threat”)

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Was that duress?
 Just why was the threat wrongful?
 Wrongful “in a moral sense”? An
“outrageous purpose”?

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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)?

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Was that duress?
 You’re a New Jersey judge in 1959.
You’re handed Wolf, and you think segregation is an evil. What do you do?

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Was that duress?
 You’re a New Jersey judge in 1959.
You’re 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?

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Was that duress?
 You’re a New Jersey judge in 1959.
You’re handed Wolf, and you think segregation is an evil. What do you do?
 How do the incentives cut?

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Was that duress?
 What’s the remedy the Π’s seek? And why should that matter?

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Was that duress?
 What’s the remedy the Π’s seek? And why should that matter?
 Rescissionary relief an equitable remedy
 The clean hands doctrine

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

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

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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)

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

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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?

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Was that duress?
 Is this case like Hochman?
 “Further instructive is…”

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Improper threats
 The threat to reveal an embarrassing secret?

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

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Improper threats
 The threat to reveal an embarrassing secret?
 Cf. Restatement § 176(1)(a) (“or if the threat itself…”)
 Why is blackmail a crime?
 Doesn’t it increase the cost of misbehavior?

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Improper threats
 The threat to reveal an embarrassing secret?
 Cf. Restatement § 176(1)(a) (“or if the threat itself…”)
 Why is blackmail a crime?
 Doesn’t it increase the cost of misbehavior?
 What else is going on?

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George Mason School of Law
F.H. Buckley fbuckley@gmu.edu

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

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

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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?

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

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

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

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

Contract Modification
Austin v. Loral
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 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

Why a different result in Chouinard?

Why a different result in Chouinard?
The Chicken Game in Rebel without a Cause

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Player 2
Swerve Straight
Swerve Tie, Tie -10, 10
Player 1
Straight 10, -10 -100, -100

Examples of Chicken
 Chouinard?

Examples of Chicken
 Chouinard?
 The Constitution of 1789?

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

Rescue Contracts
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SS Strathclyde, 1876

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

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

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

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

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
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*I assume that all attempted rescue are successful

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.
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*I assume that all attempted rescue are successful

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

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

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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?

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

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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 prerescue care

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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

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

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Ex ante
Rescue Contracts
 By investing in pre-rescue care x the victim can reduce the probability that he’ll need to be rescued
 He might avoid dangerous places
 He might take extra precautions or extra care

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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

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Rescue Contracts

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

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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?

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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

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

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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

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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?

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

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Efficient Rescue Contracts
 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. “I’ll give you food and water,” says Conrad,
“in exchange for all your money.”
Livingston is a millionaire. “ Think it over …,” says Conrad.

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Efficient Rescue Contracts
 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. “I’ll 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?

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Efficient Rescue Contracts
 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.

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George Mason School of Law
F.H. Buckley fbuckley@gmu.edu