Improper Bargaining

Mistake asked what the parties believed. Improper bargaining asks what one party did. These defenses police the conditions under which assent was given: a contract built on deception, coercion, or exploitation reflects something other than the free and informed choice the law enforces. Chapter 12 is the largest defenses chapter, and today’s task is to keep the doctrines distinct — each targets a different defect in the bargaining process.

Misrepresentation

R2d § 159. A misrepresentation is “an assertion that is not in accord with the facts.” Not every false statement undoes a contract; the assertion must induce assent on which the recipient was justified in relying.

R2d § 162. The doctrine splits two ways. A fraudulent misrepresentation is made with intent to deceive (scienter). A material misrepresentation needs no intent — it is enough that the false assertion would likely induce a reasonable person to assent. This distinction is the heart of Barrer: the bank alleged no fraud, so the case turns on materiality, not on the borrower’s state of mind.

R2d § 164. Either kind makes the contract voidable by the recipient if the misrepresentation was material or fraudulent, induced assent, and the recipient’s reliance was justified. Innocence is not a defense once the statement is material and justifiably relied upon.

Duress

R2d § 175. A contract is voidable where a party’s assent is induced by an improper threat that leaves the victim no reasonable alternative. R2d § 176 supplies what makes a threat improper — among them a threatened crime or tort, a threat to bring a claim in bad faith, or a threatened breach of the duty of good faith. Duress is distinct from hard bargaining: the test asks whether this party, on these facts, had a real choice. Physical compulsion (a hand forced to sign) is the rare case that makes a contract void, not merely voidable.

Undue influence

R2d § 177. Undue influence is unfair persuasion by a party in a dominant position, or by one whom the victim was justified in trusting. Where duress polices a threat, undue influence polices the exploitation of a relationship — guardian and ward, attorney and client, caregiver and dependent. The pressure is relational rather than coercive.

Unconscionability

R2d § 208 / UCC § 2-302. A court may refuse to enforce a contract or term that is unconscionable. The modern test has two prongs that courts generally require together: procedural unconscionability (a defect in the bargaining process — surprise, hidden terms, absence of meaningful choice) and substantive unconscionability (terms so one-sided as to be oppressive). A bad deal alone is not unconscionable; a deal no one with a real choice would sign, on terms no court should enforce, is.

Cases

Barrer v. Women’s National Bank holds that a non-fraudulent misrepresentation can void a contract where it is material, induced justified reliance, and caused detriment; summary judgment for the bank was reversed because the trial court failed to require actual, justifiable reliance on the borrower’s statements and omissions. It shows that materiality, not intent, is the operative question — and that some of the borrower’s “misrepresentations” were omissions, raising when silence becomes an assertion. Quebodeaux v. Quebodeaux sets out the three-element duress test: involuntary acceptance of terms, no reasonable alternative, and the other party’s coercive acts causing the circumstances. A husband’s threat to take the couple’s children unless his wife signed a lopsided separation agreement satisfied all three. Williams v. Walker-Thomas supplies the unconscionability framework; today we run only the procedural prong — absence of meaningful choice and surprise in an adhesion contract — and remand, as the court did, before the substantive prong is reached next class.

What you should be able to do

Run the elements of fraudulent and material misrepresentation under §§ 159, 162, and 164 and decide whether a contract is voidable without proving intent. Apply the three-element duress test to a pressured settlement, and distinguish duress from undue influence by asking whether the lever was a threat or the exploitation of a relationship. Name the two prongs of unconscionability and explain why procedural without substantive is mere paternalism. Next class adds misrepresentation by silence (Hill v. Jones), completes the substantive prong of Williams, and pivots into incapacity.