In this article, Jeffrey Harrison addresses the very real problem of contract law’s capacity to control wrongful conduct that deprives individuals of a meaningful ability to withhold consent. Specifically, for certain types of duress and undue influence, the remedies available under contract incentivize wrongful conduct against an apparently weaker party. Professor Harrison provides an insightful analysis of the situations in which contract promotes such absurd results and makes a convincing argument in favor of treating certain types of duress and undue influence as an independent tort in order to access the deterrence value of punitive damages.
Duress and undue influence are problematic for contract law in the sense that both defenses attempt to address the fundamental basis of contract in voluntary consent of both parties to the proposed bargain. Where there is no consent, there can be no contract.
Both duress and undue influence involve exploitation of another’s ability to withhold consent. In some situations, the apparently stronger party merely takes advantage of a difficult situation in which a weaker party finds itself. These situations–described as “pure advantage taking”–are not caused by the stronger party, but rather are the result of extrinsic factors that place the apparently weaker party in a position subject to advantage-taking by others. Although Harrison considers pure advantage-taking problematic, particularly where the advantage-taker knows or has reason to know of and deliberately exploits the vulnerability, the Article focuses on the more important issue of “active advantage-taking.” In the context of duress and undue influence, the active advantage-taking scenario involves the apparently stronger party creates the vulnerability in the apparently weaker party. Harrison argues that with respect to active advantage-taking, “illegitimate pressure alone is a harm that should be addressed regardless of” whether the apparently weaker party successfully resists the pressure. (P. 971.)
This approach would essentially create an independent tort out of duress and undue influence. In some ways, an independent tort is intuitive. In cases of duress, for example, Restatement (2d) of Contracts § 176(1) lists four situations in which a threat leading to duress is improper regardless of whether the resulting agreement is on fair terms: (1) threats to commit a crime or a tort, (2) threats of criminal prosecution, (3) threats of bad faith use of civil process, and (4) threats that breach the duty of good faith and fair dealing. The first three categories are clearly wrongful acts independent of contract law and, to the extent they harm the threatened party, may be actionable in tort or prosecuted as crimes in themselves. For these types of threats, the jump to an independent cause of action in tort seems odd only in that it has not been accepted by courts.
On the other hand, other improper threats, such as a threat that breaches the duty of good faith and fair dealing or the improper threats listed under § 176(2) such as those that would harm the recipient but would not significantly benefit the maker, do not in themselves constitute wrongful actions that would traditionally be recognized in tort. Likewise, the defense of undue influence may involve independent torts such as a breach of fiduciary duty by a fiduciary that unfairly persuades a beneficiary. But most undue influence situations do not involve fiduciary breaches. Rather, undue influence covers all a wide range of situations involving unfair persuasion by a dominant party over another in a relationship where the weaker party is justified in assuming that the dominant party will not act in a manner inconsistent with the weaker party’s welfare. (Restatement (2d) Contracts § 177(1).)
Harrison deals with this issue by creatively changing the focus of the inquiry to address the problem from two different angles. First, Harrison makes an important argument from consequence–under the current approach to duress and undue influence in the active advantage-taking scenario, the expected value of engaging in duress and undue influence to attempt to force weaker parties into disadvantageous contracts is positive. Contract law recognizes duress and undue influence only as defenses that render the contract void or voidable at the election of the party asserting the defense. The remedy for the weaker party is the power to avoid the unfair contract (if the weaker party elects to do so) and obtain restitution. This means that contract law actually incentivizes stronger parties to engage in duress and undue influence because not all disadvantaged parties will sue, legal expenses and other transaction costs will reduce the value of any recovery to restitution, and even if the stronger party must pay restitution there is no cost beyond giving back what it received from the deal. Because the expected value of duress and undue influence is net positive, stronger parties–particularly repeat players–will have strong incentives to engage in active advantage-taking.
Second, Harrison argues that duress and undue influence in active advantage-taking situations should be independent torts because victims of such actions do suffer real stress and real physical impacts as a result of “cognitive trespass” by the stronger party. As Harrison notes, “[t]his evidence leads us to question why contract law permits, and arguably encourages, the imposition of stress by those who make threats or unduly influence contracting partners.” (P. 988.)
The Article recognizes that many questions remain. The most significant is the difficulty of measuring damages in tort, although Harrison argues the value of the independent torts may lie in the availability of punitive damages against repeat bad actors. Similarly, Harrison observes that allowing victims who choose to keep their contracts to nonetheless sue for tort damages may raise moral hazard issues. While many such questions exist, the Article nonetheless takes a creative look at the very real harms caused to victims as a result of others’ legally or morally wrongful acts that attempt to induce duress and undue influence and is an important starting point for further investigation.