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INVALID CONTRACTS – CONTINUED

Duress

This concept tries to square the circle. The main idea is that if a person signs a contract under some sort of pressure (physical or economic) then the contract may be invalidated by a judge. This is so because this person has signed “against his/her will”… whatever that may be.

The problem with this concept is that the act of agreeing or signing a contract requires our will. Our lips won’t move if we don’t command them. Our hand won’t write unless we so desire.  So, when somebody signs a contract under said conditions, it cannot be against the will simply because this is physically impossible.

Ignoring this point, the argument states that the issue is the pressure, not the will.

Fair enough. We can then expect an objective standard as to what kind of pressure and how much is enough to void a contract, right? Well… no.  All the “duress” types and conditions are subjective.

In other words, there is no way to quantify or determine if a person was under sufficient duress to void a contract, simply because nobody knows what “sufficient” means!

Let’s take a look at their types first and then offer our own point of view.

 

Physical duress

  • Personal: This is when a person threatens with physical harm other  person. Sign or I will stab you.
  • To Goods: This is when a person hijacks your goods and won’t release them until you sign.

Economic duress

  • Wrongful or improper threat: There is no precise (or any) definition of what this means. There are a few case laws, but each judge can decide indecently.
  • Reasonable alternative: there is no other reasonable alternative but to accept the contract.
  • The threat induces the contract: contract with me or else.
  • The other party caused the distress

 

None of these “rationales” makes much sense. They are all subjective at so many levels that is not even fully, however ridiculous they may be.

In an Absolute Austro-Libertarian system, the whole affair is quite simple. The question to answer is: did the person signing the contract do so willingly or unwillingly?

This would seem like semantics, but it is not. Any person feeling that they are under duress, they can always say that they do not accept the contract but that they will cooperate to prevent other damages. Now that they have stated the rejection to the contract, any other thing that they may do willingly is not binding. This is so because they have rejected the agreement in the first place.

This automatically makes any contract that they may sign, unwilling. As such, this is a non-contract.

For example: your money or your life. If you say: yes or give them your money, you are accepting a contract. However, if you say no, but that you will cooperate, it is a robbery. Big difference. The process and the concept are very clear. The question to answer is always the same: was it a willing act or an unwilling act? Was there a contract or a non-contract?

Some of the duress concepts approach the excuse of incapacity. Did the signatory of a contract have enough age, or received sufficient advice or had the relative education? If the subjective view of the judge is no, then the contract is invalid. Preposterous!

Even in this distorted judicial Democracy, there is such a thing as an age of adulthood. However, even past this age, this concept of “duress” still applies. In other words, judges are allowed to turn back the clock and consider an adult as a child. Ridiculous!

In an Absolute Austro-Libertarian system the whole affair is quite simple. Was the signatory emancipated or not? This question defines the entire answer.

There is no need for further subjective evaluations or points of view. Plain, clear and simple.

 

Undue influence

The general idea is that a contract can be voided if one party in the contract takes advantage of a position of power over the other party. Can you spell duress? Can you spell incapacity? Humm…. This all sounds quite familiar.

There are two types.

Presumed

  • Matter of law: in other words, just because some sort of relationship exists, the law states that there has been “undue” influence. For example: parent/child, attorney/client, government/citizen, etc.
  • Others: some sort of relationship exercises “undue” influence. Then the relationship is placed on trial to see if one can “presume” that “undue” influence had taken place.

Actual

When there is evidence of “undue” influence, this is, that the power was unbalanced at the time the contract was signed.

Now let’s step back and analyze this issue. To begin with, we are always in some sort of relationship with somebody else. Even when we negotiate with strangers, this is a relationship. However, we can go a step forward. The concept of “undue influence” is based on the legal concept that when parties agree to a contract, that agreement was achieved when a balance of power existed. In other words, both people singing were equally skilled and in similar position to exercise power on the other.

How much more ridiculous can this get? Every single economic transaction, every single contract is imbalanced! There is no way, absolutely none, to have two people with exactly the same negotiating skills and power positions. This is impossibility. Yet, the legal principle is based on this impossibility.

We are all under “undue” influence all the time. For example, do you feel in the same power position when you go grocery shopping to a supermarket? Can you picture yourself negotiating the price of a can of tuna with the teller? Of course not! This is beyond ridiculous!

The whole of the economy works on the principle of inequality. If all people would be equal, if all people would perceive to be equal to everybody else, contracts would not be necessary because all parties would always have the same exchange value in mind. The incentive to contract is to try to extract value above and beyond the value you deposit, from the other person. The whole point of a contract is that both parties feel  that they have obtained better value than the value the parted with.  Inequality rules!

 

Unconscionability

This is another figment of legal imagination. The general idea is that a contract could be voided or re-stated (i.e. re-written) if the terms of the contract are extremely unjust or one-sided, to the point that they are contrary to good conscience. This is, of course, yet another  wonderfully subjective issue.

For example, when a contract is deliberately made complex to hide disadvantageous conditions. When the contract is offered as “take it or leave it”.  Or when there were negotiation disadvantages. Or in cases of fraud, deceit or misrepresentation.

This is completely ridiculous! To begin with, what is a “conscience”? Furthermore, what is a “good conscience”? I have never seen one and I sincerely doubt that any judge has either.  Also, what is “extremely unjust or one-sided”? It sounds to us like somebody just struck a good bargain. Nothing more. Why should the contract be voided just because one person lacks negotiating skills?

In an Absolute Austro-Libertarian system, the only valid question is this: was the person capable of understanding the contract yes or not? If the answer is no, then there was no contract. If the answer is yes, then there is a contract.

Unconscionability is just another way to spell incapacity, duress and undue influence.  Semantics, pure and simple.

And how about fraud or misrepresentation? The question is not if there was “bad” intention in the contract. All contracts are based on “bad” intentions. The intention of one party is to receive more value than the given. There is no way to determine objective when one has crossed the line of “normal” bad intention into “abnormal” or “elevated” bad intention.

In the event of fraud, the question is whether or not the contract was fulfilled. If it was, there are no damages. If it wasn’t, then there are damages.

For example, let’s say that I buy an island in the South Pacific. I sign a purchasing agreement and pay the price. However, the island does not exist. Is my contract valid? Of course! It was signed by mutual agreement. Am I owed damages? Of course! The other person broke the contract because the island does not exist.

This is clear and simple. There is no need to guess states of mind or read the teal leaves of contracting people.

 

Frustration of purpose

This is another make-believe legal argument. The idea is  that if the purpose of a contract is destroyed, then the contract cannot be enforced. For example, Xin buys a van with a loan from Womba. This van will be used in a courrier business. Unfortunately, there is an earthquake and the van is destroyed. The van insurance did not cover “acts of God”.  As the purpose of the loan does not exist any longer, the contract is not enforceable.

This is, again, ridiculous! A loan is a loan is a loan. The purpose is irrelevant. The point is that a loan was made to Xin  and both people accepted the risk. It was mutually agreed. Just because the risk became a certainty, this does not mean the agreement never existed. Ridiculous!

Note: please see the Glossary if you are unfamiliar with certain words.

Continue to Contracts Are The Key To Coexistence - Part 6

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