ContractsProf Blog

Editor: Myanna Dellinger
University of South Dakota School of Law

Sunday, May 14, 2006

"Unfair Advantage" and "Transactional Neglect"

Aab_34 Bargaining power is like money: you can never have too much.

Or can you?  Sometimes bargaining power, through no fault of your own, can shift to "unfair advantage," is in the classic case where the other party has absolutely no choice but to agree.  This differs from duress or undue influence in that the party getting the advantage didn't cause the situation that causes the pressure.   In a new paper, Contracts by Unfair Advantage: From Exploitation to Transactional Neglect, forthcoming in the Oxford Journal of Legal Studies, Rick Bigwood (Auckland) seeks to create a "paradigm shift" in how courts deal with the issue.  Here's the abstract:

This article aims to effectuate a paradigm shift in the way we view cases involving pure advantage-taking in contract formation. By “pure advantage-taking” it is meant that D in some sense took “unfair advantage of” a special bargaining weakness or vulnerability that D found “ready-made” in P: D neither caused P’s relevant weakness or vulnerability nor otherwise was legally responsible for relieving it.  Certain undue influence and unconscionable dealing cases (for example) fit this scenario perfectly, yet senior Commonwealth courts consistently assert (or imply) that the doctrines of undue influence and unconscionable dealing are ordered, ostensibly exclusively, by a common law precept against interpersonal exploitation, and that judges are, when they invoke those doctrines, responding precisely to that particular concern.  It is argued here, however, that the exploitation concept serves, or ought to be seen as serving, no necessary justificatory function in relation to state-assisted rescission or suppression of contracts objectively formed at common law. Instead, a principle of (what I shall call) “transactional neglect” should be seen to eclipse and subsume the exploitation concept as the prevailing justification for interference with apparent contracts in pure “unfair advantage” situations.  The advocated shift is thus away from “exploitation” towards “transactional neglect” -- D’s corrective liability for failure to take reasonable precautions against the risk of foreseeable transactional harm to P, when P and D were, knowingly to D at the time, bargaining under conditions that make “exploitation” possible.

[Frank Snyder]

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