November 10, 2008
Contracts Limerick of the Week: Carroll v. Beardon
Carroll is a great public policy case. It involves the sale of a brothel in Montana. The purchase price was in the neighborhood of $50,000, even though the property itself was worth only $6000. Moreover the mortgage was to be paid back in monthly installments, with the new madame paying the old madame $2000/month during the busy harvest months but only $1000 during the slower Winter and Spring.
If the court were to regard this case as I have described it, the contract would have to be illegal and therefore void and unenforceable. But the wise justices of the Supreme Court of Montana clearly recognized a well-established institution when they saw one. They left it to law enforcement officials to shut down the brothel if they saw fit to do so. In the meantime, Montana borrowed some law from its neighbors in Wyoming and decided that a sale such as this one could be enforced so long as the seller does not benefit from the buyer's illicit business. Applying that law to this case in such a way as to uphold the bargain requires some legal gymnastics beyond my abilities, but Montana court pulled it off and scored a perfect 10.
Inspired by my colleague, Bruce Berner, I could add that in a related case the court did void a similar sale of a massage parlor. It wasn't so much that the parlor idea was illegal or even void for public policy. But its proprietor rubbed the court the wrong way.
Carroll v. Beardon
In Montana arose a dispute
O'er a house of doubtful repute.
The seller madame,
Not in on the scam
May partake of her share of the loot.
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