Distress Exploitation Contracts in the Shadow of No Duty to Rescue

66 Pages Posted: 2 Jul 2010

See all articles by Shahar Lifshitz

Shahar Lifshitz

Bar-Ilan University - Faculty of Law

Date Written: July 2, 2007

Abstract

Distress Exploitation Contracts are agreements where one party to the transaction exploits the other's distress to negotiate an above-market price. For decades, there has been substantial uncertainly regarding if and when the law should invalidate such contracts. This article aims to contribute to the development of a comprehensive doctrine that governs Distress Exploitation Contracts by proposing innovative criteria, limitations, and terminology for such a doctrine.

Extant analysis of Distress Exploitation Contracts is divided into procedural and substantive arguments. Procedural arguments focus on the "subjective" flaws in the free will of the distressed party. Substantive arguments employ "objective" criteria to measure the unfairness of the contract.

Relying on philosophical analyses, I demonstrate that neither the procedural or substantive arguments nor even a combination of the two justify invalidating Distress Exploitation Contracts. In contrast to the traditional approaches, in this Article, I analyze Distress Exploitation contracts from the exploiter’s perspective. I posit that Distress Exploitation Contracts should be voided when the exploiter violates the moral duty to provide risk-free and costless help to the distressed party.

En route to this conclusion, I discuss the No Duty to Rescue rule, which is the law in most American jurisdictions. Based on a careful review of the philosophical and economic rationales of the rule, I show that the No Duty to Rescue rule does not bar the implementation of my proposal. I then employ economic analysis to delineate the limits necessary to prevent the Doctrine from discouraging potential rescuers from aiding individuals in distress. I conclude by arguing that jurisdictions should invalidate Distress Exploitation Contracts when the conditions specified in the Article are present.

Suggested Citation

Lifshitz, Shahar, Distress Exploitation Contracts in the Shadow of No Duty to Rescue (July 2, 2007). North Carolina Law Review, Vol. 86, No. 1, 2008, Available at SSRN: https://ssrn.com/abstract=1633835

Shahar Lifshitz (Contact Author)

Bar-Ilan University - Faculty of Law ( email )

Faculty of Law
Ramat Gan, 52900
Israel

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