8. If, before the logger commences performance, the landholder's investment fortunes suddenly improve and he wishes to get out of the timber deal with the logger, which of the following legal concepts affords his best prospect of effective cancellation?

«Unconscionability» is the refusal of a court to enforce a provision, a modification, or an entire contract to avoid unfairness. A determination of unconscionability is made based on circumstances at the time the contract was formed.

One type of unconscionability is substantive, which is based on price alone. A price may be considered excessive, for example, if it is set at approximately two or three times the market price of similar goods. The crux of this determination is the set price is so far off from the market price that it is unconscionable.

Another type of unconscionability is procedural, which exists when there is some form of unequal bargaining power between the parties. A court will find procedural unconscionability when a party was somehow induced into agreeing to the contract without any meaningful choice. In other words, there was no possibility of true «bargaining,» indicating a lack of assent. A finding of procedural unconscionability typically relies on various factors, including: (i) «belief by the stronger party that there is no reasonable probability that the weaker party will fully perform the contract»; (ii) «knowledge of the strongest party that the weaker will be unable to receive substantial benefits from the contract»; and (iii) knowledge of the stronger party that the weaker party is unable reasonably to protect his interests by reason of physical or mental infirmities, ignorance, illiteracy or inability to understand the language of the agreement.. . ." Rest. 2d, § 208, Comment d.

Contract law requires each party to act in good faith. «Good faith» has been defined in multiple ways, including honesty and remaining committed to the agreed common purpose as well as consistent with the other party's justifiable expectations. «Bad faith» has been defined as conduct that does not adhere to reasonable community standards around fairness and decency, such as abuse of power or interference with the other party's ability to perform. Rest. 2d § 205, comment.

Equitable estoppel is invoked to prevent a party from taking advantage of another party in an unfair way, often by way of false or fraudulent words or actions.

Contracts that are induced by duress will be voidable and may be rescinded. Duress may be by physical force or threats that leave a party with no viable alternative to entering into the contract.

C is correct. The landholder's best opportunity for effective cancellation of the contract is unconscionability, both substantive and procedural. If a court finds a contract unconscionable at the time it was made, it may refuse to enforce the entire contract or enforce only the remainder of the contract without the unconscionable term. Procedural unconscionability refers to unfairness in the bargaining process that leaves a party with no meaningful choice about whether to enter into the contract. Substantive unconscionability most often refers to price terms that unreasonably favor the other party.

Here, the landholder should invoke both procedural and substantive unconscionability. At the time the contract was made, the landholder was in desperate financial straits, specifically lacking cash and possessing only land value, with no other viable options. Moreover, the landholder was ignorant of the value of the rights he was selling. The logger offered to buy at a cash price that was 70% lower than the regionally prevailing price for comparable timber rights. As such, the landholder was effectively backed into a corner, without proper knowledge of what he possessed OR what he was receiving. By being presented with the opportunity to receive cash immediately, and without understanding that he could have gotten 70% more profit, these circumstances render unconscionability his best argument for cancellation of the contract.

A is incorrect. The mere fact that the logger won the contract with a below-market bid does not suggest bad faith. A finding of bad faith includes, for example, conduct that violates community standards of decency, fairness, or reasonableness, such as abuse of power or dishonesty. Without more evidence here, a claim that the logger acted in bad faith by making a below-market offer would be unlikely to succeed.

B is incorrect. There is no evidence of a statement of fact that would give rise to an estoppel claim because the logger, although he engaged in unfair dealing, did not intentionally misrepresent or fraudulently mislead the landholder such that he relied on false information.

D is incorrect. This would not be an effective basis for canceling the contract. In order to show duress, the landholder would need to show that the logger induced the landholder to make the contract by making some sort of a wrongful threat. There is no evidence of a threat of any kind, which means duress does not apply.