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Shahar Lifshitz

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 uncertainty 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, this Article demonstrates that neither the procedural nor the substantive arguments, or even a combination of the two, justify invalidating Distress Exploitation Contracts.

In contrast to the traditional approaches, this Article analyzes Distress Exploitation Contracts from the exploiter's perspective.  It posits 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, this Article discusses 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, this Article shows that the No Duty To Rescue Rule does not bar the implementation of my proposal.  It then employs economic analysis to delineate the limits necessary to prevent the doctrine from discouraging potential rescuers from aiding individuals in distress.  This Article concludes by arguing that jurisdictions should invalidate Distress Exploitation Contracts when the conditions specified in the Article are present.