Should Courts Enforce Contracts Induced by Lying?

The most recent issue of the Marquette Law Review includes a provocative article written by Professor Allen Blair of Hamline University Law School on contracts and fraud (92 Marq. L. Rev. 423).  In the article, Professor Blair explores why courts tend to not enforce so called “no reliance” clauses in contracts, clauses in which one party disclaims any liability for fraudulent statements (which includes lies) made outside of the four corners of the contract.

According to Professor Blair, courts generally refuse to enforce no-reliance clauses on the grounds that it violates public policy to protect a person against his own fraud.  While some courts have enforced no-reliance clauses, they have generally done so only after finding that the clauses were specifically negotiated, and only to the extent that they set out the precise representation on which the other party may not rely.  Only a handful of courts have upheld no-reliance clauses without attaching these types of limitations.

While Professor Blair does not promote blind enforcement of all no-reliance clauses, he argues that courts should not ignore the numerous legitimate reasons why sophisticated parties in complex transactions might agree to a no-reliance clause. 

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Seventh Circuit Criminal Case of the Week: Watch the “R” Word, Prosecutors!

Two months ago, I posted here about the Seventh Circuit’s sharp rebuke of a prosecutor in United States v. Farinella, in which the defendant was charged with selling mislabeled bottles of salad dressing.  The court’s concerns focused, in part, on the prosecutor’s repeated suggestions to the jury that the salad dressing was spoiled, despite the absence of any evidence to that effect. The court, per Judge Posner, rightly took the prosecutor to task for attempting to inflame the jury’s emotions through evocative, but misleading, characterizations of the evidence.  We can and should expect prosecutors to act with integrity and restraint in carrying on their critically important public functions, rather than playing the adversarial system for all it’s worth.  In my experience, the vast majority of prosecutors appreciate — apologies to Vince Lombardi — that winning is not the only thing.  But, when prosecutors do occasionally cross the line, as in Farinella, I am happy to see the courts call them out.

I was reminded of Farinella when reading the court’s decision last week in United States v. Mannava (No. 07-3748), in which the court, again per Judge Posner, overturned the defendant’s child enticement conviction based, again, on the prosecutor’s repeated use of misleading and inflammatory language in front of the jury. 

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