Advice on Advancing Funds against Military Retirees Pensions - Case Study Example

 Advancing funds against military retirees’ pensions can be seen as a solution to financial problems facing members of the group because the process converts future pension checks into ready cash (Wasik 1). However, pension advances have serious financial repercussions for retirees; they convert retirement savings of the victims and push them deeper into debt. The legality of the loan concealing contracts between the Client and the pensioners and higher interest rates are what form the basis of law in the case. This paper examines whether the client’s advancing of funds against retirees obligating the pensioners to commit all or a fraction of their monthly checks to the program constitutes unconscionability and or unjust enrichment by the beneficiary (the client). Unconscionability is a legal principle in contract law relating to conditions which are so much unfair or substantially skewed to benefit the party with greater bargaining power. As such, the contracts made therefrom negate the values of good conscience in contract. Generally, an unconscionable agreement is considered to be invalid because the disadvantaged party would not have agreed to it under reasonable circumstances (Wasik 1). As such, the party with greater bargaining power is not usually permitted by courts to enjoy the benefit(s) because the contract lacks sufficient consideration by the other party for fair share of the risks and benefits. Unconscionable contracts are determined by assessing the conditions of the contractors when the agreement was made, such as each party’s knowledge or mental competence, age and bargaining power. Other equally vital factors are; lack of options and acts of inducement. Wasik noted that unconscionable behavior is also occasioned by misrepresentation of fact and fraud, especially where intentional distortion of fact results in the loss of a valuable asset (1). When an individual or party benefits from a contract to the detriment of another, the perpetrator may be liable for criminal fraud or deceit in civil action. In Universal Grading Service v. eBay, Inc., 2009 U.S. (2009), eBay’s actions of influencing the value of the coin in its online auction processes was found to be conscionable because it was not fraudulent. In this case, the test for unconsionability will depend on whether the military retirees had the ability to match the Client’s when they were forming the contract. On the one hand, the retiree claims may suffice on two grounds: firstly, majority of the retirees did not have the requisite financial knowledge to match the Client’s. This is because some of them barely have high school education, while the others who are better educated were ill-equipped to predict the financial implications of committing part of their monthly pension earnings for the investment (Silver-Greenberg 1). Secondly, the Client concealed the real financial impacts of advancing the retiree pensions in the contract, in what exposes it to misrepresentation of fact with the intent of defrauding the retirees of their money. On the other hand, the claims may not suffice because courts intervene to “rewrite” unconscionable terms of where there is apparent or substantially injurious evidence of unconscionability such as where a party to a contract is a child or where parties are likely to lose massive assets to improperly drafted contracts. Otherwise, parties to a contract are generally considered (by courts) to be sufficiently competent to perform their side of the bargain. The argument was favored in the case of WXON-TV, Inc. v. A.C. Nielsen Co., 740 F. Supp. 1261, 1264 (1990) where the court ruled that the law considers investors are sufficiently competent to commit themselves to financial contracts in whichever way they want. The court added that courts should not usurp the role of redrafting contractual terms merely because some clauses are seen as unfair. In light of the ruling, the Client would be safe from claims of unconscionable contract with the military retirees by virtue of non-meddling precedent set in WXON-TV, Inc. In another case of Nelson v. McGoldrick 871 P.2d 177 (1994), the court maintained the stance of non-meddling in contracts in its ruling that whether heir-hunters deserve the definition of self-serving parties or providers of vital and essential services will remain a matter of dispute as long as there is no relevant statutory definition of the issue. As such, deciding the precise role of “heir-hunters” remains an issue to be decided on a case by case basis. In light of the ruling, the Client’s conduct could be defensible on the basis that it brought immediate financial benefits to the retirees, especially those who may not live longer to enjoy the prolonged payments. In addition, the Client’s action is arguably defensible because it performed its side of the bargain as agreed under the contract. This means the existence of lesser evidence of fraud in the activities. There are two types of unconscionability: procedural and substantive. In determining, procedural unconscionability in this case, the court will examine whether the retirees had no reasonable alternative to committing their retirement payments to the program. As such, the Client could be liable on the grounds that its actions constituted “inducement” of the retirees to agree to sole investment. As such, whether the contract between the Client and the retirees met the thresholds of adhesion will not affect its procedurally unconscionable status. However, if the Client can prove that it provided the retirees the chance to negotiate the contract, then the grounds for procedural unconscionability could fall apart (Silver-Greenberg 1). Negotiation includes evidence of free choice offered to the retirees. By contrast, substantive unconscionability exists where the basis of the claim is not practically reasonable. The contract may not necessarily be substantively unconscionable just because it seems unwise for the retirees and very beneficial to the Client; rather, substantively unreasonable contractual provisions exists where the bias is so severe that reasonable conscience cannot allow. In this case, the retirees can only have their prayers granted on the grounds of bias if they can prove that our Client intended to gain more than would be reasonable under the contract, in which case, the outcome of the case would be similar to that of Jones v. Star Credit Corp., 59 Misc.2d 189 (1969). In Jones v. Star Credit Corp, the claimants were welfare recipients who bought a freezer valued at $300 for $900 from a salesman who visited them in their homes. The value of the item eventually rose to $1,234.80 after various additional credit charges. When they formally filed the case, each of the claimants had paid more than $600 per for the item. The court ruled that the contract was substantively unconscionable because the price of the item was more than three times the average value. Apart from the unconscionability, the issue of unjust enrichment may also arise in this case. Unjust enrichment could suffice if the Client gained substantially from the advances to the detriment of the retirees, in which case, the Client would be under the obligation to provide restitution for the parties (Silver-Greenberg 1). In this case, unjust enrichment claims against the Client would only suffice when the claimants prove that the high interest rates charged on the loans, substantially enriched the lender and deprived the retirees of their finances and or a reasonable life in retirement. But if the Client is found not to have accrued unjust enrichment from the exercise, the case could be decided the same way as Beer Capitol Distributing, Inc. v. Guinness Bass Import Co., 290 F.3d 877 (2002), where the court set aside unjust enrichment claims among other prayers by the plaintiff. In deciding Beer Capitol Distributing, Inc., the court established that the claimant and the plaintiff had been parties to a contract which had lasted between 1992 and 2000, and thus the seemingly comparative contractors (in terms of knowledge and bargaining power), had just earned their fair share of the benefits under the contract. In this Client’s case, however, the court could grant unjust enrichment claims on the grounds that unlike in Beer Capitol Distributing, Inc., where both parties had equal capacities at the formation of the contract, this Client’s case had attracted inferior parties whose retirement life would be ruined by a non-protective ruling. In conclusion, evidence is what will determine the outcome of this case. If the Client proves on the balance of probabilities that it was reasonably committed to the contract, claims of unconscionability will not suffice. Otherwise the claims could be granted to protect the vulnerable consumers (consumers) from financial loss and a poor retirement life. Copy to {First Party} Copy to {Second Party} Works Cited Silver-Greenberg, Jessicca. “Loans Borrowed Against Pensions Squeeze Retirees.” The New York Times, 27 Apr. 2013. Web 19 Mar. 2015. Wasik, F. John. “Reading the Fine Print on Pension Advance Agreements.” The New York Times, 12 Dec. 2014. Web 19 Mar. 2015. < http://www.nytimes.com/> Read More