Post by Horton on Apr 8, 2009 0:03:44 GMT 4
Unconscionability in the Law of Trusts
David Horton
Boalt Hall School of Law
Notre Dame Law Review, Vol. 84, Fall 2008
Abstract:
This Article claims that trust law should recognize the unconscionability defense. It begins by noting the symmetry between trust and contract defenses and the broad consensus among courts and scholars that trusts are contracts. It sketches the leading rationales for why courts enforce promises between private actors: the theories that free exchange allows parties to maximize welfare and exercise free will. It then argues that neither concept justifies upholding a contractual term if informational defects prevent one party from observing that it sharply deviates from her ex ante desires. It asserts that the unconscionability doctrine strikes down contractual terms that suffer from precisely that defect.
The Article then explains how the unconscionability doctrine could serve the same purpose in trust law. It discusses why the policies underlying freedom of testation depart from those behind freedom of contract and provide less support for a laissez-faire regime. It then challenges the unarticulated but intuitive notion that controls in the trust-creation process are sufficient to align an instrument's text with a settlor's intent. It reveals that corporate fiduciaries, trust mills, and a revitalized do-it-yourself movement have spawned "procedurally suspect" trusts: those created without attorney involvement and laden with complex terms. It then examines three common but controversial "substantively suspect" terms - exculpatory, no contest, and arbitration clauses - and shows how a trust-specific unconscionability doctrine would improve outcomes in cases
papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID1323913_code1058639.pdf?abstractid=1280363&mirid=1
David Horton
Boalt Hall School of Law
Notre Dame Law Review, Vol. 84, Fall 2008
Abstract:
This Article claims that trust law should recognize the unconscionability defense. It begins by noting the symmetry between trust and contract defenses and the broad consensus among courts and scholars that trusts are contracts. It sketches the leading rationales for why courts enforce promises between private actors: the theories that free exchange allows parties to maximize welfare and exercise free will. It then argues that neither concept justifies upholding a contractual term if informational defects prevent one party from observing that it sharply deviates from her ex ante desires. It asserts that the unconscionability doctrine strikes down contractual terms that suffer from precisely that defect.
The Article then explains how the unconscionability doctrine could serve the same purpose in trust law. It discusses why the policies underlying freedom of testation depart from those behind freedom of contract and provide less support for a laissez-faire regime. It then challenges the unarticulated but intuitive notion that controls in the trust-creation process are sufficient to align an instrument's text with a settlor's intent. It reveals that corporate fiduciaries, trust mills, and a revitalized do-it-yourself movement have spawned "procedurally suspect" trusts: those created without attorney involvement and laden with complex terms. It then examines three common but controversial "substantively suspect" terms - exculpatory, no contest, and arbitration clauses - and shows how a trust-specific unconscionability doctrine would improve outcomes in cases
papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID1323913_code1058639.pdf?abstractid=1280363&mirid=1