Batsakis v. Demotsis
226 S.W.2d 673 (Tex.Civ.App.-El Paso 1949)
- Demotsis was caught in Greece during WWII and borrowed 500,000 drachma (aka $25) from Batsaki, until she could get money from America. She signed an IOU and an agreement to pay $2000 plus 8% interest at some point after the war was over.
- A few years later when Batsaki came to collect his debt, Demotsis declared that there was a wanton failure of consideration, and offered $25 plus interest. Batsakis wanted all the money and sued.
- Trial Court found for Batsakis and ordered Demotsis to pay $750 plus interest.
- Where did the Trial Court come up with $750?
- Demotsis appealed claiming that the contract was so lopsided, it amounted to a lack of consideration.
- The Appellate Court affirmed the decision.
- The Appellate Court found that “mere inadequacy of a consideration will not void the contract.”
- Basically that means that just because the bargain is unfair, that doesn’t mean that the contract should be invalid.
- The Court will not inquire into the adequacy of consideration.
- This has become a very accepted proposition in Contract Law.
- This case had a very different result than Fischer v. Union Trust Co. (138 Mich. 612, 101 N.W. 852 (Mich. 1904)). In that case, the Court found that if the deal was very lopsided, it did not constitute consideration.
- In some jurisdictions, charging more than a certain % interest is illegal (usury laws). This was over 2000% interest. If there was a usury law in effect, there could have been a basis to make the contract illegal.
- One reason a contract can be void is if it is made under duress. Was Demotsis, who was fleeing a Nazi invasion under duress?
- Batsakis was not putting her under duress, is there a difference between whether the reason for duress has to do with one of the people involved in the contract?
- Would Batsakis’ behavior count as price gouging?
- If there is a limited supply, raising prices will mean only people who really want it, and have a lot of money can get it. But, in economic terms, more people would supply the item, so more people would be able to get the item.