- Introduction - Introduction
- Chapter One - Introduction to Contract Law
- Chapter Two - Contract Formation
- Chapter Three - Consideration
- Chapter Four - Alternative Regimes
- Chapter Five - Contract Defenses
- Chapter Six - Terms and Interpretation
- Chapter Seven - Performance and Breach
- Chapter Eight - Remedies
- Chapter Nine - Nonparties
Franklin G. Snyder
Texas A&M University School of Law
Mark Edwin Burge
Texas A&M University School of Law
Franklin G. Snyder is Professor of Law at Texas A&M University School of Law, where he has taught Contracts and Business Associations since 2000. He also has taught as a visiting professor at the law schools at Notre Dame, Temple University, and the University of Idaho. Prior to entering teaching, he was a partner in the Washington, D.C. office of Latham & Watkins and clerked on the U.S. Court of Appeals for the D.C. Circuit. Professor Snyder is the founder of the annual International Conference on Contracts, now in its thirteenth year, and Co-Founder and Editor Emeritus of the ContractsProf blog. He is one of the co-revisers of the new edition of the popular White & Summers UCC Hornbook series by West Academic, the first volume of which, Principles of Sales Law (2d ed.), was published in 2017. He is also co-editor of the book, Harry Potter and the Law.
Mark Edwin Burge is Professor of Law and Director of San Antonio Programs at Texas A&M University School of Law, where he teaches Contracts, Payment Systems, and practice skills courses, including Contract Drafting. His scholarship focuses on commercial law, emerging payment systems, and legal pedagogy. Prior to entering teaching in 2005, he practiced in the area of business and commercial litigation and related transactions, including representation of financial institutions victimized by kiting and other negotiable instrument fraud schemes. Burge is a Contributing Editor to ContractsProf Blog, President of the Central States Law Schools Association (2017-2018), and a member of the Legal Writing Institute.
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The author’s wish to thank the following for their permission to include excerpts of their materials in this casebook:
Cheryl B. Preston & Brandon T. Crowther, Infancy Doctrine Inquiries, 52 Santa Clara L. Rev. 47 (2012). Reprinted with the permission of the authors and Santa Clara Law Review.
A. D. Kaufman, Infant’s misrepresentation as to his age as estopping him from disaffirming his voidable transaction, 29 A.L.R.3d 1270. Reprinted with the permission of Thomson Reuters.
W. E. Shipley, Infant’s liability for use or depreciation of subject matter, in action to recover purchase price upon his disaffirmance of contract to purchase goods, 12 A.L.R.3d 1174. Reprinted with the permission of Thomson Reuters.
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AMERICAN CONTRACT LAW FOR A GLOBAL AGE
Unit 1: Thinking Like a Transactional Lawyer
Unit 2: Thinking Like a Contract Litigator
Welcome to Contracts. While a year ago you might have thought that a “tort” was a kind of fruity pastry, most students enter law school with some idea of what a contract is. If we asked you to close your eyes and imagine a contract, what would you see? Maybe you would imagine an old, musty document like the one the dwarves persuaded Bilbo Baggins to sign in the movie, The Hobbit: An Unexpected Journey. You might think of a stack of “closing” papers signed by corporate executives completing a multi-billion dollar merger. Or maybe you are reminded of an apartment lease, your internet service provider agreement, or that document the plumber had you sign before fixing your sink.
Promises the Law Will Enforce. As you will discover in this course, a contract need not be a written document at all.1 Oral contracts are not only enforceable but are in fact ubiquitous. If there is a written document, is that piece of paper the contract? Or is it just evidence that a contract was made? And what’s the difference between those concepts? If the contract is not necessarily the piece of paper, what is it? On second thought, are you confident that you know what a contract is? We had better fix that.
One common definition of a contract is that it is (1) a promise (or a set of promises) that (2) the law (3) will enforce.2 To “enforce” the contract means to compel the person making the promise (the “promisor”) to either perform it or to pay damages for failing to do so. Enforcement by “the law” means that it will be done by duly authorized agencies of the government through the court system,3 and not by hired Corleone family thugs4 or angry mobs with torches.5 The really complex part of this definition is what kind of promises will the law enforce? It is fair to say that perhaps half of the first-year Contracts course involves aspects of this single question—and professors will routinely complain that they do not have enough time to teach it as thoroughly as they like.
Contracts in Transactional Foresight. An old joke about the traditional law school Contracts course is that students could get through an entire casebook’s worth of material without seeing an actual contract. We don’t want that to happen to you. While the bulk of the course is necessarily made up of legal materials—typically statutes and cases from appellate courts—the contract is always central to the questions involved.
While much of the contract law you will learn in this course will come from cases, most parties don’t anticipate a lawsuit at the time they enter into an agreement. Transactional lawyers have gotten a rap, often unfairly, as being the people who say “no” to a deal getting done. That is because transactional lawyering is forward-thinking. It requires understanding the known situation of the parties, but also considering the many potential unknown futures that might lie ahead. What happens if the deal doesn’t work out as wonderfully as the parties expect? The foresight of a good transactional lawyer can sometimes prevent a future conflict or else put the client in a better situation if a conflict does arise.
Transactional lawyers must thus deal with a contract in the absence of a legal case. We want you to do start the course by doing the same thing. Accordingly, our jumping-off point will be for you to read and consider the transactional agreement in this unit. Along with that document, we have added some comment boxes to provide additional information as you read. After the agreement, you’ll find a series of Questions for Discussion that you should (surprise!) be thoroughly prepared to discuss in class. After the questions, you will find a Problem that your professor may ask you work or even to turn in. If the goal of law school is to teach you how to “think like a lawyer,” then one of the many goals of this Contracts course is to teach you how to think like a transactional lawyer—that is, as someone who has the foresight and practical wisdom to create and draft contracts, not merely to sue over them after they are broken. The questions and problem at the end of this unit are the beginning of our process of learning how to think transactionally.
Without further ado, let us begin Contracts with a very formal-looking and lawyer-drafted document entitled “Surrogate Parenting Agreement.” Read it through carefully. Note that it never once uses the term “contract.” Is it a contract?
SURROGATE PARENTING AGREEMENT
The first paragraph in a contract is its preamble. Parties to a contract are usually identified in its preamble.
THIS AGREEMENT is made this 6th day of February, 1985, by and between MARY BETH WHITEHEAD, a married woman (herein referred to as “Surrogate”), RICHARD WHITEHEAD, her husband (herein referred to as “Husband”), and WILLIAM STERN, (herein referred to as “Natural Father”).
Like most contractual recitals, the three recitals in this section don’t state any functional terms of agreement. Recitals generally provide the background factual context for a contract. Why are they here if they don’t contain operational provisions that bind the parties?
THIS AGREEMENT is made with reference to the following facts:
(1) WILLIAM STERN, Natural Father, is an individual over the age of eighteen (18) years who is desirous of entering into this Agreement.
(2) The sole purpose of this Agreement is to enable WILLIAM STERN and his infertile wife to have a child which is biologically related to WILLIAM STERN.
(3) MARY BETH WHITEHEAD, Surrogate, and RICHARD WHITEHEAD, her husband, are over the age of eighteen (18) years and desirous of entering into this Agreement in consideration of the following:
This paragraph contains the words of agreement (here, “the parties agree as follows”), so we should expect the actual, operative terms to follow after this paragraph.
NOW THEREFORE, in consideration of the mutual promises contained herein and the intentions of being legally bound hereby, the parties agree as follows:
Detailed written contracts often include the central promises of a deal for each party in the first few paragraphs after the words of agreement. These are sometimes known as subject-matter performance provisions. These “core” provisions for this agreement are contained in paragraphs 1-4.
1. MARY BETH WHITEHEAD, Surrogate, represents that she is capable of conceiving children. MARY BETH WHITEHEAD understands and agrees that in the best interest of the child, she will not form or attempt to form a parent-child relationship with any child or children she may conceive, carry to term and give birth to, pursuant to the provisions of this Agreement, and shall freely surrender custody to WILLIAM STERN, Natural Father, immediately upon birth of the child; and terminate all parental rights to said child pursuant to this Agreement.
2. MARY BETH WHITEHEAD, Surrogate, and RICHARD WHITEHEAD, her husband, have been married since 12/2/73, and RICHARD WHITEHEAD is in agreement with the purposes, intents and provisions of this Agreement and acknowledges that his wife, MARY BETH WHITEHEAD, Surrogate, shall be artificially inseminated pursuant to the provisions of this Agreement. RICHARD WHITEHEAD agrees that in the best interest of the child, he will not form or attempt to form a parent-child relationship with any child or children MARY BETH WHITEHEAD, Surrogate, may conceive by artificial insemination as described herein, and agrees to freely and readily surrender immediate custody of the child to WILLIAM STERN, Natural Father; and terminate his parental rights; RICHARD WHITEHEAD further acknowledges he will do all acts necessary to rebut the presumption of paternity of any offspring conceived and born pursuant to aforementioned agreement as provided by law, including blood testing and/or HLA testing.
Held in escrow means that a non-party will keep the money until certain specified conditions are met. Why might that be a good idea in a transaction?
3. WILLIAM STERN, Natural Father, does hereby enter into this written contractual Agreement with MARY BETH WHITEHEAD, Surrogate, where MARY BETH WHITEHEAD shall be artificially inseminated with the semen of WILLIAM STERN by a physician. MARY BETH WHITEHEAD, Surrogate, upon becoming pregnant, acknowledges that she will carry said embryo/fetus(s) until delivery. MARY BETH WHITEHEAD, Surrogate, and RICHARD WHITEHEAD, her husband, agree that they will cooperate with any background investigation into the Surrogate’s medical, family and personal history and warrants the information to be accurate to the best of their knowledge. MARY BETH WHITEHEAD, Surrogate, and RICHARD WHITEHEAD, her husband, agree to surrender custody of the child to WILLIAM STERN, Natural Father, immediately upon birth, acknowledging that it is the intent of this Agreement in the best interests of the child to do so; as well as institute and cooperate in proceedings to terminate their respective parental rights to said child, and sign any and all necessary affidavits, documents, and the like, in order to further the intent and purposes of this Agreement. It is understood by MARY BETH WHITEHEAD, and RICHARD WHITEHEAD, that the child to be conceived is being done so for the sole purpose of giving said child to WILLIAM STERN, its natural and biological father. MARY BETH WHITEHEAD and RICHARD WHITEHEAD agree to sign all necessary affidavits prior to and after the birth of the child and voluntarily participate in any paternity proceedings necessary to have WILLIAM STERN’S name entered on said child’s birth certificate as the natural or biological father.
The word consideration shows up a great deal in contract law. It may not mean what you think it means.
4. That the consideration for this Agreement, which is compensation for services and expenses, and in no way is to be construed as a fee for termination of parental rights or a payment in exchange for a consent to surrender the child for adoption, in addition to other provisions contained herein, shall be as follows:
Adjusted for inflation using the Consumer Price Index, $10,000 in 1985 is worth $22,790.30 in 2017 dollars.
(A) $10,000 shall be paid to MARY BETH WHITEHEAD, Surrogate, upon surrender of custody to WILLIAM STERN, the natural and biological father of the child born pursuant to the provisions of this Agreement for surrogate services and expenses in carrying out her obligations under this Agreement;
(B) The consideration to be paid to MARY BETH WHITEHEAD, Surrogate, shall be deposited with the Infertility Center of New York (hereinafter ICNY), the representative of WILLIAM STERN, at the time of the signing of this Agreement, and held in escrow until completion of the duties and obligations of MARY BETH WHITEHEAD, Surrogate, (see Exhibit “A” for a copy of the Escrow Agreement), as herein described.
Held in escrow means that a non-party will keep the money until certain specified conditions are met. Why might that be a good idea?
(C) WILLIAM STERN, Natural Father, shall pay the expenses incurred by MARY BETH WHITEHEAD, Surrogate, pursuant to her pregnancy, more specifically defined as follows:
(1) All medical, hospitalization, and pharmaceutical, laboratory and therapy expenses incurred as a result of MARY BETH WHITEHEAD’S pregnancy, not covered or allowed by her present health and major medical insurance, including all extraordinary medical expenses and all reasonable expenses for treatment of any emotional or mental conditions or problems related to said pregnancy, but in no case shall any such expenses be paid or reimbursed after a period of six (6) months have elapsed since the date of the termination of the pregnancy, and this Agreement specifically excludes any expenses for lost wages or other non-itemized incidentals (see Exhibit
“B”) related to said pregnancy.
(2) WILLIAM STERN, Natural Father, shall not be responsible for any latent medical expenses occurring six (6) weeks subsequent to the birth of the child, unless the medical problem or abnormality incident thereto was known and treated by a physician prior to the expiration of said six (6) week period and in written notice of the same sent to ICNY, as representative of WILLIAM STERN by certified mail, return receipt requested, advising of this treatment.
In the interest of brevity, we have omitted the numerous Exhibits to the agreement. An exhibit is generally a standalone document that the parties want treated as part of the agreement.
(3) WILLIAM STERN, Natural Father, shall be responsible for the total costs of all paternity testing. Such paternity testing may, at the option of WILLIAM STERN, Natural Father, be required prior to release of the surrogate fee from escrow. In the event WILLIAM STERN, Natural Father, is conclusively determined not to be the biological father of the child as a result of an HLA test, this Agreement will be deemed breached and MARY BETH WHITEHEAD, Surrogate, shall not be entitled to any fee. WILLIAM STERN, Natural Father, shall be entitled to reimbursement of all medical and related expenses from MARY BETH WHITEHEAD, Surrogate, and RICHARD WHITEHEAD, her husband.
(4) MARY BETH WHITEHEAD’S reasonable travel expenses incurred at the request of WILLIAM STERN, pursuant to this Agreement.
5. MARY BETH WHITEHEAD, Surrogate, and RICHARD WHITEHEAD, her husband, understand and agree to assume all risks, including the risk of death, which are incidental to conception, pregnancy, childbirth, including but not limited to, postpartum complications. A copy of said possible risks and/or complications is attached hereto and made a part hereof (see Exhibit “C”).
6. MARY BETH WHITEHEAD, Surrogate, and RICHARD WHITEHEAD, her husband, hereby agree to undergo psychiatric evaluation by JOAN EINWOHNER, a psychiatrist as designated by WILLIAM STERN or an agent thereof. WILLIAM STERN shall pay for the cost of said psychiatric evaluation. MARY BETH WHITEHEAD and RICHARD WHITEHEAD shall sign, prior to their evaluations, a medical release permitting dissemination of the report prepared as a result of said psychiatric evaluations to ICNY or WILLIAM STERN and his wife.
7. MARY BETH WHITEHEAD, Surrogate, and RICHARD WHITEHEAD, her husband, hereby agree that it is the exclusive and sole right of WILLIAM STERN, Natural Father, to name said child.
8. “Child” as referred to in this Agreement shall include all children born simultaneously pursuant to the inseminations contemplated herein.
9. In the event of the death of WILLIAM STERN, prior or subsequent to the birth of said child, it is hereby understood and agreed by MARY BETH WHITEHEAD, Surrogate, and RICHARD WHITEHEAD, her husband, that the child will be placed in the custody of WILLIAM STERN’S wife.
10. In the event that the child is miscarried prior to the fifth (5th) month of pregnancy, no compensation, as enumerated in paragraph 4(A), shall be paid to MARY BETH WHITEHEAD, Surrogate. However, the expenses enumerated in paragraph 4(C) shall be paid or reimbursed to MARY BETH WHITEHEAD, Surrogate. In the event the child is miscarried, dies or is stillborn subsequent to the fourth (4th) month of pregnancy and said child does not survive, the Surrogate shall receive $ 1,000.00 in lieu of the compensation enumerated in paragraph 4(A). In the event of a miscarriage or stillbirth as described above, this Agreement shall terminate and neither MARY BETH WHITEHEAD, Surrogate, nor WILLIAM STERN, Natural Father, shall be under any further obligation under this Agreement.
11. MARY BETH WHITEHEAD, Surrogate, and WILLIAM STERN, Natural Father, shall have undergone complete physical and genetic evaluation, under the direction and supervision of a licensed physician, to determine whether the physical health and well-being of each is satisfactory. Said physical examination shall include testing for venereal diseases, specifically including but not limited to, syphilis, herpes and gonorrhea. Said venereal diseases testing shall be done prior to, but not limited to, each series of inseminations.
12. In the event that pregnancy has not occurred within a reasonable time, in the opinion of WILLIAM STERN, Natural Father, this Agreement shall terminate by written notice to MARY BETH WHITEHEAD, Surrogate, at the residence provided to the ICNY by the Surrogate, from ICNY, as representative of WILLIAM STERN, Natural Father.
13. MARY BETH WHITEHEAD, Surrogate, agrees that she will not abort the children conceived except, if in the professional medical opinion of the inseminating physician, such action is necessary for the physical health of MARY BETH WHITEHEAD or the child has been determined by said physician to be physiologically abnormal. MARY BETH WHITEHEAD further agrees, upon the request of said physician to undergo amniocentesis (see Exhibit “D”) or similar tests to detect genetic and congenital defects. In the event said test reveals that the fetus is genetically or congenitally abnormal, MARY BETH WHITEHEAD, Surrogate, agrees to abort the fetus upon demand of WILLIAM STERN, Natural Father, in which event, the fee paid to the Surrogate will be in accordance to Paragraph 10. If MARY BETH WHITEHEAD refuses to abort the fetus upon demand of WILLIAM STERN, his obligations as stated in this Agreement shall cease forthwith, except as to obligation of paternity imposed by statute.
14. Despite the provisions of Paragraph 13, WILLIAM STERN, Natural Father, recognizes that some genetic and congenital abnormalities may not be detected by amniocentesis or other tests, and therefore, if proven to be the biological father of the child, assumes the legal responsibility for any child who may possess genetic or congenital abnormalities. (See Exhibits “E” and “F”).
15. MARY BETH WHITEHEAD, Surrogate, further agrees to adhere to all medical instructions given to her by the inseminating physician as well as her independent obstetrician. MARY BETH WHITEHEAD also agrees not to smoke cigarettes, drink alcoholic beverages, use illegal drugs, or take non-prescription medications or prescribed medications without written consent from her physician. MARY BETH WHITEHEAD agrees to follow a prenatal medical examination schedule to consist of no fewer visits than: one visit per month during the first seven (7) months of pregnancy, two visits (each to occur at two-week intervals) during the eighth and ninth month of pregnancy.
16. MARY BETH WHITEHEAD, Surrogate, agrees to cause RICHARD WHITEHEAD, her husband, to execute a refusal of consent form as annexed hereto as Exhibit “G”.
17. Each party acknowledges that he or she fully understands this Agreement and its legal effect, and that they are signing the same freely and voluntarily and that neither party has any reason to believe that the other(s) did not freely and voluntarily execute said Agreement.
18. In the event any of the provisions of this Agreement are deemed to be invalid or unenforceable, the same shall be deemed severable from the remainder of this Agreement and shall not cause the invalidity or unenforceability of the remainder of this Agreement. If such provision shall be deemed invalid due to its scope or breadth, then said provision shall be deemed valid to the extent of the scope or breadth permitted by law.
Paragraph 18 is known as a severability clause. It appears in many contracts with the intent of ensuring that the contract will remain in force even if part of it turns out to be legally unenforceable.
19. The original of this Agreement, upon execution, shall be retained by the Infertility Center of New York, with photocopies being distributed to MARY BETH WHITEHEAD, Surrogate and WILLIAM STERN, Natural Father, having the same legal effect as the original.
/s William Stern
STATE OF NEW YORK ) SS:
COUNTY OF NEW YORK )
On the 6th day of February, 1985, before me personally came WILLIAM STERN, known to me, and to me known, to be the individual described in the foregoing instrument and he acknowledged to me that he executed the same as his free and voluntary act.
/s Jane W. Doe
We have read the foregoing five pages of this Agreement, and it is our collective intention by affixing our signatures below, to enter into a binding legal obligation.
/s Mary Beth Whitehead
/s Richard Whitehead,
Each of the parties’ signatures on this agreement is accompanied by what is known as an acknowledgement in front of a notary public. An acknowledgement isn’t a legal requirement, so why would the parties put this in the document?
STATE OF NEW YORK ) SS:
COUNTY OF NEW YORK )
On the 6th day of February, 1985, before as personally came MARY BETH WHITEHEAD, known to me, and to me known to be the individual described in the foregoing instrument and she acknowledged to me that she executed the same as her free and voluntary act.
/s Richard Roe
STATE OF NEW YORK ) SS:
COUNTY OF NEW YORK )
On the 6th day of February, 1985, before as personally came RICHARD WHITEHEAD, known to me, and to me known to be the individual described in the foregoing instrument and he acknowledged to me that he executed the same me his free and voluntary act.
/s Joseph Bloe
Questions for Discussion
1. This Surrogate Parenting Agreement certainly looks like a contract. Is it? Is there any difference between an “agreement” and a “contract”?
2. This agreement includes three specific people as parties. Why these three? Why is Richard Whitehead here, but not William Stern’s wife (who is referenced, but never by name)? You might want to look at paragraph 2 as you think about this question.
3. Re-read the words of agreement paragraph. What does this paragraph state that one or more of the parties might argue about later?
4. You may somewhere have heard the phrase freedom of contract, an important concept in American law. But should Mary Beth Whitehead be free to agree to terms like those in paragraph 1? More importantly, should the law enforce what she agreed to here?
5. Consider paragraph 3. Does it matter that the parties specify artificial insemination? After all, it might be easier and cheaper to take care of this matter the “natural” way. Can you think of any reasons why this term might affect the legal enforceability of the agreement?
6. Why exactly does the phrase “best interests of the child” keep showing up in this document? Is someone intended to read that phrase and be affected by it?
7. The header to paragraph 4 states that the payment to Mary Beth Whitehead is not “to be construed as a fee for termination of parental rights or a payment in exchange for a consent to surrender the child for adoption.” Who exactly isn’t supposed to be construing it that way? And what would happen if that person (or persons) did construe it that way?
8. Imagine that the price term in paragraph 4(A) was one dollar. Should that affect the enforceability of this agreement? How about if the term were $1 million? Should the parties be free to bargain for any price term?
9. In the top part of paragraph 4(C), the parties use the term, “expenses…pursuant to her pregnancy.” The parties then elaborate further on these expenses in the four subparagraphs that follow. Isn’t “expenses…pursuant to her pregnancy” specific enough? Read through the various items in this four-paragraph list and try to determine why those terms made it into the contract. Who benefits or is protected by each term in this list?
10. Consider paragraph 5. Should the Whiteheads really be able to agree to the “risk of death” for Mary Beth? Come to think of it, have you signed a document agreeing to the “risk of death”?
11. Why on earth would the psychiatric evaluations for the Whiteheads in paragraph 6 be part of the agreement?
12. Paragraph 9 provides that, in the event of William Stern’s death, the Whiteheads agree that the child will be placed in the custody of Stern’s wife. Do the parties have a right to agree to this term? Can Mrs. Stern, who is not a party to the contract, sue to compel performance if the Whiteheads fail to comply?
13. Notice that both paragraphs 13 and 15 involve Mary Beth Whitehead limiting her right to act in certain ways in the future. Should the legal system, in your view, enforce one, both, or neither of these two paragraphs? If you find one to be enforceable and one not, what kind of a legal rule would you craft that would support your conclusion?
14. Can the parties really, as paragraph 18 provides, sever “any of the provisions” from the agreement and enforce the remainder? Try omitting all of paragraph 4, for example. What provisions could the parties reasonably drop and still retain the benefit of their bargain?
Suppose that you represent either Mary Beth Whitehead or William Stern (your professor may assign you to one party or the other). Think about your client’s position and interests. Draft a list of changes to the Surrogate Parenting Agreement—at least five of them—that you, as the attorney would want made on your client’s behalf to improve your client’s situation.
Beside each of your proposals, include two numbers: (1) the likely importance to your client of your proposed change on a one-to-ten scale (with ten being the most important), and (2) the percentage you would estimate your chances are of persuading the other party to accept your proposal in a negotiation of the terms.
FOCUS OF THIS UNIT
In the previous unit, we considered an agreement from the perspective of a forward-thinking transactional lawyer, seeking to understand what the agreement means and what its legal implications are. Transactional lawyers don’t work in a legal vacuum, however. Even the newest contract is affected by the legal environment in which it comes into existence. A twenty-first century practitioner of American contract law must, accordingly, consider that which has come before—cases, statutes, and even the brooding presence of centuries-old English common law. The underlying analytical skills for both a litigator and a transactional lawyer necessarily have a great deal of overlap. Both are working in an environment of pre-existing law.
Looking Backwards. As our ultimate goal is for you to be a well-rounded lawyer, we will now undertake the task set out in this unit—evaluating a transaction after the fact. The Surrogate Parenting Agreement from the previous unit did indeed end up in a lawsuit. Two opinions resulting from that litigation follow in this unit and will be instructive to us in understanding the basic issues and outline of the law of contracts. While transactional lawyers are generally forward-looking in their focus, we mustn’t lose sight of the fact that thinking about the future requires a solid understanding in what came before. The traditional law school case method of instruction, whatever its faults may be, excels in training lawyers to deconstruct the past.
Just Enough Procedure to Be Dangerous. We think that your Civil Procedure professor is a better source of information about civil procedure than we are. Nonetheless, we’ll make some occasional brief diversions into civil procedure when we think it helpful to your understanding of how courts are grappling with matters of contract law (which is a far more interesting subject, in our unbiased opinion).6 Here is one such diversion.
The two court opinions that follow arise from the agreement we considered in the previous unit. The first opinion is from a trial-level court that considered evidence presented by the parties in a bench trial. When we imagine a trial, we usually envision a judge who resolves questions of law while an empaneled jury deliberates and decides disputed facts. In a bench trial, the judge fills both roles and no jury is involved. In this trial court opinion, the judge heard testimony from fact witnesses with personal knowledge of the case—such as the parties to the agreement—as well as from expert witnesses, like psychologists who could opine on matters calling for expertise outside of the law. After the parties have presented their cases in a bench trial, a judge will typically report findings of fact (resolving factual issues) and conclusions of law (resolving legal issues). Based on those findings and conclusions, a court will render its final judgment. While the parties may file various post-trial motions, the final judgment is the point at which parties unhappy with the trial court decision are able to appeal based on alleged error by the lower court.
The second court opinion in this unit is the appeal of the trial court’s decision in the first opinion. Most cases you read in law school are appellate opinions, and the second opinion is one of these, a decision by the New Jersey Supreme Court. As an appellate court, a state supreme court has no ability to engage in its own fact finding. In a sense, the higher court (much like the parties, for that matter) is stuck with the factual determinations by the lower court. An appellate court can, however, fully review the conclusions of law and the methods by which the trial court reached its factual conclusions.
As you read these two opinions arising from the same trial and same dispute by the parties, consider the legal bases by which the courts reach their decisions. We especially want you to focus on the role of contract law in the two opinions, including the role that contract law plays in relation to other bodies of law, such as family law and criminal law. Because trial court opinions are less common in law school, we have taken the liberty of adding a few box annotations to help you through it. For the appellate opinion, however, you are on your own. Good luck!
Cases and Materials
IN RE BABY “M”
Superior Court of New Jersey, Bergen County
525 A.2d 1128 (1987), rev’d 537 A.2d 1227 (1988)
SORKOW, P.J.F.P.: 7
The primary issue to be determined by this litigation is what are the best interests of a child until now called “Baby M.” All other concerns raised by counsel constitute commentary.
Pay close attention to the questions of contract law raised by the court in this paragraph. You will be grappling versions of these same questions throughout this course.
That commentary includes the need to determine if a unique arrangement between a man and woman, unmarried to each other, creates a contract. If so, is the contract enforceable; and if so, by what criteria, means and manner. If not, what are the rights and duties of the parties with regard to custody, visitation and support.
Probably the most important authority of the court is the exercise of its parens patriae jurisdiction. Jurisdiction is a word of broad and comprehensive impact. It means the authority by which courts and judicial officers take cognizance of and decide cases. It means the authority to act, to find, define and apply the law.
Parens patriae is that power of the sovereign (in this case the State of New Jersey by its judicial branch) to watch over the interests of those who are incapable of protecting themselves. BLACK’S LAW DICTIONARY (4th ed. 1975).
Thus, it is pursuant to N.J. Ct. R. 5:2-1, which defines actions cognizable in the Superior Court, Chancery Division, Family Part, that this court, as the present day successor to a part of that historic legacy of equity jurisdiction, applies said jurisdiction to the issues herein presented; to wit, the best interest of a child and contractual rights, if any, of the litigating parties.
Venue is a concept of place—in this this context, where should a lawsuit be brought. Jurisdiction defines the court’s authority; venue defines in which geographic area the suit should be instituted. Mr. and Mrs. William Stern8 live in Bergen County, New Jersey. Mr. and Mrs. Richard Whitehead live in Ocean County, New Jersey. The child was taken from Bergen County to Ocean County and returned to Bergen County ultimately from the State of Florida. At the time of the institution of this suit, Mr. and Mrs. Stern believed they had the right to have the child returned to them in Bergen County. They believed “Baby M” was a resident of Bergen County; hence, Mr. and Mrs. Stern began their action here. R.5:2-1 provides that an action involving status of children should be brought in the county of domicile. There never was a challenge to this placement of venue. This court concludes that venue is properly in Bergen County.
When a court recounts the procedural history leading up to its opinion, the context will often help you understand why the court is doing what it is doing. You usually won’t find the main point of the case here, however (unless you’re studying procedure), and we have edited this part down considerably.
This litigation began on May 5, 1986, when Mr. and Mrs. William Stern filed an ex-parte application for an order to show cause why this court should not issue an order for a summary judgment to enforce a surrogate-parenting contract. The order to show cause was returnable on May 27, 1986.
At the same time a verified complaint was filed seeking to enforce a surrogate-parenting agreement, compel the surrender to plaintiffs of the infant child born to Mrs. Mary Beth Whitehead, restrain any interference with plaintiffs’ custody of the infant, terminate Mrs. Whitehead’s parental rights and allow adoption of the child by Mrs. Stern.
[The court describes its decision to appoint a guardian ad litem to represent the interests of child independently of the parties.]
On September 2, 1986, Mr. and Mrs. Whitehead filed an answer to the complaint and a counterclaim seeking custody and damages for fraud.
The trial commenced on January 5, 1987.
Findings of Fact, Conclusions of Law and Opinion.
This is a nonjury trial. At law, it is the jury that makes the findings of fact. As in all chancery proceedings, the court is the fact finder.
The findings of fact recounted here are based on the trial judge’s consideration and weighing of evidence. Where evidence was in conflict, the judge decides which evidence was more credible. In this opinion, the findings of fact tell the story that led to the agreement we are considering.
This court has spent six weeks in the actual trial of the issues before it. The parties, with their 38 expert and lay witnesses, have testified. The admissible evidence has been marked. The testimony and the tangible evidence have been carefully listened to, noted and reviewed by this court. The credibility of the witnesses has been examined, tested and weighed.
This court makes the following findings of fact:
Mr. and Mrs. Stern met when they were both graduate students at the University of Michigan and began dating in 1969. The couple was married in East Lansing, Michigan, on July 27, 1974, by a minister friend of the family. By now each had earned a Ph.D.—Mr. Stern in bio-chemistry and Mrs. Stern in human genetics.
The Sterns had discussed having children prior to and after their marriage but mutually concluded that until Mrs. Stern’s pediatric residency was completed, her time to devote to family would be inadequate and thus unfair to the child. It was also concluded that post-residency earnings would make the family more economically secure.
In 1972 and 1978, Mrs. Stern had experienced several episodes of numbness in her fingers and toes and some leg weakness. [Mrs. Stern ultimately was diagnosed with multiple sclerosis, which made the possibility of a pregnancy dangerous to her health.]
The Sterns explored the possibility of adoption but were discouraged in their inquiries. They learned that because they were of different religions and they were an “older couple,” adoption of a newborn infant would be extremely difficult. Indeed, the multi-year wait would have them in their very late 30's to early 40's if a child were to become available. Moreover, following the death of William Stern’s mother in 1983, the desirability of having his own biological offspring became compelling to William Stern, thus making adoption a less desirable alternative
In 1984, Mr. Stern read an ad from the Infertility Center of New York (hereinafter ICNY) and with the consent of Mrs. Stern, they decided to pursue surrogate parenting. ICNY is an agency that provides surrogate mother candidates to applicants seeking a child through an alternative means of reproduction.
Mary Beth Whitehead is presently 29 years old. [She and Richard Whitehead met and were married in 1973, when she was 16 and he was 24.]
Their first child, Ryan, was born on July 7, 1974. The Whiteheads had their second child, whom they named Tuesday, on January 27, 1976.9 Within several months after their daughter’s birth, Richard and Mary Beth Whitehead decided that they did not want to have any more children, that they were “content” with the two children and thought they had the “perfect family.” There was mutual agreement that Mr. Whitehead should have a vasectomy to prevent further impregnation of Mrs. Whitehead. The Whiteheads had created their family and wanted no further children.
In or about August or September 1984, Mr. and Mrs. Stern made inquiries into several surrogate parenting programs throughout the United States. Initially, they had hoped to find a woman who would function as a gestational surrogate only; that is, a woman who would be implanted with an egg of Mrs. Stern fertilized by the sperm of Mr. Stern. At that time, however, in vitro fertilization was largely experimental and not a generally available option.
The agreement referenced here is not the document you read in the previous unit. The agreement between Stern and ICNY came earlier.
Mr. and Mrs. Stern contacted the Infertility Center of New York and were sent a brochure. The brochure explained in general terms the surrogate parenting procedure and the services which ICNY offered, including the screening of potential surrogate candidates. On December 3, 1984, Mr. Stern entered into an agreement with ICNY.
Over the next several months Mr. and Mrs. Stern were provided with various biographical data concerning potential surrogate candidates. Mr. and Mrs. Stern reviewed the material and attempted to set up interviews with several candidates. They were eventually told of a potential surrogate enrolled in the program who had been unsuccessful working with another couple for approximately eight months. The woman was described as being very dedicated and anxious to work with another couple. The candidate was Mary Beth Whitehead.
Mrs. Whitehead was enrolled in the ICNY surrogate program since the spring 1984. Mrs. Whitehead testified she was motivated to join the program in the hopes of “giving the most loving gift of happiness to an unfortunate couple.” Mrs. Whitehead also felt that the surrogate’s fee would assist her in providing for her children’s long range educational goals. Her signed application also reveals these reasons.
Mrs. Whitehead had learned of surrogate parenting through an advertisement in The Asbury Park Press. Mrs. Whitehead spoke of her interest in the surrogacy program to no one other than Mr. Whitehead over the next week. Although Mr. Whitehead was initially opposed to Mrs. Whitehead’s involvement in the surrogate program, he ultimately deferred to his wife’s wishes. Mrs. Whitehead contacted ICNY and was provided with an application form which she filled out and submitted to the center.
In or about April 1984 Mrs. Whitehead submitted to a psychological evaluation to determine her suitability as a potential surrogate. She was evaluated by interview and testing. The examiner reported that although Mrs. Whitehead expected to have strong feelings about giving up the baby at birth, she was sincere in her plan to become a surrogate mother and has thought extensively about the plan. Although the examiner noted that it would be important to explore with Mrs. Whitehead in more depth whether she would be able to relinquish the child in final analysis, Mrs. Whitehead was recommended as an appropriate candidate for a surrogate volunteer. This report was made for ICNY prior to Mrs. Whitehead working for her first childless couple. It was this fact of prior evaluation that the Sterns relied on. Mrs. Whitehead testified to receiving two counseling sessions at ICNY.
In or about May 1984 ICNY matched Mrs. Whitehead with a married couple (not Mr. and Mrs. Stern) who sought to engage Mrs. Whitehead as a surrogate. The prospective surrogate was presented with a proposed form of surrogate parenting agreement. The proposed agreement was almost identical to the agreement Mrs. Whitehead would later sign with Mr. Stern. As required by the center, she consulted independent counsel on May 24, 1984, who after spending several hours discussing the possible legal ramifications of the agreement with both Mr. and Mrs. Whitehead, negotiated at Mrs. Whitehead’s request several minor changes in the contract. The contract was signed by the Whiteheads and shortly thereafter, she began her efforts to conceive by artificial insemination. Her effort for this couple was unsuccessful. She was then introduced to Mr. and Mrs. Stern.
Mr. and Mrs. Stern met with Mr. and Mrs. Whitehead in January 1985 in New Brunswick, New Jersey. The site was chosen because it is approximately mid-way between the respective residences. The parties discussed the proposed surrogacy arrangement and other elements of their contemplated relationship, including Mrs. Whitehead’s duty to relinquish custody of the child to Mr. and Mrs. Stern. Mrs. Whitehead made it clear she would not appear on the Sterns’ doorstep. All she wanted was an annual picture and letter report of progress. At the conclusion of the meeting, it was agreed that Mrs. Whitehead would be the surrogate mother of a child to be born for Mr. and Mrs. Stern.
On February 6, 1986 Mr. Stern and Mr. and Mrs. Whitehead signed the surrogate parenting agreement. It was in all material respects the same contract that Mrs. Whitehead signed the spring of 1984. At that time, Mr. and Mrs. Whitehead had consulted with an attorney. As already noted, he read and explained the contract to them. Several minor changes were negotiated. Mrs. Whitehead believed the second contract to be as the first and thus, although able to do so, chose not to seek legal advice prior to signing the subject agreement. It is noted with more than passing importance that Mrs. Stern was not a signatory to the agreement.
Subsequent to entering into the surrogate parenting agreement of February 6, 1985, Mrs. Whitehead was inseminated with the seminal fluid of Mr. Stern nine times. Finally, in July 1985 she conceived
[The court recounts at great length what became a tortuous story sensationalized in the nation’s tabloids. Baby “M” was born on March 27, 1986. Both before and after the birth, Mrs. Whitehead began to regret her decision. After the birth, she and her husband took the child and fled with their family to Florida, later defying a New Jersey court order. Baby “M” ultimately was taken into custody by Florida authorities on July 31, and returned to New Jersey for the litigation.]
A total of 38 witnesses testified at this trial, 23 fact witnesses and 15 experts.
[The court extensively summarizes the expert testimony, most of which went to the suitability of the parties as parents and the best interest of the child.]
This court is confronted with circumstances in which on February 6, 1985, the parties to this litigation, with great joy and expectation, entered into a surrogate arrangement. It was an arrangement where both—the prospective family and the surrogate mother—wanted the child; albeit, for different purposes. Even though the insemination is artificial, the parental attitude is real. Roger Rosenblatt, The Baby in the Factory, TIME (February 14, 1983). The couple sought to bring into existence a child by conscious pre-arrangement which, as far as biologically possible, would be genetically their own. The surrogate consciously chose to bear a child for another couple with the understanding that she would not contest but would consent to their adoption of it.
Concerns have been expressed about the efficacy of surrogate arrangements. They are: (1) that the child will not be protected; (2) the potential for exploitation of the surrogate mother; (3) the alleged denigration of human dignity by recognizing any agreement in which a child is produced for money; (4) surrogacy is invalid because it is contrary to adoption statutes and other child benefit laws such as statutes establishing standards for termination of parental rights; (5) it will undermine traditional notions of family; and (6) surrogacy allows an elite economic group to use a poorer group of people to achieve their purposes.
It is argued that the child will not be protected. So long as there is no legislation and some court action in surrogacy arrangements is required, the child born of surrogacy will be protected in New Jersey. If there is compliance with the contract terms, adoption will be necessary; hence, court inquiry about best interests must take place. If there is non-compliance with the contract, as in this case, best interests is still litigated with protection to the child, with its own guardian and experts retained to aid the court in its best interests determination.
The second argument against surrogacy is that the surrogate mother will be exploited. To the contrary. It is the private adoption that has that great potential for, if not actual, exploitation of the mother. In the private adoption, the woman is already pregnant. The biological father may be unknown or at best uninterested in his obligations. The woman may want to keep the child but cannot do so for financial reasons. There is the risk of illegal consideration being paid to the mother. In surrogacy, none of these “downside” elements appear. The arrangement is made when the desire and intention to have a family exist on the couple’s part. The surrogate has an opportunity to consult, take advice and consider her act and is not forced into the relationship. She is not yet pregnant.
The third argument is that to produce or deal with a child for money denigrates human dignity. With that premise, this court urgently agrees. The 13th Amendment to the United States Constitution is still valid law. The law of adoption in New Jersey does prohibit the exchange of any consideration for obtaining a child. The fact is, however, that the money to be paid to the surrogate is not being paid for the surrender of the child to the father. And that is just the point—at birth, mother and father have equal rights to the child absent any other agreement. The biological father pays the surrogate for her willingness to be impregnated and carry his child to term. At birth, the father does not purchase the child. It is his own biological genetically related child. He cannot purchase what is already his.
The fourth argument against surrogacy is that it is a concept running contrary to the laws of adoption in New Jersey. It is in this court’s view that the laws of adoption in this State do not apply to surrogacy contracts. Surrogacy was not a viable procreation alternative and was unknown when the laws of adoption were passed. The same rationale must attach to laws dealing with termination of parental rights. Indeed, it is held that the only concept of law that can presently attach to surrogacy arrangements are contract law principles and parens patriae concepts for the benefit of the child. These are the only pole stars available for this court to chart its course on the issues of surrogacy.
The fifth argument against surrogacy is that it will undermine traditional notions of family. How can that be when the childless husband and wife so very much want a child? They seek to make a family. They intend to have a family. The surrogate mother could not make a valid contract without her husband’s consent to her act. This statement should not be construed as antifeminist. It means that if the surrogate is married, her husband will, in all probability, have to sign the contract to establish his non-paternity pursuant to the New Jersey Parentage Law. Both sides of the equation must agree.
The sixth and final argument suggests that an elite upper economic group of people will use the lower economic group of woman to “make their babies.” This argument is insensitive and offensive to the intense drive to procreate naturally and when that is impossible, to use what lawful means are possible to gain a child. This intense desire to propagate the species is fundamental. It is within the soul of all men and women regardless of economic status.
During the course of the testimony offered by the principals to this writing, the court was told on several occasions that a writing was executed by them. Indeed, that writing was marked into evidence. The court was further told by the parties that they all understood their obligations under the contract. Specifically, it was understood by all that Mr. Stern’s sperm would be used to artificially inseminate Mrs. Whitehead. Upon conception, Mrs. Whitehead would carry the child and when she gave birth, she would then surrender the infant to the biological father and his wife. Mrs. Whitehead would also voluntarily renounce her parental rights to permit Mrs. Stern to adopt the infant. Mrs. Stern, it must be noted, is not a party to the contract. This was to avoid any possible inference that there is a violation of N.J. STAT. ANN. § 9:3-54 (which prohibits giving a consideration to obtain an adoptable child). Mr. Whitehead signed a certification pursuant to Id. § 9:17-44 establishing his non-paternity. Mr. Stern agreed to pay Mrs. Whitehead $10,000 for conceiving and bearing his child.
Fundamentally, when there were no time constraints, when Mrs. Whitehead was not pregnant, when each party had the opportunity to obtain advice (legal, medical and/or psychological), the parties expressed their respective offers and acceptances to each other and reduced their understanding to a writing. If the mutual promises were not sufficient to establish a valid consideration, then certainly there was consideration when there was conception. The male gave his sperm; the female gave her egg in their pre-planned effort to create a child—thus, thus, a contract.
For the past year, there has been a child in being. She is alive and well. She is tangible proof of that which the Whiteheads and Mr. Stern in concert agreed to do. The child was conceived with a mutual understanding by the parties of her future life. Except now, Mrs. Whitehead has failed to perform one of her last promises, which was to surrender the child and renounce parental rights. She has otherwise performed the personal service that she had undertaken—conception and carrying the child to term. The terms of the contract have been executed but for the surrender.
A person who has promised is entitled to rely on the concomitant promise of the other promisor. This court holds therefore that in New Jersey, although the surrogacy contract is signed, the surrogate may nevertheless renounce and terminate the contract until the time of conception. She may be subject then for such monetary damages as may be proven. Specific performance to compel the promised conception, gestation, and birth shall not be available to the male promisor. However, once conception has occurred the parties’ rights are fixed, the terms of the contract are firm and performance will be anticipated with the joy that only a newborn can bring.
It is argued that the contract in this case is one of adhesion. It was a writing printed by and supplied by ICNY. That its terms were not immutable is shown by the testimony of the attorney, Saul Radow, who by deposition reported negotiating changes to the written contract; albeit, minor changes. By definition, a contract of adhesion is one in which one party has no alternative but to accept or reject the other party’s terms and there are no options by which the party may obtain the product or service. Here, neither party has a superior bargaining position. Each had what the other wanted. A price for the service each was to perform was struck and a bargain reached. One did not force the other. Neither had expertise that left the other at a disadvantage. Neither had disproportionate bargaining power. Although the contract was a form, there is no proof that it was absolute and could not be altered. Defendant offered no proof to this end. Mrs. Whitehead, acknowledged that minor changes were bargained for. There is no evidence of an absence of good faith or fair dealing. This is not a contract of adhesion. Henningsen v. Bloomfield Motors, Inc., 32 N.J. 358 (1960).
Defendants argue unconscionability. They claim the terms are manifestly unfair or oppressive. These terms were known to Mrs. Whitehead from her earlier surrogate contracting experience. She read the second contract, albeit briefly, prior to signing it. She was aware of her compensation. She had been pregnant before and had to be aware of the risks of pregnancy. Her obligation included physical examination for her own welfare as well as the welfare of the fetus. Mrs. Whitehead says that Mr. Stern undertook no risks. To compare the risk of pregnancy in a woman to the donation of sperm by the man would be unconscionable. This, however, is the bargain Mrs. Whitehead sought and obtained. Mr. Stern did take a risk, however, whether the child would be normal or abnormal, whether accepted or rejected he would have a lifetime obligation and responsibility to the child as its natural and biological father.
To the issue of unconscionability, defendants fail to show proof of overreaching or disproportionate bargaining that result in an unfair contract. Mrs. Whitehead was anxious to contract. At the New Brunswick meeting, she pressed for a definitive statement by the Sterns. She knew just what she was bargaining for. This court finds that she has changed her mind, reneged on her promise and now seeks to avoid her obligations. Unconscionability claims arise, more often than not, in consumer contracts for products or services. The seller is in the dominant position and the buyer must comply or there is no deal. Not so here—either party could have walked away from the other. Either party would then have continued on ICNY’s roster of available surrogates and childless families seeking a surrogate. They chose not to do so. The bargain here was one for totally personal service. It was a very scarce service Mrs. Whitehead was providing. Indeed, it might even be said she had the dominant bargaining position for without her Mr. Stern had no other immediate source available. Each party sought each other to fulfill their needs.
It is argued by amicus that the $ 10,000 to be paid Mrs. Whitehead is so low as to be unconscionable. In counterpoint, it is stated that not all services can be compensated by money. Millions of men and women work for each other in their marital relationship. There may even be mutual inequality in the value of the work performed but the benefits obtained from the relationship serve to reject the concept of equating societal acts to a monetary balancing. Perhaps the risk was great for the money to be paid but the risk was what Mrs. Whitehead chose to assume and at the agreed upon fee. And it is assumed she received other intangible benefits and satisfaction from doing what she did. Her original application set forth her highly altruistic purpose. Notwithstanding amicus’ position, all in this world cannot be equated to money.
It is defendants’ claim of unconscionability. They must show such unfairness, overreaching, bargaining disparity or patent unfairness that no reasonable person acting without duress would accept the contract terms. Toker v. Westerman, 113 N.J. Super. 452, 454 (Cty. D. Ct.1970). This, defendants have failed to do.
Defendants next claim relief from the contract because the Whiteheads had no attorney at the time they entered the contract. It is hornbook law that any person who possesses legal capacity may be bound by a contract even when it is entered without representation unless there is fraud, overreaching or undue influence which caused the party to enter the contract.
It was Dr. Vetter, one of defendants’ own psychiatrists, who testified unequivocally that the Whiteheads had legal capacity to contract. There were no mental disabilities. They understood what they were doing. They understood the contract terms. That there was capacity to contract was proven by a preponderance of the credible evidence. Furthermore, Mr. Whitehead testified they signed the contract at their New Jersey home because they did not wish to travel to New York. Their prior counsel was available to them. They chose not to call him. It is well settled that disparity of education or sophistication is not considered grounds for avoidance of a contract. Dundee Chemical Works v. Connor, 46 N.J. Eq. 576 (E. & A.1890). In Dundee, the adversaries were a homemaker-executrix and an attorney. The Court held it would not weigh the disparate skills to void a contract. This leaves just fraud, undue influence or illegality. As to the latter two factors this court says no evidence has been shown of illegality or undue influence. This court has a sense that Mrs. Whitehead would be a very difficult person to unduly influence once her mind is made up.
As to the claim of fraud, defendants allege they may rescind the contract because of the fraud perpetrated by plaintiffs. The court first defines the terms with which we are to treat. Legal fraud has four elements: (1) a material misrepresentation of a fact; (2) known to be false; (3) upon which a party relied; and (4) to its damage. Equitable fraud eliminates the element of knowledge. Thus, even if the promisor did not know of the fact being false, it would be inequitable to permit contractual recovery and the injured party should be allowed the option to sustain the contract or rescind. Jewish Center of Sussex County v. Whale, 86 N.J. 619 (1981).
[The court concludes that no false statements were made.]
There is no fraud, legal or equitable, that would allow Mr. and Mrs. Whitehead to rescind their contract.
It is further argued that the contract is illusory; that is to say, that only one of the parties has an obligation, the other only benefits, that there is no mutuality of obligation. This does not mean equality of obligation. See Friedmann v. Tappan Development Corp., 22 N.J. 523 (1956); SAMUEL WILLISTON, THE LAW OF CONTRACTS, § 105A at 421. Such is not the case. Mr. Stern gave his sperm; Mrs. Whitehead gave her egg. Together the miracle of a new life was obtained. Mrs. Whitehead argues Mr. Stern does not have to take the child under certain circumstances which have not happened and are not before this court. She is arguing, hypothetically, “if.” It is suggested again that this court is dealing with the facts before it. Even assuming arguendo, that the court were to address the issue of the illusory contract as stated by defendants, the conclusion would be the same. The Whiteheads argue that Mr. Stern does not have to take the baby if it is imperfect; but the fact is the contract does provide that there is an obligation and responsibility, that there is a life long responsibility by Mr. Stern for the child’s support and welfare. The contract is not illusory.[The court analyzes the question whether there is a right to assisted reproduction under the U.S. Constitution.]
For the foregoing reasons, this court concludes and holds that the surrogate-parenting agreement is a valid and enforceable contract pursuant to the laws of New Jersey. . . . This court further finds that Mrs. Whitehead has breached her contract in two ways: (1) by failing to surrender to Mr. Stern the child born to her and Mr. Stern and (2) by failing to renounce her parental rights to that child.
What are the remedies available to the plaintiff? The remedies that exist for breach of a contract are an award of money damages or specific enforcement of the terms of the contract. There are, of course, other remedies but they are neither relevant nor applicable here. Monetary damages cannot possibly compensate plaintiff for the loss of his bargain because of defendant’s breach. The singular subject of the contract further mitigates against an award of damages.
Remedies will be another significant issue in our study of contract law. Legal rights arising from a contract breach are not terribly useful unless the law provides a remedy for the breach.
Plaintiff acknowledges that before the remedy of specific performance can be used it must be shown that the contract was entered into with understanding and free will. Dr. Vetter, the Whitehead psychiatric expert, testified that the Whiteheads were competent when the contract was signed and they understood the terms. It must also be shown that the contract was entered in good faith, without fraud and is not unenforceable because of public policy. By reason of the findings heretofore made, to wit: there is no evidence of fraud and the parties voluntarily entered the agreement, indeed they were all very anxious to do so, such contracts are not contrary to public policy. Indeed New Jersey has no stated public policy on surrogacy. There is no reason why this court should not order specific performance.
The judgment, contained in the numbered item list at this point, is the substantive final result of the trial court’s reasoning stated up until this point. A final judgment is often the first point at which a trial court’s decision may be appealed to a higher court based on specific alleged errors.
Specific performance is a discretionary remedy. It should only be exercised in accordance with principles of equity. In each case the evaluation of the equities must be left to the judgment and good conscience of the trial court. Stehr v. Sawyer, 40 N.J. 352 (1963). This means that the court must adjudge and weigh whether the parties’ conduct was fair and reasonable. Will the relief afforded by the remedy be unreasonable? If specific performance is ordered, the result will be just what the parties bargained for and the contract contemplated. Mr. Stern wanted progeny, a child. Mrs. Whitehead wanted to give the child she would bear to a childless couple. His sperm fertilized her egg. A child was born. Until the child was placed in his home he never knew the stress and bliss, the responsibilities and rewards of a child. The Whiteheads have two children. They did not want any more. Theirs was the perfect family, Mr. Whitehead testified. The Whiteheads agreed that Mr. Whitehead should get a vasectomy to prevent further conception. It is suggested that Mrs. Whitehead wanted a baby, now that she is older than when her first two children were born, to experience and fulfill herself again as a woman. She found the opportunity in a newspaper advertisement. She received her fulfillment. Mr. Stern did not.
At this point the court would enter its order for specific performance, but an additional inquiry is necessary. Since we here deal with a human life of only one year, since we treat with, as the guardian ad litem has said “the most precious and unique thing on this earth, a small vulnerable and lovable child,” inquiry must be made to determine if the result of such an order for specific performance would be in the child’s best interest. This court holds that whether there will be specific performance of this surrogacy contract depends on whether doing so is in the child’s best interest. . . .
[The court extensively reviews the evidence and concludes that the child’s best interest is to be with the Sterns.]
This court enters judgment in favor of plaintiffs as follows:
(1) The surrogate parenting agreement of February 6, 1985, will be specifically enforced.
(2) The prior order of the court giving temporary custody to Mr. Stern is herewith made permanent. Prior orders of visitation are vacated.
(3) The parental rights of defendant Mary Beth Whitehead are terminated.
(4) Mr. Stern is formally adjudged the father of Melissa Stern.
(5) The New Jersey Department of Health, Bureau of Vital Statistics and its ancillary and/or subordinate state or county agencies are directed to amend all records of birth to reflect the paternity and name of the child to be Melissa Stern.
(6) Defendants, Mary Beth Whitehead, Richard Whitehead, Joseph Messer and Catherine Messer, their relatives, friends, agents, servants, employees or any person acting for and/or on their behalf are restrained from interfering with the parental and custodial rights of plaintiff, his wife or their agents, servants, employees or any other persons acting for and/or on their behalf.
(7) As heretofore ordered unpleaded claims for money damages are reserved to plaintiffs.
(8) Counsel for plaintiffs will submit a certification of services pursuant to R. 4:42-9 in support of their application for counsel fees.
(9) The court will enter judgment against defendants on all prayers for relief in the first and second counts of their counterclaim.
(10) The guardian ad litem shall file a certification of services pursuant to R 4:42-9 to support her application for fees. She shall also submit to the court the statements of fees from her experts for allocation by the court.
(11) The sum of $ 10,000, being held by the Clerk of the Superior Court, shall be the property of Mary Beth Whitehead.
(12) The guardian ad litem shall be discharged herewith except for the purposes of appeal.
Review Question 1. The trial court states that it “was further told by the parties that they all understood their obligations under the contract.” Why can’t we just end the inquiry there? What, based on this opinion, do you now understand to be the elements of an enforceable contract?
Review Question 2. The court notes that “Mr. and Mrs. Whitehead had consulted with an attorney” when they signed the 1984 agreement with a prior couple. Why does that matter? Can’t parties enter into contracts without attorneys being involved? What value—if any—can attorneys add to the process of contracting?
Review Question 3. The court observes that the “remedies that exist for breach of a contract are an award of money damages or specific enforcement of the terms of the contract.” Which type of remedy does the trial court enforce and why?
IN RE BABY M
Supreme Court of New Jersey
537 A.2d 1227, 109 N.J. 396 (1988)
WILENTZ, C.J., delivered the opinion of the Court:
In this matter the Court is asked to determine the validity of a contract that purports to provide a new way of bringing children into a family. For a fee of $10,000, a woman agrees to be artificially inseminated with the semen of another woman's husband; she is to conceive a child, carry it to term, and after its birth surrender it to the natural father and his wife. The intent of the contract is that the child's natural mother will thereafter be forever separated from her child. The wife is to adopt the child, and she and the natural father are to be regarded as its parents for all purposes. The contract providing for this is called a “surrogacy contract,” the natural mother inappropriately called the “surrogate mother.”
We invalidate the surrogacy contract because it conflicts with the law and public policy of this State. While we recognize the depth of the yearning of infertile couples to have their own children, we find the payment of money to a “surrogate” mother illegal, perhaps criminal, and potentially degrading to women. Although in this case we grant custody to the natural father, the evidence having clearly proved such custody to be in the best interests of the infant, we void both the termination of the surrogate mother's parental rights and the adoption of the child by the wife/stepparent. We thus restore the “surrogate” as the mother of the child. We remand the issue of the natural mother's visitation rights to the trial court, since that issue was not reached below and the record before us is not sufficient to permit us to decide it de novo.
We find no offense to our present laws where a woman voluntarily and without payment agrees to act as a “surrogate” mother, provided that she is not subject to a binding agreement to surrender her child. Moreover, our holding today does not preclude the Legislature from altering the current statutory scheme, within constitutional limits, so as to permit surrogacy contracts. Under current law, however, the surrogacy agreement before us is illegal and invalid.
[The court recites some of the facts stated in the trial court opinion above.]
The Sterns claim that the surrogacy contract is valid and should be enforced, largely for the reasons given by the trial court.
We have concluded that this surrogacy contract is invalid. Our conclusion has two bases: direct conflict with existing statutes and conflict with the public policies of this State, as expressed in its statutory and decisional law.
Conflict With Statutory Provisions
One of the surrogacy contract's basic purposes, to achieve the adoption of a child through private placement, though permitted in New Jersey “is very much disfavored.” Sees v. Baber, 377 A.2d 628 (N.J. 1977). Its use of money for this purpose—and we have no doubt whatsoever that the money is being paid to obtain an adoption and not, as the Sterns argue, for the personal services of Mary Beth Whitehead—is illegal and perhaps criminal. N.J. Stat. Ann. § 9:3-54.10 In addition to the inducement of money, there is the coercion of contract: the natural mother's irrevocable agreement, prior to birth, even prior to conception, to surrender the child to the adoptive couple. Such an agreement is totally unenforceable in private placement adoption.
Integral to these invalid provisions of the surrogacy contract is the related agreement, equally invalid, on the part of the natural mother to cooperate with, and not to contest, proceedings to terminate her parental rights, as well as her contractual concession, in aid of the adoption, that the child's best interests would be served by awarding custody to the natural father and his wife—all of this before she has even conceived, and, in some cases, before she has the slightest idea of what the natural father and adoptive mother are like.
The surrogacy contract conflicts with: (1) laws prohibiting the use of money in connection with adoptions; (2) laws requiring proof of parental unfitness or abandonment before termination of parental rights is ordered or an adoption is granted; and (3) laws that make surrender of custody and consent to adoption revocable in private placement adoptions.
(1) Our law prohibits paying or accepting money in connection with any placement of a child for adoption. Violation is a high misdemeanor. Excepted are fees of an approved agency (which must be a non-profit entity) and certain expenses in connection with childbirth.
Considerable care was taken in this case to structure the surrogacy arrangement so as not to violate this prohibition. The arrangement was structured as follows: the adopting parent, Mrs. Stern, was not a party to the surrogacy contract; the money paid to Mrs. Whitehead was stated to be for her services—not for the adoption; the sole purpose of the contract was stated as being that “of giving a child to William Stern, its natural and biological father”; the money was purported to be “compensation for services and expenses and in no way . . . a fee for termination of parental rights or a payment in exchange for consent to surrender a child for adoption”; the fee to the Infertility Center ($7,500) was stated to be for legal representation, advice, administrative work, and other “services.” Nevertheless, it seems clear that the money was paid and accepted in connection with an adoption.
The Infertility Center's major role was first as a “finder” of the surrogate mother whose child was to be adopted, and second as the arranger of all proceedings that led to the adoption. Its role as adoption finder is demonstrated by the provision requiring Mr. Stern to pay another $7,500 if he uses Mary Beth Whitehead again as a surrogate, and by ICNY's agreement to “coordinate arrangements for the adoption of the child by the wife.” The surrogacy agreement requires Mrs. Whitehead to surrender Baby M for the purposes of adoption. The agreement notes that Mr. and Mrs. Stern wanted to have a child, and provides that the child be “placed” with Mrs. Stern in the event Mr. Stern dies before the child is born. The payment of the $10,000 occurs only on surrender of custody of the child and “completion of the duties and obligations” of Mrs. Whitehead, including termination of her parental rights to facilitate adoption by Mrs. Stern. As for the contention that the Sterns are paying only for services and not for an adoption, we need note only that they would pay nothing in the event the child died before the fourth month of pregnancy, and only $1,000 if the child were stillborn, even though the “services” had been fully rendered. Additionally, one of Mrs. Whitehead's estimated costs, to be assumed by Mr. Stern, was an “Adoption Fee,” presumably for Mrs. Whitehead's incidental costs in connection with the adoption.
Mr. Stern knew he was paying for the adoption of a child; Mrs. Whitehead knew she was accepting money so that a child might be adopted; the Infertility Center knew that it was being paid for assisting in the adoption of a child.
The prohibition of our statute is strong. Violation constitutes a high misdemeanor, a third-degree crime, carrying a penalty of three to five years imprisonment.
(2) The termination of Mrs. Whitehead's parental rights, called for by the surrogacy contract and actually ordered by the court, fails to comply with the stringent requirements of New Jersey law. [The court notes that under the law a birth mother’s rights can be terminated only upon surrender to a State-designated agency after certain procedural steps are followed, or upon a showing that the parent is manifestly unfit and would actually be a danger to the child. As the surrender was made in a contract and not to a State-designated agency, and Mrs. Whitehead had not been found unfit, her parental rights had not been validly terminated despite the contract.]
Since the termination was invalid, it follows, as noted above, that adoption of Melissa by Mrs. Stern could not properly be granted.
The trial court required a "best interests" showing as a condition to granting specific performance of the surrogacy contract. Having decided the "best interests" issue in favor of the Sterns, that court's order included, among other things, specific performance of this agreement to surrender custody and terminate all parental rights.
The trial court's award of specific performance therefore reflects its view that the consent to surrender the child was irrevocable. We accept the trial court's construction of the contract; indeed it appears quite clear that this was the parties' intent. Such a provision, however, making irrevocable the natural mother's consent to surrender custody of her child in a private placement adoption, clearly conflicts with New Jersey law.
Contractual surrender of parental rights is [prohibited] in our statutes as now written. [The court at this point describes the prohibition contained in the New Jersey Parentage Act in more detail.]
Public Policy Considerations
The surrogacy contract's invalidity, resulting from its direct conflict with the above statutory provisions, is further underlined when its goals and means are measured against New Jersey's public policy. The contract's basic premise, that the natural parents can decide in advance of birth which one is to have custody of the child, bears no relationship to the settled law that the child's best interests shall determine custody. The fact that the trial court remedied that aspect of the contract through the "best interests" phase does not make the contractual provision any less offensive to the public policy of this State.
The surrogacy contract guarantees permanent separation of the child from one of its natural parents. Our policy, however, has long been that to the extent possible, children should remain with and be brought up by both of their natural parents. That was the first stated purpose of the previous adoption act: “it is necessary and desirable to protect the child from unnecessary separation from his natural parents.” While not so stated in the present adoption law, this purpose remains part of the public policy of this State. This is not simply some theoretical ideal that in practice has no meaning. The impact of failure to follow that policy is nowhere better shown than in the results of this surrogacy contract. A child, instead of starting off its life with as much peace and security as possible, finds itself immediately in a tug-of-war between contending mother and father.11
The surrogacy contract violates the policy of this State that the rights of natural parents are equal concerning their child, the father's right no greater than the mother's. ‘The parent and child relationship extends equally to every child and to every parent, regardless of the marital status of the parents.” N.J. STAT. ANN. § 9:17-40. The whole purpose and effect of the surrogacy contract was to give the father the exclusive right to the child by destroying the rights of the mother.
The policies expressed in our comprehensive laws governing consent to the surrender of a child, stand in stark contrast to the surrogacy contract and what it implies. Here there is no counseling, independent or otherwise, of the natural mother, no evaluation, no warning.
The only legal advice Mary Beth Whitehead received regarding the surrogacy contract was provided in connection with the contract that she previously entered into with another couple. Mrs. Whitehead's lawyer was referred to her by the Infertility Center, with which he had an agreement to act as counsel for surrogate candidates. His services consisted of spending one hour going through the contract with the Whiteheads, section by section, and answering their questions. Mrs. Whitehead received no further legal advice prior to signing the contract with the Sterns.
Mrs. Whitehead was examined and psychologically evaluated, but if it was for her benefit, the record does not disclose that fact. The Sterns regarded the evaluation as important, particularly in connection with the question of whether she would change her mind. Yet they never asked to see it, and were content with the assumption that the Infertility Center had made an evaluation and had concluded that there was no danger that the surrogate mother would change her mind. From Mrs. Whitehead's point of view, all that she learned from the evaluation was that “she had passed.” It is apparent that the profit motive got the better of the Infertility Center. Although the evaluation was made, it was not put to any use, and understandably so, for the psychologist warned that Mrs. Whitehead demonstrated certain traits that might make surrender of the child difficult and that there should be further inquiry into this issue in connection with her surrogacy. To inquire further, however, might have jeopardized the Infertility Center's fee. The record indicates that neither Mrs. Whitehead nor the Sterns were ever told of this fact, a fact that might have ended their surrogacy arrangement.
Under the contract, the natural mother is irrevocably committed before she knows the strength of her bond with her child. She never makes a totally voluntary, informed decision, for quite clearly any decision prior to the baby's birth is, in the most important sense, uninformed, and any decision after that, compelled by a pre-existing contractual commitment, the threat of a lawsuit, and the inducement of a $ 10,000 payment, is less than totally voluntary. Her interests are of little concern to those who controlled this transaction.
Although the interest of the natural father and adoptive mother is certainly the predominant interest, realistically the only interest served, even they are left with less than what public policy requires. They know little about the natural mother, her genetic makeup, and her psychological and medical history. Moreover, not even a superficial attempt is made to determine their awareness of their responsibilities as parents.
Worst of all, however, is the contract's total disregard of the best interests of the child. There is not the slightest suggestion that any inquiry will be made at any time to determine the fitness of the Sterns as custodial parents, of Mrs. Stern as an adoptive parent, their superiority to Mrs. Whitehead, or the effect on the child of not living with her natural mother.
This is the sale of a child, or, at the very least, the sale of a mother's right to her child, the only mitigating factor being that one of the purchasers is the father. Almost every evil that prompted the prohibition on the payment of money in connection with adoptions exists here.
Review Question 4. Compare the first paragraph of the supreme court’s opinion with the story told in the trial court’s findings of fact. To what extent does the way the story is framed impact the way you think about the case? Do judges have an audience for which they are writing, and if so, who is it?
Review Question 5. Under the heading “Public Policy Considerations,” the New Jersey Supreme Court articulates reasons not to enforce the parties’ agreement. How do these policy concerns differ from those stated by the trial court? What explains the fact that two trained and experienced opinion-writing judges reached such different results based on the exact same facts? Is “public policy” just another way of saying “in my opinion”?
Donald Donor is a single, 29-year-old former factory assembly-line worker with a high school education and no children. He has been out of work for just over a year since the factory where he was employed closed and moved overseas. Patricia Poorhealth is a 46-year old vice president with an area technology company who has become a millionaire during the past decade. Patricia is, however, suffering from a kidney disease that, absent a transplant, is likely (roughly 80% statistical probability) to be fatal within the next three years. Patricia has two children with her 49-year old husband Harold—daughter Alicia, age 8, and son Barney, age 5.
Donald has been selling plasma at a local blood bank to make ends meet. During a recent visit, he agreed, in exchange for a $20 bonus, to be tested for organ donor compatibility. As it happens, Donald has two healthy kidneys and his physiology is compatible with Patricia for purposes of a transplant. Accordingly, Patricia has contacted Donald and offered to pay him $100,000 plus all medical expenses in exchange for donating a kidney to her. Though he has a few misgivings about surgery, Donald is pleased at the prospect of earning this money, more than he has seen in one place his entire life. For her part, Patricia can’t restrain herself from tears of joy at the prospect of living long enough to raise her children to adulthood.
If the opinion of the New Jersey trial court in the Baby M case represents controlling law in your jurisdiction, would the contract be contemplated by Donald and Patricia be enforceable? Why or why not? How, if at all, would your answer change if the New Jersey Supreme Court’s Baby M opinion is the controlling law of your jurisdiction?
Regardless of your answers to Problem 2.1, assume now that Donald and Patricia’s agreement is an enforceable contract. If, one month after signing the contract, one of the parties decides to breach, what would the remedy be for the non-breaching party? Consider the discussion of remedies in both of the Baby M opinions as you formulate your answer.
Except when, for certain reasons in certain cases, the law requires a writing. At th
See, e.g., RESTATEMENT (SECOND) OF CONTRACTS § 1 (1981).
Actually, enforcement can be a little more complicated in that it isn’t only through the court system. Sometimes parties contractually agree to have a private arbitrator decide their dispute. Parties also sometimes have “self-help” means of enforcement. We will frequently refer to what “courts” and “the court system” do with regard to contracts, but we don’t mean to exclude other players in a complex legal system. We’ve just read so many judicial opinions over the years that we sometimes can’t stop ourselves from talking about courts. (Note: We are only the first unit, and you already should be figuring out that almost every general statement about contract law requires qualification. That, for better or for worse, is part of how lawyers earn their keep. If this stuff were simple, everyone would do it.).
See generally THE GODFATHER (Paramount Pictures 1972).
See, e.g., MARY SHELLEY, FRANKENSTEIN (1818).
- 6 Don’t tell your Civil Procedure professor we said that. We don’t want to cause trouble unless we have a really good reason to do so. An old lawyer’s maxim is “Never offend anyone unintentionally.”
- 7 [“P.J.F.P” stands for Presiding Judge, Family Part, Chancery Division, New Jersey Superior Court.—Eds.]
[By the court] Both Sterns hold Ph.D. degrees. In addition, Mrs. Stern has an M.D. degree. They are both properly called Doctor. However, for clarity, they will be referred to as Mr. Stern and Mrs. Stern.
- 9 [Which, as it happens, was a Tuesday. This is an excellent example of a fact that is interesting, but not legally relevant. Those sometimes happen. – Eds.]
[By the court] N.J.STAT. ANN. § 9:3-54 reads as follows:
a. No person, firm, partnership, corporation, association or agency shall make, offer to make or assist or participate in any placement for adoption and in connection therewith
(1) Pay, give or agree to give any money or any valuable consideration, or assume or discharge any financial obligation; or
(2) Take, receive, accept or agree to accept any money or any valuable consideration.
b. The prohibition of subsection a. shall not apply to the fees or services of any approved agency in connection with a placement for adoption, nor shall such prohibition apply to the payment or reimbursement of medical, hospital or other similar expenses incurred in connection with the birth or any illness of the child, or to the acceptance of such reimbursement by a parent of the child.
c. Any person, firm, partnership, corporation, association or agency violating this section shall be guilty of a high misdemeanor.
[By the court] And the impact on the natural parents, Mr. Stern and Mrs. Whitehead, is severe and dramatic. The depth of their conflict about Baby M, about custody, visitation, about the goodness or badness of each of them, comes through in their telephone conversations, in which each tried to persuade the other to give up the child. The potential adverse consequences of surrogacy are poignantly captured here -- Mrs. Whitehead threatening to kill herself and the baby, Mr. Stern begging her not to, each blaming the other. The dashed hopes of the Sterns, the agony of Mrs. Whitehead, their suffering, their hatred—all were caused by the unraveling of this arrangement.