Court Opinion

ID: 9632915
Source: CourtListenerOpinion
Date Created: 2023-08-22 11:28:11.137147+00
Date Added: 2024-06-11T18:04:44.102028
License: Public Domain

MATTHEWS, Justice,
joined by RABINOWITZ, Chief Justice, dissenting.
I agree with the majority's interpretation of the parties' contract. As so interpreted, *496I believe the contract should be specifically enforced.
In my view the question which should be asked in each case where specific enforcement is sought is whether the transaction is a fair one. Of course, adequate security is relevant to the question of fairness, but it is not determinative in every case, because a transaction can be fair, and unsecured, or unfair, and well secured.
Restatement (Second) of Contracts § 878 (Tent.Draft No. 14, 1979) describes the types of unfairness which will preclude the application of equitable remedies. It takes the position that
(1) Specific performance or an injunction will be refused if such relief would be unfair because
(a) the contract was induced by mistake or by unfair practices,
(b) the relief would cause unreasonable hardship or loss to the party in breach or to third persons, or
(c) the exchange is so grossly inadequate or the terms of the contract are otherwise unfair.
The record discloses no evidence of mistake or unfair practices in the inducement to contract. Nor would specific enforcement of the agreement cause unreasonable hardship or loss to the Chos. Consequently, here the fairness question depends solely on whether the agreed upon consideration is grossly inadequate or the terms of the contract are otherwise unfair. On this record, I think that neither conclusion can be justified.1
A subordination agreement is a contract term over which parties frequently bargain. A buyer is often willing to pay a higher price for a contract which includes a subordination clause than for one which does not because the clause will reduce, or eliminate, the need for the buyer to come up with additional capital in order to obtain bank financing for the proposed project.
The record indicates here that the sale was quite favorable to the Chos. They paid approximately $40,000.00 for the property in March of 1977. Less than two months later they listed it for $200,000.00 and sold it for that price to Stenehjem in August of the same year. The terms of the contract provide for $40,000.00 in cash payments to the Chos, assumption of the Chos' debt of $30,500.00 to the prior owners, payment of the remaining balance, $129,500.00 in semiannual installments of $6,000.00 including interest at nine per cent. On this record it appears that the amount which the Chos stand to gain under the contract is not disproportionate to the risks which they must bear.

. It is unusual to find unfairness in the exchange itself without evidence of artifice, sharp practice or the like in its inducement. See Restatement (Second) of Contracts § 378, Comment b. See also 5A A. Corbin, Corbin on Contracts § 1165 at 224-26 (Rev. ed. 1964).