Contract Violations

[source]

I haven't found an earlier discussion on this subject, but if there are some, please refer me to the relevant thread.

I just saw a movie about a clinic that dealt with artificial insemination. They also preserved women's eggs for future use. The doctors, however, were criminals. They would take eggs from a woman and they'd use them with other women, without the first woman's consent (in fact, the egg donor explicitly stated that she doesn't want her eggs to be used with other women, but the hospital had violated that request, by modifying the contract without knowledge of the donor). Now, I could ask what the proper method would be to deal with clinics that do this, but that would be too narrow a question, so I'll ask the following:

If there is suspicion of a contract violation - and now I mean ANY contract - where one of the parties that signed it isn't aware of that violation (such as in case above), what is the proper course of action for some third party (which discovered this violation one way or another)? What is the proper way to expose this crime, and what government institution is there (in today's societies, as well as in an ideal Laisses-faire Capitalism) to which you can turn to for help - for it IS their job to protect the contract as it was originally signed, right?

I'm asking this because you need to be able to prove your claims - that there really is a crime being done by certain people - in order to actually be able to go to court with it. Who should seek out this proof and by what means?

The movie offered the solution of the damaged party (a family whose eggs were misused) to go public with the problem and so denounce the clinic, and then go to court to seek justice. I'm not really a fan of this idea, because it suggests that the public is the measure of justice, or that a certain crime should first attract the attention of masses in order to be dealt with.

Edit: Fixed some typos, and added clarity.

Edited June 19, 2005 by source

[LaVache]

At the very least, if you discovered nefarious contract ignoring dealings on the behalf of a company you could always contact the Better Business Bureau. I know it's not the flashiest course of action, but at least it will let others know to avoid said company.

I don't think that going public with the situation would be a bad idea, or an attempt at justice from numbers. If a business breaks its contracts letting the public know is an excellent first step, not just because it will most likely provide economic punishment, but so that people simply know what is going on. If you did business with a company that then breaks its contract with you would you be upset to later find out that someone knew about the company's propensity for fraud, but decided to keep the info from the public eye?

I think that the company that breaks its contracts should face potential litigation, but should also be forced to reap the economic "rewards" for their actions through the publicization of their fraudulent methods.

EDIT: Yay, I leveled up with this post .

Edited June 19, 2005 by LaVache

[source]

If a business breaks its contracts letting the public know is an excellent first step, not just because it will most likely provide economic punishment, but so that people simply know what is going on.  If you did business with a company that then breaks its contract with you would you be upset to later find out that someone knew about the company's propensity for fraud, but decided to keep the info from the public eye?

The movie suggested going public for reasons I mentioned and it is in that context that I disproved of it. Moreover, I think going public before going to court (or at least getting enough proof of guilt) can be a bad idea, especially if you do so and it turns out that there was no crime in the first place.

I think that the company that breaks its contracts should face potential litigation, but should also be forced to reap the economic "rewards" for their actions through the publicization of their fraudulent methods.

Yes, but my question was aimed at what to do if there is enough basis to doubt that the company is doing legal business, but not enough to prosecute it. (Like when you see a dead body, but you don't know who the murderer is, then you have detectives, forensics and whatnot to find the murderer. However, there are no people (at least that I know of), who are able to deal with such contract frauds.

[BurgessLau]

However, there are no people (at least that I know of), who are able to deal with such contract frauds.

I don't know the legal terminology in the U. S., much less in Croatia, but news reports here repeatedly say that various government agencies (at state and federal level) investigate fraud. A typical example is defrauding elderly people out of their savings by having them sign a deliberately vague contract and then delivering a shoddy product that doesn't even come close to being what they were told (to their face) it would be.

So, where such agencies exist (and they should exist in a laissez-faire society), reporting the possible fraud would be the first step leading to criminal prosecution.

However, there might also be recourse through civil law, that is, suing them for breach of contract and claiming damages. In that case, I agree that you shouldn't publicize it first. Use fear of publicity as a lever for getting your money from them.

[DavidOdden]

Starting from your initial premise, a third party who learns of a (contract) rights violation by someone, I see no objection to giving your evidence directly to the aggrieved party. There's something suspicious about the movie's pretense that the contract was modified without the knowledge of the woman: it would be pointless (the woman's copy would shown the fraud), and pointless (they would not show the donor's (modified) contract to potential recipient as an inducement to become a customer), but movies are allowed to ignore reality for dramatic effect.

It is plausible that someone might gain knowledge of such a rights-violation, without knowing the name(s) of the victims. In some cases the government should, properly, be involved, and in other cases it should not be. The distinction hinges on fraud. It is not the business of the government to protect a businessman from late deliveries of goods (as guaranteed by a contract). The contract presumably states penalties for failure to perform, and it is the business of the government to enforce payment of those penalties if necessary. Proving that there was or was not a failure to perform is entirely the business of the contracting parties -- the government steps in only to enforce the conclusion that one party has a duty to perform. The entire process can and should be handled, quite properly, by private arbitration. The only part that is not properly in the private sphere is the actual enforcement of an arbitration decision. Late delivery is not theft.

Fraud is theft, and should be prosecuted by the state. In current legal systems, there are significant problems with puting the matter in the hands of the state. One is that under current (and classical) thinking about prosecution, the wrong is seen as being against the state or the public, and not against the aggrieved party. Thus we have to assume a significant shift in prosecutorial rationale, away from protecting "the public" and towards protecting individuals. Related to this is the widely exercised option of not bothering to prosecute fraud -- nothing requires the state to prosecute accusations of rights violations, except the prosecutor's political self-interest. So we have to assume a society where prosecutors do their job (this also involves the police, in that police may decline to present a case to the prosecutor). Essentially, the state has the option to say "It's not in our interest to prosecute this case".

The point of "going public" is to let aggrieved but uninformed parties know that their rights may have been violated, which may lead them (but not you, since you have no legal standing) to undertaking legal (civil) action. Another point of going public is to make it known that these are evil people, who should be avoided. You do need to be dang sure you're correct about the situation, since if you defame the doctors, you can end up in major legal trouble.

As a third party, you have no right to pursue legal remedy in the courts. Assuming that you can't directly contact the victims to inform them of the crime, and assuming that the state declines to pursue the matter, the remaining option is the "court of public opinion", either the media (to be extreme) or an agency like the BBB (to be conservative). Responsible media will investigate the facts, and they may be able to pressure the bad guys into making things right with the victims. I disagree with Burgess's suggestion (but I think he's not considering the matter from the POV of the third party): you should not attempt to extort money from the rights violators as a means of securing your silence. In fact, doing so is the crime of extortion. And, you cannot take them to (civil) court. The best you can hope to do is tell them to notify their victims, or else you will go to the media. If you do that, be sure you mail a copy of the evidence to the newspaper, just in case you have an unfortunate accident. After all, you are dealing with seriously immoral people, and you should not assume that they would skip the option of killing you, if it would cover up their crime.

[LaVache]

Starting from your initial premise, a third party who learns of a (contract) rights violation by someone, I see no objection to giving your evidence directly to the aggrieved party.

So true. I'm not sure why that answer escaped me, but it does seem to make the most sense.

but my question was aimed at what to do if there is enough basis to doubt that the company is doing legal business, but not enough to prosecute it.

Sorry, I must have misread part of your scenario. When you just think that the company did something wrong I don't think that it would be proper to accuse the company publicly, but that you should instead give the information that you have to the party directly involved (thanks DavidOdden!). It would also be proper to file a complaint with the BBB, but I think that letting the involved party file the complaints would make more sense, and probably be more convincing (meaning that saying I think this guy is getting screwed probably doesn't have the same effect as saying I think I'm getting screwed here).

[grasmicc]

"If there is suspicion of a contract violation - and now I mean ANY contract - where one of the parties that signed it isn't aware of that violation (such as in case above), what is the proper course of action for some third party (which discovered this violation one way or another)? What is the proper way to expose this crime,"

From the perspective of US law, violating a contract is not a crime. In fact, it is a fundamentally protected right!

A contract is nothing more than an agreement to pay whatever damages you may cause as a result of not performing. The courts merely provide for damages if a contract is breached.

"and what government institution is there (in today's societies, as well as in an ideal Laisses-faire Capitalism) to which you can turn to for help - for it IS their job to protect the contract as it was originally signed, right?"

You turn to the courts in the US when you think that someone has breached a contract with you. It is not the job of the courts to protect contracts. It is the job of the courts to uphold the law. Both common law and statutory law in the US limit the scope of contracts.

In any event, in the hypothetical that you stated with the Dr.'s, they are guilty of fraud and probably a ton of other criminal acts depending on their jurisdiction, so I don't think it is properly framed as a breach of contract issue. Anyone who became aware of this could take the Dr.'s to whatever state agency was in charge of enforcing ethics among Dr.'s, as well as contacting law enforcement agencies.

[Zeus44]

I would like to add that, generally speaking, 3rd parties have no rights under a contract. Just as 3rd parties cannot lose any rights under a contract, so 3rd parties cannot gain any rights. Thus, 3rd parties cannot sue for breach of contract. Only parties to a contract can sue for breach of contract.