Disclosure and Informed Consent

Our Property professor told us on Tuesday that the reason why we are taught Torts, Contracts, and Property all in the same semester is that these are the substantive law courses, and we are encouraged to see the connections between these legal classifications. Torts and Contracts have just intersected at Informed Consent Street and Non-Disclosure Avenue.

"The doctrine of informed consent requires a physician to warn a patient of the risks and consequences of a medical procedure." Michigan Court of Appeals, 2005

"In a bargaining transaction there is generally no duty to disclose information." Calamari & Perillo, Contracts

Of course, this Contracts text notes that informed consent in medicine is an exception to this general principle. But I believe it may be valuable to examine the different perspectives that Torts and Contracts bring to this disclosure table.

When two parties are negotiating a contract for a business contract, information and beliefs about that information are driving forces. One party to the transaction has knowledge and beliefs about the subject matter of the bargain that induce it to offer something in exchange that that party believes to be of lesser value. The other party either has different knowledge, different beliefs, or both about the same subject matter, or else neither party would agree to a bargain. Put more simply, each party must believe that they are offering something less valuable than what they are receiving, or else neither party would agree to the transaction. Two people who had the exact same knowledge and valuation of the objects in the universe would never be able to bargain with one another.

Thus, it often happens that one party, through superior knowledge and value-analysis, is able to obtain something valuable by offering something that is less valuable. For example, if I have good reason to believe that Apple stock is underpriced, and I offer the market price, then the person who sells me the Apple stock will suffer a loss if my information is accurate. Am I obligated to inform the owner of the Apple stock of whatever superior financial analysis led me to my accurate belief that Apple is underpriced? Of course not! Now, if I had insider information, this transaction would be fraud. Note where the lines are drawn in financial transactions between acceptable and criminal non-disclosure.

In the field of medicine, there is also a line between acceptable and malfeasant non-disclosure. "The extent to which [a doctor] must share . . . information with his patient depends upon what information he should reasonably recognize is material to the plaintiff's decision. 'Materiality may be said to be the significance a reasonable person, in what the physician knows or should know is his patient's position, would attach to the disclosed risk or risks in deciding whether to submit or not to submit to surgery or treatment.'" Basically, a doctor must disclose any medical information that might induce a reasonable patient to accept or decline treatment. The doctor does not need to disclose information about what he will be wearing during the operation, or a possible 3 minute hiccup side effect, or the risk that one of the nurses will be rude.

This line is certainly not the line used in contract negotiations. Imagine if an real estate broker was obligated to tell a seller of land in Texas the name and telephone number of a Colombian family that was willing to pay double the asking price to use the land for a supermarket? The broker's hard work in locating the Colombian entrepeneur and seller and arranging the transaction would all be for naught. Is there any chance that there is a similar infringement of the doctor's right to retain the economic benefits of his non-disclosure? After all, if a doctor were allowed to stay silent about unlikely risks of catastrophic side effects, then that doctor might find more patients willing to undergo expensive procedures.

But "NO!" exclaims the concerned consumer. Not so fast. There is a societal benefit to doctors informing their patients of the risks of surgery. Patients have a right to autonomy which is undermined when they are not given the information necessary to make decisions affecting their health.

Fair enough. But consider a second argument: It would be unconscionable for a doctor to become enriched at the cost of his patients' health; the doctor would be unjustly enriched by his non-disclosure. This seems reasonable as well, does it not? But why not extend this reasoning to the case of the real estate broker. Isn't it unjust that the seller in Texas would miss out on double his profits by selling directly to the Colombian? And isn't it unjust that the Colombian should pay twice what the seller is offering for the land in Texas? Both of these parties are hurt economically by the broker's non-disclosure, and the economic detriment has health consequences. What if the sellers in Texas are unable to afford a needed operation because they needlessly sold their land at a lower price?

One solution to this conflict is that the difference between the doctor and the broker is distinguishable by the special relationship between the doctor and the patient that does not exist between the broker and the seller. A doctor has a duty to "do no wrong." The doctor has a conflict of interest, whereas the broker has no conflict of interest. The broker has only one interest: economic selfishness.

We'll see if my future studies shed any new light on this conflict.

Corbin v. Williston

Williston: The written agreement has a unique and powerful force of influence. To the extent that the written agreement is clear in meaning to a reasonable person, that written agreement is the superseding force that dictates the terms of the contract (to the exclusion of parol evidence to the contrary). FOCUS: The integration practices of reasonable persons acting normally and naturally.

Corbin: The written agreement only contains the unique and powerful force when the parties intend the agreement to have such a force at the time the written agreement is executed. If there is compelling evidence that one of the parties did not intend for the written agreement to be the final say on the matter, then that evidence must be considered by a jury if the evidence is sufficiently compelling. FOCUS: The intention of the parties.

The UCC § 2-202 sides with Corbin. Why? How does this section go about determining evidence of intent? Isn't the whole point of the Parol Evidence Rule to grant evidentiary weight to objective written agreements over squirrely subjective issues like intent?

Parol Evidence Rule

This appears to be a principle of contracts that attempts to resolve disputes about what obligations in a contract are enforceable. In particular, the Parol Evidence Rule seeks to limit terms and conditions that were not included in the final executed contract. If a final agreement is signed, the only terms that are enforceable under that agreement are those that appear in the writing. Previous oral negotiations or proposed elements of a final writing are not enforceable in these cases.

Justice Andrews in 1928 describes it as, "a rule of law which defines the limits of the contract to be construed." Even if the parties concede that an oral agreement was made, that oral agreement is still not enforceable if there was a subsequent written agreement that did not include the orally-agreed-upon condition.

Now, the parol evidence rule does not apply if it can be shown that the oral agreement was sufficiently distinct and unrelated to the subsequent written contract. Thus, if I agree orally to sell you my car, and 5 minutes later sign a contract to mow your lawn, neither you nor I can void the oral agreement to sell the car based on the parol evidence rule. The two contracts are unrelated. This is an obvious example, but it would not take much imagination to conjure a situation in which the line between related and unrelated is more blurry.

Let's say that you and I orally agree that I will supply you with lawn ornaments at a reduced price, and five minutes later we sign an agreement that I will mow, fertilize, and maintain the general upkeep of your lawn (no mention of the lawn ornaments). Is the oral agreement to supply lawn ornaments relevant enough to the written contract that it should have been in the contract (such that its absence implies a lack of final agreement), or is it an entirely different matter that stands distinct and unaffected by the written agreement? Drawing the line in this case would depend on how much we view the supply of lawn ornaments to be a part of "the general upkeep" of one's lawn.