Also known as:fair & reasonable · reasonable and fair
Written by attorneys — see sources below.
A standard requiring that the terms of a transaction or allocation be equitable and justifiable to the affected party under the circumstances.
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How its tested
Common Examples
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Lawyer Equity Stake Purchase
Finn Fletcher, a nonprofit director facing cash shortages, agreed to sell a donated building to his compliance lawyer Francesca Fiore for $165,000 based on a two-year-old appraisal she supplied. Fiore's written agreement listed the price and her interest but omitted recent comparable sales showing values near $200,000. The transaction failed the standard because the disclosure did not allow Fletcher to assess whether the price was equitable.
Seller Allocation During Shortage
Fisher Foods faced a partial crop failure that limited its ability to fulfill all contracts for frozen vegetables. It allocated remaining stock pro rata among current contract buyers and its regular spot customers but excluded new buyers. The allocation satisfied the standard because it treated similarly situated customers equitably without favoring the seller's own manufacturing needs.
Frederick Ferguson sent one child to live with the mother in California while the second child remained with him in New York. California asserted jurisdiction over support for both children based on the single purposeful contact. The court rejected the claim because the contacts did not provide an equitable basis for imposing obligations regarding the second child.
Kulko v. Superior Courtsupra, 436 U.S., at 94-95
Ezra Kulko married Sharon Kulko Horn in 1959 during a three-day stopover in California while en route from a military base in Texas to Korea. Both parties were New York domiciliaries who returned to New York after the marriage and Ezra's service. Their children Darwin and Ilsa were born in New York in 1961 and 1962. The family lived together in New York City until their separation in March 1972.
Following the separation, Sharon moved to San Francisco, California. In September 1972, Sharon flew to New York to sign a separation agreement providing that the children would spend school years with their father and vacations with their mother in exchange for $3,000 annual child support payments during her custody periods. Sharon obtained a Haitian divorce incorporating the agreement and returned to California, where she remarried.
The children resided with their father during the school year until December 1973, when Ilsa remained in California after her father bought her a one-way ticket. In January 1976 Darwin flew to California using a ticket sent by his mother.
Less than one month after Darwin's arrival, Sharon commenced an action in California Superior Court to establish the Haitian divorce decree as a California judgment, modify it to award her full custody, and increase the father's child-support obligations. Ezra appeared specially and moved to quash service on the ground that he lacked sufficient minimum contacts with California. The trial court denied the motion. The Court of Appeal affirmed. The California Supreme Court sustained the rulings in a 4-2 decision before Ezra appealed to the United States Supreme Court.
Forrest Falconer challenged a state workers compensation statute that granted widows benefits automatically but required widowers to prove dependency. The statute failed the standard because it imposed an unequal evidentiary burden without justification tied to the parties' actual economic circumstances.
Wengler v. Druggists Mutual Insurance Co.446 U.S. 142, 151, 100 S.Ct. 1540, 1546, 64 L.Ed.2d 107 (1980)
On February 11, 1977, Ruth Wengler, wife of appellant Paul J. Wengler, died in a work-related accident in the parking lot of her employer, appellee Dicus Prescription Drugs, Inc.
Her husband, appellant Paul J. Wengler, filed a claim for death benefits under Mo. Rev. Stat. § 287.240 (Supp. 1979). Under the statute a widower is not entitled to death benefits unless he either is mentally or physically incapacitated from wage earning or proves actual dependence on his wife’s earnings. In contrast, a widow qualifies for death benefits without having to prove actual dependence on her husband’s earnings.
Wengler stipulated that he was neither incapacitated nor dependent on his wife’s earnings. He argued that the statute’s disparate treatment of similarly situated widows and widowers violated the Equal Protection Clause of the Fourteenth Amendment to the United States Constitution. The claim was administratively denied. The Circuit Court of Madison County reversed, holding that § 287.240 violated the Equal Protection Clause because the statutory restriction on a widower’s recovery of death benefits did not also apply to a surviving wife. Dicus and its insurer, appellee Druggists Mutual Insurance Co., were ordered to pay death benefits to appellant in the appropriate amount.
The Missouri Supreme Court, distinguishing cases in this Court, reversed the Circuit Court’s decision. The equal protection challenge to § 287.240 failed because the substantive difference in the economic standing of working men and women justifies the advantage that the statute administratively gives to a widow. Because the decision of the Supreme Court of Missouri arguably conflicted with precedents, the Supreme Court of the United States noted probable jurisdiction. The Supreme Court reversed.
Frontier Capital held a mortgage on property whose owners could not pay during an economic emergency. A state statute extended the redemption period while requiring payment of fair rental value. The extension met the standard because it balanced the lender's security interest against the borrowers' temporary inability to perform.
Home Building & Loan Association v. Blaisdell290 U.S. 398, 54 S.Ct. 231, 78 L.Ed. 413 (1934)
The Blaisdells executed a mortgage on their property in Minneapolis to the Home Building & Loan Association on August 1, 1928. The mortgage contained a valid power of sale by advertisement. After default, the mortgage was foreclosed and the property sold to the Association on May 2, 1932, for $3700.98. The period of redemption under the law then in effect was set to expire on May 2, 1933.
On April 18, 1933, Minnesota enacted Chapter 339 of the Laws of 1933, known as the Mortgage Moratorium Law. The statute authorized district courts to extend the period of redemption from foreclosure sales for such additional time as the court deemed just and equitable, not beyond May 1, 1935, upon condition that the mortgagor pay a reasonable part of the income or rental value toward taxes, insurance, interest, and principal. The Blaisdells applied to the District Court of Hennepin County for an extension of the redemption period.
The district court found that the reasonable rental value of the property was $40 per month and the present market value was $6000. It extended the redemption period to May 1, 1935, requiring the Blaisdells to pay $40 per month to the Association. The Supreme Court of Minnesota affirmed the order.
The Home Building & Loan Association appealed to the United States Supreme Court, which reviewed the judgment sustaining the statute as applied to the preexisting mortgage.
Felicity French sought a divorce but could not afford the required court filing fee. The state denied a waiver and required prepayment. The denial violated the standard because it imposed a financial barrier that prevented access to the only available forum for dissolving the marriage.
Boddie v. Connecticut401 U.S. 371 (1971)
Appellants, welfare recipients residing in the State of Connecticut, brought this action in the Federal District Court for the District of Connecticut on behalf of themselves and others similarly situated. The action concerned state procedures for the commencement of litigation, including requirements for payment of court fees and costs for service of process, in connection with efforts to bring divorce actions.
The average cost to a litigant for bringing an action for divorce is sixty dollars. Section 52-259 of the Connecticut General Statutes provides that there shall be paid to the clerks of the supreme court or the superior court, for entering each civil cause, forty-five dollars. An additional fifteen dollars is usually required for the service of process by the sheriff.
There is no dispute as to the inability of the named appellants to pay either the court fees required by statute or the cost incurred for the service of process. The affidavits in the record establish that appellants' welfare income in each instance barely suffices to meet the costs of the daily essentials of life. It includes no allotment that could be budgeted for the expense to gain access to the courts. The clerk of the Superior Court returned their papers on the ground that he could not accept them until an entry fee had been paid. Subsequent efforts to obtain a judicial waiver of the fee requirement and to have the court effect service of process were to no avail.
Appellants sought a judgment declaring that the fee requirements were unconstitutional as applied to them and an injunction ordering the appropriate officials to permit them to proceed with their divorce actions without payment of fees and costs. A three-judge court was convened pursuant to twenty-eight United States Code section 2281. On July sixteen, nineteen sixty-eight, that court issued its decision. The Supreme Court noted probable jurisdiction in nineteen sixty-nine. The case was heard at the nineteen sixty-nine term and thereafter was set for reargument at the present term.
What must a lawyer disclose to satisfy the standard in a business transaction with a client?
The lawyer must transmit the essential terms and the lawyer's role in writing in a form the client can reasonably understand. The disclosure must include enough information for the client to evaluate whether the price or other terms are equitable given current market data.
Supporting sources
Does client sophistication excuse the absence of written disclosure under the standard?
No. Even sophisticated clients must receive the required written disclosures, advice about independent counsel, and signed consent. Informal understandings or client expertise do not substitute for the formal writing requirements.
Supporting sources
When allocating scarce goods under the UCC, what makes an allocation equitable?
The seller must limit participation to contract customers and regular customers and distribute the available supply pro rata or by another method that treats similarly situated buyers even-handedly without favoring the seller's own manufacturing needs.
Supporting sources
198 U.S. 45 (1905)
…labor in a bakery for more than a certain number of hours a week, is, in our judgment, so wholly beside the matter of a proper, reasonable and fair provision, as to run counter to that liberty of person and of free contract provided for in the Federal Constitution. It was further urged on the argument that restricting the hours of…