Considerations in Breaking a Water Monopoly

Some wholesale customers of the Detroit Water and Sewerage Department (DWSD) worry about retribution in terminating (supposed) contractual obligations with DWSD.

I question whether a monopoly in essential services like DWSD even qualifies as a party to a contract.

The essence of a contract is agreement as the result of bargaining, more precisely arms-length bargaining.  Bargaining like that is impossible with a monopoly such as DWSD.

There may be an understanding as to which goes first, your left foot or your right foot, but there’s no contract.  One foot doesn't expect to sue the other foot over who goes first. They are both creatures of a greater whole.

Furthermore, when one party to an understanding robs the other parties blind, it would be insane to suggest that the victims are obliged to submit themselves to the risk of further abuses.

The rule should be that, where one creature of the state has a monopoly in essential services like water and acts dishonestly, another creature of the state which is a recipient of those services should be free to break the monopoly without retribution.

Indeed, that was the result in terminating the relationship between DWSD and Genesee County, Flint, et al.

DWSD Relies on Vulnerable Contracts with 'Burbs

A Free Press article on February 12, 2014 about DWSD quotes suburban officials bemoaning the (perceived) fact that the suburbs are stuck in long-term contracts with DWSD.

“Commissioners asked a question that homeowners and business customers across suburban Detroit have posed for years — is there a way to break away from Detroit’s historic stranglehold on supplying water and sewer service to nearly 4 million people in southeast Michigan?”

“The answer was no. That would be all but impossible because numerous communities have long-term contracts with the Detroit Water & Sewerage Department, including many that won’t expire until 2043, said Richard Sulaka Jr., Macomb County deputy public works commissioner.”

I don’t agree.  DWSD’s contracts are as full of holes as a wool sweater in a moth colony.

First, let’s think about the makings of a sound contract.  Implicit is the idea of arms-length bargaining.  Not much of that with a monopoly like DWSD (especially when run by a criminal enterprise headed by the city’s mayor).  How about duress?  When is somebody going to play that card?  Or adhesion contract?  Cornell Law defines it as:

“A standard form contract drafted by one party (usually a business with stronger bargaining power) and signed by the weaker party (usually a consumer in need of goods or services), who must adhere to the contract and therefore does not have the power to negotiate or modify the terms of the contract…”

“Courts carefully scrutinize adhesion contracts and sometimes void certain provisions because of the possibility of unequal bargaining power, unfairness, and unconscionability. Factoring into such decisions include the nature of the assent, the possibility of unfair surprise, lack of notice, unequal bargaining power, and substantive unfairness…”

Last but certainly not least, massive fraud, bribery, extortion and bid-rigging by one party in the performance of its contractual duties, to the detriment of other parties, will void contracts that precede the crimes.

Unless all existing contracts were signed subsequent to those crimes, suburban representatives in current negotiations with Detroit should consider their options more carefully.