ACU; Blaw 363, Little; Exam #3

caveat emptor

"Let the buyer beware"

Evolution of Contract Law

1. Freedom of Contract --> Form contracts 2. Little government regulation --> Government regulations 3. Parties dealing face-to-face, equal bargaining power --> Parties dealing at a distance, unequal bargaining power.

Section _-___ of the Uniform CommercialCode (UCC) is the basic Statute of Frauds provision for sales contracts.

2-201

_____ is manifestation of assent by the offeree to the terms of the offer in a manner invited or required by the offer as measured by the objective theory of contracts

Acceptance

______: parties agree to accept something different in satisfaction of the original contract.

Accord

To be enforceable a contract requires:

Agreement Consideration Lawful Object Contractual Capacity

As discussed in the context of intentional torts, ________ _______________ results when a plaintiff's economic interests are damaged or injured because of false and malicious statements.

Business Disparagement

"________ _____" arise when companies, often competitors, claim marketplace unfairness against each other based on theories similar to intentional torts.

Business Torts

DTPA makes it unlawful for a business to do the following with respect to goods and services:

Cause confusion about the source or certification of goods or services Represent that goods or services have certain qualities or characteristics that they do not have Represent that goods or services are of a particular standard or grade when they are not Represent that goods or services are new when they are not Advertise goods for sale with no intent to sell them Make false statements about sales or price reductions Falsely state the terms of a guarantee or warranty Fail to disclose information about goods and services if the failure was intended to induce a sale Taking advantage of a natural disaster to artificially raise prices (price gouging)

Sources of Contract Law

Common Law Uniform Commercial Code (UCC)

____________ - something of legal value given in exchange for a promise.

Consideration

______ _______ ____ are federal and state statutes and regulations that promote product safety and prohibit abusive, unfair, and deceptive practices.

Consumer Protection Laws

Contracts that MUST be in writing:

Contracts involving interests in land Contracts that by their own terms cannot possibly be performed within one year Collateral contracts where a person promises to answer for the debt of another Promises made in consideration of marriage Contracts for the sale of goods for more than $500 Real estate agents' contracts gents' contracts where the underlying contract must be in writing Promises to write a will Contracts to pay debts barred by the statute of limitations or discharged in bankruptcy Contracts to pay compensation for services rendered in negotiating the purchase of a business Finders fee contracts

response by offeree that contains terms and conditions different from or in addition to those of the offer.

Counteroffer

Do-Not-Call Registry

Created by FTC and FCC in 2003. Consumer signs up for registry. Telemarketers must remove consumer's telephone number from sales call list.

The elements of fraud in Texas:

Defendant made a representation of fact to the plaintiff The representation was material The representation was false The defendant either, A) knew the representation was false, or B) made the representation recklessly and without knowledge of its truth The defendant made the representation with the intent that the plaintiff rely on it The plaintiff did in fact rely on the representation The plaintiff suffered damages or injury as a result

Elements of business disparagement under Texas state law:

Defendant published disparaging words about the plaintiff's economic interests The words were false Defendant published the false words with malice Defendant had no "privilege" to publish the words The publication caused "special damages," meaning quantifiable, liquidated damages like a lost sale.

_____________: minor's act of rescinding a contract under infancy doctrine

Disaffirmance

_______ occurs when one party threatens to do a wrongful act unless the other party enters into a contract.

Duress

Genuineness of Assent is lacking if consent is obtained by...

Duress, Undue influence, Fraud.

_____ _______ Rule states that Agents' contracts to sell real property must be in writing to be enforceable.

Equal dignity

______ is a doctrine that permits judges to make decisions based on fairness, equality, moral rights, and natural law. Sometimes applied in contract cases.

Equity

Regulation of Medicinal Devices

FDA regulates devices Mislabeling of medicinal devices is prohibited FDA is empowered to remove "quack" devices from the market.

Regulates testing, manufacture, distribution, and sale of foods, drugs, cosmetics, and medicinal products and devices in the U.S.

Federal Food, Drug, and Cosmetic Act

The federal food, drug, and cosmetic act is administered by the...

Food and Drug Administration (FDA)

Four common tort-like claims often leveled by businesses against each other in lawsuits:

Fraud Business Disparagement Tortious Interference with Contract Misappropriation of Trade Secrets Several other business torts exist, but these are most commonly alleged.

Types of Fraud:

Fraud in the Inception Fraud in the Inducement Fraud by Concealment Silence of Misrepresentation Misrepresentation of Law

Defenses to Enforcement

Genuineness of Assent Writing and Form

________ __ ______ is a gratuitous promises unenforceable due to lack of consideration.

Gift Promises

________ _______ is a contract that both parties enter, but one or both of the parties can choose not to perform their contractual obligations

Illusory Promise

Contracts that have a negative impact on society or that interfere with the public's safety and welfare are void. These include:

Immoral Contracts Contracts in Restraint of Trade Exculpatory Clauses

_________ Doctrine states that minors may disaffirm (cancel) most contracts they have entered into with adults

Infancy

Key Issues Relating to Minors and Contracts

Infancy Doctrine Ratification parents' liability for their children's contracts necessaries of life

Objective Theory of Contracts

Intent to contract is judged by the reasonable person standard and not by the subjective intent of the parties.

___________ _______________ is when a person consciously induces another person to rely on a misrepresentation. Also known as fraud

Intentional misrepresentation

Trade Secrets defenses:

Lack of secrecy Information at issue does not meet the definition of a trade secret Independent discovery Three-year statute of limitations

Real property includes:

Land Buildings Trees, Plants, Crops Soil Minerals Timber Other things that are permanently affixed to the land

_____ rule or the ______-_____-______ rule: Acceptance is effective when dispatched, even if it is lost in transmission

Mailbox, acceptance upon dispatch

Door-to-Door Sales

Many state statutes permit consumers to rescind contracts made at home with door-to-door sales representatives within a set period after signing the contract Consumer must send required notice of cancellation to seller.

Minors cannot disaffirm certain contracts. These are typically:

Medical care Health and life insurance Educational loan agreements Contracts to support children Contracts to enlist in military Certain sports and entertainment contracts

Certain persons do not have the capacity to enter into a contract:

Minors Insane persons Intoxicated persons

_______________ is when an assertion is made that is not in accord with the facts

Misrepresentation

Examples of contracts involving interests in land include:

Mortgages Leases Life Estates Easements

Regulation of Cosmetics

Must be safe and properly labeled. Animal testing may be used to establish product safety. Adulterated or misbranded cosmetics prohibited. FDA may remove from commerce cosmetics that contain unsubstantiated claims.

Agreement:

Offer by offeror and acceptance by offeree. Mutual assent.

Silence serves as acceptance for a contract when:

Offeree states that silence means assent. Offeree signed agreement indicating continuing acceptance until further notification. Prior dealings indicate that silence means assent. Offeree accepts benefits, had opportunity to reject, knows offeror expects compensation.

Business contracts that specifically allow a greater degree of uncertainty concerning consideration:

Output Contracts Requirements Contracts Best-Efforts Contracts

________ _________ ___ ________ ________ states that parents owe a legal duty to provide food, clothing, shelter, and other necessaries of life for their minor children.

Parents Liability for Children Contracts

_____ ________: Any oral or written words outside the four corners of the written contract.

Parol Evidence

Contractual Capacity

Parties must have capacity. Certain parties, such as minors or persons adjudged to be insane, do not have contractual capacity.

Elements of tortious interference:

Plaintiff had a valid contract with some other party Defendant willfully and intentionally interfered with the contract The interference proximately caused plaintiff's injury Plaintiff incurred actual damage or loss

Elements of misappropriation claim in Texas:

Plaintiff owned a trade secret Defendant used or disclosed the trade secret: A) in violation of a confidential or contractual relationship with plaintiff; B) after acquiring the trade secret through improper means; or C) after acquiring the trade secret with notice that the disclosure was improper Plaintiff suffered damages or injury

Objective theory of contracts states that no valid contract results from

Preliminary negotiations Offers that are made in jest, anger, or undue excitement

The following elements must be shown in a promissory estoppel:

Promisor made a promise. Promisor should have reasonably expected that promisee would rely on the promise. Promisee did rely on promise. Injustice would result if promise not enforced.

State Lemon Laws

Provide a procedure for consumers to follow to correct recurring problems in vehicles Car dealer must be notified of problem and be given a certain number of opportunities to fix the defects If defect not corrected, consumer files claim with appropriate state agency Arbitrator then decides the dispute between the consumer and car dealer

withdrawal of the offer by the offeror

Revocation

False and Deceptive Advertising

Section 5 of the FTC Act describes false and deceptive advertising as "Containing misinformation or omitting information that is likely to mislead a reasonable consumer, or Making an unsubstantiated claim. Proof of actual deception not required."

Bait and Switch

Seller advertises low-cost item to attract customers. Seller pressures buyers to upgrade. Often refuses to show advertised merchandise. Discourages employees from selling advertised merchandise. Fails to have adequate quantities on hand.

Consideration consists of two elements:

Something of legal value must be given There must be a bargained-for exchange

Examples of "privileged" comments that might otherwise rise to the level of business disparagement:

Statements made in a court pleading Statements made by a co-worker during an investigation of employee misconduct Statements by a hospital administrator about a physician's medical qualifications in response to an inquiry from another hospital at which the physician had applied for privileges

_______ __ _______ is a state statute that requires certain types of contracts to be in writing. It is intended to ensure that the terms of important contracts are not forgotten, misunderstood, or fabricated.

Statute of Frauds

Valid defenses to a fraud claim in Texas:

Statute of limitations is four years Plaintiff's injury was plaintiff's own fault Ratification: in cases where fraud induced a contract, if the plaintiff continues to perform after learning of the fraud, he or she is said to have "ratified" the contract, including the fraudulent inducement, and cannot later complain of the fraud. Contractual disclaimer of fraud in arms-length transactions where both parties are sophisticated businesses and represented by counsel No fraud for religious beliefs

T or F: Contracts unsupported by consideration are generally not enforceable.

T

T or F: For a contract silence is generally not acceptance

T

The _____ ______ _____ ____ ____ (____) provides a private cause of action to consumers for false advertising and deceptive business practices.

Texas Deceptive Trade Practices Act (DTPA)

When a party is fraudulently induced to enter into a contract, the contract is voidable by which party?

The innocent party

A contract is lawful if ancillary to sale of a business or employment contract and if reasonable in three aspects:

The line of business protected Geographical area Duration of the restriction

Lawful Object

The object of the contract must be lawful. Contracts to accomplish illegal objects or contracts that are against public policy are void.

Oral promise is enforceable against promisor if:

The promise induces action or forbearance of action by another. The reliance on the oral promise was foreseeable. Injustice can be avoided only by enforcing the oral promise.

Consideration

The promise must be supported by bargained-for consideration that is legally sufficient.

Agencies regulating consumer safety:

U.S. Dept. of Agriculture U.S. Food and Drug Administration Consumer Product Safety Commission

________ law presumes that parties have contractual capacity to enter into the contract.

capacity

The terms of the offer must be definite or reasonably _______.

certain

Preexisting duty rule arises when one party to an existing contract seeks to ______ the terms of the contract during the course of its performance

change

Without enforceable contracts, ________ would collapse.

commerce

The offer must be ____________ to the offeree.

communicated

Unfortunately, companies sue each other for business torts and use the court system as an anti-____________ weapon, as opposed to a place for the resolution of valid business disputes.

competitive

A ________ is an agreement that is is an agreement that is enforceable by a court of law or equity.

contract

A written contract (does/ does not) not have to be drafted by a lawyer or formally typed to be legally binding

does not

Court will generally refuse to enforce or rescind an illegal contract. This is called the _______ __ __________

effect of illegality

Parental duty of support terminates if a minor becomes ____________.

emancipated

A person is liable for using a trade secret if he discovered the secret by _________ means.

improper

_______ ___________ is when a person makes statement of fact that he or she honestly and reasonably believes to be true, even though it is not.

innocent misrepresentation

Fraud is an __________ tort.

intentional

A person who is so intoxicated that he or she cannot understand nature of transaction may be voided by the ________ party

intoxicated

In the event of innocent misrepresentation, the aggrieved party (may/may not) rescind the contract but (may/may not) sue for damages

may, may not

A _______ or an ___________ clause in a contract that stipulates that it is a complete integration and the exclusive expression of the parties' agreement.

merger, integration

________________ (or theft) of trade secrets is a state law claim, often alleged between competitors.

misappropriation

Promises made out of a sense of _____ __________ or honor lack consideration.

moral obligation

The offeror must ________ ______ to be bound by the offer.

objectively intend

An _____ is the manifestation of willingness to enter into a bargain, so made as to justify another person in understanding that his assent to that bargain is invited and will conclude it

offer

The ___ ____ _____ is shown when an executory contract that cannot by its own terms be performed within one year of its formation must be in writing.

one year rule

The parties have a preexisting duty to perform according to the _________ terms of the contract.

original

Problems of ____ _____________ often arise when a party to a contract promises to pay additional compensation for work done in the past.

past consideration

Business disparagement differs from classic defamation in that defamatory words refer to a plaintiff's ______, while business disparagement refer to a plaintiff's _______ _________: like the plaintiff's products, credit-worthiness, sales efforts, etc.

person, economic interests

___________ ____ is a promise to do something the party is already under an obligation to do.

preexisting duty

Terms of the contract become _______ ____ between the parties.

private law

A _________ _________ is a promise legally unenforceable due to lack of consideration or other problem.

promissory estoppel

__________ ________ is an equitable doctrine that permits enforcement of oral contracts that should have been in writing.

promissory estoppel

______ ________ Rule states that acceptance must be properly dispatched: Properly addressed, packaged, and posted

proper dispatch

____________: performance of the accord

satisfaction

The ___________ __ ______ law promotes voluntary settlement of disputed claims.

settlement of claims

Statute of Frauds and the UCC require the written contract, whatever its form, to be ______ by the party against whom enforcement is sought.

signed

Business torts are almost always _____-___ ______.

state law claims

If one party fails to perform as promised, the other party can ___ to enforce the contract and recover _______.

sue, damages

The business tort of ________ ____________ arises under Texas law when two parties, A and B, have a contract, and a third party, C, induces one of them to breach the contract. Under this scenario, C would be liable to whichever party (A or B) was damaged by the induced breach.

tortious interference

_____ ________ occurs where one person: Takes advantage of another person's mental, emotional, or physical weakness, and Unduly persuades that person to enter into a contract.

undue influence

Rewards are offers to form a ___________ contract.

unilateral

A contract entered into by a person who has been adjudged insane by a proper court or administrative agency is considered _____.

void

A person who is insane but has not been adjudged insane by a court or administrative agency and enters into a contract is generally ________.

voidable

Contracts are ___________ entered into by parties.

voluntarily

Prenuptial agreements must be in _______ to be enforceable.

writing