Exam 4 B-law
Explain how the existence of conditions subsequent and precedent affects the discharge of a contract.
A condition precedent is a particular event that must occur in order for a party's duty to arise. If the event does not arise, the party's duty to perform does not arise. A condition subsequent is a future event that terminates the obligations of the parties when it occurs.
explain the difference between an assignor's liability and a delegator's liability after rights have been transferred to a third party.
A delegator's liability after rights have been transferred to a third party differs from an assignor's liability. A delegator is liable to the obligee if the delegate does not perform. This is in contrast with an assignor, who has no more rights after assignment.
Differentiate between donee beneficiaries, creditor beneficiaries, and incidental beneficiaries.
A donee beneficiary is a beneficiary in which the promisor intends to give a gift to a third party. • A creditor beneficiary is a beneficiary to whom a debt is owed. • An incidental beneficiary is someone who the parties did not intend to benefit, but who still does.
3 Recall the elements of misrepresentation.
A misrepresentation is an untruthful assertion by one party about a material fact. • An innocent misrepresentation is a false statement made, with a person thinking it was true. With an innocent misrepresentation, the party who was misled can rescind, but not sue for damages. • A negligent misrepresentation occurs when the person making the statement would have known the truth if he had sued reasonable care to discover the fact. • A fraudulent misrepresentation occurs when a person consciously misrepresents a fact to the other party who relied on it, and the reliance is justified. In this case, the contract can be rescinded because there was no meeting of the minds. Fantastic Sams Salons Corp. v. Pstevo, LLC and Jeremy Baker (briefed below) considers a case of fraudulent misrepresentation.
Distinguish innocent misrepresentation from fraudulent misrepresentation.
A negligent misrepresentation occurs when the person making the statement would have known the truth if he had sued reasonable care to discover the fact. A fraudulent misrepresentation occurs when a person consciously misrepresents a fact to the other party who relied on it, and the reliance is justified.
Explain the difference between a unilateral mistake and a mutual mistake.
A unilateral mistake means that one party has made an error about a material fact, while a mutual mistake means that both parties are mistaken about a material fact.
explain hen a unilateral mistake can lead to a contract being voidable.
A unilateral mistake means that one party has made an error about a material fact. Generally, a unilateral mistake does not present grounds to void a contract. Exceptions where rescission may be possible are: when one party made the mistake, but the other party knew or had reason to know of it; the mistake was the result of a clerical error; the mistake is so serious that it would be unconscionable to enforce the contract.
Briarwood Farms v. Toll Bros. Inc.
Affirmed in favor of Briarwood. The court's argument was essentially a restatement of the lower court's position. That is, the court argued that a reasonable reader would not infer from Briarwood's December 28, 2006 response to Toll's December 22, 2006 letter was a positive and unequivocal repudiation of their agreement. The court concluded that the contract had not been repudiated, in that Briarwood seemed willing to comply with the provisions of the agreement, and consequently, Toll was liable for breach of contract.
Integrate the concepts of assignments with the concept of delegations
An assignment is a transfer of a contract right to a third party, while a delegation is a transfer of a contract duty to a third party.
Explain the relationship between commercial impracticability and frustration purpose.
Commercial impracticability is used when performance is still objectively possible, but would be extraordinarily injurious or expensive to one party. Frustration of purpose is relevant when both parties recognize that the contract is to fulfill a particular purpose, the particular purpose if foundational to the agreement, and, due to factors beyond the parties' control, the event does not occur. In this circumstance, the contract may be discharged.
Identify the primary methods of discharging a contract.
Contracts can be discharged by performance. o Some contracts must be performed exactly on time. o Even brief tardiness can constitute a material breach. o Contracts can be discharged by substantial performance. Obligations under contract are discharged if a party makes a good faith effort to perform exactly as promised and provides the essential benefits of the promise. The other party can be compensated for reasonable costs to cure the defects. o Even brief tardiness can constitute a material breach Contracts can be discharged by material breach. o This occurs when a party fails to substantially perform. o In this situation, the other parties are discharged. o If the breach is minor, the non-breaching party can sue for damages—obligations are not necessarily discharged. o When one party knows in advance that it will breach and lets the other party know, this is called an anticipatory repudiation. The non-breaching party can rescind and recover the value of consideration, sue for breach right away, or wait for the time of performance and sue. Contracts can be discharged by agreement. o Conditional contracts are promises under the contract that are conditioned on a certain event. When the event occurs, the contract is discharged. o Mutual rescission is an agreement to cancel the contract. It is considered a separate contract and must meet the elements of a contract. o A novation is an agreement to substitute one party in a contract for another. The party leaving the contractual agreement is discharged. o An accord and satisfaction occurs when parties agree to substitute a settlement contract for the original contract. Contracts can be discharged by operation of law. o Most contractual obligations can be discharged through bankruptcy—when remaining assets are distributed to creditors. o Under a statute of limitations, court action must be brought within a certain time period or else the right to bring the action is waived. o If a party willfully changes a contract in a material way, then the other party can discharge, using the idea of alteration. Contracts can be discharged by changed circumstances. o Impossibility—when some event makes the performance literally impossible, the promisor must pay damages for failure to perform, e.g., death or incapacity of an essential party in a personal service contract, destruction of a unique subject matter. o Frustration of purpose—when performance is not impossible, but somehow the contract's purpose has been destroyed. o Commercial impracticability—when performance is more expensive than originally thought, and the financial hardship is extreme.
Recognize the types of contracts that require a writing to satisfy the statute of frauds.
Contracts that must be in writing are: o Contracts for the sale of real property. o Contracts that cannot be performed in one year. o Contracts for the sale of goods valued at $500 or more. o Contracts for the sale of intellectual property valued at $5,000 or more. o Contracts to answer another's debt. o Other specific contracts, such as prenuptial agreements. Power Entertainment, Inc. v. National Football League Properties, Inc. (briefed below) considers whether a suretyship promise falls within the statute of frauds.
list the kinds of contracts that require a writing under the statute of frauds.
Contracts that must be in writing are: contracts for the sale of real property, contracts that cannot be performed in one year, contracts for the sale of goods valued at $500 or more, contracts for the sale of intellectual property valued at $5,000 or more, contracts to answer another's debt, and other specific contracts, such as prenuptial agreements.
Why are courts stricter with interpretations of anti-delegation clauses in contracts than of anti-assignment clauses?
Courts are stricter with interpretations of antidelegation clauses in contracts that with antiassignment clauses. Most courts consider contractual prohibitions against assignments as promises, hence, if assignments are made anyway, courts are likely to believe they are effective. Courts examine antidelegation clauses more closely that assignments because assignments usually do not affect the party to the contract who is not involved in the assignment, whereas a delegation forces the party to the contract who is not involved in the delegation to receive performance of the contract from a party with whom the oblige did not directly contract.
Explain how nondisclosure can be treated as misrepresentation.
Courts will now find nondisclosure as having the same legal effect as an actual false assertion when a relationship of trust exists between the parties to a contract, and when there is a failure to correct assertions of fact that are no longer true in light of events that have occurred since the initial consent to the terms of the agreement.
Recall the elements of duress
Duress occurs when one party is forced to consent to an agreement by the wrongful act of another. The party claiming duress must show there was no reasonable alternative to signing the contract. In cases of duress, the contract can be voided. • Garage Solutions, LLC v. Monty J. Person (briefed below) considers a case alleging an agreement made under duress.
Jack Kelly v Zegelstein
For mutual mistake to occur, a basic assumption about the subject matter, a material effect on the agreement, and an adverse effect on a party who did not agree to bear the risk of mistake must be present. In this case, the defendants advertised that that the premises were suitable for commercial use, the plaintiff relied on the defendant's statements when agreeing to the lease, and then the defendant was left with the burden when he was not allowed to operate a business on the premises.
General Mills, Inc. v. Kraft Foods Global, Inc., 487 F.3d 1368 (2007).
Holding: Under Minnesota law, the rights of competitor's successor in interest to protection of covenant not to sue, under settlement agreement entered to resolve competitor's alleged infringement of patents were not forfeited by operation of law when that successor sold off assets that were part of the competitor's original business in transaction that was permitted under the settlement agreement. Reasoning: • The settlement agreement did not bar the defendant from retaining its rights to protection of covenant not to sue as stated in the agreement when it transferred parts of its rolled food business. • This agreement, which covered the assignment of rights, did not cover the defendant's (competitor's) retention of the agreement and sale of other assets. • Additionally, the agreement did not require the defendant's successor in interest to retain all or any particular assets of defendant's business to preserve its status. • The transaction in which the defendant sold its assets that were part of the original business of its predecessor in interest did not excuse the plaintiff from complying with its obligations under the settlement agreement. • The plaintiff (patentee) should afford the defendant same rights under the settlement agreement that it had possessed prior to the sale of the assets.
Fantastic Sams Salons Corp. v. Pstevo, LLC and Jeremy Baker. United States Court for the Northern District of Illinois, Eastern Division 2016 U.S. Dist. Lexis 5590 (2016).
Holding: The court granted Fantastic Sams' motion to dismiss the fraudulent misrepresentation claims under FRCP 12(b)(6). Reasoning: • Fantastic Sams argued that PSTEVO's claims were insufficient because Baker signed a document agreeing that no representation of the franchise's profitability was made to him. • Thus, PSTEVO was precluded from claiming it relied on Fantastic Sams' representation of the franchise's profitability • Being that Baker lacked this reliance, PSTEVO could not make a convincing claim that Fantastic Sams was liable for fraudulent misrepresentation.
Hosch v. Colonial Pacific Leasing Corp.
Hosch argued that there was no evidence that the contracts were assigned to Colonial, and therefore the trial court erred in its granting of summary judgment. However, Hosch's loan agreements expressly state that the lender may transfer or assign its rights under the agreements without notifying Hosch. Thus, the court of appeals the lower court's decision.
Why is it that incidental beneficiaries cannot enforce rights under a contract? should they be able to enforce such rights?
Incidental beneficiaries have limited rights because the parties to the contract did not intend for them to benefit.
Martha Rochelle v. Hartley Mead (guy with ADHD)
It's unlikely that the case will be reopened. Even if defendant's condition does make him more susceptible to duress, there's no evidence that plaintiff was aware if that fact and attempted to exploit it. The defendant has failed to provide convincing evidence of his duress at the hands of the plaintiff.
Describe the importance of legal assent.
Legal assent is a promise to buy or sell that courts will require parties to obey. • Courts consider some forms of assent more genuine than others. • The purpose of legal assent rules is to make transactions more smooth and dependable.
Explain the difference between legal and equitable remedies.
Legal remedies are damages, while equitable remedies are some form of court-ordered action.
2 Recall the elements of mistake.
Legally, a mistake means an erroneous belief that existed at the time a contract was formed about the material facts of the contract. • Mistakes of fact are the only type of mistake that allow a contract to be rescinded. o A unilateral mistake means that one party has made an error about a material fact. Generally, a unilateral mistake does not present grounds to void a contract. Exceptions where rescission may be possible are: when one party made the mistake, but the other party knew or had reason to know of it; the mistake was the result of a clerical error; the mistake is so serious that it would be unconscionable to enforce the contract. o A mutual mistake means that both parties are mistaken about a material fact. Either party can choose to rescind. Simkin v. Blank (briefed below) considers a case of mutual mistake.
Okes v Arthur Murray (dancing lady)
On appeal, the case was reversed in favor of the plaintiff. The court determined that the defendants, as dance instructors, had superior knowledge as to the plaintiff's abilities. Furthermore, the plaintiff and defendants were not on equal footing. Consequently, the plaintiff is entitled to a trial to determine damages.
Describe the characteristics of a thirdparty beneficiary contract.
One who obtains contract rights when two parties to a contract intend that the third party will benefit from the contract is called a third- party beneficiary. • Third parties acquire contract rights through transfer of an existing contract, and when parties intend that a third party will benefit. • Contract language must clearly and explicitly show intent to benefit a third party. Juan Mendez, Jr. v. Hampton Court Nursing Center (briefed below) shows what obligations an individual has and does not have as a third-party beneficiary to a contract. Tucker v. Tom Raper, Inc. (briefed below) considers whether a party must be specifically named in a contract to qualify as a third-party beneficiary.
Power Entertainment, Inc. v. National Football League Properties, Inc., 151 F.3D 247 (1998).
Procedural History: District court granted NFLP's motion to dismiss. Power entertainment appeals. Holding: District court's decision is reversed and remanded. Reasoning: • The main purpose doctrine removes an oral agreement to pay the debt of another from the statute of frauds whenever the main purpose and object of the promisor is not to answer for another, but to subserve some purpose of his own. • Power Entertainment may be able to show the alleged oral contract falls outside of the statute of frauds. • The licensing agreement constituted valuable consideration for Power Entertainment's agreement to pay Pro Set's debt. • Power Entertainment apparently agreed to pay Pro Set's debt to NFLP not to aid Pro Set, but to induce the NFLP to transfer Pro Set's licensing agreement to Power Entertainment for Power Entertainment's use and benefit.
Tucker v. Tom Raper, Inc., 81 N.E.3d 1088 (Ind. Ct. App. 2017)
Procedural History: Raper and Clark moved to dismiss the claims on the grounds that the Tuckers' alleged status as thirdparty beneficiaries must be founded on a written contract. The trial court dismissed the Tuckers' suit. The Tuckers appealed. Holding: Reversed and remanded in favor of the Tuckers. Reasoning: • For a third party to sue to enforce a contract, it must clearly appear that the purpose of the contract was to impose an obligation in favor of the third party • Third-party beneficiary status is not solely dependent on a written contract • The contract between American Family and Raper was clearly for the benefit of the Tuckers, and the oral nature of the contract does not preclude the Tuckers from enforcing it as thirdparty beneficiaries
Mind & Motion Utah Investments, LLC, Appellee v. Celtic Bank Corporation. Supreme Court of the State of Utah 2015
Procedural History: The district court granted summary judgment in Mind & Motion's favor, concluding that the recording provision was unambiguously a covenant, not a condition. Celtic Bank appealed, arguing that summary judgement was improper because the recording provision is unambiguously a condition. Holding: Affirmed.
Juan Mendez, Jr., as guardian of Juan Mendez, Sr. v. Hampton Court Nursing Center, LLC. Court of Appeals of Florida, Third District 140 SO. 3D 671; 2014 Fla. App. Lexis 8520 (2014).
Procedural History: The district court ruled in favor of defendant and compelled arbitration. Mendez, Jr. appealed. Holding: Affirmed in favor of Hampton. Reasoning: • The issue here is not whether Mendez, Sr. actually signed the agreement, but if Mendez, Sr. accepted the benefits of the contract and was therefore a third-party beneficiary. • Mendez, Sr. is not merely an incidental beneficiary of the agreement, but the intended thirdparty beneficiary. • Thus, even though the agreement was signed by Mendez, Jr. on his father's behalf, Mendez, Sr. (through his son) is still bound by the arbitration agreement.
Barker v. Price, Indiana Court of Appeals, 2015 WL 9478049 (2015)
Procedural History: The trial court concluded that the model year of the van was not material to the deposit agreement because that agreement made no reference to the year of the vehicle and because Barker accepted the van and paid the deposit following his inspection. Barker appealed. Holding: The deposit agreement is not the entire agreement. Reversed and remanded. Reasoning: • The deposit agreement does not contain the year of the van • Despite Price's arguments to the contrary, the model year could very well be material to the agreement because there is usually a correlation between model year and price in auto sales • Because the deposit agreement did not contain the whole agreement, it is necessary for the case to be remanded and parol evidence to be considered
Heritage Constructors, Inc. v. Chrietzberg Electric, Inc., and Richard Marc Chrietzberg. Court of Appeals of Texas, Sixth District, Texarkana, 2015 Tex. App. LEXIS 1974
Procedural History: The trial court ruled in favor of Heritage, but only awarded Heritage twenty-eight percent of the fees it had asked for. Heritage appealed, and Chrietzberg cross-appealed, claiming that all of Heritage's causes of action were barred by the statute of frauds. Holding: The Court reversed the trial court's ruling on Heritage's breach of contract and promissory estoppel claims and affirmed their denial of negligent misrepresentation claims. Reasoning: • The statute of frauds requires that any contracts that cannot be completed in under a year must be in writing to be enforceable. • Heritage estimated that the project (and therefore its agreement with Chrietzberg) would take 19 months to complete, and so the agreement fell under the statute of frauds. • In the bid documents allegedly containing the agreement, Heritage was not once mentioned as a party to the agreement. • Thus, Heritage cannot claim that Chrietzberg breached its agreement with Heritage because Heritage wasn't named in the agreement.
Hemlock Semiconductor Operations, LLC v. Solarworld Industries Sachsen Gmbh.
Procedural History: The district court granted Hemlock's motion for summary judgment and award the company $800 million in damages. Sachsen appealed. Holding: Yes. Affirmed in favor of Hemlock
Garage Solutions, LLC v. Monty J. Person, 201 So.3d 962 (2016)
Procedural History: The trial court found the reimbursement contracts unenforceable because Person was under duress when he signed the contracts. Garage Solutions appealed. Holding: Affirmed in favor of persons. Reasoning: • The evidence presented at trial shows that Person clearly did not want to sign the reimbursement contracts • In fact, Person did not agree to sign until the owner of Garage Solutions threatened to withhold Person's paycheck for the time spent at training until Person signed • The court found this evidence to show that Person signed the contracts under duress and that the contracts were therefore unenforceable
Simkin v. Blank, Court of Appeals of New York, 19 N.Y.3d 46 (2012).
Procedural History: A lower court granted Simkin the right to sue, but the case moved on to the Court of Appeals of New York. Holding: Reversed, in favor defendant Blank. Reasoning: • Under the theory of mutual mistake, the mistake must be so important that it goes to the foundation of the agreement. • A mutual mistake must exist at the time a contract is created, but at the time of the divorce agreement between Simkin and Blank, no mutual mistake existed. Because no mutual mistake exists, the court ruled in favor of Blank.
Hamilton v. State Farm Fire & Casualty Insurance Company, U.S. Court of Appeals for the Fifth Circuit, 2012
Procedural History: An appellate court found in favor of the insurance company. The Hamiltons appealed. Failure to allow state farm to see damages.
List the conditions that must be met for a court to impose a quasi-contract
Quasi-contract requires a plaintiff to prove" the plaintiff conferred a benefit on the defendant, the plaintiff had reasonably expected to be compensated for this benefit, and the defendant would be unjustly enriched from receiving the benefit without compensating the plaintiff.
Define assignment.
Teaching tip: Consider starting your in-class discussion with Case 19-4, Lawrence v. Fox, as it goes to the heart of third-party rights. Discuss both the majority and dissenting opinions. • An assignment is a transfer of a contract right to a third party. To create an assignment, words and actions of the assignor must indicate an intent to transfer rights to the assignee. • Parties to an assignment are: o Obligor—one who is obligated to perform. o Obligee—one who has the right to expect performance. o Assignor—what the obligee becomes after transferring her contract rights. o Assignee—person to whom the contract is assigned. • Most contract rights are assignable. Exceptions are: assignments that increase the burden on the obligor, assignments that violate public policy, personal service contracts, contracts that prohibit assignments. • A delegation is a transfer of a contract duty to a third party.
Olympic Holding V ACE
The Ohio Supreme Court ruled in favor of ACE. The Court argued that it was unreasonable for Olympic Group to rely on ACE's statement of future intent prior to the conclusion of negotiations. Because Olympic Group's reliance on ACE's promise was unreasonable, Olympic Group could not use promissory estoppel to override the statute of frauds requirement. Thus, the promise was unenforceable because it was not in writing.
Huff v First energy corp.
The Ohio Supreme Court ruled in favor of Ohio Edison and Asplundh. For an injured third party to qualify as an intended third-party beneficiary in a contract, the Court argued, the contract must indicate an intention to benefit that third party. The contract between Ohio Edison and Asplundh does not indicate an intent to benefit Huff.
IN RE JW, 2017 Ohio (Parenting custody case)
The Supreme Court of Ohio refused to vacate the order. The father failed to provide clear and convincing evidence of a unilateral mistake or that he did not understand the terms of the agreement. The record showed that the father intended to be bound by the parenting agreement, and thus the magistrate did not err in his decision to incorporate the parenting agreement into the judgement.
Foxwood estates v foxwood estates LLC
The appellate court affirmed in favor of the homeowners' association. The developer had intentionally misrepresented the land being sold to members of the homeowners' association and thus was entitled to compensate the members.
Connaughton v Chipotle
The appellate court affirmed the lower court's ruling. The court argued that Connaughton had failed to show any compensable damages resulting from Chipotle's alleged fraud. Connaughton argued that he stopped soliciting potential buyers when he relied on Chipotle's fraudulent omissions, but he failed to allege that he rejected the offers of other buyers when he did so. In other words, there was no provable injury for which Connaughton could seek damages.
Universal concrete products v. Turner construction
The appellate court affirmed, holding that an unambiguous pay-when-paid clause in parties' subcontract was not rendered ambiguous through incorporation of prime contract provision.
Severn Peanuts v. Industrial Fumigant
The appellate court did not agree with Severn and ultimately affirmed in favor of IFC. The agreement between Severn and IFC clearly stated that the sum that Severn was paying IFC for its fumigation services was not sufficient to warrant IFC assuming any risk. Severn argued that even with this clause, its negligence claims should be allowed to proceed. The court once again disagreed with Severn because IFC was performing its contractual duties normally when the explosion occurred.
Hotel group LLC. Inc. v. Environs
The court affirmed in favor of Environ. Following the running theme of this chapter, the court ruled that SAMS and Environ are two sophisticated business entities that knew the risks and freely bargained for the terms of the contract. Thus, SAMS acknowledged and accepted the risk when it entered into the contract with Environ that contained the liquidated-damages clause. SAMS was only entitled to collect up to $70,000, as the contract clearly stated.
Nutrisoya v. Sunrich
The court affirmed in favor of Nutrisoya, denying Sunrich's motion for summary judgment. In disagreeing with Sunrich's argument that additional jury instructions should have been provided about a breach of a single installment, the court argued that the lack of instructions did not prevent Sunrich from arguing that Nutrisoya's damages should be restricted to the value of only one installment payment. Furthermore, Sunrich did make this argument, therein informing the jury about the significance of a breach of a single installment. Thus, the court ruled that considering the circumstances of the case as well as the complete set of jury instructions, the court did not erroneously decline to give jury instructions to clarify the distinction between a breach of a single installment and a breach of the full contract.
ST. John's holdings, LLC v Two electronics
The court argued that the requirements for satisfying the statute of frauds are rather minimal. The court cited other decisions that held that emails can satisfy the statute of frauds if they contain all of the essential terms, even in the absence of a signature. The text messages sent by SJH's agent contained a clear acceptance without any modifications. Therefore, the texts satisfied the statute of frauds and Two Electronics was bound to its contract with SJH.
Yellow Book Sales v. JB McCoy Masonry
The court found that the essential terms of the contract between Yellow Book, Brooks and McCoy Masonry were all sufficiently identified by the written agreement. According to the court, it was clear that Brooks was not a guarantor but instead the primary obligor in the contract with Yellow Book. Therefore, the court did not allow the parol evidence and reversed and remanded the case.
Foreign workers v Walmart
The court in favor of Wal-Mart. Wal-Mart's contract with its foreign supplier gave it the power to conduct inspections of the foreign plants and terminate its contract with the supplier if Wal-Mart found that the supplier did not comply with industry working conditions. However, the contract did not obligate Wal-Mart in any manner to actually monitor its supplier or to protect the plaintiffs from substandard business practices. Wal-Mart was not the plaintiffs' employer and there was no basis for restitution.
Davis v A&E network
The court of appeals affirmed in favor of Davis. The court found evidence supporting both that Davis reasonably believed that an agreement was made during the phone conversations and that such a belief would be made by an objectively reasonable person. Specifically, the court found proof of these two facts through Davis's testimony regarding his phone call with A&E executives, and the negotiation process during the call. Based on this call, the court found that a reasonable person would have taken the executive's response to Davis as an acceptance of the oral contract.
William W. Hunter Jr. v. Stacey H. Green (oral land agreement gone south)
The court of appeals affirmed the lower courts position in favor of Greene. While the purchase contract, deed and promissory notes proved that an agreement to give the farm to Greene existed, there was no evidence of the oral agreement between Hunter and Green to eventually give the farm back to Hunter.
Johnson v Wentworth
The court of appeals reversed in favor of MetLife. When State Farm assigned the SSA to MetLife, MetLife gained all the rights and obligations that State Farm originally had. Thus, MetLife had the right to enforce the anti-assignment agreement against Johnson, just as State Farm did.
Gabriel v Brino
The court of appeals reversed the lower court's decision and remanded the case with direction to render judgment in favor of the seller, Brino. Certain terms, such as the designation of the seller, were missing from the contract, and thus did not satisfy the requirements of the statute of frauds. Acts of a preliminary nature, much as obtaining financing, were insufficient to justify applying the part performance doctrine. The buyer's application for a bank loan did not remove the contract from the statute of frauds.
First bank v Brumitt
The court ruled in favor of First Bank, agreeing that the loan commitment letters did not express intent to make Brumitt a third-party beneficiary to the loans. The court noted that while one may presume that Brumitt, as the seller of the existing business, would benefit from the transaction and therefore First Bank's agreement to finance the transaction, that presumption is not enough to support Brumitt's claim.
Isbell v. Friedman
The defendant's motion to dismiss was granted by the court, and the appellate court affirmed. The court ruled in favor of Friedman because the court found no contract establishing that Friedman would testify in court. Specifically, the initial retainer contract that led to the plaintiff's paying $60,000 to Friedman ended when the plaintiff told Friedman that she would no longer need his expert services. It was afterwards that Isbell sought to have Friedman testify in court, but Friedman never accepted Isbell's multiple offers. Thus, the court concluded no written contract existed that would require Friedman to testify in court. Further, even if the Isbell had been a third-party beneficiary, the court would still dismiss this case because Friedman had performed his duties under the initial retainer contract. The plaintiff's complaint regarding Friedman's not testifying had no basis because plaintiff had ended her contract with Friedman prior to asking for Friedman to testify in court.
identify the exceptions to the parol evidence rule, and explain why some people might argue that the rule is not very effective.
The parol evidence rule says that parole evidence will not be admitted in court to contradict the terms of a written, integrated contract. Exceptions—evidence is allowed to describe negotiations after the contract is signed is permitted, To explain ambiguous or incomplete writings, to show a contract contingent on an event not stated in the writing, to show a writing contains a clerical error, and to establish that a contract is voidable due to incapacity, or reality of assent.
Describe the purpose of the parole evidence rule.
The parole evidence rule says that parole evidence will not be admitted in court to contradict the terms of a written, integrated contract. Exceptions— evidence is allowed: o To describe negotiations after the contract is signed is permitted. o To explain ambiguous or incomplete writings. o To show a contract contingent on an event not stated in the writing. o To show writing contains a clerical error. o To establish that a contract is voidable due to incapacity, or reality of assent. Barker v. Price (briefed below) considers whether an agreement is complete or whether parol evidence must be considered. • Promissory estoppel—one party may not be able to assert the statute of frauds if the other party suffers a severe hardship from reliance on an oral promise.
Recognize the primary legal remedies available for a breach of contract.
The primary legal remedy for breach of contract is monetary or money damages. • Ways to measure money damages: o Expectation remedy—an innocent party gets the amount of money necessary to put him or her in the financial position he/she expected t be in if the contract had been performed. o Compensatory damages—covers direct loss from the breach. o Incidental damages—covers expenditures that were incidental to the contract. o Consequential (special) damages—covers more remote and unusual damages, and only those damages that could be reasonably foreseen. • There are, however, limitations on money damages: o The non-breaching party has a duty to mitigate—he/she must try to lessen the other party's damages. o Courts can award nominal damages in the amount of one dollar when the breach does not result in money damages. o Consequential damages are recoverable only if they were foreseeable at the time of contract formation. Parties can only assume the risks to which they agreed. Liquidated damages are damages parties agree to in advance, indicating the amount to be paid in case of a breach. • Restitution is the remedy available when one party has partially performed an unenforceable contract. Purpose is to return parties to their position before the contract was made. Quantum meruit is an equitable doctrine under which restitution damages can be awarded. Usually this doctrine provides compensation for services rendered. Reliance damages are an alternative measurement to expectation damages. The purpose is to return parties to positions before the contract was made. Reliance damages are usually awarded using the doctrine of promissory estoppel.
Describe the purpose of the statute of frauds.
The purposes of the statute of frauds are: o To ease contractual negotiations by requiring sufficiently reliable evidence to prove the existence and specific terms of the contract. o To prevent unreliable oral evidence from interfering with a contractual relationship. o To prevent parties from entering into contracts with which they do not agree.
Oncology Tech v Elekta inc.
The statute of frauds holds that contracts of indefinite duration do not fall under the statute of frauds, regardless of how long performance actually takes. Thus, the statute of frauds did not apply to the agreement in question and the plaintiff's action was not barred.
Recognize what a writing must contain to satisfy the statute of frauds.
The writing must include: o Essential terms of the deal. o Signatures. Heritage Constructors, Inc. v. Chrietzberg Electric, Inc., (briefed below) considers what constitutes a writing and when an agreement is sufficient under the statute of frauds. • With regard to contract interpretation: o Ambiguous language is construed against the drafting party. o This language is interpreted to make language consistent with business custom. o Express language trumps past dealings. o Past dealings trump business custom. o When writings conflict, handwritten terms trump typewritten terms. o Typewritten terms trump preprinted terms. o Spelled out numbers trump Arabic numerals. o Clauses that cut against public policy need to be conspicuous and easy to read.
Recall the elements of unconscionability.
Unconscionability occurs when one party has so much more power than the other party that she dictates the terms of the agreement. Due to the imbalance of power, one side could not exercise free will.
Describe the contents of writing that would be sufficient to satisfy statute of frauds under the common law.
Under common law, the terms that must be in writing are: parties, subject matter, quantity, price or other consideration, and time of performance.
Recall the elements of undue influence.
Undue influence occurs when one party has taken advantage of a dominant position to unduly persuade the other party. Courts consider the mental condition of the less dominant party, and the extent to which the dominant party used persuasive techniques to get assent. In cases of undue influence, a contract can be rescinded.
explain the primary difference between duress and undue influence.
Undue influence occurs when one party has taken advantage of a dominant position to unduly persuade the other party. Duress occurs when one party is forced to consent to an agreement by the wrongful act of another. The party claiming duress must show there was no reasonable alternative to signing the contract.
Recall the rights and duties of an assignor. Recall the rights and duties of an assignee.
When an obligor does not perform: assignee steps into the shoes of the assignor, assignee can sue obligor, and assignee is subject to any defenses the obligor could raise against the assignor. • When an assignor promises he does not know of any defenses the obligor can assert against the assignee, this is known as an implied warranty of assignability. General Mills, Inc. v. Kraft Foods Global, Inc. (briefed below) demonstrates problems that can arise in business transactions when it is not clear whether something is a sale or an assignment of rights.