Legal Framework of Business Final

Tender of performance

(attempted performance) - where one party attempts to properly perform and the other party rejects it, first party's duties are discharged and he/she can sue for breach

Example of how difficult it is for performance to be considered impossible

-A dairy farmer agrees to ship 1,000 gallons of milk to a supermarket chain. Before shipment, the dairy farmer's cows are stricken with anthrax. If the dairy farmer can obtain milk from other sources, he will not be discharged because he can arrange for substituted performance. He must bear the cost.

Assault and Battery

-Act that puts someone in fear of imminent bodily harm -Act that involves unauthorized bodily contact

•Events of dissolution under UPA

-Agreement, i.e. the terms of the partnership agreement -Consent of the partners -Expulsion or ouster -Withdrawal -Death of a partner -Bankruptcy of the partnership or of a partner -Illegality of the partnership business -Court decree, i.e. insanity or incapacity of a partner, mismanagement, impasse, or any equitable reason

If the firm winds up

-All outstanding business must be completed. -No new business may be accepted. -If creditors receive no notice, estoppel may occur.

•Comparative Negligence

-Apportionment of fault -Has replaced contributory negligence in nearly all the 50 states -Juries in most states can split liability (e.g. defendant 80%; plaintiff 20%)

•Contributory Negligence

-Complete defense if plaintiff contributed to accident -Followed by only a few states

Example of Substantive unconscionability

-Contract to install aluminum siding on a brick home. Price is $15,000 plus a $10,000 "installation fee". Buyer is a retired man with a third-grade education; seller is a merchant with years of experience.

Tort distinguished from breach of contract

-Contracts involve duties as part of agreement, not civil duties

Statute of Frauds Contracts that must be in writing

-Contracts not to be performed within one year from the date of formation -Contracts to convey an interest in land -Contracts to answer for the debt of another, i.e. guarantees and suretyships -Contracts in consideration of marriage, e.g., pre-nuptial agreements -Contracts for the sale of goods for ≥ $500. UCC 2-201

Assumption of Risk

-Definition: Voluntarily accepting a known risk -Example: Warning on pack of cigarettes -Example: Skier who takes a tumble down an expert slope

joint and several liability

-Each partner can be held totally liable for the entire debt of the business.

Example of condition precedent

-Eric agrees to sell Fran one of his playoff seat tickets if the Atlanta Braves make it to the playoffs. The obligation to sell Fran a ticket only arises upon the occurrence of a specific event

Strict Products Liability in Tort: Defenses: Foreseeable Misuse

-Example 1: Violently shaking a beer bottle -Example 2: Riding new tires over shards of glass

Reasons for discharge

-Failure to perform a condition -Full performance by the parties -Material (major) breach of contract: If one of the parties substantially fails to perform its obligations, the other party is discharged. -Impossibility (circumstances that make performance impossible or very, very difficult) -Discharge in bankruptcy: If a bankruptcy court discharges an obligation, it is terminated.

Breach of duty

-Focus on carelessness, not intent •Based on "reasonable person" standard •Based on statutory requirement •Those with superior skills or knowledge have that skill taken into account Duty to act (rarely) - special duties

Immunity

-Governmental -- Federal, state and local -Charitable

Substantive unconscionability

-Grossly unfair terms such as a doubled price or an oppressive forfeiture clause

•Supervening Cause

-Intervening causes that break the chain of causation

Elements of strict products liability in tort

-Merchant seller -Defective product in design or warning -Resulting in it being unreasonably dangerous -Causation -Injury

Standards of Monetary Relief

-No punitive damages (except for fraud) -Lost profits/lost business (rare)

Tort distinguished from a Crime

-O.J. Simpson Case -Acquittal of criminal charges; later found liable on tort of wrongful death

Duty of reasonable care

-Obligation imposed on an individual requiring adherence to a standard of reasonable care while performing any acts. •Standard of care focuses on how a typical person, with ordinary prudence, would act in certain circumstances. •Do not assume that such duty is always created

Manager-Managed LLCs

-Organized more like a corporation -Members do not have the authority to control or act on behalf of the business as manager(s) run the business and control the daily affairs. -Managers may also be members, or can be employees of the LLC hired to run the daily affairs -Members, however, retain the authority to vote for major business decisions

•Intentional Infliction of Emotional Distress

-Outrageous uncivilized conduct intended to inflict emotional distress

Example of a waiver

-Per our contract, I am supposed to paint your house, but I fail to do so in the allotted time. You grant a waiver excusing my liability for failure to perform.

•False Imprisonment

-Restraint of a person in a confined area without justification or consent.

Member-Managed LLC's

-Similar to General Partnerships. -Each member has authority to manage and act on behalf of the LLC. -The default rule is that each member has equal authority. -Members should take great care to outline the authority and rights of members in the operating agreement. -Can be used to limit the authority of the member-manager. If third parties are aware of the limited authority of a member-manager, the LLC will not be obligated if the member-manager exceeds her authority when dealing with that third party.

liability in general partnership example

-Two doctors, Fine and Howard, run a clinic as partners. While intoxicated, Dr. Fine incompetently performs an appendectomy and the patient dies. Dr. Howard was on vacation at the time. The victim's surviving spouse sues Dr. Howard without suing Dr. Fine. The judgment is $5 million. Dr. Howard must pay the judgment. He may seek indemnification (reimbursement) from Dr. Fine for the full $5 million.

Procedural unconscionability

-Unfairness in the bargaining tactics, grossly unequal bargaining power, or unfairness in the form of the contract, e.g., tiny print

Example of release

-We sign a contract where you agree to pay me to paint your house by the end of the month. Before my performance is due, I explain that I do not have time to paint your house. You sign a release that frees me of my duty to paint your house.

Statutory for Strict Liability

-Worker's Compensation • Example: A lawyer carrying a heavy load of books to his desk at work wrenches his back

Compensatory Damages can include

-cost of substitute performance -Diminution of value based on the value of the item received if it did not conform to the contract -Possibly lost profits on the contract

. D (although it would not be easy to show apparent authority in this case, if the partnership is liable, apparent authority would be the best argument. There was no express or implied authority in this case because any authority of Partner 2 was negated by the partnership prior to this contract. Even though the partners share losses equally, in this case the partners who had to pay the judgment from their personal assets could sue Partner 2 for the entire amount.)

1. 1 2 3 Co. is a traditional partnership. Partner 3 has been given authority to enter into contracts with third parties to buy building supplies. At one time, Partner 2 was given this authority, but his contracts were not successful. So, the partnership stripped Partner 2 of the power and gave it to Partner 3. Partner 2 enters into an agreement with S to buy $10,000 worth of supplies. S never dealt with the partnership. When the partnership found out, it refused to perform the contract. Which of the following would be best argument for S to be successful in a lawsuit against the partnership? A. 1 2 3 Co. and the partners are liable because the agreement was made with implied authority. B. 1 2 3 Co. is not liable, but Partner 2 is personally liable because the contract was not made with actual authority. C. 1 2 3 Co. is liable because Partner 2 acted with apparent authority, but Partner 2 must be liable for 1/3 of the share as indemnification. D. 1 2 3 Co. is liable because Partner 2 acted with apparent authority, but the other parties could seem indemnification for the total amount they paid from Partner 2.

Answer: B. Only the principal can sue the third party, as the agent is not a party to the contract and does not receive rights under the contract. If, however, the agency was working for an undisclosed principal, the agent becomes liable on the contract, but also has rights to sue the third party if the third party breaches.

1. A, agent for disclosed principal P, makes a contract with third party T on behalf of P for the purchase of property insurance from which T will be paid $500 by P. A acts within her implied authority. If T breaches the contract, who can sue T? a. A only b. P only c. P and A d. A third party cannot be sued

Answer: D. This is a tricky question. The ideal answer would be that apparent authority exists in this case. It does, based on the facts. A reasonable third party would likely believe that Alice would have express or implied authority to make this agreement based on the prior activities. Even though her authority ended, apparent authority would exist. However, the rest of the statement in B is not correct. There is no such rule. As for the other choices, there is clearly no ratification here (Gotham does not want to perform the agreement). Also, there is no implied authority here, since her agency ended.

1. Alice was an agent working for the Gotham Bus Company for 20 years. Alice was in charge of securing contracts with vendors to repair buses. Alice retired, but her supervisor Ralph did not inform Safety Contractors, Inc. of that fact. Safety Contractors was a vendor who made contracts with Alice (who signed on behalf of Gotham Bus Company) dozens of times over the last 10 years. Alice, in order to spite the company because she thought the company did not give her enough of a retirement gift, entered into a contract on behalf of the Gotham Bus Company with Safety Contractors to repair two buses. This contract was made about two weeks after she left the firm. The amount was $2500. When Gotham Bus Company found out, it refused to be bound by it. Safety Contractors sues Gotham. The most likely result would be: a. Gotham would be liable because Alice had implied authority to make that contract. b. Gotham would be liable because Alice had apparent authority to make that contract because by law retired agents still have the power to make contracts on behalf of their former principals. c. Gotham would be liable because Alice had apparent authority if the firm ratified it. d. None of the above.

Answer: C. Agencies can be terminated even if the termination constitutes a breach of contract. You cannot compel one to continue the agency as that would be an improper specific performance of a personal services contract.

1. An agency may be terminated by the following situations: I. The principal, for no good reason, fires the agent, despite the fact that the agent has done a proper job and despite the fact there are five years left in the agency agreement II. The agent, for no good reason, resigns from being an agent, despite having five years left on her contract with the principal a. I only b. II only c. Both I and II d. Neither I or II

CORRECT ANSWER: D. This is the best answer. Although there is some question as to whether a late performance is a material breach of not, the facts of this demonstrate that a 30-day lateness would likely be material and if so, Bruce would not have to pay for the shoes. Therefore, A is not correct. B is not correct for the same reason. C is the modern rule, not the traditional common law rule.

1. Axel, a merchant and Bruce, a customer, enter into a contract whereby Axel will sell Bruce 5,000 pairs of ABC Running shoes for $300 a pair. Delivery was specified for June 1. All of the shoes arrive, but they arrive on July 1. Which of the following is correct under traditional rules? A. To avoid liability, Bruce must pay for the shoes and accept them, because the breach is considered minor even if the delivery was 30 days late. B. To avoid ability, Bruce must pay for the shoes and accept them because lateness is always a minor breach, unless there is a time of the essence clause in the contract. C. Bruce does not have to pay for the shoes, because any breach, even a minor one, results in the right to discharge the contract by Bruce. D. Bruce does not have to pay for the shoes, if we assume that the lateness would be a material breach.

B (LLC member had valid authority, so no personal liability)

1. Dick and Jane form Colorbooks LLC. Dick invests $100,000 into the LLC. Jane invests $50,000. Dick, on behalf of the LLC, enters into a contract with a third party to buy book binding materials for $25,000. The LLC breaches the contract. Which of the following correctly expresses the liability of the managers of the LLC? A. Dick and Jane are personally liable for damages based on their investment in the LLC. B. The LLC is liable, but Dick and Jane are not personally liable. C. Neither Dick, Jane, nor the LLC are liable because the contract was made with valid authority. D. Dick and Jane may be personally liable because LLCs are not treated the same as corporations.

Answer: D. The principal is bound by the agent's conduct as long as there is express and implied authority. Also, the principal is bound by the agent's apparent authority (event though the agent was acting beyond express and implied authority). The principal is also bound by the agent if he/she is undisclosed as long as the contract was done with express or implied authority (NOTE: apparent authority does not exist in a situation where the agent is acting for an undisclosed principal)

1. Generally, the principal is liable for contracts created by an agent's acts that are I. Made under implied authority II. Made under apparent authority III. Made under express authority IV. Made where the principal is undisclosed but with express authority a. I only b. II only c. I, II and III d. All of the above

Answer: B - all other answers are not correct because of the word "must"

1. In most situations, which of the following is true: a. Agency contracts must be sealed and notarized to be valid b. No specific formalities are required for valid agency contracts c. Agency contracts must be written to be enforceable d. Agency contracts must be validated by a state authority

C. We went over this point quickly. A new partner who comes into the partnership is only liable as to his/her contribution for prior obligations; that new partner is not personally liable.

1. Kramden and Norton Co. add a third Partner, Manicotti. Manicotti contributes $100,000 in capital to the partnership. Manicotti has personal assets of $100 million. The partnership owes money on a $1 million judgment which occurred before Manicotti became a partner. Assuming that the partnership has no other assets besides the $100,000, which of the following accurately describes the liability of Manicotti? A. Manicotti is unlimitedly liable for the rest of the judgment. B. Manicotti has no liability because she was not a partner at the time of the judgment, so the creditor cannot go against the $100,000 contributed to the partnership. C. Manicotti is liable for the $100,000 she contributed, but not for any personal assets. D. None of the above.

C

1. Lucy, Ricky, Ethel and Fred are members of Big Band LLC. The LLC is struggling, but has assets of $50,000. Ricky, hits Oscar, a pedestrian while driving to a sales call. The pedestrian sues the LLC and each of the managers individually. Which of the following is correct? A. Oscar can collect from the LLP, but not from the managers because managers are shielded from personally liability. B. Oscar can collect from the LLP and any of the managers personally, but tort cases are exempt from the general limited liability rules. C. Oscar can collect from the LLP and from Ricky personally, but not from the other managers, because Ricky committed the accident. D. None of the above.

A (writing is not required)

1. Matt and Orit agree today to become partners in advertising and promoting a local sports event, which will take place from Oct 1 - Oct 15th. They will perform their services throughout the period when the event takes place. If they agree orally, will the partnership agreement be enforceable? A. Yes, as long as it can be proven. B. No, all partnership agreements must be in writing and signed. C. Yes, as long as the profits are shared equally. D. No, because it involves real estate.

CORRECT ANSWER: A. This is an example of a minor breach, as the performance was for 90% of the ordered goods. B is not correct, as this is the modern rule and we did not discuss it. C is not correct, as there is no evidence in the problem that the breach is intentional. D is not correct as there is not evidence of unconscionability of any other public policy issue.

1. Same facts as number one, except that 4,500 pairs of ABC Running shoes were sent on the correct due date of June 1. Which of the following is correct? A. Bruce must pay for the shoes and accept them because this level of performance is generally considered a minor breach. B. Bruce must pay for the shoes and accept them because such a breach is presumed to be material since the performance was not "perfect." C. Bruce does not have to pay for the shoes, because the breach was presumed to be intentional. D. Bruce does not have to pay or the shoes, because it would be against public policy as this was a consumer contract.

1. The Statute of Frauds requires: I. All contacts must be in writing and signed by both parties II. Real estate contracts under $500 need not be in writing a) I only b) II only c) I and II d) Neither I or II

1. The Statute of Frauds requires: I. All contacts must be in writing and signed by both parties II. Real estate contracts under $500 need not be in writing a) I only b) II only c) I and II d) Neither I or II

Correct Answer: D. Neither statement is correct. The statute of frauds requires certain types of contracts to be in writing and signed to be enforcement, not all contracts. The second statement is incorrect because the rule for real estate contracts applies to ALL contracts involving the sale, transfer, use or mortgaging of real estate The $500 minimum is the requirement for the rule involving sale of goods.

1. The Statute of Frauds requires: I. All contacts must be in writing and signed by both parties II. Real estate contracts under $500 need not be in writing a) I only b) II only c) I and II d) Neither I or II

B

1. Which of the following are characteristics of an LLC? I. It is not subject to double taxation like a corporation is. II. It is subject to limited personal liability for members in most circumstances. III. It must be created under the Federal LLC legislation. A. I only. B. I and II. C. II and III. D. I, II and III.

Answer: A - Note that principals do have some duties to an agent, like reimbursing the agent for expenses and paying the agent as per the contract. However, those duties are not fiduciary duties. Only the agent has fiduciary duties to the principal. Choices II and III are incorrect.

1. Which of the following is correct? I. Principals owe agents a duty to reimburse the agent for expenses paid by the agent in furtherance of the agent's work for the principal II. Principal owe agents fiduciary duties III. Principals do not owe agents any duty a. I only b. II only c. I and II d. III only

CORRECT ANSWER: A. This is a key point - if the price increase could be foreseeable than the contract is not discharged by commercial impracticability. B is not correct as there is no evidence of impossibility; C is true, but irrelevant; and D is incorrect as frustration does not apply here.

3. Alpha and Beta, two oil wholesalers, agree that Alpha will buy 5,000 barrels of oil from Beta for a price of $80.00 per barrel each month over the three-year duration of the agreement. The agreement was signed on August 30, 2017, and takes effect the next day. Recent events in the Middle East have pushed the price of oil to over $100 per barrel. What is the status of this agreement? A. It is enforceable and valid because if the price increase was not unforeseeable. B. It is unenforceable because it is impossible to perform. C. It is enforceable because sales contracts are presumptively valid. D. It is unenforceable because of frustration of purpose.

CORRECT ANSWER: C. This points to chapter 18, but the reason for this question involves the issue of material breach and the right to terminate (rescind) the contract. Clearly, it is a material breach as only 10% of the goods sere sent. The problem with A and B is the word "only."

3. Alvin enters into a purchase agreement with Zappo to buy 10,000 motorized scooters for a price $1 million. The amount is paid in full before the delivery date. Only 1,000 scooters are delivered. Which best describes the best remedy for Alvin? A. Only sue for damages for the undelivered motor scooters ($900,000) plus incidental damages. B. Only sue for damages for the undelivered motor scooters ($900.000) and incidental damages and lost profits. C. Return the scooters delivered and sue for damages for the undelivered motor scooters ($1 million) and the difference in price Alvin had to pay for when he paid for replacements if that price was higher. D. None of the above.

CORRECT ANSWER: C. This is a tricky question. It may involve commercial impracticability, but that is not one of the choices. Of the choices, C is correct because the terms of the contract, the farmer could get the corn from somewhere else and then sell it to Wholesaler. It was not literally impossible under the terms of the contract. If the storm destroyed every farmer's crop, then it would be. A is incorrect; B is irrelevant and so is D.

3. Harry Wholesaler enters into a contract with Farmer Dell to purchase 5,000 Bushels of corn for $30,000. Pickup is scheduled for October 1. On September 10, a fierce rainstorm destroys the farmer's entire crop. Farmer Dell wishes to be discharged from the contract. The correct result is the following: A. Farmer Dell can be discharged due to impossibility B. Farmer Dell can be discharged due to illegality C. Farmer Dell cannot be discharged because the contract is not impossible. D. Farmer Dell cannot be discharged because the contract is unilateral.

CORRECT ANSWER: C. Since the contract stated that the games had to be played at MSG, it was a condition and had to be fulfilled. If not, the contract would be discharged. A is not relevant; B contradicts the facts of this case; and D is incorrect as it was not a breach by any party. In case anyone was thinking about this, impossibility would not be an issue here because of the contract terms.

3. Snooky is an avid New Jersey Devils fan. Flora is an avid New York Rangers fan. Both make an agreement that Snooky will buy Flora top-priced tickets to any one Rangers game of Flora's choosing during the 2017-2018 season, as long as the Rangers play their home games at Madison Square Garden. It turns out that the Rangers must play their games at the TD Garden in Boston that season because of unanticipated delays in construction of refurbished Madison Square Garden. What is the status of this agreement? A. It is enforceable because both parties gave consideration. B. It is enforceable because it makes no difference where the team plays, as long as it plays home games during that season. C. It is not enforceable because it was conditioned on the team playing at Madison Square Garden. D. It is not enforceable because it is a material breach of contract.

Correct answer: A. The first statement is under the full performance exception of the S/F. The second statement is incorrect because the contract is executory (meaning it has to be performed).

4. Which statement regarding the Statute of Frauds rule regarding real estate contracts in writing is correct? I) If one party fully performs the oral contract involving real estate, then the other party cannot assert the Statute of Frauds as a defense to the enforcement of that oral contract II) If both parties agree to an executory contract to buy real estate, with the sale taking place 30 days from the date of telephone agreement A. I only B. II only C. I and II D. Neither I or II

Correct Answer: A. This is a tricky question. Generally, price is considered a material term and required part of the writing, in the case of a sales of goods contract, the price need not be stated in the writing and the contract will be enforceable, assumption the other material terms are in the writing (parties, description of goods). The reason for this rule is that under the UCC, the price does not have to be stated in the contract and can be inferred through course of dealing or industry standards. This is so because merchants may not want to agree on a particular price, given fluctuations in the market. B is correct because of the word "any". C and D are incorrect for the reasons noted above.

5. Buyer and seller make an agreement for seller to sell 1,000 books to buyer. The agreement is in a memorandum and signed by both parties. It identifies the books, but does not state the price, which was orally agreed to be $800. Does the writing comply with the statute of frauds? a) Yes, because the price need not be in writing b) Yes, because price is not a necessary component for any type of agreement covered by the statute of frauds c) No, because the price is a required term and must be in writing d) No, because the price is a material term on all contracts

Impossibility of Performance

: If circumstances beyond a party's control make performance virtually impossible, the party may cancel the contract and duties are discharged. We mean literally impossible, not just harder to do.

Dissolution

A change in the relationship of the partners caused by the cessation of a partner's association with the partnership

Liquidated Damages

A contractually stipulated sum of damages

Answer: D. The correct answer would be specific performance. Restitution means restoring the parties to the position they were in before the contract was performed. It usually involves returning of a payment or returning goods. It is not a mandated performance.

A court order ordering the performance of a sale of real estate is known as: A) Restitution B) Punitive damages C) Injunction D) None of the above

Writing required

A formal contract is not required. All that is required is a note or memorandum containing the material terms. UCC 2-201 merely requires assent of the party to be charged and a quantity of goods sold. No price is required.

example of fiduciary duties between partners

A law partner may not secretly maintain a client for himself, even if the lawyer works for the client exclusively on his own time.

Answer: B. Compensatory damages involve an amount of monetary damages to put the victim in as good a position as if the contract was performed. Examples would be difference between contract price and replacement price or difference between contract price and resale price. Choices A and C are not monetary damage remedies; D involves loss of profits due to the breach - it's not based on actual loss directly from the breach.

A remedy for breach of contract that represents the actual dollar loss to the plaintiff is: A) Specific performance B) Compensatory (expectation) damages C) Restitution D) Consequential damages

Answer: C. This is an example of damages for cost of repair (which would occur if the victim wishes to keep the item and pay to make it as good as if the contract was fully performed). That amount is $1500. However, the extra $250 would be incidental damages and would be reasonable given the circumstances as Ace needed a car during that time. A is not correct, because of the word "only". D is not correct because the victim has a duty to mitigate damages. It would be excessive to collect the entire contract price as damages when the cost of repair is relatively low.

Ace contracted to buy a car from Beta, a neighbor, for $10,000. Beta said that the car's radiator was replaced. It wasn't. Ace noticed the problem five days after receipt. It turns out that it would cost $1500 to fix the radiator. The car would have to stay at the mechanics garage for three days. During that time Ace had to rent a car, costing $250. Which describes the correct measure of damages that can be collected by Ace? A) $1500 only, as that would be the cost of putting the buyer is as good a position as if the contract was properly performed. B) $1750, because the rental car fee would be considered consequential damages. C) $1750, because the rental car fee would be incidental damages added to the cost of repair. D) The full $10,000 because the breach was material.

Apparent Authority

Although "A" has no authority to bind "P," the words or conduct of "P" leads the third party to believe reasonably that "A" has authority to bind P, and the third party relies to its detriment on that belief. Apparent authority is also called "Agency by estoppel."

Authority - Ratification

Although A lacks authority to bind P, P affirms a contract that A entered into purportedly on P's behalf. P may ratify in words, by part performance of the contract, or by accepting a benefit under the contract.

Agreements that violates a statute of regulation is void

An illegal price-fixing agreement is void Usury (lending money at a illegal rate of interest) Contracts to do illegal things in general

CORRECT ANSWER: B. In a bankruptcy, the contract may be discharged by the court. A is not true; C and D are irrelevant.

Associated Motors, Inc., a longtime automobile manufacturer, files for bankruptcy under Chapter 11 of the bankruptcy code (reorganization). It owes Zoom-Zoom distributors $25,000 on a contract purchasing brake parts. What is the status of that contract? A. It is enforceable despite the determination of the bankruptcy panel. B. It is unenforceable because bankruptcy discharges contracts by operation of law. C. It is enforceable because the contract was made in good faith. D. It is unenforceable because of frustration of purpose.

Answer: B. Consequential damages must be foreseeable on the part of the breaching party.

Assume that James also lost a business deal with another party because he did not receive all of the golf clubs. The lost profits would be $500. Under what circumstance could that lost profit amount be collected? A) It is part expectation damages, so it is presumed. B) It can only be collected if it is foreseeable on the part of the breaching party C) It can be collected if it is foreseeable on the part of the victim D) None of the above

Undisclosed Principal example

Bella, who secretly represents Ronald Rump, owner of Rump Towers, buys bathroom fixtures for $ 2 million from Bathkit on 30 day's credit. When payment is due, Ronald defaults. Bathkit may sue Bella and Ronald, if it learns that he is the P, but Bathkit may collect the judgment from only one of them.

Discharge

Circumstances when Contractual obligations terminate

sale of a business and employment contracts

Covenants not to compete used often in these two areas

Damages = Cover Price - Original Contract Price + incidental damages (such as extra brokerage, storage, advertising, and shipping costs) - expenses saved Damages = $110,000 - $100,000 + $1,000 - $3,000 = $8,000 Assume the facts in the previous example. If CL could prove $7,000 in lost profits, its total recovery would be $15,000.

Damages to Compensate Victim -E.g., Celestial Lights (CL), a retailer, contracts to buy $100,000 of fixtures from a manufacturer, Major Electric (ME). Three days before the expected delivery, ME anticipatorily breaches. CL covers by purchasing comparable inventory from another supplier for $110,000. It had to hire an agent at a cost of $1,000 to find the new supplier, but it saved $3,000 in shipping costs. Suppose that CL can prove that it lost sales because of ME's breach. It can recover the provable lost profits, which are called consequential damages

•Henry won. Both parties understood, at the time of formation, that the reason Henry paid a premium for the room was to have a view of the coronation.

Edward VII was to be crowned King of England. Krell, a hotel owner, offered to rent rooms with a view of the procession. Henry agreed to pay a substantial sum for such a room. At the last minute, Edward became ill and the outdoor procession was cancelled. Henry refused to pay for the room. Krell sued. Who won?

obsolete

Except for informal or short-term arrangements, general partnerships are virtually ______

Example of Condition Subsequent

Frank obtains a theft insurance contract from X Insurance Co. The contract states that his home must have a working alarm at all times. Two years later, the home is burglarized. It turns out that Frank forgot to change the battery on the alarm and the alarm did not work. Insurance Company is discharged

Frustration of Purpose

If changed circumstances negate the benefit that one of the parties would have derived from the contract, that party is entitled to a discharge. The purpose of the contract must have been part of the understanding of the parties at the time of formation.

Answer: D. There were 100 golf clubs that were purchased to make up for the loss. They cost $12.50 instead of the $10 per club in the contract (that can be determined by divided $15,000 by 1500). The problem presumes that the contract price was paid after delivery (since none of the choices would apply if the buyer did not pay). So, it would cost $1250 for replacement plus the postage charge of $200 which would be incidental damages.

James contracted with Eddie to sell Eddie 1500 XYZ golf clubs for a price of $15,000. Payment would occur after delivery was made. Delivery was scheduled for the following week. Delivery was done on time, but only 1400 golf clubs were delivered. Eddie bought 100 golf clubs from another party for $12.50 per golf club. In addition, it cost an additional $200 for postage. What would the total amount of damages that Eddie could collect from James? A) $1,000 for purchasing the 100 golf clubs from the other party. B) $1,250 only as this is the difference between the contract price and the repurchase price C) $1,450 calculated to be the difference between the contract price and the repurchase price, with consequential damages added for the postage, as lost profits. D) $1,450 calculated to be the difference between the contract price and the repurchase price, with incidental damages added for the postage.

He is entitled to recover $30,000 from Jeff.

Jeff agrees to sell Ali a clothing store. Jeff breaches. Before the breach, Ali purchased $25,000 of inventory and spent $5,000 on advanced advertising. Note that it would be difficult for Ali to prove how much profit he lost because of Jeff's breach.

Answer: B. This is an example of a liquidated damages clause. The damage amount for a breach is stated in the contract. This is done for types of contacts where actual damages would be hard to calculate. A is not correct because a limitation of liability clause limits damages. It may contain a specific amount, but does not have to. B is the best answer.

Joe and Peter enter into a contract where Joe would build a boat for Peter for a price of $500,000. The contract had a due date for completion of June 1, 2020. It also states: "for every day that the boat is late, there will be damages for breach of contract of $1,000. This is known as a: A) Limitation of liability clause B) Liquidated damages clause C) Punitive damages clause D) Lost profits clause

Example of Mitigation of Damages

Landlord rents an apartment to tenant at $1,000/month. After paying two month's rent, T wrongfully vacates. L is entitled to $10,000, but he must attempt to find another tenant or he may forfeit his right to some or all of the damages.

•Yes. The napkin sets forth the material terms of the deal, i.e. the house, the date, and the price. •Since Donna is "the party to be charged" and she initialed the napkin, it may be used to block her Statute of Frauds defense. The court will enforce the oral contract.

Leo and Donna go to a bar to negotiate the sale of Donna's house to Leo. They enter into an oral agreement whereby Donna agrees to sell her house to Leo. Donna jots on a cocktail napkin: "Nov. 18, 09: Agreed to sell Leo my house at 3 Oak St., Garden City, for $1 million. D" Leo picks up the napkin. Donna refuses to perform the oral contract, and Leo sues to enforce it. Donna asserts the Statute of Frauds defense. Can Leo use the napkin to defeat Donna's Statute of Frauds defense to his lawsuit?

Answer: C. This is one of the situations where the entire contract would be a remedy for breach. The buyer acceptance the item, so the seller cannot resell it. Specific performance is not a remedy since the contract was performed by the seller.

Linda contracted to sell 100 scanning machines to Helen for a price of $50,000. The contract specified delivery for June 1. On June 1, the scanning machines are delivered to Helen. Helen accepted them. However, Helen refused to pay for them. Which of the following would be a correct statement? A) Linda can seek the fair market value of the scanners, which would be less than the contract price B) Linda can seek specific performance to compel Helen to pay C) Linda can seek the entire purchase price since Helen accepted the scanning machines D) Linda can seek the difference between the contract price and the likely resale price

Example of Specific performance

Midori agrees to sell her unique Stradivarius violin to Jascha for $250,000. Midori changes her mind and refuses to deliver the violin. Because it is unique, Jascha can get an order of specific performance compelling Midori to deliver the violin to him. Jascha must pay the $250,000 to Midori.

Standard for validity of Non-Compete Clauses

Must be reasonable as far as time and reasonable distance (standard in sale of a business, like with selling a dry cleaning store)

Liability of Partners Torts

Partners are jointly and severally liable for partnership torts. Any or all may be sued. Plaintiffs are entitled to single recovery. Innocent partners can be personally liable for the entire judgment. Their personal assets are subject to collection.

•Arguments -Golfers understand the term "1st hole" to mean the first of 18 holes, not the physical 1st hole. Phil wins. -Phil said "a hole-in-one on the 1st hole." Lion did so his second time around the course. Any ambiguity must be construed against Phil because he chose the words of his offer. Lion wins.

Phil Michelob owns a 9-hole golf course. He organizes an 18-hole tournament in which each participant will play the course twice. To entice golfers to play in the tournament, he makes this offer: "Any golfer who makes a hole-in-one on the 1st hole will get a $75,000 prize. Lion Forest makes a hole-in-one on hole #1 his second time around the course. Has he earned the $75,000?

Injury

Physical or psychological harm, damage to property, financial loss

Exceptions

Protection of a particular class (For example if securities are sold illegally without having been registered with SEC, purchasers will be able to recover their purchase price)

LLC's

Provide virtually all the advantages of the corporate form without any of its disadvantages. For many, this is the preferred form of business organization

-Answer: Breach of warranty damages, equal to the value of the goods (sofa) as warranted ($3,500) - the value of the goods (sofa) as delivered ($3,200). Bernice is entitled to $300.

Roma Furniture ships a custom-made sofa to Bernice. The leather on the sofa is scratched during shipment from Italy. Bernice accepts the sofa because she does not want to wait for another sofa to be shipped. The price of the sofa is $3,500. The value of the sofa delivered is $3,200. What is Bernice's remedy?

Yes, taking advantage of a language disadvantage is an example of procedural unconscionability while an inflated price shows substantive unconscionability.

Rosa, a non-English-speaking immigrant, entered an appliance store in New York to buy a refrigerator. The salesman took advantage of her language disadvantage and sold her a $300 refrigerator for $600. Rosa sued to rescind the contract. Could she support an "unconscionability" defense?

Apparent authority binds Roy

Roy owns a ranch where he sells horses. Gene has been Roy's foreman and exclusive sales agent for 10 years. On March 1, Roy fires Gene, but allows Gene to remain at the ranch. Roy does not inform his customers or anyone else that he fired Gene. Nor does he hire a new sales agent. On March 10, Tex, a customer who has often dealt with Gene as Roy's agent, arrives at the ranch to buy the "Son of Secretariat," a promising colt. Roy knows the sales price is $ 1 million, but to avenge his firing, he enters into a written contract, purportedly on behalf of Roy, to sell the horse to Tex for $600,000. Is Roy bound to the contract, and, if so, why is he bound. What theory of agency law applies?

Answer: D. Courts will examine the scope of liquidated damages clauses. If the amount stated in the contact is excessive and deemed a "penalty" by the court, the court can strike that clause down as unconscionable. A $100,000 amount of each day late would be excessive.

Same fact as number 3, except that the amount of damages is $100,000 a day for each date late. Which of the following best describes the enforceability of this clause? A) Enforceable because actual damages are difficult to gauge in such a situation B) Unenforceable because all liquidated damages clause are presumed to be penalties C) Enforceable because the amount is less than the total contract price. D) Unenforceable if the amount of damages is deemed excessive by a court

•"party to be charged," i.e. that party resisting the oral contract. (The other party need not sign it.)

The writing must be signed, initialed, or stamped physically or electronically by the...

false, -It is common in the U.S. for contracts for the sale of homes to include a liquidated damages clause of 10% of the purchase price in the event of the buyer's willful breach.

True or False; -It is uncommon in the U.S. for contracts for the sale of homes to include a liquidated damages clause of 10% of the purchase price in the event of the buyer's willful breach.

true

True or false; If such a clause attempted to impose damages of the entire sales price, the clause would be a penalty and unenforceable.

true

True or false; ordinary fluctuations in market conditions, even if extreme, cannot be an unforeseen event in commercial impracticability

Employment non-compete

Very difficult to enforce, in ny it only applies to those "unique" and hard to replace

Partnership by Estoppel example

Warren Buffet, although not a partner of Stock & Trade a startup investment company, allows Stock & Trade to state he is a partner in its advertisements. Bernie, who relied on the advertisements, is defrauded by a partner of Stock & Trade; he loses $50,000. Warren is liable for the loss.

•Donna cannot use the napkin to block Leo's Statute of Frauds defense to the oral contract because he did not sign or initial the napkin. The court will not enforce the oral contract.

What if Leo, not Donna, wants to back out of the deal?

Waiver

When a party intentionally relinquishes a right to enforce the contract. A waiver is generally employed after a party fails to perform

Correct Answer: B. The S/F applies to all contracts for real estate. Choice B involves real estate. Note that choice A involves a portable pool that is not attached the land, so it is a sale of a good, not land and the price is under $500. C is simply incorrect.

Which of the following contracts is subject to the Statute of Frauds? a) A contract to buy a portable pool on top of Joe's backyard for use only in the summer months for $450 b) A contract to buy Jane's small plot of land for $350 c) All contracts relating to personal services d) None of the above

E) All of the above

Which of the following is true? A)Liquidated damages are damages specified in the contract in the event of non-performance by either party. B)Liquidated damages are appropriate where real damages for breach of contract are likely to be uncertain. C)Courts will enforce these liquidated damage clauses unless they seem to penalize the defendant instead of merely compensating the plaintiff for uncertain losses. D)The amount must be reasonable (20% or less). If it is unreasonably excessive, it violates public policy and is an unenforceable penalty. E) All of the above

Correct Answer: C. This is a general standard. A is not correct because of the word "all" (remember: material or intentional breach only in common law); B is not correct because there has to be foreseeability on the part of the breaching party for consequential damages under traditional rules; D is not correct (only fraud allows punitive damages in contract law)

Which of the following statements is true? A) A victim of a breach of contract can rescind (terminate) the contract in all circumstances under traditional rules B) A victim of a breach of contract can sue for lost profits whether the other party know of this loss or not C) A victim of a breach of contract must take steps to mitigate damages D) A victim of a breach of contract is subject to punitive damages in a non-fraud case

Condition

a pre-requisite where one party must fully perform before other party has any duty to perform (such as insurance or obtaining mortgage before sale)

Reliance Damages

an alternative calculation •Known as The costs the injured party incurred because of the breach. Reliance damages restore the injured party to the position he would have occupied had there been no contract. •This is a more difficult remedy to get because these damages have to be foreseeable.

A party does not raise the Statute of Frauds

an oral contract is enforceable when...

The Statute of Frauds is Rendered

an oral contract is unenforceable when...

"expectation damages"

calculation in compensatory damages that requires evaluation of buyer and seller

Examples of impossibility of performance

disability, death, item in question destroyed. If there is a contract to sell a warehouse, and, through no fault of either party, the warehouse burns down before the sale is completed, the contract will be discharged

Failure to Perform scope

fairly limited- courts do not like to make this too expansive

Partial illegality

if a lease contains an illegal clause exculpating (freeing) the landlord from liability for its own negligence, the lease will be enforceable but the exculpatory clause will be stricken from the contract

Partial Performance

may discharge duties if performance is not "substantial"

Minor breach

other party still has a duty to perform but can sue for damages

General Partnership

partnership in which partners share equally in both responsibility and liability. a potentially risky entity form of business

two factors of unconscionability

procedural and substantive.

true

true or false; -If the business stops operating or goes bankrupt, the owners are liable for the debts and obligations of the business.

true

true or false; Each partner is potentially personally liable for the actions of partners and employees of the partnership

true

true or false; Each partner is potentially personally liable for the actions of partners and employees of the partnership -This may be true even if a partner or employee exceeds authority under a partnership agreement or employment agreement (apparent authority/partnership by estoppel).

false; •Negligence is not an element

true or false; Negligence is an element of strict products liability in tort

false; the injured party is entitled to recover the expected benefit of the bargain in compensatory damages

true or false; the injured party is not entitled to recover the expected benefit of the bargain in compensatory damages

false; •Based on agency law, the partnership is liable for the obligations established by its agents or their tortious conduct committed within the scope of employment.

true or false; •Based on agency law, the partnership is not liable for the obligations established by its agents or their tortious conduct committed within the scope of employment.

true

true or false; •Waiver and release are often used synonymously to refer to a single document that simultaneously relieves a party from her duty to perform and excuses a non-performance or breach.

True

true or false; •When an agent or employee commits a negligent tort within the scope of the agency or employment, both the agent and principal (employee and employer) are liable.

true

true or false; •When the agent or employee commits an intentional tort such as fraud, the principal or employer is liable if the tort furthers the interests of the principal or employer.

true

true or false;•A general partnership does not offer the business owners any form of personal liability protection. Each partner is personally liable for any debts, obligations, or tortious conduct of the business.

either reform or wind up (terminate)

what a partnership can do after dissolution

Definition of a Tort

•A civil wrong; the breach of a civil duty

Conditions Precedent

•A condition precedent is where something must take place or a situation must arise prior to or before a party has a duty to perform

Condition Subsequent

•A condition subsequent excuses contractual performance if some future event takes place or situation arises.

Specific Performance

•A court order requiring the parties to perform the contract.

UPA (Uniform Partnership Act)

•A general partnership is a voluntary association of two or more people (or business entities) to conduct a business for profit as co-owners.

Undisclosed Principal

•A may deal with a third party without disclosing the identity or the existence of A's principal. •If P breaches the contract, both P and A are liable to the third party. The third party may sue both, but may collect only from one. •A may seek indemnification from P.

Incidental Authority

•A needs to assume additional authority to perform his duties to P. -E.g., P authorizes A to buy goods, but does not provide A with any funds. A may purchase the goods on credit.

Fiduciary Duties

•A owes fiduciary duties to P. These duties are demanding. One of the most important fiduciary duties is the duty of loyalty and fidelity: A must put the interests of P above his own, when A is acting within the scope of his agency. -E.g., If P hires A to buy him a boat, and A finds a great deal, A may not buy the boat for himself.

Partially Disclosed Principal

•A reveals to the third party that he represents a P, but A does not disclose the identity of the P. •If P breaches the contract, the third party may sue both P and A, and he may collect any part of the judgment from both. He is limited, however, to single recovery. •A may seek indemnification from P.

Discharge by Waiver and Release

•A waiver and a release serve to excuse one or both parties' duty of performance.

Vicarious Liability (in Regards to Torts)

•A, while acting on behalf of B, commits a tortious act. B is liable due to A's acts. -Employer sued for employee's tort -Principal sued for agent's tort •Workers' Compensation laws are based on vicarious liability

Authority

•Actual -Express (in words) •Written (Power of attorney) •Oral: Permissible unless underlying contract governed by Statute of Frauds -Implied (Conduct)

Relationship of Principal and Agent

•An agent is a party usually appointed by someone else (known as a principal) and is empowered to enter into contracts on behalf of that principal •An agent has the authority to bind the principal to contract.

Unconscionability

•An unprincipled or unscrupulous contract, one that shocks the conscience

Intentional Torts

•Assault and Battery •False Imprisonment •Intentional Infliction of Emotional Distress

Negligence

•Based on fault, not intent -Acts that fall below a standard of reasonable care •Most common tort claim

Bankruptcy

•By law, bankruptcy of one party discharges contracts. Trustee is empowered to settle claims.

•Full performance by one party -One party fully performs the oral agreement •Partial performance by one party -Only as to what has been performed •Promissory Estoppel -Occurs when someone's words reasonably induce reliance by the other to his detriment. Promissory estoppel is when an estoppel arises from a promise that induced reasonable reliance.

•Certain Oral Contracts Subject to the S/F can be enforceable under these exceptions:

Common Law of strict liability

•Common Law: Ultra hazardous activities -Explosives -Dangerous animals and the two bite rule

Defenses to Intentional Torts

•Consent -By words, conduct, prior relationship •Self-defense (for assault and battery) -Use of reasonable force against imminent physical harm

Attributes of UPA (Uniform Partnership Act)

•Contribution of capital, skill, or labor •Management prerogative •Sharing profits and losses •Sharing revenues not relevant

Damages = Cover Price - Original Contract Price + incidental damages (such as extra brokerage, storage, advertising, and shipping costs) - expenses saved Damages = $110,000 - $100,000 + $1,000 - $3,000 = $8,000

•Damages to Compensate Victim -E.g., Celestial Lights (CL), a retailer, contracts to buy $100,000 of fixtures from a manufacturer, Major Electric (ME). Three days before the expected delivery, ME anticipatorily breaches. CL covers by purchasing comparable inventory from another supplier for $110,000. It had to hire an agent at a cost of $1,000 to find the new supplier, but it saved $3,000 in shipping costs.

-Answer: The entire contract price

•Damages to Compensate Victim -E.g., Celestial Lights (CL), a retailer, contracts to buy $100,000 of fixtures from a manufacturer, Major Electric (ME). Three days before the expected delivery, ME anticipatorily breaches. CL covers by purchasing comparable inventory from another supplier for $110,000. It had to hire an agent at a cost of $1,000 to find the new supplier, but it saved $3,000 in shipping costs. Suppose ME ships to CL, but CL does not pay for the fixtures, although it accepts the shipment. What is ME's measure of expectation damages?

Compensatory Damages

•Damages to put the plaintiff in the same position as if the contract had been performed.

Strict Liability

•Definition: Liability without fault

•Example of Member-Managed LLC

•Derek and Sara form a member-managed LLC. There is no clause in the operating agreement to limit authority. Both members have complete control over LLC operations and unfettered authority to act on behalf of the LLC. -If a clause in the operating agreement that limits either person's authority, it is only effective to limit our dealings with third parties if those individuals are aware of the contractual limitations.

Elements of Negligence

•Duty of reasonable care Breach of duty

Termination of Agency

•Either party may terminate the agency relationship at any time, but a wrongful termination will subject the breaching party to a lawsuit for damages.

Partners' Authority

•Express and implied (customary) authority to conduct partnership business, i.e., to buy supplies, inventory, insurance, and equipment, to sell the firm's goods or services, to enter into employment or service agreements.

-Proximate Causation (sufficient connection between act and injury)

•Factual cause of injury must be shown: -"But for" test •Proximate (legal cause) -Foreseeability Standard -Who likely is that the factual cause had a connection with the injury?

Governing Law

•Governed by state law: either the Uniform Partnership Act (UPA) or the Revised Uniform Partnership Act (RUPA). We will focus on the UPA.

Strict Products Liability in Tort: Defenses

•Horizontal Privity •Vertical Privity •Comparative Negligence •Assumption of Risk •Foreseeable Misuse

Two Kinds of LLCs

•I. Member-Managed •II. Manager-Managed.

Partnership by Estoppel

•If a third party, based on a person's words or conduct, reasonably believes to his detriment that the person is a partner, the person is liable to the third party for partnership obligations •Similar to apparent authority in agency

when is specific performance appropriate?

•If money damages are an inadequate remedy, the injured party may be entitled to an order of specific performance. •

Discharge by Breach

•If one party materially breaches (that is, a major breach), the other party's duty to perform is discharged.

Time of Performance

•If performance is late, question of whether the lateness is a material breach •Depends on contract terms -"If performance is late, then other party can discharge" •If no contract terms, depends on circumstances -"Time of the essence"

3 types of Tort

•Intentional Torts -Deliberate infliction of harm •Negligent Torts -Breach of duty of care •Strict Liability Torts -Liability without fault

Conversion

•Intentional exercise of dominion or control over personal property which interferes with the owner's right to control it. -Where one improperly acquires possession or -Moves the item; or -Makes an unauthorized transfer or disposal; or -Destroys or alters the item

Business Torts

•Interference with Contract -Action by a non-contracting party to induce a breach of contract •Misappropriation/Right of Publicity -Traditionally, a tort prohibiting the use of one's name or likeness for commercial purposes without consent Case: Darin v. McDonald's

Vicarious Liability In Regards to Agency

•Liability imposed on one party for the wrongful conduct of another.

•Logan won. •The covenant not to compete violated public policy, even though Logan had voluntarily signed it. REM had no "protectible" interest. It had used standard techniques to teach him Titanium welding, and had no justification to deprive him of his livelihood.

•Logan was the greatest welder in the world. He took a job with REM metals, and signed a covenant not to work for a competitor of REM for one year after leaving REM within a 25 mile radius of REM's plant. REM taught Logan titanium welding using standard teaching methods. Logan excelled at titanium welding. He asked for a 50 cent/hr raise. REM refused. Logan took a job with a nearby competitor. REM sued to enjoin (stop) Logan from working for its rival. Who won?

LLC's requirement

•Must file articles of organization with the secretary of state •Run according to an operating agreement, which need not be in writing •May be member-managed or manager-managed, i.e. managed by non-members •May have only one member •Some states give LLCs perpetual existence •Subject to single taxation •Members may manage •Members have limited personal liability for contracts and torts of other members -They are personally responsible for the torts •LLC shares may be traded as securities on capital markets

Limited Partnerships Require

•Must file with the secretary of state of the state where the filing is made. •Must have at least one general partner and one limited partner •Limit liability of limited partners to their investments •Subject limited partners to unlimited liability, if they assume a management role. •Subject to single taxation

Strict Products Liability in Tort: Defenses: Vertical Privity

•Only direct seller liable -Abolished: Now any merchant in the distributive chain is liable

Strict Products Liability in Tort: Defenses: Horizontal Privity

•Only the buyer could sue -Abolished: Now any injured party may sue

Fiduciary Duties of partners

•Partners are agents of each other as well as co-owners of the business; they owe strict fiduciary duties to each other.

Liability of Partners Contracts

•Partners are jointly liable for partnership breaches of contract. All must be sued. Plaintiffs are entitled to single recovery.

Punitive Damages

•Punitive damages are never awarded for a simple breach of contract. Some courts will not award punitive damages for a breach of contract even if the breaching party entered into the contract with the intention not to perform.

Punitive Damages under U.S. Law

•Purposes -To punish wrongdoers -To deter similar future conduct •Awardable for intentional torts and strict products liability torts, but not ordinary negligent torts

Joint venture

•Similar to general partnerships, but they are specifically formed for a limited purpose or a single project. •Requires the specific intent and agreement of the parties. -Accomplishing a specific goal or working on a specific project is a key characteristic of the joint venture. -Joint venturers may be individuals or business entities •Most commonly used by two separate business entities to undertake a special project or commercial activity. •They are particularly common when one business wishes to expand operations into a new market, such as when expanding sales to a foreign country.

LLPs

•Some states LLP statutes shield innocent members only from vicarious tort liability •Others provide "full shields" as do LLCs •Conversion by registration is easy for general partnerships

Punitive Damages (cont.)

•Some states have caps on punitive damages such as 10 times the injury

Injunction

•Specific performance can NEVER be awarded in personal service contracts -Unconstitutional •Instead, injunction to stop one from contracting with a rival firm can be utilized (injunction). •Difficult to get Must be "unique and extraordinary"

Negligence Defenses

•Supervening Cause •Contributory Negligence •Comparative Negligence •Immunity •Assumption of risk

Mitigation of Damages

•The injured party must make reasonable efforts to minimize the damages the breaching party will have to pay him.

Strict Products Liability in Tort

•The most important area of strict liability

limited personal liability

•The reason for LPs, LLCs, and LLPs is to create a from of doing business where the members have __________ and where the members are not subject to double taxation.

Priorities in Distribution

•Third-party creditors •Advancement, i.e. loans of partners to the partnership •Capital accounts •Profits

Goal of Monetary Relief

•To put the victim in as good a position as if the contract was performed

Commercial Impracticability

•Unforeseen events would impose a hardship on a party if the contract were performed, but would not be literally impossible (UCC)

Example of Manager-Managed LLCs

•Veronica and John form a manager-managed LLC. They are both members, but Veronica is designated as manager. As manager, she has total control over the daily operations of the LLC and complete authority to interact with third parties on behalf of the LLC. •John, as a member, has certain decision-making rights regarding the structure or governance of the LLC, but he does not have authority to manage operations or interact with third parties on behalf of the LLC.

Release

•When one party is relieved from her promise of performance. A release generally occurs before a contracting party has to perform.

Trespass

•Where one intentionally enters land or remains on land after his privilege to be there has expired. -Intent to enter land, even if it is mistaken -When does the right to be on land end? •Case example - The circus v. the game

Full Performance

•Where the parties fully perform, their obligations, there is nothing else left to do, so duties are discharged •This is the ideal way to discharge obligations

possibilities to calculate compensatory damages for a buyer

•difference between contract sales price and repurchase price; or •costs of repair to put item in as good a position as of K was performed •Difference between the contract price and the fair market value of the item(s)

possibilities to calculate compensatory damages for a seller

•difference between the contract sales price and the resale price; or •Difference between the contract sales price and the fair market value of the items

Respondeat superior

•the name for vicarious liability in agency and in employment law.

Material breach

•where a salient requirement is not performed; or, less than 70% performance; or, where breach (not matter how small) is intentional.