BLAW Exam 2 chapter 10 -

Requirements of a valid contract

1. Agreement 2. Consideration 3. Contractual Capacity 4. Legality

The courts use the following rules in interpreting contractual terms

1. Insofar as possible, a reasonable, lawful, and effective meaning will be given to all of a contract's terms. A contract will be interpreted as a whole. Individual, specific clauses will be considered subordinate to the contract's general intent. All writings that are a part of the same transaction will be interpreted together. Terms that were the subject of separate negotiation will be given greater consideration than standardized terms and terms that were not negotiated separately. A word will be given its ordinary, commonly accepted meaning, and a technical word or term will be given its technical meaning, unless the parties clearly intended something else. Specific and exact wording will be given greater consideration than general language. Written or typewritten terms prevail over preprinted terms. Because a contract should be drafted in clear and unambiguous language, a party that uses ambiguous expressions is held to be responsible for the ambiguities. Thus, when the language has more than one meaning, it will be interpreted against the party that drafted the contract. Evidence of trade usage, prior dealing, and course of performance may be admitted to clarify the meaning of an ambiguously worded contract. (We will define and discuss these terms in the chapter on sales and lease contracts.)

Requirements for implied contracts

1. The plantiff furnished some service or property 2. the plantiff expected to be paid for that service or property and the defendant knew or should have known that payment was expected 3. the defendant had a chance to reject the services or property and did not

Objective facts include

1. What the party said when entering into the contract 2. How the party acted or appealed 3. The circumstances surrounding the transaction

Unclear and ambiguous language in the following situations

1. when the intent of the parties cnannot be determined from its language 2. when it lacks a provision on a disputed issue 3. when a term is susceptible to more than one interpretation 4. when there is uncertainty about a provision

requirements typically are raised as defenses to the enforceability of an otherwise valid contract

1.Voluntary Consent 2. Form

Implied Contract

A contract formed in whole or in part from the conduct of the parties - conduct of the parties rather than their words creates and defines at least some terms of the contract (certain requirements must be made)

Void Contracts

A contract having no legal force or binding effect. not a contract at all. no parties have any legal obligations if a contract is oid ex: person was determined incompetent or it was illegal

Informal or simple contract

A contract that does not require a specific form or method of creation to be value (not a formal contract)( although can include it must be in in writing or evidenced by electronic record)

executed contract

A contract that has been fully performed by both parties

Promise

A declaration that binds a person who makes it (the promisor) to do or not to do a certain act

Promisee

A person to whom a promise is made

Limitation on Quasi contractual recovery

A person who has conferred a benfit on someone else unneccessarily or as a result of miscont or negligence cannot invoke the doctine of quasi

Contract

A set of promises constituting an agreement between parties, giving each a legal dury to the other and the right to seek a remedy for the breach of the promises or duties- can be enforced in courty

Bilateral Contract

A type of contract that arises when a person is given in exchange for a return promise

Unilateral Contracts

A type of contract that results when an offer can be accepted only by the offerees performance :Promise for an act"

Unenforceable contracts

A valid contract rendered unenforceable by some statute or law. ex: some contracts needed in writing

Case Wagner v Comublia pictures

Actor Robert Wagner entered into an agreement with Spelling-Goldberg Productions (SGP) "relating to Charlie's Angels (herein called the 'series')." The contract entitled Wagner to 50 percent of the net profits that SGP received from broadcasting the series and from all ancillary, music, and subsidiary rights in connection with the series. SGP hired Ivan Goff and Ben Roberts to write the series, under a contract subject to the Writers Guild of America Minimum Basic Agreement (MBA). The MBA stipulated that the writer of a television show retains the right to make and market films based on the material, subject to the producer's right to buy this right if the writer decides to sell it within five years. The first Charlie's Angels episode aired in 1976. In 1982, SGP sold its rights to the series to Columbia Pictures Industries, Inc. Thirteen years later, Columbia bought the movie rights to the material from Goff's and Roberts's heirs. In 2000 and 2003, Columbia produced and distributed two Charlie's Angels movies. Wagner filed a suit in a California state court against Columbia, claiming a share of the profits from the films. The court granted Columbia's motion for summary judgment. Wagner appealed to a state intermediate appellate court. Issue Did the language of Wagner's contract with SGP entitle Columbia to all of the profits from the two Charlie's Angels movies? Decision Yes. The state intermediate appellate court affirmed the lower court's judgment. Reason Wagner offered evidence to show that a previous contract with SGP involving a property titled Love Song had been intended to give him half of the net profits that SGP received from the property from all sources without limitation as to source or time. Wagner argued that because the profits provision in the Charlie's Angels agreement used identical language, the provision should be interpreted to give him the same share. The court stated that an "agreement is the writing itself." Extrinsic evidence is not admissible "to show intention independent of an unambiguous written instrument." The court reasoned that even if the parties intended Wagner to share in the profits from all sources, "they did not say so in their con

1. Agreement

An agreement to form a contract includes an offer and acceptance. one party must offer to enter into a legal agreement and the other party must accept

Example of bilateral

An example of a bilateral contract is a contract in which one person agrees to buy another person's automobile for a specified price. No performance, such as the payment of funds or delivery of goods, need take place for a bilateral contract to be formed. The contract comes into existence at the moment the promises are exchanged.

Extrinsic Evidence

Any evidence not contained in the contract itself, which may include testimony of the parties, additional agreements or other information relevant to determining the parties intent - can significantly affect the courts interpretation of ambigious contractual provisions - when a contract is clear and unamiguous, a court normally cannot consider outside evidence

2. Consideration

Any promises made by the parties must be supported by legally sufficient and bargained for consideration (something of value recieved or promised to convinced to a person to make a deal)

Types of contracts

Based on legal distinctions as to their Formation, performance and enforceability

Bilateral verses unitlateral

Bilateral: a promise for a promise Unilateral: A promsie for an act a contract i classified as bilateral or unilateral depending on what the offeree must do to accept the offer and bind the offeror to a contract

3. Contractual capacity

Both parties entering into the contract must have the contractual capacity to do so. The law must recognize them as possessing characteristics that qualify them as competent parties

Case Quasi contract (wilson v parker)

Chad Parker owned about an acre of property that had a trailer home on it. He sold the trailer to David and Alison Wilson for $1,000 and sold the property to them for $10,000. These agreements were made orally, and no title or deed transfers took place. The Wilsons lived in the trailer for seven years, making $11,228.19 of improvements to the structure and the property. After a falling out between Parker and David, Parker had the Wilsons evicted and moved back into the trailer. A Pennsylvania appellate court found that, in the absence of any express contract, Parker had unjustly enriched himself at the Wilsons' expense. Enforcing a quasi contract, the court ordered Parker to pay the Wilsons $12,228.19 in damages. This amount represented the value of the improvements plus the $1,000 difference between how much the Wilsons actually paid Parker and how much they would have paid him had they rented the trailer and property for seven years.

Examples of unilateral

Contests, lotteries and other competitions offering prizes - failing with contest rules however, no binding contract is formed

The functions of contracts

Contract law is designed to provide 1. stability 2. predictability 3. certainty

Case Rules of interpretation Bearden v EI du pont de Nemours and company

E.I. du Pont de Nemours and Company's standard employment contract states that employees who "retire" keep any stock options provided by the company. According to the language of the contract, an employee can only "retire" after having been with the company for at least fifteen years. Employees who leave for other reasons must exercise the stock options by their last day of employment or lose them. (When a company offers stock options to its employees, it gives them the opportunity to buy a specified number of shares of the company's stock within a set time period and at a price established by the company on a prior date.) After ten years with DuPont, James Bearden, at the age of sixty-seven, decided to stop working. Because Bearden did not exercise his stock options before leaving, DuPont allowed them to expire. Bearden sued, arguing that, going by the dictionary, "retirement" means exiting the workforce upon reaching a certain age. A federal appellate court rejected this reasoning. By the express language of the contract, the court held, Bearden had fallen short of the years-of-service requirement (fifteen years) and therefore had not "retired" from DuPont for stock option purposes.

CASE: Objective theory of contracts (Credible behavioral health, Inc V Johnson)

Facts Credible Behavioral Health, Inc., provides software solutions to behavioral health and human services providers. Credible offers a tuition loan program to its employees who wish to pursue undergraduate, graduate, or postgraduate education. Emmanuel Johnson, a Credible employee, accepted the offer, and the parties memorialized their agreement in a promissory note. The terms provided that Johnson would repay the loan after completing his studies, with the percentage to be repaid depending on how long he remained with the company. Before Johnson obtained a degree, however, Credible fired him. When he did not repay the loan, Credible filed a suit in a Maryland state court against him, seeking repayment. Johnson argued that the terms of the note required repayment only if he quit his employment, not if he was fired. The trial court ruled in his favor. Credible appealed. A state intermediate appellate court affirmed the ruling. Credible appealed to the state's highest court, the Maryland Court of Appeals. Issue Did the parties intend the note to be repaid regardless of whether an employee quit or was fired? Decision Yes. The Maryland Court of Appeals reversed the decision of the intermediate appellate court, which had upheld the ruling of the trial court. The lower courts "erred in construing the promissory note to require repayment only in situations where an employee quits." Reason Credible argued that the terms of the note revealed that the parties intended the loan to be repaid on termination of employment whether an employee was fired or quit. The state's highest court applied the objective theory of contracts to determine the parties' intent in agreeing to the note and to interpret its terms to be consistent with that intent. This determination "is based on what a reasonable person in the position of the parties would have understood the language to mean and not the subjective intent of the parties at the time of formation." The note provided for the repayment of the loan, plus interest, "if you terminate employment with the company" less than thirty-six months after achieving a degree. The note further provided that this amount was due and payable ninety days "after the termination

Case: Unilateral new revoking terms: Boswell v Panera bread co

Facts To recruit and retain managers for its restaurants, Panera Bread Company created a program under which managers were eligible to receive a one-time bonus. A manager who signed an agreement to participate in the program would be paid the bonus five years later, provided the manager was still working for Panera at that time. The amount of the bonus depended on the profitability of the manager's restaurant. Later, a change in general business conditions led Panera to conclude that the bonuses would be too costly. The employer set a $100,000 cap on the amount. Mark Boswell and sixty-six other managers filed a suit in a federal district court, maintaining that by imposing the cap, Panera committed breach of contract. The court issued a summary judgment in favor of the managers. Panera appealed to the U.S. Court of Appeals for the Eighth Circuit. Issue Were the managers entitled to bonuses based on the offer's original terms? Decision Yes. The U.S. Court of Appeals for the Eighth Circuit affirmed the judgment of the lower court. Panera's promise to pay bonuses in return for the managers' continued employment was an offer for a unilateral contract. "Panera was not entitled to move the goalposts on them by imposing a bonus cap, which was outside the contemplation of the . . . offer." Reason The managers were at-will employees when they signed the bonus agreements, which provided that they would retain this status for the five-year period. Employment at will is a unilateral contract—the employer promises to pay if the employee works as directed. "An employer's promise to pay a bonus in return for an at-will employee's continued employment is an offer for a unilateral contract." To make an offer for a unilateral contract irrevocable, the offeree need only begin performance. The purpose of this rule is to protect the offeree's justifiable reliance on the offeror's promise. In this case, each of the managers had begun performing. Therefore, the offer had become irrevocable, and Panera could not modify its terms. Of course, "Panera could have terminated the managers if it chose and precluded them from receiving the bonus, but it did not."

Ex contract law

If Alicia agrees to Snapchat's terms of service but then reverse-engineers Snapchat's software to create competing software, she has breached her contract with Snapchat.

mix

If one party has fully performed but the other has not, the contract is said to be executed on the one side and executory on the other, but the contract is still classified as executory.

Example of executed and executory

Jackson, Inc., agreed to buy ten tons of coal from the Northern Coal Company. Northern has delivered the coal to Jackson's steel mill, but Jackson has not yet paid. At this point, the contract is executed on the part of Northern and executory on Jackson's part. After Jackson pays Northern, the contract will be executed on both sides.

Example 2.0 of Bilateral

Javier offers to buy Ann's smartphone for $200. Javier tells Ann that he will give her the cash for the phone on the following Friday, when he gets paid. Ann accepts Javier's offer and promises to give him the phone when he pays her on Friday. Javier and Ann have formed a bilateral contract.

Mixed of express and implied contract example

Lamar Hopkins hired Uhrhahn Construction & Design, Inc., for several projects in the construction of his home. For each project, the parties signed a written contract that was based on a cost estimate and specifications and that required changes to the agreement to be in writing. While the work was in progress, however, Hopkins repeatedly asked Uhrhahn to deviate from the contract specifications, which Uhrhahn did. None of these requests was made in writing. One day, Hopkins asked Uhrhahn to use Durisol blocks instead of the cinder blocks specified in the original contract, indicating that the cost would be the same. Uhrhahn used the Durisol blocks but demanded extra payment when it became clear that the Durisol blocks were more complicated to install. Although Hopkins had paid for the other orally requested deviations from the contract, he refused to pay Uhrhahn for the substitution of the Durisol blocks. Uhrhahn sued for breach of contract. The court found that Hopkins, through his conduct, had waived the provision requiring written contract modification and created an implied contract to pay the extra cost of installing the Durisol blocks.

Case (limitation on quasi) State farm automoble insurance v newberg chripractic

Michael Plambeck owned two chiropractic clinics in Kentucky that treated many patients injured in car accidents, including some who were customers of State Farm Automobile Insurance Company. All of the clinics' treating chiropractors were licensed to practice in Kentucky, but Plambeck (the owner) was not. Plambeck was a licensed chiropractor in another state but had allowed his Kentucky license to lapse because he was not treating any patients. Plambeck did not realize that Kentucky state law required him to be licensed as the owner of the clinics. When State Farm discovered that Plambeck was not licensed in Kentucky, it filed a suit against the clinics seeking to recover payments it had made on behalf of its customers. The trial court awarded State Farm $577,124 in damages for unjust enrichment, but the appellate court reversed. The court reasoned that State Farm had a legal duty to pay for the chiropractic treatment of its customers and could not avoid paying for the services because the clinics' owner was not licensed. The payments did not constitute unjust enrichment, because the patients had, in fact, received treatment by licensed chiropractors.

examples of voidable contracts

Minors generally are voidable, contracts made by incompetent persons and intoxicated persons, contracts entered into under fraudulent conditions, contracts entered into under legally definded duress or undue influence

When the court imposes a quasi contract, a plantiff may recover

Quantum Meruit

Case Actual contract exhists, quasi cant. R&M trucking intermodal, inc v Dr miracles inc

R & M Trucking-Intermodal, Inc., is a trucking company in Illinois that provides transportation and warehousing services in the Chicago area. Richard Lombardi is a top executive at DRM Holdings, Inc., which, along with Dr. Miracle's, Inc., produces and distributes hair care products. Lombardi contracted with R & M to transport a large amount of inventory (773 pallets, or twenty full-size trailer loads) of hair relaxer kits for DRM. Lombardi then requested that R & M store the inventory until DRM could pick it up. R & M agreed to store the goods for a weekly storage fee, but DRM never came to remove the pallets, despite repeated requests. DRM owed nearly $430,000 on the account, and payments were sporadic. Eventually, R & M filed a lawsuit, asserting a number of claims, including both breach of contract and quasi contract. Lombardi filed a motion to dismiss. The court held that R & M's quasi-contract claim must be dismissed under state law, because an express contract already existed that governed the parties' relationship.

Example of unilateral

Reese says to Kay, "If you drive my car from New York to Los Angeles, I'll give you $1,000." Only on Kay's completion of the act—bringing the car to Los Angeles—does she fully accept Reese's offer to pay $1,000. If she chooses not to accept the offer to drive the car to Los Angeles, there are no legal consequences.

Implied contract example

Ryan, a small business owner, needs an accountant to complete his tax return. He drops by a local accountant's office, explains his situation to the accountant, and learns what fees she charges. The next day, he returns and gives the receptionist all of the necessary documents to complete his tax return. Then he walks out without saying anything further. In this situation, Ryan has entered into an implied contract to pay the accountant the usual fees for her services. The contract is implied because of Ryan's conduct and hers. She expects to be paid for completing the tax return, and by bringing in the records she will need to do the job, Ryan has implied an intent to pay her.

Case: Revocation of offers:(Seiko and Jins)

Seiko offers to buy Jin's sailboat, moored in San Francisco, on delivery of the boat to Seiko's dock in Newport Beach, three hundred miles south of San Francisco. Jin rigs the boat and sets sail. Shortly before his arrival at Newport Beach, Jin receives a message from Seiko withdrawing her offer. Is the offer terminated? In contract law, offers are normally revocable (capable of being taken back, or canceled) until accepted. Under the traditional view of unilateral contracts, Seiko's revocation would terminate the offer. Because Seiko's offer was to form a unilateral contract, only Jin's delivery of the sailboat at her dock would have been an acceptance.

Case Objective Theory "Leaf invenergy company v Invenergy renwables

The Leaf Clean Energy Company invested $30 million with Invenergy Wind, a wind energy developer. The investment contract prohibited Invenergy from conducting a "Material Partial Sale" without Leaf's consent. If such a sale occurred, Invenergy was required to pay Leaf a penalty. After Invenergy concluded a $1.8 billion "Material Partial Sale" without Leaf's consent, the investment company sued to obtain its penalty under the contract, which was about $126 million. A lower court agreed that Invenergy had breached the contract but awarded Leaf only one dollar in damages. The court reasoned that, under the terms of the agreement, if Leaf had been notified and agreed to the sale, Leaf would not have received any payment. (That is, Leaf was entitled to a penalty only if Invenergy breached the contract.) It would have been unfair for Leaf to gain such a large amount when it had not suffered any actual harm. Applying the objective theory of contracts, the Delaware Supreme Court reversed and ordered Invenergy to pay Leaf the $126 million. The appellate court scolded the lower court for ignoring the "clear and unambiguous" terms of the contract, which were designed to prevent Invenergy from making any major financial decisions without Leaf's consent.

2. Form

The contract must be in whatever form the law requires some contracts must be in writing to be enforceable

4. Legality

The contracts purpose must be accomplish some goal that is legal and not against public policy

The objective theory of contracts

The view that contracting parties shall be bound only by terms that can be objectively inferred from promises made

Example of formal contracts is letters of credit

Which are frequently used in international sales contracts

Express contract

a contract in which the terms of the agreement are states in words, oral or written ex: - signed lease - classmate offer to sell you a txt book for $200 an oral contract has been made

Voidable Contract

a contract that may be legally avoided at the option of one or both parties - the party having the otion can elect either to avoid any duty to perform or to retify (make value) the contract - if avoided both paries are released from it -Ratified - both parties must fully perform their legal obligation

consider custom and usage

a court will look at the trade customs and usgae common to the particular business or industry and to the locale in which the contract was made or to be performed

Quantum Meruit

a latin phrase meaning "as much as one deserves" the expression describes the extent of compensation owed under a quasi contract

Under the objective theory of contracts

a partys intention to enter into a contract is judged by outware, objective facts as interpreted by a reasonable person, rather than by the parts secret subjective intention

Offeror

a person who makes an offer (promising to do or not do something)

Revocation of offers for unilateral contracts

a problem arises in unilateral contracts when the promisor attempts to revoke (Cancel) the offer after the promisee has begun the performance but before the act has been completed

Quasi cannot generally be used when

an actual contract exhsits. The nonbreaching party can sue the breaching party for breach of contract

Formal contract

an agreement that by law requires a specific form for its validity (requires a special form or method of creation to be enforceable)

Quasi contract

an obligation or contract imposed by law (A court), in the absense of an agreement, to preent the unjust enrichment of one party - equitable rather than legal contracts 0 imposed to avoid the unjust enrichment of one party at the expense of another -

Mixed contracts w express and implied terms

can have a mixture of both. may contain some terms and others are implied

Contract performance

contracts are also classified according to the state of their performance

Contract law

distinguishes between promises that create only moral obligations and promises that are legally binding

example

during the construction of a home, the homeowner often asked the builder to make changes in the original specifications

Plain language laws

enacted by federal government and majority of states ti regulate legal writing and eliminate legalse - all fed anecies are required to use plain language in most forms and written communications

Contracts may be

enforceable, voidable or unenforcable

Valid contract

has four elements neccesary to entitle at least one of the parties to enforce it in court 1. agreements 2. dupports by legally sufficient consideration 3. made by paries who have the legal capactiy to enter into the contract 4. for legal purpose

Example of formal contract is negotiable instruments

include checks, drafts, promissory notes and certificates of deposits - bc a special form and language are required to create them

Executory Contract

not yet been fully performed

In determining whether a contract has been formed, the element of intent is of prime importance. Intent is determined by what to is referred to as the

objective theory of contracts

Bilateral

promising to perform, promise for a promise

***An agreement to form a contract can modify the terms of a previous contract. When a dispute concerns whether this has occurred, the offer and acceptance of both agreements can be reviewed to determine their effect. If the terms are ambiguous, evidence outside the expression of an agreement can be considered to determine what the parties intended at the time.

subjective beliefs with respect to the terms are irrelevant, particularly in the absense of any evidence that supports those beliefs

express terms

terms expressly state in contract give the greaest weight, followed by course of performance, course of dealing and custom and usage of trade

States frequently have plain language laws

that apply to customer contracts, primarily for personal, family and household purposes

1. Voluntary Consent

the consent of both parties must be voluntary. For instance, if a contract was formed as a result of fraud, mistake or duress (coercion) the contract may not be enforceable

Offeree

the party to whom the offer is made

lots of contracts are written plainly

to avoid misinterpretation. btu it still isnt always clear

rules of interpretation

to determine the parties' intent from the language used in their agreement and to give effect to that intent.

Contract law is designed

to provide stability and predictability, for both buyers and sellers in markets

contractual relationship is needed when

you borrow funds, or buy or lease a house, obtain insurance, form a business or purchase goods or services