BLAW Exam 3
Quasi Contract
court-imposed obligation to prevent unjust enrichment in the absence of a contract A possible remedy for an injured plaintiff in a case with no valid contract, when the plaintiff can show benefit to the defendant reasonable expectation of payment and unjust enrichment
Kaye contracted to sell Hodges a building for $310,000. The contract required Hodges to pay the entire amount at closing. Kaye refused to close the sale of the building. Hodges sued Kaye. To what relief is Hodges entitled? ⦁ punitive damages and direct damages ⦁ specific performance and direct damages ⦁ consequential damages or punitive damage ⦁ direct damages or specific performance
direct damages or specific performance
Lenny makes K2, a synthetic form of marijuana, in his basement. He signs an agreement with the Super Smoke Shop to deliver 1000 cans of K2 for $10,000. After the contract is signed, but before the delivery, Super Smoke Shop's state legislature makes the sale of K2 illegal. Lenny's contract will be discharged because of ____. ⦁ true impossibility ⦁ commercial impracticability ⦁ frustration of purpose ⦁ none of the above
true impossibility Impossibility is an excuse that can be used by a seller as an excuse for non-performance when an unforeseen event occurs after the contract is made which makes performance impossible.
Sale of Goods
"Goods" means anything moveable, except for money, securities, and certain legal rights ie land or a house
Big Co., a construction company, builds a grocery store. The contract calls for a final price of $5 million. Big Co. incurred $4.5 million in costs and stands to make a profit of $500,000. On a final inspection, the grocery store owner is upset. His blueprints called for 24 skylights, but the finished building has only 12. Installing the additional skylights would cost $100,000. Big Co. made no other errors. How much must the grocery store owner pay Big Co.? ⦁ $5,000,000 ⦁ $4,900,000 ⦁ $4,500,000 ⦁ $0
$4,900,000
Know difference between void and voidable. Void: neither party can enforce; voidable: one party can choose to set aside the contract.
--Fraud: Voidable --Intoxicated party: Voidable --Gambling unauthorized by statute: Void --Usury: Void Usury laws are laws that limit the amount of interest that can be charged. The word usury means illegal or exorbitant interest rates.
Sixteen-year-old Travis Mitchell brought his Pontiac GTO into M&M Precision Body and Paint for body work and a paint job. M&M did the work and charged $1,900, which Travis paid. When, Travis later complained about the quality of the work, M&M did some touching up, but Travis was still dissatisfied. He demanded his $1,900 back, but M&M refused to refund it since all of the work was "in" the car and Travis could not return it to the shop. The state of Nebraska, where this occurred, follows the majority rule on this issue. Does Travis get his money? Is this a fair result?
: Yes, Travis gets his money. In most states, a minor is permitted to disaffirm a contract and get a full refund of his money, even if he is unable to make restitution. Since restitution is impossible here, Travis wins his money while M&M gets nothing. Mitchell v. Mizerski, 1995 Neb. Asp. LEXIS 99 (Neb. 1995). The common law rule is intended to discourage wily hucksters from preying on minors, selling them goods they cannot afford and do not need. The best way to insure against such sales is to let the seller know the minor has the right to rescind, even if the goods are destroyed. Few judges have shown any inclination to change the rule. It is true that some minors are street smart, and might take advantage of the rule. However, the answer, in the opinion of most courts, is that a concerned seller can easily protect himself by not making the sale.
Angela makes a material misstatement of fact to Lance which he relies on it when he signs Angela's contract. Fraud exists if Angela made the misstatement ____. ⦁ intentionally ⦁ recklessly ⦁ carelessly ⦁ A and B only ⦁ A, B, and C
A and B only
For consideration to exist, there must be: ⦁ A bargained-for exchange ⦁ A manifestation of mutual assent ⦁ Genuineness of assent ⦁ Substantially equal economic benefits to both parties
A bargained- for exchange
Parkinson was injured in an auto accident by a driver who had no insurance. Parkinson filed a claim with her insurer, Liberty Mutual, for $2,000 under her "uninsured motorist" coverage. Liberty Mutual told her that if she sought that money, her premiums would go "sky high," so Parkinson dropped the claim. Later, after she had spoken with an attorney, Parkinson sued. What additional claim was her attorney likely to make?
A claim for punitive damages, based on Liberty Mutual's bad faith in discouraging Parkinson from filing a claim for money to which she was entitled. The court awarded her $2,000 for uninsured motorist coverage and $40,000 punitive damages. Liberty Mutual Insurance Co. v. Parkinson, 487 N.E.2d 162, reh'g denied, 491 N.E.2d 229 (Ind. Ct. App. 1986).
Implied Contract
A contract formed in whole or in part from the conduct of the parties.
Express Contract
A contract in which the terms of the agreement are fully and explicitly stated in words, oral or written.
Injunction
A court order that requires someone to do something or refrain from doing something
Commercial Impracticability
A doctrine that may excuse the duty to perform a contract when performance becomes much more difficult or costly due to forces that neither party could control or contemplate at the time the contract was formed.
Specific Performance
A legal action to compel a party to carry out the terms of a contract.
bi-lateral contract
A promise made in exchange for another promise
Four Elements of a Contract
Agreement: one party must make a valid offer, and the other party must accept it; a meeting of the minds, Consideration: There has to be bargaining that leads to an exchange between the parties. Legality: The contract must be for a lawful purpose. Capacity: The parties must be adults of sound mind.
5. Which of the following amounts to an offer? ⦁ Ed says to Carmen, "I offer to sell you my pen for $1." ⦁ Ed says to Carmen, "I'll sell you my pen for $1." ⦁ Ed writes, "I'll sell you my pen for $1," and gives the note to Carmen. ⦁ All of the above ⦁ A and C only.
All of the above
Ted's wallet is as empty as his bank account, and he needs $3,500 immediately. Fortunately, he has three gold coins that he inherited from his grandfather. Each is worth $2,500, but it is Sunday, and the local rare coins store is closed. When approached, Ted's neighbor Andrea agrees to buy the first coin for $2,300. Another neighbor, Cami, agrees to buy the second for $1,100. A final neighbor, Lorne, offers "all the money I have on me" - $100 - for the last coin. Desperate, Ted agrees to the proposal. Which of the deals is supported by consideration? ⦁ Ted's agreement with Andrea, only ⦁ Ted's agreements with Andrea and Cami, only ⦁ All three of the agreements ⦁ None of the agreements
All three of the agreements
John and Susan Verba sold a Vermont lakeshore lot to Shane and Deborah Rancourt for $115,000. The Rancourts intended to build a house on the property, but after preparing the land for construction, they learned that a wetland protection law prevented building near the lake. They sued, seeking rescission of the contract. The trial court concluded that the parties had reached their agreement under a "mutual, but innocent, misunderstanding." The trial judge gave the Verbas a choice: they could rescind the contract and refund the purchase price, or they could give the Rancourts $55,000, the difference between the sales price and the actual market value of the land. The Rancourts appealed. Were the Rancourts entitled to rescission of the contract?
Argument for the Rancourts: When the parties have made a mutual mistake about an important factual issue, either party is entitled to rescind the contract. The land is of no use to us and we want our money back. Argument for the Verbas: Both sides were acting in good faith and both sides made an honest mistake. We are willing to acknowledge that the land is worth somewhat less than we all thought, and we are willing to refund $55,000. The buyers shouldn't complain—they are getting the property at about half the original price, and the error was as much their fault as ours. Answer: The Rancourts win, and are entitled to rescission. Both parties clearly intended that the Rancourts would build a house near the lake. They cannot do so. That is a basic error of fact, and the Rancourts get their money back. The judge has no power to reshape the contract to express expectations that neither party ever held.
American Bakeries had a fleet of over 3,000 delivery trucks. Because of the increasing cost of gasoline, the company was interested in converting the trucks to propane fuel. It signed a requirements contract with Empire Gas, in which Empire would convert "approximately 3,000" trucks to propane fuel, as American Bakeries requested, and would then sell all required propane fuel to run the trucks. But American Bakeries changed its mind and never requested a single conversion. Empire sued for lost profits. Who won?
Empire won over $3.2 million dollars, and the appeals court affirmed. Empire Gas Corp. v. American Bakeries Co., 840 F.2d 1333, 1988 U.S. App. LEXIS 2482 (7th Cir. 1988). Since this was a requirements contract for the sale of goods (the conversion units and the propane gas were the goods), it was governed by UCC §2306. American Bakeries did have the right to reduce the number of conversions from the estimated 3,000. It could potentially reduce them even to zero, but any reduction had to be done in good faith, meaning that changed circumstances made a reduction important. Here, American Bakeries never offered any reason at all, and the jury verdict was reasonable.
When a Tom Cat Bakery delivery van struck Elizabeth Nadel, she suffered significant injuries, Nadel filed suit. Before the trial, Tom Cat's attorney offered a $100,000 settlement, which Nadel refused. While the jury was deliberating, the bakery's lawyer again offered Nadel the $100,000 settlement. She decided to think about it during lunch. Later that day, the jury sent a note to the judge. The bakery owner told her lawyer that if the note indicated the jury had reached a verdict, he should revoke the settlement offer. Back in the courtroom, the bakery's lawyer said, "If the note is a verdict, my client wants to take the verdict." Nadel's lawyer then said, "My client will take the settlement." The trial court judge allowed the forewoman to read the verdict, which awarded Nadel—nothing. Did Nadel's lawyer accept the settlement offer in time?
Excerpts from Judge Figueroa's Decision: Plaintiff's motion to enforce "the settlement" has generated considerable debate between the parties. Plaintiff asserts that the defendant is bound to a settlement. Plaintiff's problem is that there was no "agreement" to speak of. To be sure, there was an offer from defendant. During the above-quoted colloquy, clearly there were also words of acceptance from plaintiff. But when the words, "my client will take the settlement" were uttered, it was too late for them to be effective. By that time, defense counsel had made it clear that if the jury had already come to a verdict, the offer was off the table. That condition could not be ignored, as the verdict that would mean all bets were off had already been reached. For the foregoing reasons, plaintiff's motion is denied.
T/F Courts will scrutinize the value of consideration in determining whether consideration is adequate to form a contract
False.
T/F An advertisement is an offer.
False. It is an invitation to bargain. A counteroffer is also a new offer.
T/F Juries can award money damages and equitable remedies
False. Only judges can award equitable remedies. Equitable remedies are remedies awarded injured parties when a money award will not suffice. These include: specific performance, injunctions, and reformation.
T/F Quatum meruit can be a valid claim even though a contract exists.
False. Quantum meruit (as much as he deserves) or quasi-contract is a potential remedy when a contract is not formed. This is also true of promissory estoppel.
T/F The statute of limitations for contract actions controls the maximum amount of money a party can sue for in a law suit involving a violation of a contract.
False. The statute of limitations sets the time limit for when a law suit can be filed.
T/F Anticipatory breach occurs when a party acts in bad faith in completing its side of a contract.
False. This is failing to act in good faith. Anticipatory breach occurs when a party makes it unmistakably clear that it will not honor a contract.
Frank, an accountant, says to Missy, "I'll sell you my laptop for $100." Missy asks, "Will you give me until tomorrow to make up my mind?" "Sure," Frank replies. Which of the following is true? ⦁ Frank cannot revoke his offer, no matter what. ⦁ Frank cannot revoke his offer only if Missy pays him to keep the offer open until tomorrow. ⦁ Frank can revoke his offer no matter what, because he is not a merchant. ⦁ Frank can revoke his offer no matter what, because he did not promise Missy anything in writing.
Frank cannot revoke his offer only if Missy pays him to keep the offer open until tomorrow. Frank may choose to keep the offer open, but he is not required to unless Missy pays for an options contract.
Melnick built a house for Gintzler, but the foundation was defective. Gintzler agreed to accept the foundation if Melnick guaranteed to make future repairs caused by the defects. Melnick agreed but later refused to make any repairs. Melnick argued that his promise to make future repairs was unsupported by consideration. Who will win the suit? Is either party acting unethically? Which one, and why?
Gintzler should, and did. The consideration to support Melnick's promise of repairs was Gintzler's acceptance of the defective foundation. He was under no obligation to accept a house in that condition. Gintzler v. Melnick, 116 N.H. 566,364 A.2d 637 (1976).
⦁ Madison says to a group of students, "I'll pay $35 to the first one of you who shows up at my house and mows my lawn." ⦁ Lea posts a flyer around town that reads, "Reward: $500 for information about the person who keyed my truck last Saturday night in the Wag-a-Bag parking lot. Call Lea at 555-5309." 6. Which of these proposes a unilateral contract? ⦁ I only ⦁ II only ⦁ Both I and II ⦁ None of the above
Got to look at terms of contract 1) Agreement 2) Consideration 3) Legality 4) Capacity
CeCe Hylton and Edward Meztista, partners in a small advertising firm, agreed to terminate the business and split assets evenly. Meztista gave Hylton a two-page document showing assets, liabilities, and a bottom line of $35,235.67, with one half due to each partner. Hylton questioned the accounting, and asked to see the books. Meztista did not permit Hylton to see any records, and refused to answer her phone calls. Instead, he gave her a check in the amount of $17,617.83, on which he wrote "Final payment/payment in full." Hylton cashed the check, but wrote on it, "Under protest—cashing this check does not constitute my acceptance of this amount as payment in full." Hylton then filed suit, demanding additional monies. Meztista claimed that the parties had made an accord and satisfaction. What is the best argument for each party? Who should win?
Hylton argued that in denying her access to the books, Meztista had not shown the good faith required to support accord and satisfaction. Meztista argued that the good faith requirement applies only to offering the accord, not to any of the underlying business negotiations. The court agreed with Meztista, who won. Although he may have shown bad faith while dividing up the assets, he offered his accord in good faith, knowing that the parties disagreed about the value of the business. At that point, Hylton's only choices were to reject the check or to accept it as full payment. Her "restrictive endorsement" had no legal effect. Ex Parte Meztista, 2001 WL 1021725, Alabama Supreme Court, 2001
Unilateral contract
In an unilateral contract one party makes a promise that the other party can accept only by actually doing something
Past consideration
Is not valid consideration
Void Agreement
Is one that neither party can enforce, usually because the purpose of the deal is illegal or because one of the parties had no legal authority to make a contract.
Machado Ford published the following newspaper ad: "Buy a New Ford and Get $3,000 Minimum Trade-In Allowance." Izadi attempted to purchase a new Ford Ranger valued at $6,595 for $3,595 in cash plus his trade=in (assuming the minimum trade=in allowance). Machado refused. The ad's superfine print indicated that the offer was only good towards two other vehicle models and that the trade-in must be worth at least $3,000. Izadi sued, arguing that the ad was misleading. Machado contended that it did not mean for the ad to be interpreted as it was. Who should prevail?
Izadi prevails. The ad was misleading, whether or not Machado Ford intended for it to be so, and the fine print too fine. Ford's ad amounted to a bait and switch tactic. Izadi v. Machado (Gus) Ford, Inc., 550 So.2d 1135 (Fla. 3d DCA 1989)
Manny offers to sell Gina his television for $100 on January 1. On January 2, Gina writes out a letter of acceptance. On January 3, Gina drops the letter in a mailbox. On January 4, a postal worker gets the letter out of the mailbox and takes it to the post office. On January 5, the letter arrives in Manny's mailbox. When (if ever) was a contract formed? ⦁ January 2 ⦁ January 3 ⦁ January 4 ⦁ January 5 ⦁ None of the above - a contract has not been formed.
January 3 The contract was formed on January 3, when Gina mailed the letter.
Brunswick owned a tennis club on property that it leased form Route 18. Upon expiration of its 25-year lease, Brunswick had the option of either buying the property or purchasing a 99-year lease, both on very favorable terms. To exercise its option, Brunswick had to notify route 18 no later than September 30 and had to pay the option price of $150,000. If Brunswick failed to exercise its options, the existing lease automatically renewed for 25 more years at more than triple the current rent. Over a year before the deadline, Brunswick informed Route 18 that it intended to exercise the option for a 99-year lease and asked to review the new lease. Route 18 responded with delays and did not provide a new lease, despite repeated pleas. After the September deadline passed, Route 18 notified Brunswick that it was too late to exercise the option because it did not pay the $150,000 on time. Brunswick sued, claiming that Route 18 had breached its duty of good faith and fair dealing. What result?
Judgment for Brunswick. Route 18 breached its duty of good faith and fair dealing. Brunswick Hills Racquet Club, Inc., v. Route 18 Shopping Center Associates, a Limited Partnership, 182 N.J. 210, 864 A.2d 387 (2005)
Arturo hires Kate to work in his new sporting goods store. "Look," he explains, "I can only pay you $9.00 an hour. But if business is good a year from now, and you're still here, I'm sure I can pay you a healthy bonus." Four months later Arturo terminates Kate. She sues. ⦁ Kate will win her job back, plus the year's pay and the bonus. ⦁ Kate will win the year's pay and the bonus. ⦁ Kate will win only the bonus. ⦁ Kate will win only her job back. ⦁ Kate will win nothing.
Kate will win nothing Kate will win nothing. The only thing Arturo obligated himself to do was to pay $9.00 an hour while Kate worked. He did not promise her a year's employment. The statement about the bonus was too indefinite to be enforceable: there is no way to measure whether "business is good" or what a "healthy" bonus is.
Kerry finds a big green ring in the street. She shows it to Leroy, who says, "Wow. That could be valuable." Neither Kerry nor Leroy knows what the ring is made of or whether it is valuable. Kerry sells the ring to Leroy for $100, saying, "Don't come griping if it turns out to be worth two dollars." Leroy takes the ring to a jeweler who tells him it is an unusually perfect emerald, worth at least $75,000. Kerry sues to rescind. ⦁ Kerry will win based on fraud. ⦁ Kerry will win based on mutual mistake. ⦁ Kerry will win based on unilateral mistake. ⦁ Kerry will lose.
Kerry will lose, based on conscious uncertainty. If Leroy knew the ring was valuable, Kerry could win based on unilateral mistake. If both parties were certain that it was worthless, Kerry could win based on mutual mistake. But here, the parties are aware that it might be priceless and might be worthless. Each has accepted the risk and must live with the results.
Material Breach
Material breach is a contract law term which refers to a failure of performance under the contract which is significant enough to give the aggrieved party the right to sue for breach of contract.
Miller listed her home for sale. On August 4th, Norman made an offer, specifying that it must be accepted by 5:00 p.m. on August 5th. Miller received the offer, made several changes, signed it, and returned it to Norman. Norman did not respond. On August 5th at noon, Segal offered to buy Miller's house and Miller accepted. Miller than revoked the counteroffer to Norman. But right before 5:00 p.m., Norman initialed Miller's counteroffer and delivered it with a deposit. To whom, if anyone, did Miller sell her home?
Miller has sold her home to Segal. Although she made changes to Norman's offer, signed it, and returned it to Norman, Norman did not respond to the changes, and his assent was required. Even though Norman's offer specified that it had to be accepted by 5:00 p.m. on August 5, Miller's counteroffer rejected Norman's offer, and the rejection was received when she returned it to Norman, so no offer was pending between them. Meanwhile, Segal's offer was made and accepted. Norman's initialing of Miller's counteroffer was too late, since at the time he initialed it, it was no longer pending, and had been revoked. Normile v. Miller, 326 S.E.2d 11, Supreme Court of North Carolina (1985)
Which of the following requires consideration in order to be binding on the parties? ⦁ Modification of a contract involving the sale of real estate ⦁ Modification of a sale of goods contract under the UCC ⦁ Both (a) and (b) ⦁ None of the above
Modification of a contract involving the sale of real estate
The Madariagas owned a restaurant where they served "Albert's Famous Mexican Hot Sauce." They entered into a contract to sell the restaurant and the formula for the secret sauce to Morris. Although Morris paid the agreed-upon price, the sellers refused to give him the recipe unless he also paid them lifetime royalties for the sales. Which of these remedies should Morris seek; expectation, restitution, specific performance or reformation? Why?
Morris should seek specific performance, and compel the Madariagas to give him the recipe, as was set forth in their contract. Madariaga v. Morris, 639 S.W.2d 709 )1982)
Lewis signed a contract for the rights to all timber located on Nine Mile Mine. He agreed to pay $70 per thousand board feet ($70/mbf). As he began work, Nine Mile became convinced that Lewis lacked sufficient equipment to do the job well and forbade him to enter the land. Lewis sued. Nine Mile moved for summary judgment. The mine offered proof that the market value of the timber was exactly $70/mbf, and Lewis had no evidence to contradict Nine Mile. The evidence about market value proved decisive. Why? Please rule on the summary judgment motion.
Motion granted. Nine Mile may have breached the agreement, but there is no evidence that Lewis lost money. To win he must demonstrate a difference between the contract price and the market value of the timber. There was no difference, and he recovers nothing. Lewis v. Nine Mile Mines, Inc., 886 P.2d 912, 1994 Mont. LEXIS 283 (Mont. 1994).
The town of Sanford, Maine, decided to auction off a lot it owned. The town advertised that it would accept bids through the mail, up to a specified date. Arthur and Arline Chevalier mailed in a bid that turned out to be the highest. When the town refused to sell them the lot, they sued. Result?
No contract, no sale. An auction is with reserve unless stated otherwise. The ad was silent on the subject, so this auction was with reserve. That means that all of the bids, including the highest, are merely offers. The auctioneer, in this case the town, has the right to reject all of the offers, and the Chevaliers have no right to the lot. Chevalier v. Town of Sanford, 475 A.2d 1148 (Me. 1984).
Roy Newburn borrowed money and bought a $49,000 truck from Treadwell Ford. A few months later the truck developed transmission problems. Newburn learned that the truck had 170,000 more miles on it than the odometer indicated. The company admitted the mileage error and promised to install a new transmission free. Treadwell did install the new transmission, but when Newburn came to pick up the truck, Treadwell demanded that he sign a general release absolving the dealership of any claims based on the inaccurate mileage. Treadwell refused to turn over the truck until Newburn finally signed. The truck broke down again, and delays cost Newburn so much income that he fell behind on his loan payments and lost the truck. He sued Treadwell, which defended based on the release. Is the release valid?
No. Newburn signed under economic duress. Treadwell had no right to hold the truck, Newburn had no reasonable alternative, and Treadwell's conduct caused economic distress. The release was invalid and Newburn was entitled to damages for his losses. Newburn v. Dobbs Mobile Bay, Inc., 657 So.2d 849, 1995 Ala. LEXIS 137 (Ala.1995).
Guyan Machinery, a West Virginia manufacturing corporation, hired Albert Voorhees as a salesman and required him to sign a contract stating that if he left Guyan he would not work for a competing corporation anywhere within 250 miles of West Virginia for a two-year period. Later, Voorhees left Guyan and began working at Polydeck Corp., another West Virginia manufacturer. The only product Polydeck made was urethane screens, which comprised half of 1 percent of Guyan's business. Is Guyan entitled to enforce its noncompete clause?
No. The noncompete clause is unenforceable here because the two companies are not really in competition and Guyan therefore has no confidential information or customer lists to protect. Voorhees v. Guyan Machinery Co., 191 W. Va. 450, 446 S.E.2d 672, 1994 W.Va. LEXIS 27 (1994).
On television and in magazines, Maurine and Mamie Mason saw numerous advertisements for Chrysler Fifth Avenue automobiles. The ads described the car as "luxurious," "quality-engineered," and "reliable." When they went to inspect the car, the salesman told them the warranty was "the best comparable to Cadillacs and Lincolns." After the Masons bought a Fifth Avenue, they began to have many problems with it. Even after numerous repairs, the car was unsatisfactory and required more work. The Masons sued, seeking to rescind the contract based on the ads and the dealer's statement. Will they win?
No. The statements are all puffery. Mason v. Chrysler Corp
Substantial Performance
Occurs when one party fulfills enough of its contract obligations to warrant payment
Voidable Contract
Occurs when the law permits one party to terminate the agreement.
Carol says, "Pam, you're my best friend in the world. I just inherited a million bucks, and I want you to have some of it. Come with me to the bank tomorrow, and I'll give you $10,000." "Sweet!" Pam replies. Later that day, Carol has a change of heart. She is allowed to do so. Examine the list of the elements of a contract, and cite the correct reason. ⦁ The agreement was not put into writing. ⦁ The agreement lacks a legal purpose. ⦁ Pam did not give consideration. ⦁ Pam does not have the capacity to make a contract.
Pam did not give consideration This is because no consideration besides complementing the word "sweet"
Parol Evidence
Parol evidence rule: When two parties make an integrated contract, neither one may use parol evidence to contradict, vary or add to its term.
Auction
Placing an item up for auction is not an offer it is merely a request for an offer
Valid Contract
Satisfies all of the law's requirements Offer Acceptance Consideration Legality Capacity Consent Writing
Wells Fargo Armored Service offered a $25,000 reward for information leading to the arrest and conviction of the person who shot one of its guards. Slattery worked as an independent contractor conducting lie detector tests in the State Attorney's office. While he was questioning a man about an unrelated event, the fellow confessed to the Wells Fargo crime, and was ultimately convicted. When Slattery sued Wells Fargo for the reward, it refused to pay. Is Slattery entitled to the reward: Why?
Slattery was under a preexisting duty to report all useful information revealed during his interrogation to his employers. A preexisting duty does not provide consideration for the alleged agreement. Slattery v. Wells Fargo Armored Serv. Corp., 366 So.2d 157 (1979)
Rebecca, in Honolulu, faxes a job offer to Spike, in Pittsburgh, saying, "We can pay you $55,000 per year, starting June 1." Spike faxes a reply, saying, "Thank you! I accept your generous offer, though I will also need $3,000 in relocation money. See you June 1. Can't wait!" On June 1 Spike arrives, and find that his position is filled by Gus. He sues Rebecca. ⦁ Spike wins $55,000. ⦁ Spike wins $58,000. ⦁ Spike wins $3,000. ⦁ Spike wins restitution. ⦁ Spike wins nothing.
Spike wins nothing. Although he used the phrase, "I accept," he included a counteroffer, which is a rejection of Rebecca's offer. She has no obligation to him.
Revocation
Taking back of an offer by the offeror because the offeror has a change in mind or circumstances and decides to withdraw the offer before it has been accepted.
Bob Elloti is a basketball coach for Oregon State University. The President of the university wishes to hire a new coach. He enters into a contract that contains the following language: "The university will pay you $975,000 per year to serve as Athletic Director. In exchange for your past efforts, the university will also pay you $2.3 million whenever you decide to leave the employ of the university." After two months, Elloti leaves his AD position to take a job as a broadcaster for Fox. The university refuses to pay the $2.3 million, and the former coach sues. What result and why? (1 point)
The University should win. Past consideration is not valid consideration.
The Basultos were Cuban immigrants who spoke only Spanish. When they purchased a new minivan from Potamkin Dodge, the dealer had them sign a blank, English-language contract with the promise that he would fill in the agreed-upon numbers later. But then the dealer completed the sales contract with numbers that were higher than those agreed upon. The couple tried to sue, only to realize that they had inadvertently signed away their rights because the contract contained, in tiny print, an arbitration clause. What remedy is available to the Basultos?
The arbitration clause can be stricken for unconscionability, and an injunction issued; the Basultos may sue. Basulto v. Ialeah Automotive, 3D07-855 (Fl.App.3 Dist. 10-15-2008); affirmed on appeal Dicks,
What is the primary purpose of business contracts?
To make things predictable.
KwikFix, a Fortune 500 company, contracts with Allied Rocket, another huge company, to provide the software for Allied's new Jupiter Probe rocket for $14 million. The software is negligently designed, and when the rocket blasts off from Cape Kennedy, it travels only as far as Fort Lauderdale. Allied Rocket sues for $200 million and proves that as a result of the disaster it lost a huge government contract, worth at least that much, which KwikFix was aware of. KwikFix responds that its contract with Allied included a clause limiting its liability to the value of the contract. Is the contract clause valid? ⦁ The clause is unenforceable because it is unconscionable. ⦁ The clause is unenforceable because it is exculpatory. ⦁ The clause is enforceable because both parties are sophisticated corporations. ⦁ The clause is enforceable because $200 million is an unconscionable claim.
The clause is enforceable. There is no unconscionability problem because this is not an adhesion contract and the terms were negotiated by sophisticated corporations that could have taken their business elsewhere if they were dissatisfied with the contract.
Commercial Union Insurance Co. (CU) insured Redux, Ltd. The contract made CU liable for fire damage, but stated that the insurer would not pay for harm caused by criminal acts of any Redux employees. Fire destroyed Redux's property. CU claimed that the "criminal acts" clause was a condition precedent, but Redux asserted it was a condition subsequent. What difference does it make, and who is legally right? Does the insurance company's position raise any ethical issues? Who drafted the contract? How clear were its terms?
The type of condition determines who must prove the source of the fire. CU claimed that the clause was a condition precedent, meaning that Redux had the burden of proving the fire was not arson. Redux argued that the clause was a condition subsequent, meaning that CU became liable to pay benefits as soon as the fire started, and could escape its duty only if the insurer proved Redux had committed arson. The court agreed with Redux, held that the clause was a condition subsequent, and placed the burden on CU to prove arson. Redux, Ltd. v. Commercial Union Ins. Co., 1995 U.S. Dist. LEXIS 2545 (D. Kan. 1995). The most obvious ethical issues arise around the language of the contract and the sale of the policy. The contract says that the insurer is not liable for harm caused by criminal acts of employees. However, the contract says nothing about who must prove whether the harm was caused by such crimes. Further, it is very unlikely that the insurance agent explained, when selling the policy, that in the event of fire the insured company would have to prove the harm was not caused by employee arson. Some would say, as this court did, that the company is attempting to sneak one by its policyholders, using ambiguous language to help sell the policy, then sandbagging the insured once a loss occurs, claiming a contract interpretation that it had never before mentioned. Many would argue that the company that drafts a contract has an ethical obligation to make its terms clear. It is hard to believe that the insurance company would desire to be treated this way-for example, by reinsurers upon whom it depends.
Implied Contract
The words and conduct of the parties indicate that they intended an agreement
Under the Statute of Frauds, what are the two minimum requirements for a written contract to be enforceable
The written document must be signed by the defendant and must be reasonably certain (i.e. the name of each party, the subject matter of the agreement, and all the essential terms and promises.)
While on a cruise, DePrince inquired about the price of a 20-carat diamond in the ship's gift shop. After confirming with the cruise line's corporate office, the sales person told DePrince that the price was $235,000. DePrince's traveling companions, who both happened to be gemologists, told him that the price was too good to be true: A diamond that large should cost at least $2 million. DePrince ignored their advice and purchased the diamond. Soon after the sale was completed, the cruise line realized that the $235,000 price quote was per carat, not the total price. What kind of mistake did the cruise line make? Can the cruise line void the transaction?
They did void the transaction, based on unilateral mistake, saying that DePrince well knew the true value of the diamond. DePrince v. Starboard Cruise Services, Inc., 163 So.3d 586, Ct. of App. of Fla. (2015)
T/F All contracts imply a duty of good faith.
True
T/F A plaintiff cannot recover for any damage which he reasonably could have avoided
True. This is the doctrine of mitigation of damages.
Linda goes to an electronics store and buys a smart television. Lauren hires a company to clean her swimming pool once a week. The ____ governs Linda's contract with the store, and the ____ governs Lauren's contract with the cleaning company. ⦁ common law; common law ⦁ common law; UCC ⦁ UCC; common law ⦁ UCC; UCC
UCC; common law Uniform Commercial Code
Usury
Usury laws prohibit charging excess interest on loans
Now assume that Vicky has loaned George $50,000. George again mentions that he is going to learn to hang glide during spring break, so Vicki purchases the $100,000 life insurance policy on George's life. If George dies and the insurance company refuses to pay... ⦁ Vicki will win $100,000 but only if she mentioned animal bites to the insurance agent. ⦁ Vicki will win $100,000 regardless of whether she mentioned animal bites to the insurance agent. ⦁ Vicki will win $50,000. ⦁ Vicki will win nothing.
Vicki will win $50,000. Vicki has an insurable interest in George's life, but only to the amount he owes her.
At a fraternity party, George mentions that he is going to learn to hang glide during spring break. Vicki, a casual friend, overhears him, and the next day she purchases a $100,000 life insurance policy on George's life. George has a happy week of hang gliding. But on the way home, he is bitten by a parrot and dies of a rare tropical illness. Vicki files a claim for $100,000. The insurance company refuses to pay. ⦁ Vicki will win $100,000 but only if she mentioned animal bites to the insurance agent. ⦁ Vicki will win $100,000 regardless of whether she mentioned animal bites to the insurance agent. ⦁ Vicki will win $50,000. ⦁ Vicki will win nothing.
Vicki will win nothing. Vicki will win nothing. She has no insurable interest in George's life, and her policy is therefore an unenforceable wagering contract.
An actor, exhausted after his 10-hour workweek, agrees to buy a briefcase full of cocaine from Lewis for $12,000. John and the actor have a ______________ contract. ⦁ valid ⦁ unenforceable ⦁ voidable ⦁ void
Void Because this is an example of it being illegal
The Tufte family leased a 260-acre farm from the Travelers Insurance Co. Toward the end of the lease, Travelers mailed the Tuftes an option to renew the lease. The option arrived at the Tuftes' house on March 30, and gave them until April 14 to accept. On April 13, the Tuftes signed and mailed their acceptance, which Travelers received on April 19. Travelers claimed there was no lease and attempted to evict the Tuftes from the farm. May they stay?
Yes, they may. Using the mail to accept is reasonable, since Travelers chose that medium to send its offer. Acceptance is effective on dispatch, meaning that the Tuftes accepted Travelers' offer on April 13, within the deadline. They have a binding lease. Travelers Insurance Co. v. Tufte, 435 N.W.2d 824 (Minn Ct. App. 1989).
Morell bought a security guard business from Conley, including the property on which the business was located. Neither party knew that underground storage tanks were leaking and contaminating the property. After the sale, Morell discovered the tanks and sought to rescind the contract. Should he be allowed to do so?
Yes. There was no fraud or misrepresentation because Conley knew nothing of the tanks. But there is mutual mistake: the parties were both in error about an important factual assumption- namely, the ground's condition. Morell was permitted to rescind. Morell v. Conley Detective and Security Guard Agency, Inc., Michigan Lawyers Weekly No. 18079, Nov. 28, 1994 (Mich. Ct. App. 1994).
Quantum Meriut
You are entitled to be paid the reasonable value of your services and material in a contract action when you have completed the work and the buyer refuses to pay because of some "minor" difference in what was contracted for. "As much as he deserves" the damages awared in a quasi-contract case
Force Majeure Clause
a clause in a contract in which the parties specify certain events that will excuse nonperformance
Force Majeure Event
a disruptive, unexpected occurrence for which neither party is to blame that prevents one or both parties from complying with a contract
Promissory Estoppel
a possible remedy for an injured plaintiff in a case with no valid contract, where the plaintiff can show a promise, reasonable reliance, and injustice
Integrated Contract
a writing that the parties intend as the final, complete expression of their agreement
: Nagel and Fields entered into a contract in which Nagel was obligated to deliver certain goods by September 10. On September 3, Nagel told Fields that he had no intention of delivering the goods. Prior to September 10, Fields may successfully sue Nagel under the doctrine of: ⦁ promissory estoppel ⦁ accord and satisfaction ⦁ anticipatory breach ⦁ substantial performance
anticipatory breach
Equitable Remedies
any form of relief that does not involve a request for monetary damages
Ricki goes to a baseball game. The back of her ticket clearly reads: "Fan agrees to hold team blameless for all injuries - pay attention to the game at all times for your own safety!" In the first inning, a foul ball hits Ricki in the elbow. She ____________ sue the team over the foul ball. Ricky spends the next several innings riding the opposing team's first baseman. The very nicest thing she says to him is, "You suck, Franklin!" In the eighth inning, Franklin has had enough. He grabs the ball boy's chair and throws it into the stands, injuring Ricki's other elbow. Ricki _____________ sue the team over the thrown chair. ⦁ can; can ⦁ can; cannot ⦁ cannot; can ⦁ cannot; cannot
cannot; can
A manufacturer delivers a new tractor to Farmer Ted on the first day of the harvest season. But, the tractor will not start. It takes two weeks for the right parts to be delivered and installed. The repair bill comes to $1000. During the two weeks, some acres of Farmer Ted's crops die. He argues in court that his lost profit on those acres is $60,000. If a jury awards $1000 for tractor repairs, it will be in the form of ____ damages. If it awards $60,000 for the lost crops, it will be in the form of ____ damages. ⦁ direct; direct ⦁ direct; consequential ⦁ consequential; direct ⦁ consequential; consequential ⦁ direct; incidental
direct; consequential
On the first day of the baseball season, Dean orders a new Cardinals hat from Amazon. At the moment he submits his order, Dean and Amazon have an ____ contract. Two days later, Amazon delivers the hat to Dean's house. At this point, Dean and Amazon have an ____ contract. ⦁ executory; executory ⦁ executory; executed ⦁ executed; executory ⦁ executed; executed
executory; executed An executory contract is a contract that has not yet been fully performed or fully executed. It is a contract in which both sides still have important performance remaining. An executed contract is a contract where both parties have fulfilled their obligations
Julie signs a contract to buy Nick's 2012 Mustang GT for $20,000. Later, Nick changes his mind and refuses to sell his car. Julie soon buys a similar 2012 Mustang GT for $21,500. She then sues Nick and wins $1,500. The $1,500 represents her ____. ⦁ expectation interest ⦁ reliance interest ⦁ restitution interest ⦁ none of the above
expectation interest
Most contracts are discharged by: ⦁ agreement of the parties ⦁ full performance ⦁ failure of conditions ⦁ commercial impracticability ⦁ a material breach
full performance
Jim, about to start a pickup soccer game, asks Desiree if she will hold his wallet while he plays. Desiree, a law student, says, "Sure, if you'll sign this exculpatory clause holding me blameless for negligence." Jim is very surprised, but he signs the paper that Desiree holds out for him. A bailment _________ been created. If Desiree is careless and loses the wallet, she __________ be liable to Jim. ⦁ has; will ⦁ has; will not ⦁ has not; will ⦁ has not; will not
has; will not
CONTRACTS THINGY
https://studylib.net/doc/8131931/contract-law-flowchart
Under the Uniform Commercial Code, a seller ____ generally entitled to recover consequential damages. Under the UCC, a buyer ____ generally entitled to recover consequential damages. ⦁ is; is ⦁ is; is not ⦁ is not; is ⦁ is not; is not
is not; is
Unenforceable Agreement
occurs when the parties intend to form a valid bargain, but a court declares that some rule of law prevents enforcing it
In a(n) contract, the seller guarantees to sell 100% of its output to one buyer, and the buyer agrees to accept the entire quantity. This kind of arrangement ____________ acceptable under the Uniform Commercial Code. ⦁ output; is ⦁ output; is not ⦁ requirements; is ⦁ requirements; is not
output; is
If a contract contains a condition precedent, the ____ has the burden of proving that the condition actually happened. If a condition subsequent exists, the ____ has the burden of showing that the condition occurred. ⦁ plaintiff; plaintiff ⦁ plaintiff; defendant ⦁ defendant; plaintiff ⦁ defendant; defendant
plaintiff; defendant
Rescission
to "undo" a contract and put the parties where they were before they made the agreement
Scarborough's Department Store opens for business on a busy shopping day just before Christmas. A hurried clerk places a sign in the middle of a table piled high with red cashmere sweaters. The sign reads, "SALE - 100% Cashmere - $0.99 Each". The sign, of course, was supposed to read "$99 each." This is a ____ mistake, and customers ____ be able to demand that Scarborough's sell the sweaters for 99 cents. ⦁ unilateral; will ⦁ unilateral; will not ⦁ mutual; will ⦁ mutual; will not
unilateral; will not
Noncompete agreements are common features of employment contracts. Currently, courts ____________ enforce these clauses. ⦁ always ⦁ usually ⦁ rarely ⦁ never
usually
Veronica has a beer and then makes a contract. She continues drinking, and her blood alcohol level eventually rises to .09, which is just above her state's threshold for drunk driving. She makes a second contract while in this condition. Veronica's first contract is ____, and her second contract is ____. ⦁ valid; valid ⦁ valid; voidable ⦁ voidable; voidable ⦁ voidable; void
valid; valid
Jerry is so mentally ill, that he is unable to understand the nature and consequences of his transactions, but he has not been adjudicated insane. Penny has been adjudicated insane, and has a court-appointed guardian. Jerry's contracts are ____, and Penny's contracts are ____. ⦁ valid; valid ⦁ valid; voidable ⦁ valid; void ⦁ voidable; voidable ⦁ voidable; void
voidable; void
Master Mfg., Inc. contracted with Accur Computer Repair Corp. to maintain Master's computer system. Master's manufacturing process depends on its computer system operating properly at all times. A liquidated damages clause in the contract provided that Accur would pay $1,000 to Master for each day that Accur was late responding to a service request. On January 12, Accur was notified that Master's computer system had failed. Accur did not respond to Master's service request until January 15. If Master sues Accur under the liquidated damage provision of the contract, Master will: ⦁ win, unless the liquidated damages provision is determined to be a penalty ⦁ win, because under all circumstances liquidated damage provisions are enforceable ⦁ lose, because Accur's breach was not material ⦁ lose, because liquidated damage provisions violate public policy
win, unless the liquidated damages provision is determined to be a penalty
