BUS390 Business Law Fall21

True impossibility

- where there is destruction of the subject matter - where there is the death of the promisor in a personal services contract - illegality

Seven characteristics of contracts

1. Any: acceptance 2. Other: offer 3. Cow: consideration 4. Would: writing 5. Carefully: capacity 6. Lick: legality 7. Couches: consent

Conditions of fraud

1. Defendant knew the statement was false or didn't care 2. False statement was material 3. Injured party was justifiable in relying on the statements

Challenges to consent

1. Freaky: fraud 2. Moms: mistake 3. Dress: duress 4. Up: undue influence

Settlement of debts

1. Liquidated debts - where there is no dispute about the amount owed - Exception: if the debtor offers a different performance to settle the liquidated debt, and the creditor agrees to take it as full settlement it is a binding agreement 2. Unliquidated debts - where either (1) the parties dispute whether any money is owed, or (2) the parties agree that some money is owed but there is a dispute about how much is owed.

Contracts that must be in writing

1. M: marriage 2. Y: cannot be performed in one year 3. L: transfer of an interest of land 4. E: estate 5. G: goods of $500 or more (UCC) 6. S: one party pay the debt of another

Termination of contracts

1. Meaty: mutual agreement to rescind 2. French: full performance 3. Cuisine: conditions never happened

Conditions of capacity

1. Minor (voidable) 2. Mentally impaired (voidable unless adjudicated incompetent; then void) 3. Intoxicated (voidable)

Ways to terminate an offer

1. Other: operation of law - offeror dies or becomes incapacitated or subject matter is destroyed 2. Rude: revocation - offer is taken back before acceptance 3. Ranchers: rejection by offeree - offeree doens't want offer 4: Evacuated: expiration - the offer expires where a time limit is set. If no time limit set, a "reasonable time" is used

Contracts that might seem like consideration but aren't

1. P: Pre-existing duties - providing services that someone is already obligated to provide does not count as consideration 2. I: Illusory promises - promise must be clear 3. P: Past consideration - a completed act cannot generally be the basis for consideration

Conditions of undue influence

1. Relationship between parties of either trust or domination, and 2. improper persuasion by the stronger party

Remedy examples

1. expectation damages - what injured party reasonably thought they would get out of the contract - compensatory damages - direct damages flowing from the contract's breach - consequential damages - special damages representing the harm caused by the injured party's unique situation where the harm was foreseeable from the breach at the time the contract was formed - incidental damages - minor costs associated with the breach 2. reliance damages - where the injured party spent money in reliance on the agreement 3. restitution damages - where injured party conferred a benefit on the other party and that benefit should be restored 4. equitable interest - sometimes money damages will not suffice and the courts need to require some other remedy

Examples of illegal agreements

1. insuring the life of another without insurable interest 2. working without an appropriate license 3. Usury (charging excess interest on loans)

UCC definiteness exceptions

1. the parties intended to make a contract AND 2. there is a reasonably certain basis for giving an appropriate remedy - contract might state how to use gap-fillers to satisfy the missing terms

Types of illegal agreements

1. those that violate statutes and 2. those that violate public policy

Parol Evidence Rule

A contract law doctrine that prevents parties to a written contract from presenting oral or extrinsic evidence to explain the terms of the agreement when the agreement is considered complete and finalized - anything apart from the written contract itself that was said, done, or written before the parties signed the agreement or as they signed it - neither party may use parol evidence to contradict, vary, or add to the terms of an integrated contract

Void agreement

A contract that neither party can enforce, because the bargain is illegal or one of the parties had no legal authority to make it

Assignment

A contracting party may transfer their rights under a contract Rights are assignable under any contract except when the assignment - would substantially change the obligor's rights or duties under the contract - is forbidden by law or public policy, or - is validly precluded by the contract itself

Offer

An act of statement that proposes definite terms and permits the other party to create a contract by accepting those terms

Executory contract

An agreement in which one or more parties has not yet fulfilled its obligations

Express contract

An agreement with all the important terms explicitly stated

Restitution

Awarding damages to avoid u just enrichment

Liquidated damages

Clauses in a contract that place a specified value on a potential breach

Void contract

Contract is illegal from the beginning and may not be enforced by either party

Voidable contract

Contract that is legal in its formation but permits one party to escape, if they want. A valid contract except that it can be affirmed or rejected at the option of one of the parties

Expectation damages

Damages that put the plaintiff in the position that they would have been in had the contract been honored

Reliance damages

Damages that put the plaintiff in the position they would have been in had the contract never formed

Consideration

Each party giving up something of value; mutuality in the agreement. The inducement, price, or promise that causes a person to enter into a contract and forms the basis for the parties' exchange There are two basic elements: 1. Value - requires legal benefit to the promisor or detriment to the promisee 2. Bargained for exchange - reciprocity

16. 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

16. Ryan Leslie, a rapper, was distraught when someone stole his computer and external hard drive because they contained some music he was writing. In an effort to retrieve his items, he created a series of YouTube videos, news articles, and social media postings in which he promised to pay $20,000 to anyone who returned his property. Leslie later increased the reward to $1 million in another YouTube video, which included the following text: In the interest of retrieving the invaluable intellectual property contained on his laptop and hard drive, Mr. Leslie has increased the reward offer from $20,000 to $1,000,000 USD. Armin returned the computer and hard drive, but Leslie refused to pay, saying that he could not get his intellectual property from his hard drive. Did Leslie make a valid offer? Did Armin make a valid acceptance?

Leslie made a valid offer, and Armin made a valid acceptance of the unilateral contract. The rapper was ordered to pay the reward. Augstein v. Leslie, No. 11 Civ. 7512 (HB)

Ways to communicate acceptance

Method: 1. in person 2. by mail 3. by phone 4. by email 5. by fax Manner: 1. by promising 2. by making a down payment 3. by performing ACCEPTANCE IS EFFECTIVE WHEN OUT OF THE OFFEREE'S CONTROL

Invitation to bargain

NOT AN OFFER - price lists - advertisements - auctions

Requirements contract

Obligates a buyer to get all of their needed goods from seller without stipulating the amount of quantity. Lacks definiteness but is enforced

Zahara was looking for apartments to rent. She was reading the newspaper when she saw an ad for just what she was looking for. She called the owner and arranged to see the apartment. Zahara was so happy with the apartment that she offered to pay both the deposit and first month's rent right there. The owner said that the apartment was hers and took the money. Identify the offer, acceptance, and consideration. If there is no contract, then put "no contract."

Offer: Ad in the paper. Acceptance: Owner's response, "The apartment is yours." Consideration: Payment of deposit and first month's rent. Contract created, but to be enforceable, will normally need to be in writing.

Adrienne was at an auction hoping to add to her collection of baseball memorabilia. The auctioneer started the bidding on a signed baseball. The auctioneer said, "Do I hear $300?" Adrienne raised her #22 paddle and said "$300". The auctioneer loudly announced, "Going once, going twice...Sold to #22 for $300." Identify the offer, acceptance, and consideration. If there is no contract, then put "no contract."

Offer: Adrienne's response of "$300". Acceptance: Auctioneer's answer, "Sold to #22 for $300". Consideration: Promise of $300

Tao has posted a speaker system on Craigslist and is asking for $250. Noah calls Tao and leaves the following voicemail message: "Don't sell the speaker system. I want the system and will pay full price." Identify the offer, acceptance, and consideration. If there is no contract, then put "no contract."

Offer: Noah's voicemail Acceptance: none Consideration: none No Contract Missing both acceptance and consideration.

Justin wanted to buy a new bike, but first he had to sell his old bike. His friend Sean said he would buy Justin's old bike for $25. . Justin said, "Cool deal." Identify the offer, acceptance, and consideration. If there is no contract, then put "no contract."

Offer: Sean says he will buy Justin's bike Acceptance: Justin says "cool deal" Consideration: None. No Contract: Missing consideration.

Unilateral contract

One party makes a promise that the other party can accept only by actually doing something

Bertha is buying a hot tub for $499 to be installed at her ski chalet.

Oral

Hazel sells an old swag lamp from her basement for $40.

Oral

Scott is offered a job for the summer job mowing lawns. Decide whether or not this contract needs to be put in writing to be enforceable.

Oral

Tara rents a video game machine for the weekend at a cost of $200. Decide whether or not this contract needs to be put in writing to be enforceable.

Oral

Acceptance

Party responding in a certain way that a reasonable person would understand to mean the party wanted to take the offer such as through Mirror Image Rule

Consent

Refers to whether a contracting party truly understood the terms of the contract and whether they made the agreement voluntarily

Forebearance

Refraining from doing something that one has the legal right to do

Duty to mitigate damages

Requirement to make efforts to try to lessen the impact of the other party having breached

Specific performance

Requiring the breaching party to perform as promised under the contract

Statute of Frauds

Rule of law that makes plaintiff may not enforce any of the following agreements, unless the agreement, or some memorandum of it, is in writing and signed by the defendant

Valid contract

Satisfies all of the law's requirements

Capacity

The legal ability to enter into a contract

Delegation

Where a party transfers their obligations under the contract Most duties are delegable, but delegation does not by itself relieve the delegator of his own liability to perform the contract Delegation is possible except when: - it would violate public policy the original contract prohibits delegation the obligee has a substantial interest in personal performance by the obligor

Equitable Relief

Where money damages don't suffice

Promissory Estoppel

Where no contract has legally been formed but a party relies on a promise made by the other party to their detriment, or some memorandum of it, is in writing and signed by the defendant Elements of this claim are: 1. Picky: a promise was made (promise) 2. Rhinos: a reasonable expectation of the promisor to induce action or forbearance on the part of the promisee (reasonable expectation) 3. Roaring: the promisee reasonably relied on the promise and took action to his detriment (reasonable reliance) This promise is binding

Colin rents an airplane for a two-year term.

Written

John hires Hazel for a six-month assignment. He hires her on November 1 and the assignment starts on June 1 of the following year.

Written

Joy joins a DVD club and agrees to buy five movies over the next three years where there may be only up to two per year.

Written

Kenny agrees to co-sign his sister's car loan.

Written

Marlin agrees to buy all his bread for the next two years from a neighbor.

Written

Uncle Bernie offers $50,000 to anyone willing to marry his son, Maurice. Decide whether or not this contract needs to be put in writing to be enforceable.

Written

Virginia sells a barren plot of land to a neighbor. Decide whether or not this contract needs to be put in writing to be enforceable.

Written

16. 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).

Bilateral contract

a promise made in exchange for another promise

Offer

a proposal of a deal in a certain way - must have a "meeting" of the minds" - offer proposes definite terms and acceptance unconditionally agrees to them - courts assess based on actual words and conduct 1. Do the offeror's words and actions indicate an intention to make a bargain, and 2. Are the terms of the offer reasonably definite? INVITATION TO BARGAIN IS NOT AN OFFER

anticipatory breach

advising or acting in some way that makes it clear that the party does not intend to honor the contract

Executed contract

an agreement in which all parties have fulfilled their obligations (completed contract)

Exculpatory clauses

attempts to release a party from liability in the event of injury to another party - generally unenforceable when - trying to exclude intentional torts or gross negligence or - the affected activity is in the public interest like medial care, public transportation or some essential service, or - the parties have greatly unequal bargaining power, or - they are not clearly visible and written

Quasi-contract

avoids "unjust enrichment" by creating contract where none existed but one party got a benefit they should not be allowed to keep

Gap fillers

clauses in a contract that is enforceable but lacks some definiteness that help to determine the missing terms - open price (like market price for lobster) - output contracts (like buyer must buy everything from a seller) - requirements contracts (like buyer must get all the needed goods from a seller)

Writing

depending on the kind of contract, it may also need to be in writing

Substantial performance

for contracts for services (rather than goods) this will generally render contract enforceable (minus any costs related to the defects)

Mistake

generally parties are left to their own, unless one party will profit unreasonably from another's error - unilateral - can be voided by the party who didn't know of the mistake when the agreement was made - mutual - can be voided by either party

Uniform Commercial Code (UCC)

governs many aspects of commercial transactions (specifically GOODS of anything movable) Only UCC OR common law can be applied to a contract; the courts must determine whether goods or services is the primary purpose of the contract and apply the right statute

Condition subsequent

must occur after a particular duty arises

Condition precedent

must occur before any duty arises

Strict performance

not usually required unless parties agreed to that in contract and that standard is reasonable (minor defects don't count)

Unenforceable contract

occurs when the parties intended to for a valid bargain, but do not. Missing one of the items (4-7) listed above

Clickwrap agreements

online acceptance of terms through I Agree buttons (generally enforceable unless the terms are not easily seen)

Good faith

parties must carry out contractual obligations in good faith

Duress

party threatens other party to cause them to enter the contract (voidable)

Offeree

party to whom an offer is made

Offeror

party who makes an offer

commercial impracticability

some event occurred that neither party anticipated and that will make fulfilling the contract extraordinarily difficult and unfair to one party

Frustration of purpose

some event occurred that neither party anticipated where the contract now has no value to one of the parties

Intended beneficiary

someone who may enforce a contract made between two other parties

Incidental beneficiary

someone who might have benefited from a contract between two others but has no right to enforce the agreement

Third party beneficiary

someone who was not a party to the contract but stands to benefit from it

Legality

the contract must be for a lawful purpose

Remedies

the method a court uses to compensate an injured party

Implied contract

the words and conduct of the parties indicate that they intended an agreement

Mirror Image Rule

under common law, acceptance must be precisely the same terms as the offer. Additional or contradictory terms are both a rejection of the offer and a counteroffer under UCC, still must have intent to accept, however, may be able to add additional terms or have different terms and still have a valid contract - additional terms will generally become a part of the contract - different terms that contradict terms of the offer generally cancel each other out and are replaced with UCC gap-fillers

Breach of contract

when one party fails to perform their terms of the contract results in the discharge of obligations from the other party - discharged party may sue for damages - must be a MATERIAL BREACH

Termination of offer

when the offeror ends a contract OFFERS MUST BE TERMINATED BEFORE ACCEPTANCE TERMINATIONS ARE EFFECTIVE WHEN RECEIVED BY OFFEREE