Business 250 Final Exam

Types of Consideration

- Remember, consideration is something bargained for and received by a promisor from a promisee. - The most common type is money. - But other forms of consideration also exist: a forebearance a return promisebargained for and(maybe a grant of extension of time), given in exchange for the promise, the relinquishment of a right, claim or privilege

Methods of Acceptance

• A contract is formed when an offeree accepts a valid offer. • An offeree can accept a valid offer in a variety of ways, including by conduct, provided that the conduct is definitely nonequivocal. • Therefore, a party need not formally accept an offer in writing in order to form a valid and binding contract. • Acceptance can be by orally saying "I accept" or some equivalent, writing it, or by conduct. • Conduct acceptance example: Your neighbor offers to pay you$40 to mow his grass. You don't say anything in response and instead just start mowing

Counteroffers

• A counteroffer serves as a rejection of the offer. • That means that the offer is now off the table - unless the offeror wants to re-offer it. • So you have to be careful sometimes if you make a counteroffer and now lose the opportunity to accept the offer previously made.

Statute of Frauds

• Certain types of contracts, covered by the Statute of Frauds, must be in writing and signed to be enforceable. • Mississippi's Statute of Frauds is an affirmative defense to the enforcement of certain oral contracts that should have been in writing pursuant to section 15-3-1 of the Mississippi Code. • "The principal purpose of the Statute of Frauds ... is to require the contracting parties to reduce to writing the specific terms of their contract ... to avoid dependence on the imperfect memory of the contracting parties, after the passage of time, as to what they actually agreed to some time in the past.

Rescission

- a retroactive remedy that renders the contract unenforceable from the outset. • Fraud • A contract obtained by a misrepresentation or fraud is voidable. • Mistake • Because there must be a "meeting of the minds," there is no contract if it is based on a mistake. • A mutual mistake (one common to both parties) can void a contract. • Mutual mistake example: A agrees to buy a horse from B. It turns out the horse was dead at the time of the bargain, though neither party was aware of the fact. The agreement is void. • If the mistake is unilateral, a party can only get rescission if (1) the mistake is so fundamental in character that the minds of the parties never met, (2) there was no gross negligence in falling into the error, (3) no intervening rights accrued, and (4) the parties may still be placed in status quo. • Unilateral mistake example: Prospective real estate purchaser gained an unconscionable advantage by having an elderly property owner with mental problems sign a contract that she did not know was a contract, that she didn't review and she previously refused to sell her land.

Ordinary things that involve contract principles

- employment agreements - agreements to purchase goods - agreement to sell property - hiring a roofer to re-roof your house - asking for an oil change at Dipstix - purchasing goods at a store - agreeing to mow a neighbor's grass for $40 - contracts for the purchase of a business - your lease agreement - your cell phone contract

Six elements of a contract

1) two or more contracting parties 2) consideration 3) an agreement that is sufficiently definite 4) parties with legal capacity to make a contract 5) mutual assent 6) no legal prohibition precluding contract formation

DEFENSES TO FORMATION

1. All elements of a contract required (previous material) 2. Statute of frauds (previous material) 3. Statute of limitations (previous material) 4. Force majeure 5. Unconscionability 6. Fraud/misrepresentation 7. Duress 8. Illegality 9. Waiver 10. Accord and Satisfaction

offer

A promise or commitment to perform or refrain from performing some specified act in the future. Must be stated in a way that would lead to reasonable person to expect a binding contract to arise from its acceptance.

another inconsistent action example

Angel v. Tauch, S.W.3d (Tex. Jan. 14, 2022)

Breach of Contract

Definition: "A breach of contract is always a non-performance of duty when that performance is due." Burden of Proof: A plaintiff asserting any breach of contract claim has the burden to prove his/her claim by a preponderance of the evidence. Elements to Prove: (1) that a valid and binding contract exists; and (2) that the defendant has broken or breached it without regard to the remedy sought or the actual damage sustained. (3) The nonbreaching party (Plaintiff) must also show that it was willing and able to perform but for the defendant's breach.

Illegality of Contract

• If either the consideration or the subject matter of the contract violates Mississippi law, the constitution or public policy, the illegality will serve as a defense to enforcement of the contract. • A contract will not be enforced if the principal purpose of the contract directly furnishes aid and protection to an illegal enterprise, or if the party seeking to enforce the contract must base his or her cause of action on his or her own illegal act, or if the contract itself is unlawful. • Examples: contracts for the sale of controlled substances, contracts for prostitution or gambling, employment contracts that permit the hiring of underage workers

Statute of Frauds - what is covered

Miss. Code Ann. § 15-3-1 An action shall not be brought whereby to charge a defendant or other party: (a) upon any special promise to answer for the debt or default or miscarriage of another person; (b) upon any agreement made upon consideration of marriage, mutual promises to marry excepted; (c) upon any contract for the sale of lands, tenements, or hereditaments, or the making of any lease thereof for a longer term than one year; (d) upon any agreement which is not to be performed within the space of fifteen months from the making thereof; or(e) upon any special promise by an executor or administrator to answer any debt or damage out of his own estate; unless, in each of said cases, the promise or agreement upon which such action may be brought, or some memorandum or note thereof, shall be in writing, and signed by the party to be charged therewith or signed by some person by him or her thereunto lawfully authorized in

Past consideration/moral obligation is not consideration

Past consideration, or moral obligation, generally, is not adequate consideration. • However, there is a caveat. Mississippi is one of a minority of states which follows the promissory restitution rule. Where there is an unambiguous written obligation based on appreciation for past services, the obligation may be enforced by the courts. • In Mississippi, "love and affection" are regarded as consideration.

Quasi-contractual Remedies

Remedies created in the absence of a contract when the acts of the parties have placed in the possession of one person money, or its equivalent, under such circumstances that in equity and good conscience, he/she ought not to retain it. • Unjust Enrichment • For example, if money is paid to another by mistake of fact, even if the mistake was the payor's negligence, the money may be recovered from the person to whom it was paid. • Quantum Meruit • This theory can be premised on either an express or implied contract. • Elements: (1) valuable services or materials provided; (2) for the person sought to be charged; (3) the services or materials were accepted, used and enjoyed by the person; and (4) under the person sought to be charged was reasonably notified that the provider expected to be paid by the person. • This often applies when services exceed the scope of a contract. • Examples of quantum meruit include legal work performed without a contract, emergency aid provided by a physician, or determining the total amount due when the task ended unexpectedly.

Acceptance

The assent to the terms of an offer. must be judged objectively, but can either be expressed stated or implied by the offeree's conduct

Step 2/Exception 1: Interpreting ambiguous terms

The first case in which parol evidence is allowed is to clarify terms in a contract when a term's meaning is missing or ambiguous. Ambiguity: noun 1.the quality of being open to more than one interpretation; inexactness. 2."we can detect no ambiguity in this section of the Act" Doubtfulness; doubleness of meaning; indistinctness or uncertainty of meaning of an expression used in a written instrument

revocation by inconsistent conduct

Vice v Hinton, Miss. Ct. App. 2001

contract

a written or spoken agreement between private parties creating mutual obligations enforceable by law

notice of revocation

can be given by taking some action that is inconsistent with the offer before the offeree accepts the offer; however, "if the offer is accepted before withdrawal, it becomes a binding contract and cannot be withdrawn"

Elements of a Contract

offer, acceptance, consideration

Consideration

something of value exchanged for something else of value; consideration or a valid substitute is required to have a contract

Revocation of Offer

withdrawal of a previous offer to engage in some sort of legally binding contract; generally a party may revoke an offer by giving notice to the other party at any time before the offer is accepted.

Indemnification Clause

• "To indemnify" means to compensate someone for his/her harm or loss. In most contracts, an indemnification clause serves to compensate a party for harm or loss arising in connection with the other party's actions or failure to act. The intent is to shift liability away from one party, and on to the indemnifying party. • Stated another way, they serve as a device to allocate the risk associated with a party's negligence, willful misconduct, breach of a warranty or covenant, or the mere presence of one party on the property of the other party. Of course, these clauses often appear within contracts for the sale of assets as a device to insure the buyer against unexpected risks associated with the assets purchased.

Choice of Law Provisions

• A choice of law clause or proper law clause is a term of a contract in which the parties specify that any dispute arising under the contract shall be determined in accordance with the law of a particular jurisdiction. • Examples: Choice of Law. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of California. • Choice of Law. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of New York

Confidentiality Clause

• A confidentiality clause (also referred to as a nondisclosure agreement) is a legally binding contract where an individual or enterprise guarantees to deal with particular data as a commercial secret and guarantees to not disclose such information to others without correct authorization. • A confidentiality clause should be mutual. Both parties to a contract often disclose trade secret and confidential business information to one another. The mechanism for designating the information should not be overly burdensome. The range of provisions governing the designation of certain information as "confidential" ranges from all information being exchanged under the contract as being confidential to all information so designated in writing and if exchanged orally, then confirmed in writing at a later date. It is preferable to have all written information that is confidential designated as such at the time of exchange. • Common Exceptions: information which is independently developed by the receiving party without involvement of anyone having knowledge of the disclosing party's confidential information is not considered to be confidential under many agreements. Other exceptions include information that is obtained from third parties not having an obligation of confidentiality to the disclosing party and information in the public domain through no fault of the receiving party

Forum Selection Clause

• A forum selection clause in a contract allows the parties to agree that any disputes relating to that contract will be resolved in a specific forum. They usually operate in conjunction with a choice of law clause which determines the proper law of the relevant contract. • The first step in analyzing the enforceability of a forum selection clause is to determine whether its language is mandatory or permissive. A "mandatory" forum selection clause "purports to require litigation in the specified forum only and ... prohibit[s] litigation in any other forum." A "permissive" forum selection clause permits litigation in the chosen forum but does not prohibit litigation in any other forum. If the language is permissive, the clause will not be given effect. If the language is mandatory, the clause is "presumptively valid and enforceable."

When is a word or phrase ambiguous?

• A word or phrase is ambiguous if it is reasonably capable of more than one meaning under the circumstances. • The court decides whether ambiguity exists, and a trial court's failure to address a contract's ambiguity will not be in error if the ambiguity is not plain, clear, or obvious. • The court will attempt to "harmonize" all the provisions in accord with the parties' intent, but it is not at liberty to alter its terms. • Furthermore, "[t]he mere fact that the parties disagree about the meaning of a provision of a contract does not make the contract ambiguous as a matter of law." • A contract's silence as to a certain provision does not equate to ambiguity in favor of the nondrafting party, "and the court is not bound to adopt a construction which is not compelled by the instrument and which no man in his right mind would have agreed to." • Undefined words are given their plain and ordinary meaning/dictionary meaning.

Arbitration Continued

• Advantages: in theory, the cost should be less, justice dispensed in quicker fashion, and the outcome should be decided by individuals having some expertise in the subject matter of the contract. • Disadvantages: No right to appeal an adverse decision. Example: Arbitration Clause. All disputes arising under this agreement shall be governed by and interpreted in accordance with the laws of New York, without regard to principles of conflict of laws. The parties to this agreement will submit all disputes arising under this agreement to arbitration in New York City, New York before a single arbitrator of the American Arbitration Association ("AAA"). The arbitrator shall be selected by application of the rules of the AAA, or by mutual agreement of the parties, except that such arbitrator shall be an attorney admitted to practice law New York. No party to this agreement will challenge the jurisdiction or venue provisions as provided in this section. No party to this agreement will challenge the jurisdiction or venue provisions as provided in this section. Nothing contained herein shall prevent the party from obtaining an injunction.

Oral Contracts

• An oral contract is enforceable under Mississippi law unless the contract falls within Mississippi's Statute of Frauds. (next slide) • Outside of concerns raised by the Mississippi Statute of Frauds, however, the enforceability of an oral agreement depends upon the intent of the parties. The applicable tests are whether the contract is one usually put in writing, whether there are few or many details, whether the amount of money involved is large or small, whether a formal writing is needed for a full expression of covenants and promises, and whether negotiations themselves indicate that a written draft is contemplated as a final conclusion of negotiations

Reliance Damages

• Another form of compensatory damages, reliance damages are available when expectation damages are too speculative to measure. • Instead of determining the "benefit of the bargain," this type of damage is designed to put the injured party in the position he or she would have been in had the contract never been formed. • In other words, any expenses you incurred in reliance on the contract being performed are owed to you be the breaching party. • In the couch example, your reliance damages are $50. If we had never made the contract, you never would have spent the $50 on the truck rental. You paid that $50 in reasonable reliance on my promise to sell you my couch. Because I broke my promise, you're out $50. If I break the deal before you rent the truck, you don't have any damages, since you're in the same position you would otherwise be in.

Arbitration Clause

• Arbitration - a form of alternative dispute resolution, is a way to resolve disputes outside the judiciary courts. The dispute will be decided by one or more persons, which renders the 'arbitration award'. Parties refer their disputes to an arbitrator who reviews the evidence, listens to the parties, and then makes a decision. Arbitration clauses can be mandatory or voluntary, and the arbitrator's decision may be binding or nonbinding. • Mississippi law is clear that courts must respect the rights of individuals and entities to agree in advance of a dispute to arbitration or other alternative dispute resolution.

Common Contract Clauses

• Arbitration Clause • Indemnification Clause • Express Warranties • Implied Warranty of Merchantability • Implied Warranty of Fitness for a Particular Purpose • Limitation of Remedy • Choice of Law • Forum Selection Clause • Confidentiality

Arbitration Clause Continued

• Arbitration agreements must be enforced except in those cases when the agreement is revocable due to a lack of consideration or if there was fraud, duress, or unconscionability in the formation of the agreement. • "The party opposing arbitration bears the burden of proving that a contract defense applies in the particular case." • Terms Required: At the very minimum, an arbitration clause should specifically state that the arbitration is the parties' sole remedy and will be final and binding and enforceable in any court having jurisdiction thereof. Moreover, the specific rules and procedures that will govern the arbitration and selection of arbitrators should also be included. Often, the most expedient way to do this is by incorporating the Commercial Arbitration Rules of the American Arbitration Association (AAA) or similar organization by reference. • To ensure the enforceability of arbitration agreements, the terms of the arbitration provision should be written in plain language. Though Mississippi law does not necessarily require it, it is also a good practice to include in arbitration agreements a clear explanation that the person signing the agreement is waiving a right to a jury trial. Moreover, if the arbitration agreement is just one provision of a broader contract, the terms of the arbitration agreement should be conspicuous and not buried within the document.

Confidentiality Clause Examples

• Confidentiality. The parties hereto agree that each shall treat confidentially the terms and conditions of this Agreement and all information provided by each party to the other regarding its business and operations. All confidential information provided by a party hereto shall be used by any other party hereto solely for the purpose of rendering or obtaining services pursuant to this Agreement and, except as may be required in carrying out this Agreement, shall not be disclosed to any third party without the prior consent of such providing party. The foregoing shall not be applicable to any information that is publicly available when provided or thereafter becomes publicly available other than through a breach of this Agreement, or that is required to be disclosed by or to any bank examiner of the Custodian or any Subcustodian, any Regulatory Authority, any auditor of the parties hereto, or by judicial or administrative process or otherwise by Applicable Law. • It is further understood and agreed that for he same consideration including an amount of ten and No/100 Dollars ($10.00), paidto Releasors as part of the total settlement herein, that the terms of this Agreement and amounts paid by the Releasees in settlement of this claim shall forever be kept strictly confidential. Releasors will not communicate this Agreement's terms and amounts paid to any third party, whether verbally or in writing, by any means, including by social media such as Twitter and Facebook and the like. Any disclosure by Releasors will cause Releasees irreparable harm that money cannot undo. Accordingly, violation of this section will entitle Releasees to temporary and permanent injunctive relief. Except as required by law, Releasors have not disclosed and will not disclose any term of this Agreement, including any payment under this Agreement, to anyone except Releasors' legal/financial advisors. Each of them is bound by this non-disclosure provision, and a disclosure by any of them is a disclosure by Releasors.

What happens if the word or phrase is determined to be ambiguous?

• Contra proferentem, also known as "interpretation against the draftsman", is a doctrine of contractual interpretation providing that, where a promise, agreement or term is ambiguous, the preferred meaning should be the one that works against the interests of the party who provided the wording. • If a contract is subject to more than one fair reading, it will be construed against the drafter.

Duress

• Contracts obtained by duress are unenforceable. • Forms of duress: physical threats or economic duress • Elements to establish duress defense: (1) that the dominant party threatened to do something which he had no legal right to do; and (2) that the wrongful threat overrode the volition of the victim and caused him to enter an agreement against his free will. • It is never duress to threaten to do that which a party has a legal right to do. For example, you can threaten to sue if you don't settle(but watch out for blackmail).

Unconscionability

• Definition of an "unconscionable contract" - one such as no man in his senses and not under a delusion would make on the one hand, and as no honest and fair man would accept on the other. • It can be either procedural or substantive. Substantive looks at the terms of contract while procedural focuses on the circumstances surrounding the formation. • SubstantiveTest: If a contract is so one-sided that one party is deprived of all the benefits of the agreement or left without a remedy for another party's nonperformance or breach, then it is substantively unconscionable. • But it is not required that each party get identical rights and obligations or that both parties are bound in the same manner. • Procedural Test: 6 factors - (1) lack of knowledge, (2) lack of voluntariness, (3) inconspicuous print, (4) the use of complex, legalistic language, (5) disparity of sophistication or bargaining power of the parties; and (6) lack of opportunity to study the contract and inquire about the terms.

Express Warranties

• Definition: An express warranty can take several different forms, whether spoken or written, and is basically a guarantee that the product will meet a certain level of quality and reliability. If the product fails in this regard, the manufacturer will fix or replace the product for no additional charge. Many such warranties are printed on a product's packaging or made available as an option. • A verbal express warranty may be as simple as a car dealer telling a customer, "I guarantee that this engine will last another 100,000 miles." If the car fails to live up to this claim, the buyer may take it up with the seller (although proving the existence of a verbal warranty is very difficult). • Other warranties may be expressed in writing but do not necessarily look like traditional warranties. For example, a light bulb manufacturer prints the words "lasts 15,000 hours" on its packaging. The words "guaranteed" or "warranty" do not appear, but this claim nevertheless is an express warranty. However, a mere affirmation of the value of goods or a statement purporting to be the seller's opinion or commendation of the goods does not create a warranty. • In order to be valid, an express warranty must be part of the basis of the bargain

Anticipatory Repudiation

• Definition: Anticipatory repudiation applies when a party manifests a "positive and unconditional" intent to refuse to perform under a contract when the time for performance comes due. • Where there has been an anticipatory breach, the other party has a right to pursue any one of the following three remedies: (1) rescind the contract; (2) treat the contract as still binding and wait until the time arrives for its performance by the promisor, and at such time to bring an action on the contract; or (3) treat the renunciation as an immediate breach and sue at once for any damages. • The nonbreaching party cannot enhance its damages by continuing to perform despite the repudiation. • Furthermore, because repudiation excuses the other party "from the obligation to perform further," the party who repudiated the contract cannot sue for specific performance.

Compensatory Damages

• Definition: a type of monetary damage designed to "put the injured party in the position where he/she would have been but for the breach." • This is not intended to put the injured party in a better position. • There must be proof of the actual monetary damages. Sometimes, however, the amount of loss is not certain. That does not prevent you from recovering if it is "reasonably certain that damage has resulted." • Like in tort cases, the extent of the injury and amount of damage need not be capable of exact proof as long as the best evidence available is produced that allows the jury to make a fair and reasonable estimate of the amount of damage. • You have to offer more than mere speculation and conjecture. • Think of lost profits claims for a new business. The law recognizes that some degree of speculation is required to compute unrealized profits. • Example: if a contract were signed in which Party A agreed to pay Party B $5,000 for consulting services, but Party A breached the contract by not then using the services and not paying, then Party B would be entitled to $5,000 in compensation.

Parol Evidence - avoiding the contract

• If extrinsic evidence attacks the existence of the contract, it does not fall within the purview of the parol evidence rule. For example, parol evidence can be used to show that a contract never came into being because of fraud, duress, mistake, illegality, or failure of consideration. • Parol evidence is also admissible to show conditions precedent. Such evidence is admissible because it "does not vary the written contract; it destroys and avoids it."

What is parol evidence?

• Despite its similarity to the word "parole," the parol evidence rule does not have anything to do with criminal law. The parol evidence rule is a contract law doctrine that prevents parties to a written contract from presenting "extrinsic" evidence of terms in a contract that contradict, modify, or vary the terms of a written agreement, when that written agreement is considered complete and finalized. - For example, in a dispute over the sale of a home, if the buyer and seller have signed a written contract for the sale of a home and have written down that the sales price is $500,000, the buyer will be barred from introducing evidence of a discussion that he had with the seller where she agreed to sell it to him for $400,000 or that she agreed to throw in a car as part of the purchase price. • The parol evidence rule can thus be simplified as "the outside evidence rule." Outside evidence cannot be used where there is a written contract. Like most legal doctrines, however, this one has lots of qualifications and exceptions.

Parol Evidence - Collateral Agreements

• Evidence of collateral agreements is admissible as an exception to the parol evidence rule if the agreement (i) does not conflict with the primary document, and (ii) it covers matters that one would not reasonably expect to be merged into the final written contract. • If the contract itself states that there is a collateral agreement not embodied in the writing, the parol evidence rule has no application. When the contract is silent, the question becomes more difficult. • Example 1: It was held proper to allow extrinsic evidence of compensation when an employment contract was silent with respect to any form of compensation, salary, or commission. • Example 2: Parol evidence could not be used to show the existence of an alleged buy-back provision in a real estate contract because it was "reasonable to expect the parties to memorialize such an important contract provision."

Express Warranty Examples

• Express Warranty. Subject to the limitations in these Terms, Seller warrants to Buyer only, and not Buyer's customers or any other third parties, that the Products will be free from significant operational defects in material and workmanship for a period of 60 days from the date of sale as shown on the invoice. • Express Warranty. In addition to any other warranty implied by law, the Seller warrants that, as of Settlement Date and for one year thereafter, the Project shall be (i) free from structural defects, so as to pass without objection in the trade; (ii) constructed in a workmanlike manner, so as to pass without objection in the trade; and (iii) fit for habitation. Seller shall assign all manufacturer warranties to Buyer on Settlement Date.

Indemnification Examples

• FOR THE SAME CONSIDERATION aforesaid, but without limiting the generality of this Release, the Releasors hereby agree to indemnify, protect, and hold harmless the Releasees of and from all claims and causes of action, including attorneys' fees, costs and/or expenses, of every kind and description, on account of any action, claim, lawsuit or judgment, by any person or entity as a result of the injuries, expenses, damages, death or claims of injuries or damages, suffered by, or arising out of, or related in any way to the aforesaid accident involving Releasors, including, but not limited to, any subrogation claims, assignments and liens (including any medical liens, hospital liens, Federal Employees' Compensation Act interests and workers compensation liens) and the Releasors expressly acknowledge that payment of any subrogation claims or liens or assignments is Releasors' sole responsibility as part of the settlement and release.

Implied Warranty of Fitness for a Particular Purpose - examples

• For example, this warranty is violated when a buyer asks a mechanic to provide snow tires and receives tires that are unsafe to use in snow • If a farmer goes to a farm supply store, and tells the salesman he needs a plow for the rocky soil of his farm, and the salesman directs him to a particular plow, there may be an implied warranty that the plow in question is fit for use in rocky soil.

Force Majeure

• Force majeure is a French term that literally means "greater force." It is related to the concept of an act of God, an event for which no party can be held accountable, such as a hurricane or a tornado. Force majeure also encompasses human actions, however, such as armed conflict. Generally speaking, for events to constitute force majeure, they must be unforeseeable, external to the parties of the contract, and unavoidable. • Mississippi common law (judge made law) has long recognized that an act of God may free a party from performance. • But an act of God which renders performance of the contract difficult but not impossible does not excuse performance • Examples: War, riots, earthquakes, hurricanes, lightning and explosions • Another Example: Let's suppose you have to deliver goods to a customer abroad. You both agree that you send the goods by plane. However, there is a major terrorist attack at their country's airport. The major terrorist attack is an unforeseeable event. You didn't expect it, and there is nothing you can do about it, i.e., it's beyond your control.

Forum Selection Clause Examples

• Forum Selection. Any legal action or proceeding with respect to this Agreement or the services provided hereunder or for recognition and enforcement of any judgment in respect hereof brought by the other party hereto or its successors or assigns must be brought and determined in the state courts of the Commonwealth of Massachusetts or the United States District Court for the District of Massachusetts (and may not be brought or determined in any other forum or jurisdiction), and each party hereto submits with regard to any action or proceeding for itself and in respect of its property, generally and unconditionally, to the sole and exclusive jurisdiction of the aforesaid courts. • Forum Selection. Any suit, claim, or other action to enforce the terms of this Agreement will be brought exclusively in the state and federal courts of King County, Washington. Company hereby submits to the jurisdiction of that court and waives any objections it may have to that court asserting jurisdiction over Company or its assets and property.

Fraud/Misrepresentation

• Fraud in Factum: misrepresentation as to the nature of a writing that a person signs with neither knowledge nor reasonable opportunity to obtain knowledge of its character or essential terms. • Example: someone is tricked into signing a promissory note (loan agreement) believing it was merely a receipt or some other document. • Fraud in the inducement: when a party to a contract makes a fraudulent misrepresentation, such as by asserting material information he or she knows to be untrue, for the purpose of inducing the innocent party to enter the contract. Silence may constitute fraud if a party has a duty to disclose.

Step 3/Exception 2: Use of Extrinsic/Parol Evidence

• If intent remains unascertainable (i.e., it is still ambiguous), then the court may proceed to the third-tier analysis, which involves admission of extrinsic or parol evidence. • "It is only when the review of a contract reaches this point that prior negotiations, agreements and conversations might be considered in determining the parties' intentions in the construction of the contract." • Caveat: Public Contract Doctrine - A public entity "can act only as a body, and its act must be evidenced by an entry on its minutes." The entity's minutes are the "sole and exclusive evidence" of what the entity did. Thus, parol evidence outside of the minutes is inadmissible. "The fact that in some instances the rule may work an apparent injustice does not negate the stringent requirement."

Indemnification Clause Examples

• Indemnification. Contractor shall indemnify and save harmless City and its officers, agents and employees from, and, if requested, shall defend them against any and all loss, cost, damage, injury, liability, and claims thereof for injury to or death of a person, including employees of Contractor or loss of or damage to property, arising directly or indirectly from Contractor's performance of this Agreement, including, but not limited to, Contractor's use of facilities or equipment provided by City or others, regardless of the negligence of, and regardless of whether liability without fault is imposed or sought to be imposed on City, except to the extent that such indemnity is void or otherwise unenforceable under applicable law in effect on or validly retroactive to the date of this Agreement, and except where such loss, damage, injury, liability or claim is the result of the active negligence or willful misconduct of City and is not contributed to by any act of, or by any omission to perform some duty imposed by law or agreement on Contractor, its subcontractors or either's agent or employee. The foregoing indemnity shall include, without limitation, reasonable fees of attorneys, consultants and experts and related costs and City's costs of investigating any claims against the City. In addition to Contractor's obligation to indemnify City, Contractor specifically acknowledges and agrees that it has an immediate and independent obligation to defend City from any claim which actually or potentially falls within this indemnification provision, even if the allegations are or may be groundless, false or fraudulent, which obligation arises at the time such claim is tendered to Contractor by City and continues at all times thereafter. Contractor shall indemnify and hold City harmless from all loss and liability, including attorneys' fees, court costs and all other litigation expenses for any infringement of the patent rights, copyright, trade secret or any other proprietary right or trademark, and all other intellectual property claims of any person or persons in consequence of the use by City, or any of its officers or agents, of articles or services to be supplied in the performance of this Agreement.

Force Majeure continued - Contractual Language

• It can also be included as a term in a contract to remove liability for natural and unavoidable catastrophes that interrupt the expected course of events and prevent participants from fulfilling obligations. • A force majeure clause that is not informed by thoughtful consideration of general or particular risks and their effects on the parties can lead to unfortunate results because a court will construe the clause as if it represents an allocation of risk that the parties bargained for. • There are four necessary components of a force majeure clause: 1. It must define the breach for which a promisor seeks to be excused. 2. It must define the "force majeure event" itself. 3. It must require (and define) the causal connection between these two. 4. It must explain what will happen if performance is excused. • Each component raises considerations that contracting parties need to consider with some care. • Neither party shall be held liable or responsible to the other party nor be deemed to have defaulted under or breached this Agreement for failure or delay in fulfilling or performing any obligation under this Agreement when such failure or delay is caused by or results from causes beyond the reasonable control of the affected party, including but not limited to fire, floods, embargoes, war, acts of war, insurrections, riots, strikes, lockouts or other labor disturbances, or acts of God; provided, however, that the party so affected shall use reasonable commercial efforts to avoid or remove such causes of nonperformance, and shall continue performance hereunder with reasonable dispatch whenever such causes are removed. Either party shall provide the other party with prompt written notice of any delay or failure to perform that occurs by reason of force majeure.

Limitation of Remedy Examples

• Limitation of Remedies. With respect to claims by the Company or any person acting by or through the Company, or by the Purchaser or any person acting through the Purchaser, for remedies at law or at equity relating to or arising out of a breach of this Agreement, liability, if any, shall, in no event, include loss of profits or incidental, indirect, exemplary, punitive, special or consequential damages of any kind. • Limitation of Remedies. If Employee's employment hereunder terminates for any reason, Employee shall not be entitled to any payments, benefits, damages, awards or compensation other than as provided by this Agreement.

Consequential and Incidental Damages

• Mississippi allows recovery for losses resulting from a breach that were reasonably foreseeable at the time the contract was entered into. • Consequential damages must be measurable in monetary terms and must be reasonably certain. • For example, when a contractor relies on a subcontractor's bid in submitting a quote, and the subcontractor subsequently refuses to perform, the difference between the subcontractor's bid and the price the contractor had to pay another subcontractor is a reasonably foreseeable consequence of the subcontractor's breach. • An example of a breach of contract would be a toy store contracting with a department store to deliver a specified number of dolls by the end of November. When the toy store has not delivered the specified number of dolls as agreed, it is a breach of contract. The direct damages are the initial costs the department store initially paid to the toy company. The consequential damages are the costs the department store had to pay to hire a new manufacturer to finish what the toy store failed to do. The department store can sue for both consequential and direct damages. • This type of damage is often waived in contracts.

Accord and Satisfaction

• Mississippi law requires the following 4 elements to be met for accord and satisfaction to exist: (1) something of value must be offered "in full satisfaction of a demand;" (2) the offer must be "accompanied by acts and declarations that amount to a condition that if the thing is accepted, it is accepted in satisfaction;" (3) "the party offered the thing of value" must "understand that if he takes it, he takes subject to such conditions; and (4) the party offered the item must "actually ... accept the item." • When a final payment is tendered, the other party has two choices: (1) refuse it, or (2) accept it upon such condition. • Door purchase example

Implied Warranty of Merchantability cont.

• Most consumer purchases are covered by an implied warranty of merchantability, which means it is guaranteed to work as claimed. For instance, a vacuum cleaner that does not create enough suction to clean an average floor is in breach of the implied warranty of merchantability. Or, when you buy a new car from a car dealer, the implied warranty is that the car works. And when you order a hamburger at a restaurant, it comes with the implied warranty that it is edible. • Federal law defines "merchantable" by the following criteria: (1) They must conform to the standards of the trade as applicable to the contract for sale. (2) They must be fit for the purposes such goods are ordinarily used, even if the buyer ordered them for use otherwise. (3) They must be uniform as to quality and quantity, within tolerances of the contract for sale. (4) They must be packaged and labeled per the contract for sale. (5) They must meet the specifications on the package labels, even if not so specified by the contract for sale.

DAMAGES/REMEDIES FOR BREACH OF CONTRACT

• Once a party has breached a contract, there are several remedies available to the injured party • Courts prefer to award monetary remedies, but will award nonmonetary remedies (or a combination), when monetary damages alone would be inadequate.

Limitation of Remedy Clause

• Parties to a contract may provide for remedies in addition to or in substitution of the remedies available in the Mississippi Code. • For example, parties may choose to limit the buyer's remedies to return of goods and repayment of price or to repair and replacement of nonconforming goods or parts. • Parties may likewise contract to limit or expand liability in the event of a breach. • Clauses that limit liability, however, "are given strict scrutiny ... and are not to be enforced unless the limitation is fairly and honestly negotiated and understood by both parties."5 • A party's admission that it "entered into the agreement voluntarily with a full understanding of [the agreement's] contents" will satisfy the burden. • Moreover, a mutual waiver of consequential damages is strong evidence that such as provision is not a "one-sided" contract of "adhesion.

Waiver

• Sometimes a term of a contract can be considered waived based on conduct of the parties. • "It is simple contract law that a party may waive the protections of any provision of a contract." • Waiver can be express or implied. • Test: If, after acquiring knowledge of the deviation from a known right articulated in the contract, a party fails to insist on its contractual rights, or acts inconsistently with such rights, then that party waives the right to require such performance. • Example: umpire clause in insurance agreement

Implied Warranty of Merchantability

• The Mississippi Code provides for two implied warranties in contracts for the sale of goods: (1) the implied warranty of merchantability and (2) the Implied warranty of fitness for a particular purpose. • In order to recover under the implied warranty of merchantability provision, a plaintiff must prove the following: (1) that a "merchant" sold "goods" and was a merchant with respect to "goods of the kind" involved in the transaction, (2) that the goods were not merchantable at the time of the sale, (3) that plaintiff incurred injuries and damages, (4) that injuries and damages were caused proximately and in fact by the defective nature of the goods, and (5) that seller was given notice of the injury.

Interpreting Contracts (Ambiguity Rules) Step 1: What does the contract say?

• The first step is to look at the language contained within the "four corners" of the contract. • In interpreting contracts, the court's primary purpose is to determine the intent of the contracting parties. • The best evidence of the parties' intent is the language used in the contract. • Absent ambiguity, the contract will be enforced according to the words' plain meaning without resort to parol or extrinsic evidence. • Court's do not have the authority to modify, add to, or subtract from the terms of a contract validly executed between two parties.

Implied Warranty of Fitness for a Particular Purpose

• The implied warranty of fitness for a particular purpose exists when the seller at the time of contracting has reason to know any particular purpose for which the goods are required and that the buyer is relying on the seller's skill or judgment to select or furnish suitable goods. • Thus, for a plaintiff to recover under the implied warranty of fitness for a particular purpose, the evidence must be sufficient for the jury to find (1) the seller at the time of contracting had reason to know the particular purpose for which the goods were required; (2) the reliance by the plaintiff as buyer upon the skill or judgment of the seller to select suitable goods; and (3) the goods were unfit for the particular purpose.

Parol Evidence: Subsequent Modifications

• The parol evidence rule does not bar evidence of a subsequent modification or rescission of a contract. • But a modification or rescission must still satisfy other areas of contract law. (All elements required) • And, of course, there must be an existing contract to be modified.

Mutual Assent

• The parties to a contract must come to an agreement on all essential elements of a contract for it to be enforceable. • This is what is known as "a meeting of the minds" and is a prerequisite to contract formation. A party cannot be held to have contracted if there was no assent. • Mutual assent is often evidenced by a written contract signed by all parties. But assent can also be shown through "actions and conduct." (like the mowing example)

Expectation Damages

• This is a measure of compensatory damage based on the injured party's "expectation interest."• Expectation damage are intended to give the party "the benefit of the bargain" as if the contract had been fully performed. • An award of expectation damages protects the injured party's interest in realising the value of the expectancy that was created by the promise of the other party. • For example, let's imagine you ordered 100 bushels, meaning you would have had $1,000 worth of oranges had the contract been fulfilled. The court would calculate your expectation damages by subtracting the price you paid - $500 - from the value you expected to receive, resulting in $500 of damages. • Also imagine that I agreed to sell you my couch for $200. You rent a truck for $50 to transport it, but when you show up, I say I changed my mind and don't want to sell. The cheapest comparable couch you can find costs $300 and will require another $50 truck rental to pick it up. Your expectation damages are $150. You expected to pay $200 and a $50 rental fee, and receive a couch. Instead, you paid $300 and two $50 rental fees to receive a couch, so you are $150 worse off than you would have been had I stuck to the deal.

Specific Performance

• This is an extraordinary remedy. • It only is available if: (1) money damages are inadequate (2) the contract is definite and certain in terms and (3) specific performance is feasible. • Most often granted if the subject matter of the contract is unique. Real property is almost always considered unique. • Personal service contracts are almost never subject to specific performance. • Example: Rina offers to buy Beth's house and Beth accepts, but later decides to keep the property. ... Beth would be compelled to go through with the sale • Example: If a buyer purchases a famous art sculpture at auction, and does not receive the sculpture, the buyer may not be made whole by the return of his money, because there is only one such sculpture in the world for him to buy. Therefore a civil court may order the auction house to provide him with his sculpture or face penalty

Covid Example - Force Majeure

• To provide a contemporary example, what if the list doesn't include the word "pandemic?" A recent case in the Southern District of New York provides a good example of how a court decides whether and how the parties intended, at the time of contracting, to allocate the risk that a pandemic might delay, hinder, or prevent contract performance. In JN Contemporary Art LLC v. Phillips Auctioneers LLC, No. 20-cv-4370 (S.D.N.Y. Dec. 16, 2020), the court noted: • The words of the force majeure clause itself were open-ended, defining a force majeure event as "circumstances beyond our or your reasonable control," followed by a lot of examples. Even though none of the examples was "pandemic," the court relied on the broader catch-all statement. • Common reference materials, such as Black's Law Dictionary, confirmed that one of the examples ("natural disaster") was broad enough to encompass a "pandemic." • Other cases arising from COVID-19, outside the force majeure context (e.g., emergency powers authorizations) supported the conclusion that a "pandemic" could be considered a "natural disaster." • Taking these together, the court ruled that the pandemic did qualify as a force majeure event in the contract before it.

Perfect Tender Rule

• Under the perfect tender rule, all goods must conform to contract specifications. • If they do not, and unless the parties agree otherwise, the buyer has the right to: (1) reject the whole; or (2) accept the whole; or (3) accept any commercial unit or units and reject the rest. • Installment contracts are excepted from this rule.

Liquidated Damages

• What Are Liquidated Damages? Liquidated damages are presented in certain legal contracts as an estimate of otherwise intangible or hard-to- define losses to one of the parties. It is a provision that allows for the payment of a specified sum should one of the parties be in breach of contract. • KEY TAKEAWAYS • Liquidated damages are presented in certain legal contracts as an estimate of otherwise intangible or hard-to-define losses to one of the parties. • Liquidated damages are meant as a fair representation of losses in situations where actual damages are difficult to ascertain. • The courts typically require that the parties involved make the most reasonable assessment possible for the liquidated damages clause at the time the contract is signed. • Liquidated Damages. (This Liquidated Damages paragraph is applicable only if initialed by both Parties). THE PARTIES AGREE THAT IT WOULD BE IMPRACTICABLE OR EXTREMELY DIFFICULT TO FIX, PRIOR TO SIGNING THIS AGREEMENT, THE ACTUAL DAMAGES WHICH WOULD BE SUFFERED BY SELLER IF BUYER FAILS TO PERFORM ITS OBLIGATIONS UNDER THIS AGREEMENT. THEREFORE, IF, AFTER THE SATISFACTION OR WAIVER OF ALL CONTINGENCIES PROVIDED FOR THE BUYER'S BENEFIT, BUYER BREACHES THIS AGREEMENT, SELLER SHALL BE ENTITLED TO LIQUIDATED DAMAGES IN THE AMOUNT OF TWO HUNDRED FIFTY THOUSAND DOLLARS ($250,000). UPON PAYMENT OF SAID SUM TO SELLER, BUYER SHALL BE RELEASED FROM ANY FURTHER LIABILITY TO SELLER, AND ANY ESCROW CANCELLATION FEES AND TITLE COMPANY CHARGES SHALL BE PAID BY SELLER.