Kaplan Exam 3 BLAW

Basis of the Bargain

- If statements, promises, descriptions, samples, or models are part of the buyer's assumption underlying the sale, reliance by the buyer is presumed. - Statements or promises made by the seller subsequent to the sale may become express warranties.

Steinberg v. Chicago Medical School

- Steinberg applied to school, paid application $, was rejected - Steinberg claimed: school did not evaluate his application according to brochure criteria, therefore breached contract it created when it accepted his application $ Court held: - Steinberg & school entered into enforceable contract, & accepting Steinberg's application fee bound the school to fulfill its promise (in brochure) - An agreement meeting all of the requirements of a contract is binding & legally enforceable

Hamer v. Sidway

- Uncle becomes indebted to nephew after uncle promises nephew $5,000 if he can refrain from drinking, using tobacco, swearing and playing cards or billiards for money until age 21 - Nephew fulfills promise to refrain - Nephew gives the right to receive the money to receive the money to Louisa Hamer. - Uncle Dies - Sidway, executor for the Estate of the Uncle refuses to pay Hamer - Executor argues there was no consideration given in exchange for the promise to pay $5,000 - Court disagrees and says the action of refraining from a legal right is consideration

Requirements of a Contract

1) Mutual assent Parties to a contract must manifest by words or conduct that they have agreed to enter into a contact -- offer and acceptance 2) Consideration Each party must intentionally exchange a legal benefit or incur a legal detriment as an inducement to the other party to make a return exchange 3) Legality of Object Purpose of a contract must not be criminal, tortious, or against public policy 4) Capacity Parties must have a contractual capacity Some contracts must be in writing - statue of frauds - has to be in writing if the act cannot be completed within the year Must be an absence of invalidating conduct

Requirements of Strict Liability in Tort

1. Defendant was engaged in the business of selling a product such as the defective one; 2. Defendant sold the product in a defective condition; 3. Defective condition made the product unreasonably dangerous to the user or consumer or to his property; 4. Defect in the product existed when it left the defendant's hands; 5. Plaintiff sustained physical harm or property damage by using or consuming the product; and 6. Defective condition was the proximate cause of the injury or damage.

Denney v. Reppert

3 bank robbers Bank employees and cops in jurisdiction will not be rewarded $1500 Sherif out of jurisdiction does because not within scope of official duties

Uniform Commercial Code (UCC)

"Battle of the Forms" - Focuses on the intent of the parties If the offeree does not expressly make their acceptance conditional upon the offeror's assent to the additional or different terms, a contract is formed If both the offeror and offeree are merchants, such additional terms may become a part of the contract provided that they do not materially alter the agreement and are not objected to either in the offer itself or within a reasonable period of time

Common Law

An acceptance must be positive and unequivocal It may not change, add to, or subtract from, or qualify in any way the provisions of the offer It must be the mirror image of the offer Any communication that attempts to modify the offer is not an acceptance but a counteroffer, which does not create a contract

covenant not to compete

An agreement not to compete against a party for a set period of time within a designated geographic area. Enforceable if the Purpose of the restraint is to protect a property interest of the promisee and The restraint is no more extensive than is reasonably necessary to protect the interest Sale of a business Seller frequently promises not to compete in that particular type of business in a defined area for a stated period of time Employment Contracts Employees frequently sign employment contracts prohibiting them from competing with their employers during their employment and for some additional period of time after their termination

exclusive dealing contract

An agreement under which a seller forbids a buyer to purchase products from the seller's competitors.

Implied Warranty of Fitness for a Particular Purpose

Applies to ANY seller, whether they are a merchant or not Arises if at the time of contracting the seller had reason to know the buyer's particular purpose and to know that the buyer was relying on the seller's skill and judgement to select suitable goods Buyer need not specifically inform the seller of their particular purpose; it is sufficient if the seller has reason to know it Specific purpose not ordinary purpose

Bilateral and Unilateral Contracts

Bilateral: both parties make a promise (to do something) to each other. Unilateral: one party makes a promise to the other that the other party can accept only by doing something specific. When unclear, courts presume a bilateral contract

Notice of Breach of Warranty

Buyers are required to notify the seller of any breach of warranty, express or implied, as well as any other breach, within a reasonable time after she has discovered the breach or should have discovered it. If the buyer fails to notify the seller of any breach within a reasonable time, she is barred from any remedy against the seller.

Acceptance of Offer

Acceptance of an offer is essential to the formation of a contract Once an effective acceptance has been given, the contract is formed Acceptance of an offer for a bilateral contract is some overt act by the offeree that manifests their assent to the terms of the offer If the offer is for a unilateral contract, acceptance is the performance of the requested act with the intention of accepting

Lefkowitz v. Great Minneapolis Surplus Store

Advertisement listed rabbit furs for a $1.00. First come, first serve. RULE: an advertiser has the right to modify its offer. HOWEVER, it does not have the right to impose new conditions AFTER a party has already accepted

Violation of Public Policy

Agreements having a tendency to be injurious to the public or the public good are contrary to public policy

Gambling Statutes

All states have legislation on gambling or wagering. Courts generally refuse to recognize the enforceability of a gambling agreement. Some states have regulated gambling. - Lottery - Horseracing - Casinos

Conditional Promises

Conditional promise is a promise the performance of which depends upon the happening or nonhappening of an event not certain to occur. Sufficient consideration unless the promisor knows at the time of making the promise that the condition cannot occur.

Consideration

Consideration is the inducement to make a promise enforceable Legal sufficiency and Bargained-for exchange Promises are enforced only in cases in which the parties have exchanged something of value in the eye of the law Consideration occurs only when the parties intend to exchange Consideration exchanged for a promise may be an act, a forbearance to act, or a promise Gifts are made without consideration and are typically not legally enforceable

Third Parties

Consideration to support a promise may be given to a person other than the promisor if the promisor bargains for the exchange Consideration may be given by some person other than the promisee

Definition of a Contract

Contract is a binding agreement that the courts will enforce Promise or set of promises for the breach of which the law gives a remedy, or the performance of which the law, in some way, recognizes a duty Promise manifests or demonstrates the intention to act or to refrain from acting in a specified manner Breach is a failure to properly perform the agreement All contracts are promises; not all promises are contracts

Voidable Contract

Defective, but the law permits one or more of the parties to avoid the legal duties the contract creates If contract is voided, both parties no longer have legal duties under the agreement

Design Defect

Despite the product being produced as specified, the product is dangerous or hazardous because of inadequate design Ex: Ford Pinto

Neugebauer v. Neugebauer

Farm land Two sons One(Lincoln) takes advantage of mom Family finds out Mom(pearl) won

Firm offers under the UCC

Firm offer is a written promise not to revoke an offer for a specified period of time Merchant is bound to keep an offer to buy or sell goods open for a stated period not exceeding three months if the merchant gives assurance in a signed writing that the offer will be held open Enforceable even if no consideration is given to the offeror for that promise

Communication of Acceptance

For bilateral contracts, the offeree's acceptance must be communicated to the offeror For unilateral contracts, notice of acceptance to the offeror is typically not required

Fraud

Fraud prevents assent from being knowingly given

Promissory Estoppel

Gratuitous promises are enforceable to the extent necessary to avoid injustice Applies when a promise that the promisor should reasonably expect to induce detrimental reliance does induce such action or forbearance Charitable subscriptions

Preliminary Negotiations

If a communication creates in the mind of a reasonable person in the position of the offeree an expectation that their acceptance will conclude a contract, then the communication is an offer If not, then the communication is a preliminary negotiation Statement that may indicate a willingness to make an offer is not in itself an offer Offeror must demonstrate an intent to enter into a contract, not merely a willingness to enter into a negotiation

buyer's examination or refusal to inspect

If the buyer inspects the goods before entering into the contract, implied warranties do not apply to defects that are apparent on examination No implied warranty on defects that an examination ought to have revealed when the buyer has refused to examine the goods

Stipulated Provisions in the Offer

If the offer specifically stipulates the means of communication the offeree is to use, the communication of acceptance must conform to the specification in the offer in order to be effective

Illusory Promises

Illusory promise is a statement that is in the form of a promise but imposes no obligation upon the maker of the statement. Not consideration for a return promise

Article 2 of the Uniform Commercial Code (UCC)

Sale of personal property (goods) Sale consists of the transfer of title to goods from seller to buyer for a price Present sales and contracts to sell goods at a future time Goods are tangible personal property

Description, Sample, and Model

Seller can create an express warranty by use of a description of the goods that becomes a part of the basis of the bargain. -Seller expressly warrants that the goods shall conform to the description. When a sample or model is a part of the basis of the bargain, the seller expressly warrants that the goods sold shall conform to the sample or model. -Sample is a good that is actually drawn from the bulk of goods that is the subject matter of the sale. -Model is offered for inspection when the subject matter is not at hand; it is not drawn from the bulk.

Plaintiff's Conduct

Seller cannot defend a strict liability lawsuit on the basis of a plaintiff's negligent failure to discover a defect or to guard against its possibility. In comparative negligence states, damages may be apportioned.

Warranty of Title

Seller implicitly warrants that Title conveyed is good and its transferable, and Goods are subject to no security interest or other lien of which the buyer did not know at the time of contracting Lien is a claim on property by another for payment of debt

failure to warn

Seller is under a duty to warn of a product's possible danger, to provide adequate directions for its safe use, and to package the product safely. Cannot escape liability with a warning if the product could have been made or designed safer in a cost-effective manner. Duty to give a warning arises from a foreseeable danger of physical harm that could result from the normal or probable use of the product and from the likelihood that, unless warned, the user or consumer would not ordinarily be aware of such danger or hazard.

Statement Regarding the Value

Statements regarding the value of the goods or the seller's opinion or recommendation of the goods does not create a warranty. Express warranty may be created if seller states the price at which the goods were purchased from a former owner or in which she gives market figures relating to sales of similar goods. Expert seller's opinion may create an express warranty.

Substituted Contracts

Substituted contract results when the parties to a contract mutually agree to rescind their original contract and enter into a new one Three Separated contracts: Original contract Contract of rescission Substitute contract Valid contracts that allow the parties to effectively discharge the original contract and to impose obligations under the new agreement

Definiteness

Terms of a contract, all of which are usually contained in the offer, must be clear enough to provide a court with a reasonable basis for determining the existence of a breach and for giving an appropriate remedy where the courts have intended to form a contract, the courts will attempt to find a basis for granting a remedy The more terms that the parties leave open, the less likely it is that they intended to form a contract material terms would include the parties, subject matter, price, quantity, and time of performance

Mistake in Meaning of Terms

There is no manifestation of mutual assent in cases in which the parties attach materially different meanings to their manifestations and neither party knows or has reason to know the meaning attached to the other. If blame can be ascribed to either party, that party will be held responsible. If neither party is to blame or both are to blame, there is no contract; the agreement is void.

Legal Sufficiency

To be legal sufficient, the consideration for the promise must be either a legal detriment to the promisee or a legal benefit to the promisor In return for the promise, the promisee must give up something of legal value or the promisor must receive something of legal value Legal detriment means doing something the promisee was under no prior legal duty to do or Refraining from something that the promisee was under no prior legal duty to refrain from Legal benefit means the obtaining by the promisor of something that they had no prior legal right to obtain

Materiality

To constitute fraud, misrepresentation of a fact must be material Misrepresentation is material if It would be likely to induce a reasonable person to manifest assent or Maker knows that it would be likely to induce the recipient to do so Contract justifiably induced by a misrepresentation is voidable if the misrepresentation is either fraudulent or material Fraudulent misrepresentation does not have to be material to obtain rescission, but it must be material to recover damages

Misrepresentation of Fact

To constitute fraud, there must be a misrepresentation of a fact Fact is an event that actually took place or a thing that actually exists Opinion is not fraud Sales puffery refers exaggerations of products offered for sale - not fraud Predictions are usually not fraud Promissory statements are not fraud

Knowledge of Falsity and Intention to Deceive

To establish fraud, the misrepresentation must have been known by the one making it to be false and must be made with an intent to deceive includes (1) actual knowledge, (2) lack of belief in statement's truthfulness, or (3) reckless indifference to its truthfulness

Intent

To have legal effect, an offer must manifest an intent to enter into a contract Intent of an offer is determined objectively from the words or conduct of the parties Based upon what a reasonable person in the other party's position would have believed Beware of jokes, excited utterances, and invitations for offers

Settlement of Debts

Undisputed Debts - Obligation that is not contested as to its existence or its amount. - Common law - payment of a lesser sum of money than is owed in consideration of a promise to discharge a fully matured, insufficient debt is legally INSUFFICIENT to support the promise to discharge. Disputed Debts - Obligation whose existence or amount is contested. - Promise to settle a validly disputed claim in exchange for an agreed payment or other performance is supported by consideration.

undue infleunce

Undue influence is the unfair persuasion of a person by a party in a dominant position based on a confidential relationship Is voidable Ultimate question is whether the transaction was induced by dominating either or both the mind or emotions of the submissive party

Effect of Illegality

Unenforceability - neither party may recover under an illegal agreement where both parties are in equal fault. Exceptions - permit one party to recover payments - Party Withdrawing Before Performance - Party Protected by Statute - Party Not Equally at Fault - Excusable Ignorance - Partial Illegality

Improper Threats

Use of improper threats or acts to compel a person to enter into a contract is illegal. Threat may be explicit or may be inferred from words or conduct. It must leave the victim with no reasonable alternative. The agreement is voidable at the option of the coerced party. Test is subjective - Did the threat actually induce assent on the part of the person claiming to be the victim of duress? Acts need not be criminal or tortious to be wrongful - simply contrary to public policy or morally reprehensible.

Variant Acceptances

Variant acceptance is one that contains terms different from or additional to those in the offer. It receives different treatment under common law and the UCC.

Warranties

Warranty creates a duty on the part of the seller to ensure that the goods that they sell will conform to certain qualities, characteristics, or conditions In a warranty action, the buyer must prove Warranty existed, Warranty has been breached, Breach of the warranty was given to the seller Sellers are not required to warranty goods Buyer may reject or revoke acceptance of the goods Either way, buyer may recover damages: personal injury, damage to property, and economic loss

Types of Warranty

Warranty of Title Express Warranty Implied Warranty

Acceptance Following a Prior Rejection

When an acceptance follows a prior rejection, the first communication received by the offeror is the effective one.

Unauthorized Means

When the method of communication used by the offeree is unauthorized, the traditional rule is that acceptance is effective when and if received by the offeror, provided that it is received within the time during which the authorized means would have arrived.

Authorized Means

Where the language in the offer or the circumstances do not otherwise indicate, an offer to make a contract shall be construed as authorizing acceptance in any reasonable manner Authorized means is usually any reasonable means of communication

Irrevocable Offers of Unilateral Contracts

Where the offer contemplates a unilateral contract - promise for an act - injustice to the offeree may result if revocation is permitted after the offeree has started to perform the act requested in the offer and has substantially but not completely accomplished it If offeror does not know of the offeree's performance and has no adequate means of learning of it within a reasonable time, the offeree must exercise reasonable diligence to notify the offeror of the performance

Uniform Written Obligations Act

Written promise will be enforceable absent consideration if it "contains an additional express statement... that the signer intends to be legally bound" Only in PA

Counteroffer

a rejection of the original offer and the simultaneous making of a new offer Conditional acceptance Accepts the offer but expressly makes the acceptance contingent upon the offeror's assent to additional or different terms

Corrupting Public Officials

agreements that corrupt public officials are not enforceable

tortious conduct

an agreement that requires a person to commit a tort is an illegal agreement and unenforceable

Output and Requirements Contracts

an output contract is an agreement to purchase a seller's entire output for a stated period; a requirements contract is an agreement of a seller to supply a buyer with all the buyer's requirements for certain goods for a state period Such agreements are enforceable by the application of an objective standard based upon the good faith of both parties

Fraud in the Execution

consists of misrepresentation that deceives the defrauded person as to the very nature of the contract Such fraud occurs when a person does not know, or does not have a reasonable opportunity to know, the character or essence of a proposed contract bc the other party misrepresents its character or essential terms Renders the transaction void

executory contract

contract not fully performed on both sides

unconscionable contract

courts refuse to enforce in part or at all because it is so oppressive or manifestly unfair as to be unjust Permits the courts to resolve issues of unfairness Adhesion Contracts Standard-Form Contract prepared by one party Not automatically unenforceable but are subject to greater scrutiny

Warranty of Title

created by the existence of a sale

Past Consideration

element of exchange is absent where a promise is given for an act already done

Usury Statutes

establish a maximum rate of interest Maximum rates vary from state to state For a transaction to be usurious, courts usually require evidence of the following: a loan of money That is repayable absolutely and in all events For which an interest charge exacted in excess of the interest rate allowed by law

Anderson v. McOskar Enterprises, Inc.

exculpatory clauses

exculpatory clause

excuses one party from liability for her own tortious conduct - negligent conduct Cannot relive a person from tort liability for harm caused intentionally or recklessly Cause must be conspicuously placed in the contract and clearly written One party's superior bargaining position may nullify an exculpatory clause

Subsequent Illegality

if performance becomes illegal or impractical as a result of a change in the law, the duty of performance is discharged Illegality taking effect after an offer has been made, but prior to acceptance, terminates the offer

fraud in the inducement

intentional misrepresentation of material fact by one party to the other, who consents to enter into a contract in justifiable reliance on the misrepresentation Makes contract voidable Requisites for fraud in the inducement: 1) False representation 2) Of a fact 3) That is material and 4) Made with the knowledge of its falsity and the intention to deceive and 5) Which representation is justifiability relied on

adequancy

legal sufficiency has nothing to do with the adequacy of consideration Items or actions do not need to have the same value, just have some value No concern about whether the deal was good or bad Requirement of legally sufficient consideration Parties agree to an exchange and subject matter exchanged or promised imposed a legal detriment on the promisee or conferred a legal benefit on the promisor

Subsequent Alteration

liability exists only if the product reaches the user or consumer without substantial change in the condition in which it is sold

Promissory Estoppel

the legal enforcement of an otherwise unenforceable contract due to a party's detrimental reliance on the contract

Revocation

the taking back of an offer by the offeror

Osprey L.L.C. v. Kelly-Moore Paint Co., Inc.

the use of "Shall" vs. the use of "May" in lease documents - shall means it had to be kelly moore had a lease with osprey that had two renewal periods osprey required six months notification if they were going to renew kelly moore faxed it the last day of their lease at 5:28 pm osprey tried to evict them but court ruled in kelly moore favor

Promissory Estoppel

A doctrine that applies when a promisor makes a clear and definite promise on which the promisee justifiably relies; such a promise is binding if justice will be better served by the enforcement of the promise. (The hail Mary attempt of law)

Defective Acceptances

A late or defective acceptance does not create a contract.

Nonfraudulent Misrepresentation

A material, false statement that induces another to rely justifiably but is made without scienter Negligent Misrepresentation False representation that is made without due care in ascertaining its truthfulness Render agreement voidable Innocent Misrepresentation False representation made without knowledge of its falsity but with due care Renders a contract voidable

Unilateral Mistake

A mistake that occurs when one party to a contract is mistaken as to a material fact. Mistake must be obvious Objective standard Rescission is allowed in cases in which the effect of unilateral mistake makes enforcement of the contract unconscionable

Mutual Mistake

A mutual mistake occurs when the parties to a contract are both mistaken about the same material fact within their contract. They are at cross-purposes. There is a meeting of the minds, but the parties are mistaken. Hence the contract is voidable.

Assumption of Risk of Mistake

A party who has undertaken to bear the risk of mistake will not be able to avoid the contract even though the mutual or unilateral mistake would have otherwise permitted the party to do so.

Justifiable Reliance

A person is not entitled to relief unless he has justifiably relied on the misrepresentation. There is no fraud if the complaining party's decision was in no way influenced by the misrepresentation.

Offer

A promise or commitment to perform or refrain from performing some specified act in the future. When it is received, the offer confers on the offeree the power to create a contract by acceptance, which is an expression of the offeree's willingness to comply with the terms of the offer Outstanding offer creates no rights or duties until it is accepted

Advertisements

No offer when merchant announces that they have goods for sale, describes the goods, and quotes prices Invites public to make offers to buy the goods General advertisements are not offers because They do not contain a promise, and They would leave unexpressed many terms that would be necessary to the making of a contract Seller is not free to advertise goods at one price and then raise the price Advertisement may constitute an offer if it contains a definite promise of something in exchange for something else and confers a power of acceptance on a specified person or class of persons

Implied Warranties

Not found in the language of the sales contract or in a specific statement or promise by the seller Arises out of the circumstances under which the parties enter into their contract and depends on factors such as the type of contract or sale entered into, the seller's merchant or nonmerchant status, the conduct of the parties, and the applicability of other statutes

Quasi Contract - Contract Implied in Law

Obligation, not a contract, that is imposed to avoid injustice Requirements: Court will impose a quasi contract when 1) the plantiff confers a benefit upon the defendant, 2) the defendant knows or appreciates the benefit, and 3) the defendant's retention of the benefit is inequitable Remedy: plaintiff recovers the reasonable value of the benefit they conferred upon the defendant

Manufacturing Defect or Production Defect

Occurs when the product is not properly made It fails to meet its own manufacturing specifications

Communication

Oferee must know about the offer Offeror must communicate the offer in an intended manner Communication must be made or authorized by the offeror Offer need not be communicated by words Conduct from which a reasonable person may infer a proposal in return for either an act or a promise amounts to an offer Offer may be made to the general public No person can accept such an offer until and unless they know that the offer exists

Duration of Offers

Offer confers upon the offeree a power of acceptance, which continues until the offer terminates Ways in which an offer may terminate other than by acceptance: 1. Lapse of Time 2. Revocation 3. Rejection 4. Counteroffer 5. Death or Incompetency 6. Destruction of Subject Matter 7. Subsequent Illegality

Essentials of an Offer

Offer need not take any particular form to have a legal effect it must Be communicated to the oferee, Manifest an intent to enter into a contract, and Be sufficiently definite and certain

Effective Moment

Offer, a revocation, a rejection, and a counteroffer are effective when they are received Acceptance is generally effective upon dispatch Mailbox ruke Unless the offer specifically provides otherwise, the offeree uses an unauthorized means of communication, or the acceptance follows a prior rejection

Silence as Acceptance

Offeree is generally under no legal duty to reply to an offer Silence or inaction does not indicate acceptance of the offer By custom, usage, or course of dealing, however, the offeree's silence or inaction may operate as an acceptance, and a contract is formed

Lapse of Time

Offeror may specify the time within which the offer is to be accepted Upon the expiration of that time, the offer no longer exists and cannot be accepted If the offer does not state the time within which the offeree may accept, the offer will terminate after a reasonable time Determining a reasonable time is a question of fact, depending on the nature of the contract proposed, the usages of business, and other circumstances of the case

Effect of Fault upon Mistake

One who assents to a writing is presumed to know its contents and cannot escape being bound by its terms merely by contending that she did not read them. --Her assent is meant to cover unknown and known terms.

Maroun v. Wyreless Systems (Fraud: Fact)

Opinions of a businesses success are generally not taken as actionable fraud -> summary judgment in favor of wyreless Although a potential case exists for no financial backing being present even though it was claimed

Option Contract

Option is a contract by which the offeror is bound to hold open an offer for a specified period of time Must comply with all of the requirements of a contract, including the offeree's giving of consideration to the offeror

Express and Implied Contracts

Parties to a contract may indicate their assent either in words or by conduct implying such willingness Express Contract Parties manifest assent in words Oral or in writing Implied in Fact Contract Contract formed by conduct Both contracts are equally enforceable

Mutual Assent

Parties typically demonstrate mutual assent via an OFFER and ACCEPTANCE One party makes a proposal by words or conduct to the other party, who agrees by words or conduct to the proposal Contract exists if both parties' actions indicate a recognition by each of them of the existence of a contract Courts apply an objective standard to determine assent

duress

Person should not be held to an agreement that they have not entered into voluntarily Law will not enforce any contract induced by duress Duress is any wrongful or unlawful act or threat that overcomes the free will of a party

Physical Compulsion

Physical duress occurs when one party compels another to manifest assent to a contract through actual physical force. This type of duress renders the agreement void.

Defective Condition

Plaintiff must prove a defective condition in the product. Plaintiff must show that, at the time she was injured, the condition of the product was not substantially changed from the condition in which the manufacturer or seller sold it.

Montz v. Pilgrim Films & Television, Inc.

Plaintiff pitched idea to NBC and was rejected -> NBC created Ghost Hunters -> sued for breach of implied-in-fact contract to pay for the use of the reality show concept "as a result of cases like Montz, some firms are wary of accepting unsolicited product ideas unless a clearly defined contractual relationship exists"

Voluntary assumption of risk

Plaintiff's express or implied consent to encounter a known danger. Defendant must show that 1. Plaintiff actually knew and appreciated the particular risk or danger the defect created; 2. Plaintiff voluntarily encountered the risk while realizing the danger; and 3. Plaintiff's decision to encounter the known risk was unreasonable.

procedural v. substantive

Procedural Unconscionability - Was the negotiation process fair? - Fine print or legal jargon Substantive Unconscionability - Courts examine the actual terms of the contract for oppressive or grossly unfair provisions - Exorbitant prices or limitations on contractual remedies

Preexisiting Public Obligations

Public duty does not arise out of a contract; it is imposed on members of society by forced of the common law or by statue Public officials are under a preexisting obligation to perform their duties by virtue of their public office Preexisiting contractual duty Insufficient consideration because doing what one is legally bound to do is neither a detriment to the promisee nor a benefit to the promisor

Common law Restrain of Trade

Restraint of trade is any contract or agreement that eliminates or tends to eliminate competition or otherwise obstructs trade or commerce

Licensing Statutes

Revenue License Does not seek to protect against incompetent or unqualified people but serves simply to raise money Cosmetologists Agreement for unlicensed services are enforceable

False Representation

positive statement or conduct that misleads Silence or nondisclosure alone does not generally amount to fraud when the parties deal at arm's length Arm's-length transaction is one in which the parties owe each other no special duties and each is acting in their self-interest Parties generally have no obligations to tell the other party everything they know about the subject of the contract Misrepresentation does occur when (1) a person fails to disclose a fact known to them, (2) they know that the disclosure of the fact would correct a mistake of the other party as to a basic assumption on which that party is making the contract, and (3) nondisclosure of the fact amounts to a failure to act in good faith and in accordance w reasonable standards of fair dealing

Contracts without Consideration

promises to perform prior unenforceable obligations Promise to pay debt discharged in bankruptcy- may be enforceable without consideration Voidable Promises- is enforceable Moral Obligation- generally unenforceable for lack of consideration

Bouton v. Byers

promissory estoppel

Rejection

rejection if an offer is a manifestation by the offeree of their unwillingness to accept Offeree is at liberty to accept or reject the offer as they see fit Communicated rejection terminates the power of acceptance rejection may consist of express language or may be implied by language or conduct

Payroll Advance, Inc. v. Yates

restraint of trade

Destruction of Subject Matter

terminates the offer

Open terms

with respect to agreements for the sale of goods, the UCC provides standards by which the courts may determine omitted terms, provided the parties intended to enter into a binding contract Offer for the purchase or sale of goods may leave open particulars to be specified by one of the parties Any such specification must be made in good faith and within limits set by commercial reasonableness

Void Contract

A contract having no legal force or binding effect.

Executed Contract

A contract that has been completely performed by both parties.

Common Law

Contracts are primarily governed by state common law Everything outside the scope of the UCC Employment contracts, service contracts, insurance contracts, contracts involving real property, and contracts for the sale of intangibles such as patents and copyrights

Improper Threats

Contracts induced by threats of criminal prosecution are voidable, regardless of whether the coerced party had committed an unlawful act It is not wrongful to threaten a civil suit against an individual to recover a debt It is wrongful to bring a civil suit when bringing such a suit would be abuse of process

Plaintiff's Conduct

Contributory negligence of the buyer is no defense to an action against the seller for breach of warranty. Voluntary Assumption of Risk -If the buyer discovers a defect in the goods that may cause injury and nevertheless proceeds to make use of them, he will not be permitted to recover damages from the seller for loss or injuries caused by such use.

Express Warranty

Created by a statement of fact or promise made by the seller to the buyer

Implied Warranty

Created by circumstances under which the sale is made

Disclaimer of Warranties

Disclaimer must be positive, explicit, unequivocal, and conspicuous. Seller cannot provide an express warranty and then disclaim express OR implied warranties. Warranty of title may be excluded only by specific language or certain circumstances. To exclude or to modify an implied warranty of merchantability, the language of disclaimer or modification must mention merchantability and, in the case of a writing, be conspicuous. - Conspicuous means that a reasonable person against whom the disclaimer is to operate ought to have noticed it. To exclude or modify an implied warranty of fitness for a particular purpose of the buyer, the disclaimer must also be in writing and conspicuous. Court will invalidate disclaimers it considers unconscionable.

Conduct Invalidating Assent

Duress by physical force - void Duress by improper threat - voidable Undue influence - voidable Fraud in the execution - void Fraud in the inducement - Voidable

bargained for exchange

Each party intentionally gives the other party something in a mutually agreed-upon exchange for his promise or performance.

Vanegas v. American Energy Services

Employers alleged promised pay 5% to the producer of sale Employees were at-will meaning not held by contract to job

liscensing statutes

Every jurisdiction has laws requiring a license for those who engage in certain trades, professions, or business Regulatory License Designed to protect the public from unqualified people Doctors, lawyers, construction

Express Warranties

Explicit undertaking by the seller with respect to the quality, description, condition, or performability of the goods Statement of fact or a promise that relates to the goods, a description of the goods, or a sample or model of the goods Oral or in writing

Reed v. King (Fraud: Materiality)

Facts: Plaintiff and appellant: Reed; Defendant and appellee: King. Reed purchased a house from King. Neither King nor his real estate agents told Reed that a woman and her four children were murdered there 10 years earlier. Reed learned of the gruesome episode from a neighbor after the sale. She sues seeking rescission and damages. King successfully demurred to her first amended complaint for failure to state a cause of action. Reed appeals. King knew about the murder and that it would affect the market value. He also asked a neighbor not to inform Reed of the even. Issue: In the sale of a house, must the seller disclose it was the site of a multiple murder? Decision: Judgement is reversed. Reasons: Elements of fraud: There must be a false representation or concealment of material fact, made with the knowledge of its falsity, with the intent to induce the person to act upon it, and such person must act in reliance upon the representation to his damage.

Sherrod v. Kidd

Facts: Plaintiff: Sherrod; Defendant: Kidd. Kidd's dog bit Sherrod. Sherrod through her guardian made a claim for damages. The Kidds offered to settle the claim for $31,837. Sherrod sued the Kidds. The Kidds bumped their offer to $32,843. The arbitrator awarded Sherrod $25069.47 and she wrote to the Kidds saying she wanted to accept their ls offer of $32.8k made the year before. Sherrod moved to enforce the settlement agreement. The court concluded the offer was properly accepted because it had not been withdrawn. Issue: How much time is reasonable until the offer is withdrawn? Decision: The offer was not properly accepted because it had been withdrawn due the amount of time that had passed. Reasons: Value of the claim was set after arbitration. It was certainly subject to appeal but nonetheless set by a fact finder. This offer expired when the arbitrator announced the award and was not subject to being accepted

Conduct Invalidating Assent

Law demands that agreements be voluntary, knowing, legal and entered into by parties with legal capacity. If these requirements are not met, then the agreement is either voidable or void

statue of Repose

Laws limit the period for which a manufacturer is liable for injury caused by a defective product Typically 6 to 12 years After the time period has elapsed, a manufacturer ceases to be liable for such harm

Illegal Bargins

Legal objective is essential for a promise or agreement to be binding When the formation or performance of an agreement is criminal, tortious, or otherwise contrary to public policy, the agreement is illegal and unenforceable

Merchant Sellers

Liability is imposed only upon a person who is in the business of selling the product involved. Does not apply to an occasional seller. Strict liability also applies to the manufacturer of a component that is used in a larger product if the manufacturer of the finished product has made no essential change in the component.

Unreasonably Dangerous

Liability only applies if the defective product is unreasonably dangerous to the user or consumer Ex: Not whiskey, but whiskey w gasoline Not tobacco, but tobacco w marijuana

Valid Contract

Meets all of the requirements of a binding contract

Implied Warranty of Merchantability

Merchant seller makes an implied warranty of merchantability of goods that are of the kind in which they deal Provides that the goods are reasonably fit for the ORDINARY purposes for which they are used, pass without objection in the trade under the contract description, and are of fair, average quality

Strict Liability Tort

Merchant sellers are liable for personal injuries and for property damage that result from selling a product in a defective condition, unreasonably dangerous to the consumer even though the seller has exercised all possible care in the preparation and sale of his product. Focus on the product, not the conduct of the manufacturer.

Mistake

Mistake is a belief that is not accord with the facts Where the mistaken facts relate to the basis of the parties agreement, the law permits the adversely affected party to avoid or reform the contract under certain circumstances

Misuse or Abuse of the Product

Misuse or abuse occurs when the injured party knows, or should know, that he is using the product in a manner the seller did not contemplate. Misuse or abuse must not be foreseeable by the seller. - If foreseeable, seller must take measures to guard against it.

Tort Reform

More than half of the states have limited the punitive damages that a plaintiff can collect in a product liability lawsuit

Modification of a Preexisting Contract

occurs when parties to a contract MUTUALLY AGREE to CHANGE one or more of its terms Common Law Modification of an existing contract must be supported by new mutual consideration beyond that which is already owed under the original contract UCC Parties can effectively modify a contract for the sale of goods without new consideration if both parties intend to modify the contract and act in good faith Restatement Modification of an executory contract is binding if it is fair and equitable in the light of surrounding facts that the parties had not anticipated when the contract was made

Death or Incompetency

of either the offeror or the offeree terminates the offer

Statutory Irrevocability

offer made irrevocable by statute