Business Law - Ch. 12

Carol's car was hit while it was parked. Carol calls A-1 Towing, tells the dispatcher the car needs to be towed, and gives her location. Carol never mentions a price and leaves before the tow truck arrives, so she does not talk with the driver or sign any documents. Carol

owes the company for towing her car under an implied contract

Beaux is discussing with Brad the purpose of the statute of frauds enacted in all states, and tells him the purpose of the law is to

prevent enforcement of certain contracts that are not in writing

KJ Games, in Colorado, designs computer games that it markets and sells to customers via the Internet. A click-on agreement accompanies every download; no game can be installed on a buyer's computer if the buyer does not click on the words "I agree" when prompted. The click-on agreement clearly states in capital letters that all disputes will be settled in Colorado's state courts. Buyers of KJ's games are most likely

required to file any lawsuits in Colorado

What property or services did Wrench furnish?

art work, merchandising and marketing ideas

What are the requirements for an implied contract?

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

Thomas Rinks and Joseph Shields developed Psycho Chihuahua, a caricature of a Chihuahua dog with a "do-not-back-down" attitude. They promoted and marketed the character through their company, Wrench, L.L.C. Ed Alfaro and Rudy Pollak, representatives of Taco Bell Corp., learned of Psycho Chihuahua and met with Rinks and Shields to talk about using the character as a Taco Bell "icon." Wrench sent art-work, merchandise, and marketing ideas to Alfaro, who promoted the character within Taco Bell. Alfaro asked Wrench to propose terms for Taco Bell's use of Psycho Chihuahua. Taco Bell did not accept Wrench's terms, but Alfaro continued to promote the character within the company. Meanwhile, Taco Bell hired a new advertising agency, which proposed an advertising campaign involving a Chihuahua. When Alfaro learned of this proposal, he sent the Psycho Chihuahua materials to the agency. Taco Bell made a Chihuahua the focus of its marketing but paid nothing to Wrench. Wrench filed a suit against Taco Bell in a federal court claiming that it had an implied contract with Taco Bell and that Taco Bell breached that contract. Do these facts satisfy the requirements for an implied contract? Why or why not?

Case Study

Wes agrees to install a new hard drive and modem in Mary's computer in exchange for four of her used textbooks. After he installs the hard drive, Wes says he won't install the modem unless Mary gives him two more books. What legal position are the parties in now?

Mary can sue for breach of contract, because Wes had a preexisting duty to do all of the work

Suppose that Jack and Hal and Sophia enter into an agreement to sell the restaurant. The contract includes the non-competition agreement. A few months later, Jack decides that he will sell the frozen food in violation of non-competition agreement unless if Hal and Sophia agree to pay him an extra $100,000. Hal and Sophia agree since they do not want to fight. Six months later, however the still have not paid and Jack sues. What is the result?

Hal and Sophia would win, since Jack already had a prior existing legal duty to not compete with Hal and Sophia.

Suppose that Jack and Sophia and Hal enter into a contract to close on the business without the non-competition agreement. Jack states that he would probably sign the non-competition agreement if they included an extra $100,000. A month later, Hal and Sophia bring Jack $100,000. What is the result?

If Jack does not accept the $100,000, there is a valid contract for the sale of the business, without a non-competition clause.

Suppose that Jack, Hal, and Sophia enter into an agreement for the sale of the restaurant, with Jack stating in the agreement that if he feels comfortable with his finances in his retirement, that he will not sell the frozen food in competition with the restaurant. After the sale, the stock market rises considerably, and Jack's net worth quadruples. He still decides to sell the frozen food. Hal and Sophia sue. What is the result?

Jack would win since the promise not to compete was illusory.

If Vinny and Maria had an otherwise valid contract, can she avoid her obligations if it does not have air conditioning?

No, the only condition in her acceptance was that it pass a smog inspection.

Kelly tells Matthew that she will sell him one of her motorcycles at some time in the future. Matthew eagerly accepts. Do they have a valid contract?

Probably not, because the terms are not definite

Keisha contracts with a broker to invest all of her savings. The year goes badly, and she loses almost all the money. She is too ill to return to work and will be penniless if she cannot avoid the contract. Which of the following applies?

She has no legal recourse

What if Taco Bell had rejected the terms of the arrangement and never used or considered the Chihuahua as a Taco Bell icon? The court would likely find for

Taco Bell

Why was Taco Bell's rejection of the terms not sufficient to be considered a rejection of Wrench's services or property?

Taco Bell rejected their terms, but ultimately used Wrench's idea

Generally, what facts established an expectation that Wrench was to be paid for its services or property and that Taco Bell knew or should have know that payment was expected?

Taco Bell using Wrench's idea or concept

Assume that the contract was voidable due to Jack's intoxication. Two years later Jack sues to undo the contract for the sale. Which of the following would be Hal and Sophie's best defense against this action?

That Jack, by waiting two years ratified the contract.

Suppose that Jack and Hal and Sophia enter in to a contract for the sale of the business. Jack however was drunk at the time that the negotiations took place and at the time of the signing of the contract. Please decide.

The contract is valid unless Jack did not know he was entering into the contract or lacked the mental capacity to comprehend its nature.

Suppose that Jack and Hal and Sophia enter in to a contract for the sale of the restaurant. Hal and Sophia inventory the restaurant and they find that there was a case of bald eagle meat in the refrigerator, which is illegal to possess. This was unknown to them at the time of the agreement. Which of the following is true?

The contract would likely sever the illegal part of the contract and allow for the contract for the sale of the business to be enforced.

Assume that a contract was entered into for the sale of the restaurant, and that the sale included the covenant not to compete. Which of the following is true?

The covenant not to compete must be reasonable in geographic scope to be valid.

Suppose that Jack states that he would sell the restaurant with the non-competition agreement for an extra $100,000. Hal and Sophia say they will buy the restaurant, but only pay an extra $75,000 for the non-competition agreement. Jack says no to that. Hal and Sophia, then agree to the $100,000. Do they now have a valid contract?

There would be no valid contract.

Do implied contracts require an agreement with another party?

Yes

Would a court likely find an implied contract in this case and make Taco Bell pay for the services and property provided by Wrench?

Yes

Suppose that Jack makes an offer to sell the restaurant on July 10th. Hal and Sophia decide to think it over. On July 15th they mail a letter of acceptance to Jack. On July 16th Hal and Sophia change their mind and call Jack stating that they did not want to purchase the business. On July 20th, Jack receives the letter of acceptance. Would there be a valid contract?

Yes, a valid contract was formed on July 15th when the letter of acceptance was sent.

Suppose at the end of the meeting that Jack agrees to offer the restaurant buyout, including the non-competition agreement. Prior to Jack and Sophia agreeing to the offer, however, Jack changes his mind. Can he do so?

Yes, as long as he actually communicates the revocation to Hal and Sophia (or their agent) prior to acceptance.

Ignoring issues of the Statute of Frauds, is there a contract for the sale of Vinny's Celica?

Yes, between Vinny and Oscar for $5,000 cash since that was the first offer accepted.

Carmen owns a 2009 Toyota Camry that has been driven 24,000 miles and, to his knowledge, has no mechanical problems. He offers to sell the car to his friend Jamie for $12,000. Jamie accepts Carmen's offer. Jamie and Carmen have

an express contract

This case primarily involves:

an implied contract

Troy, who is 18, offers to sell Jenna, who is also 18, his car for $5,000. Jenna accepts Troy's offer, but only agrees to pay $4,500 for the car. Which of the following contract elements has not been met?

acceptance

Kristin contracts with Jacob to buy a car through an online auction service. All of their negotiations and transactions are conducted electronically. None of their communications ever mention the Uniform Electronic Transactions Act (UETA), which was adopted by their state in its entirety in 2001. Their contract is

automatically covered by the UETA

Jackson offers to pay Casey $50 for his used business law textbook. Casey agrees to sell it for that amount. They agree to meet one week later to exchange the money for the book. Casey and Jackson have formed

bilateral contract

Heather is sixteen but looks much older. She goes into a jewelry store and buys a diamond bracelet with the money she has been saving for college. If Heather realizes a year later that it was unwise to spend the money on the bracelet, she

can return the bracelet and get her money back

Elliot enters into a contract to purchase JD's house, and then changes her mind. JD sues her for breach of contract. The lawsuit for a breach of contract will be governed by

common law of contracts

Edward offers to sell Penny his home gym equipment for $1,000. Penny tells Edward, "I like the gym equipment, but I'll only pay $750." Penny's statement constitutes a:

counteroffer

Patricia drives to her favorite gas station and tells the attendant to fill her tank. The attendant asks Patricia what grade she wants, and she tells him, "regular." The attendant fills the tank. At this point, the contract between the station and Patricia is

executory

Marcy tells Jessica that she will buy Jessica a new dress if she reads a book by Friday night. Jessica begins reading and has only two chapters left to finish when Marcy tells Jessica that she has changed her mind and will not buy the dress. Under the modern approach to contracts, Marcy and Jessica

formed a unilateral contract as soon as Jessica began reading

Paul goes to a bar, has seven shots of whiskey, and then goes to an electronics store and buys a $2,500 stereo system. If he later wants to avoid the contract based on his intoxication when he bought it, he will need to prove that

he lacked the mental capacity to enter into the contract

n implied contract can also be referred to as:

implied in-fact contract

In this case, a court would rely on the:

the conduct of the parties