CHP 10
Void
-Contract does not exist at law so cannot be enforced -One of elements is missing: lacks a requirement of a contract -i.e. Contract with a legally insane person -i.e. Contract for an illegal subject matter -Courts won't accept disputes
Arthur J. Gallagher & Co. Vs. Babcock
-Court upheld the agreement but limited the geographical area because didn't put specifics -Defendants said non-competition provisions were not valid b/c 1) their language 2) their geographic scope
Adequacy of Consideration
-Courts do not care about this in a contract -If a party bargains poorly, courts usually won't interfere -Those who bargain take on the risk of their own errors -There are exceptions such as fraud, duress, etc. -The main concern is an exchange of mutual promises and obligations by the parties
Element #4: Legality
-If a contract is lacking legality, courts will not enforce it -Subject matter must be lawful (criminal activities; sale of prohibited drugs; gambling activities in some states -Interest rates on loans that violate usury laws (court may strike entire bargain as enforceable or only a part that concerns illegal subject matter
Element #1-The Agreement: The Acceptance
-The Acceptance: Expression for assent or agreement to the terms of an offer -To be effective, an acceptance must be: 1) Unconditional -Must be a mirror image of the offer -If conditions are added, they create a counteroffer 2) Unequivocal 3) Legally communicated
The role of a Contract law
-provides a mechanism to deal with others -Law of contracts has evolved in commerce over the centuries -The concept of *freedom of contract* means there are responsibilities to those who create binding relationships -->only laws limit the choices parties may make
Casey v. Gulfstream Aerospace Corp.
-was a contract because first contract was dead. unilateral b/c if they walked in after 2 week period then they are continuing to work.
Terminating an offer
-*Revocation:* Withdrawing of offer by the Offeror -*Rejection:* By Offeree. Through lapse of time . Counteroffers are created by rejecting the original offer but keeping negotiations open by presenting new conditions-result is a *counteroffer* *-Operation of Law: * Intervening illegality. occurs when a court decision or legislation makes an offer illegal. (ex: Lindsey Lohan has gambling site, gov. intervenes and forbids gambling by Internet) --Destruction of subject matter (ex: if someone offers to sell someone car and the car is wrecked before exchange) --Death or insanity of offeror or offeree (ex: person doesn't have mental capacity to enter into contract)
Enforceable promises w/o Consideration
-*promissory estoppel (or detrimental reliance)*: avoids injustice due to the promisee's reasonable reliance on the promisor's promise -Promisor is estopped (prevented) from denying a promise -Courts don't impose the rule lightly -Sometimes used in promises to charities, especially if organizations rely on the donation to act in some way -there wasn't writing so not valid contract
Bilateral contracts
-2 promises -a promise in exchange for a promise -ex: I promise to pay you $250 to trim my trees; you say Fine. -If promises are broken, there may be responsibility if losses are incurred
Implied contracts
-Actions and circumstances infer and define the terms of the contract -May be words, conduct, gestures -These contracts are implied at law -ex: At a checkout counter at a grocery store, actions of the parties create offers/acceptances
Unenforceable contracts
-Contract is actually valid when made, but changes in law made it unenforceable *-Unconscionable contracts:* occur when one of the parties being in a strong position takes advantage of the other party *-Exculpatory agreements:* releases one party from the consequences brought about by wrongful acts or negligence (ex: an employment contract stating that the employee will not hold the employer liable for any harm to her caused by the employer while on the job) -ex: company agrees to ship wheat to Iran. After shipment is at sea, US gov changes no US firms may trade with Iran-void contract, turn ship around -Unenforceable under US law even if seen as legal in Iran
Element #6: Contracts in Writing & the Statute of Frauds
-Contracts do not always have to be in writing to be enforceable,HOWEVER, written contracts are always good as evidence of the agreement -The purpose is to prevent parties from claiming that a contract existed when it didn't **Some contracts require writing: 1) Sale of land or interest therein 2) Contracts that cannot be performed within 1 year 3) Promise to pay the debt of another, including debts of an estate 4) Promises made in consideration of marriage ---anything on land and attached to land
Legality & Contract Contrary to Public Policy
-Contracts in Restraint of Trade: contracts that restrain trade or unreasonably restrict competition -Covenant not to compete may be restraint of trade unless limited by time, territory, and ancillary to the contract . Different states differ on this subject -Covenants not to compete often used in sale of business or employment contracts
Minors
-Defined as a person under the legal age of majority -Traditionally the age of majority was 21 but now it is 18 years old in all states for most contracts -Minors have partial capacity -Contract is voidable -Legal policy to protect the young from the "results of their own folly"
Express contracts
-Direct statement by the parties of the promises made -May be oral or written -All important terms are expressly stated between the parties ex: someone expresses they want you to mow their lawn, don't write it down, but an intent to mow the lawn
Williams v. Walker-Thomas Furniture
-Furniture store sold items on credit to an unsophisticated, low income person -Under contract, none of goods were paid for until every item was paid -Buyer failed to make payments on the last item bought -Store wanted to repossess everything, not just last item -Appeals court held contract was unconscionable -Trial court need not enforce the contract
DeRosier vs. Utility Systems of America, Inc
-HELD: District Court erred in awarding DeRosier $8,000 in consequential damages. HELD: District court had sufficient basis for calculating and granting $22,829 in general damages. HELD: Regarding DeRosier's duty to mitigate: Non-breaching DeRosier could decline the offer of USA to remove dirt for $9,500. Did not unreasonably reject USA's offer and did not fail to mitigate his general damages. HELD: Reversed in part; affirmed in part.
"You Can't Trust Anyone These Days"
-Man hiding from police, couple said they would hide him, they escape and he ends up getting shot so he tries to sue -This is not a contract
Voidable
-One party to the contract has right to avoid legal obligation -Is valid but capable of being voided by a circumstance -i.e. Minors contracts -i.e. Contracts with person under influence of drugs or alcohol -i.e. Fraud by one of the parties
Unilateral contracts
-Only 1 promise -A promise in exchange for a performance -Ex: I promise to pay you $250 to trim my trees; you don't respond but next day you go out and trim them -Once performance has been made, the other party's duty arises to fulfill his/her promise
Certified Fire Protection, Inc. v. Precision Construction, Inc.
-Precision Construction told Certified that it was ending relationship b/c contract wasn't signed, there was no insurance certificate, and drawings were incorrect -Certified sued for breach of contract -Contended it was due payment for the sprinkler system drawings -Trial court held for Precision--no contract existed -Certified appealed HELD: Affirmed. No contract was ever made. -Precision never agreed to a contract for only design related work -No agreed upon price
Parole Evidence Rule
-Restricts use of oral evidence when that evidence is contrary to terms of written contract -Oral evidence cannot contradict, change, or add terms to written contracts -IF a written contract is incomplete, ambiguous, proves fraud, mistake, or misrepresentation, then oral evidence may explain the problems
"No Extra Charge For The Smell"
-Salais bought a 4 yr old car from a dealership during the winter -When weather warmed up, the car began to smell -The warmer it got, the worse the smell -She took the car back to the dealership and someone told her it was from a dead animal -Doubtful about that, she filed a claim with her insurance company -State Farm hired a biohazard clean-up company -It determined the odor was human -State Farm also learned the car had been stolen 3 times -Had been used as a rental vehicle -Salais sued the dealership to undo the deal or return her money plus extra for her trouble **Better settle with her esp if they knew and didn't clean the mess up---dealer knew or should've known and for her trouble she would get her money back she will win assumingly
Definition of a Contract
-Sir Wm. Blackstone: "An agreement, upon sufficient consideration, to do or not to do a particular thing" -Modern definition: centers on a *promise*: "A 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" -The promise itself creates a manifestation of intent to act or refrain from acting in a specified manner -Contracts form legal relationships and duties between parties -Not all promises are enforceable contracts--must meet the requirements of a contract to create an enforceable promise
"Me, Read the Rules?"
-Struna bought 52 lottery tickets with the same numbers on each. Top Prize was $100,000 for a winning ticket. BUT, one of the lottery rules held that the maximum any one person could win in a drawing is $1 million. When Struna's number won, he received $1 million, not the $5.2 million he expected. He sued Convenient Food Mart (where he bought the tickets) for fraud. He said the clerk did not tell him the terms of the lottery contract - that were printed on the ticket. Jury awarded him $250,000 in compensatory damages and $1.1 million in punitive damages. Appeals Court: Threw out the judgment. He loses. note that Mr. Struna DID NOT win the amount he had sued for and received only $1 Million, NOT the $5.2 Million that he felt he deserved. It was his fault that he did not read the terms and conditions of the lottery rules on the back of the lottery tickets he purchased.
Element #5: Reality of Consent/Genuine Consent
-This concept deals with an individual's choice of entering into agreements -If reality is missing, there is no meeting of the minds --If there is unilateral mistake over a simple error, then contract usually can be avoided (typographical error-$20,000 instead of $200,000) -enters into an agreement with false info -Without this element, the contract is void or voidable (depending on the circumstances) Ex: Fraud, Misrepresentation, Duress (opening scene of godfather basically don't have choice feel threatened), Undue influence (care taker)
Hinson v. N&W Construction Company, Inc.
-Trial court granted summary judgment to N&W, awarding $47,000. Hinson appealed. Ct. of Appeals held: Affirmed. Hinson admits he provided a verbal quote. Also testified that he reviewed plans & specs for the building, & was satisfied with his quote of $92,000. Hinson refused to do the plumbing because, "I just had a lot of other jobs going." Promissory estoppel arises when "making of a promise, even though without consideration . . . " that plaintiff (here N&W) relied upon. ***"Refusal to enforce it would be virtually to sanction the perpetuation of fraud or would result in other injustice."
"Contracting with the Japanese"
-US contracts tend to try to cover all contingencies -Japanese view contracts as secondary to the ongoing relationships of the parties -Contracts with the Japanese should be brief and flexible, not detailed -Long, detailed contracts may be viewed with suspicion -Strong statement ("That just won't work") likely to be viewed as an insult -The Japanese often want "good faith clauses" in contracts with Westerners -Consensus among the negotiating teams is very important
Deschamps vs. Treasure State Trailer Court
-When language of contract is clear and unambiguous, look at the substance of the contract itself. Here contract clearly, expressly stated that Deschamps did not rely on any oral assurances or presentations by Rasmussen. Deschamps cannot now claim otherwise. Deschamps signed a contract prepared by his real estate agent, containing statement that Deschamps had not relied upon assurances by Rasmussen. -Agreement provided 1) Rasmussen had not conducted an inspection nor warranted property's condition. 2) Deschamps had right/duty to inspect property prior to purchase. 3) Special disclaimer of reliance on Rasmussen's assurances. 4) Inspection was waived or satisfied. 5) Clause in agreement said this was entire agreement and superseded any oral agreements. 6) Agreement could only be amended by a writing. Note that the contract was very specific regarding any oral evidence that would change the written terms of the contract. Also see the reasoning of the court as to why they held against Deschamps.
Sufficiency of Writing
-Writing must set out the material terms of contract -Names of parties -Consideration -Subject matter -Invoices, emails, sales orders, checks, confirmations may satisfy this requirement
Economic Loss Rule
-You need to specifically know that the under this rule, damages are only those related to economic losses suffered by the breach. Also note that in contract cases, there are no punitive damages or mental distress awards.
Element #1: The Agreement-The Offer
-a mutual understanding between parties reached through a process of offer and acceptance -Creates the offeror (person making an offer) and offeree ( party to whom the offer is made) 1)Manifestation of Intent: To make an offer, the offeror must have the intent to be bound to the contract, and that intent must be clearly expressed or manifested 2) Definite Terms & Conditions: terms of an offer must be sufficiently detailed so each party's promises are certain 3) Communication: Cannot form a contract by accepting an unknown offer (ex: Person returns a lost dog but does not know of an award) -Sometimes terms will be presumed: (ex: ordering a laptop online you assume it is packed properly)
Quasi Contract
-also called quantum meruit -Quasi means "almost"->not a true contract -Legal concept used by courts to prevent injustice -Courts apply this classification in equity (out of a sense of fairness) to give relief to innocent parties -Ex: you watch as a crew (in good faith) come to your house and pave your driveway -Do you have to pay the bill when it is sent to you? Yes, under *quasi contract* Note the example. If you watch the crew mistakenly, but in good faith, pave your driveway and you don't stop them, you will have to pay for the work. HOWEVER, if you were away from home and came home to the mistakenly paved driveway, you would not have to pay them for the work that was done.
Element #3: Capacity
-refers to the legal ability to create a contract -Some have limited capacity to contract: --Minors --Intoxicated persons --Insane persons -If there is no capacity, the contract is void -If there is partial capacity, the contract is voidable=may disaffirm -Until the mid 19th century, married women did not have capacity to make contracts independent of their husbands
Consideration
-something of value or something bargained for in exchange for a promise -both parties to a contract get something and give up something -This element is what distinguishes contracts from gifts -Gift law is an area of property rights—gift is giving and not receiving—gift is different from contract because its on sided giving
Contract law
-state common law -judge-made law -each state differs -There is uniformity about general contract principles that run throughout most states' laws -years ago, english courts began to use *lex mercatoria* ("the law merchant") these are commercial rules that merchants devised over centuries of doing business across national borders -Roman law of contracts was surprisingly sophisticated covering the Roman Empire *-UCC: Uniform Commercial Code.* All states have adopted in its entirety except Louisiana. Covers contracts for sale of goods -Many countries rely on Code Law only for their basic legal framework
Remedies
-the most common remedy for breach of contract is *monetary damages:* compensatory damages, actual damages, expectancy damages, liquidated damages, nominal damages, punitive damages (if there is tort related to breach of contract), special damages *-Equitable Remedies:* -Specific performance, Injunction, Restitution *Mitigation of Damages*: -Injured party is required to make efforts to mitigate or lessen losses . Know these, and look particularly at "nominal damages" which are very small requests for damages, such as $1.00 - $100. I think most of you know that "punitive damages" punish a defendant for very bad behavior or neglect, and can be 2X or 3X the actual or compensatory damages that the plaintiff will receive.
Elements of a Contract
1) An agreement, through: -Offer -Acceptance 2)Consideration 3) Contractual Capacity 4) Legality 5) Genuine Consent 6) Writing -If necessary under the Statute of Frauds *Rule*: if all elements are present, the contract is generally termed valid!
General Rules for Minors
1) Minors may disaffirm contracts at their option 2) If a minor disaffirms a contract after receiving benefits, *restitution* must be paid for the benefit -Some contracts may not be disaffirmed: --enlistment contracts --marriage contracts --educational loans --insurance loans --medical care -After reaching majority, the minor may ratify the contract (ratify=could void it before you stay in it)
Scheerer v. Fisher
Scheerer, a real estate agent. Helped arrange to buy commercial real estate. Cost was $20 million. Seller & Fisher each promised to pay Scheerer 2% commission. Deal fell apart. Fisher formed a new company, & had 3rd party, Antonio, buy the property & then sell it to Fisher's new company. Scheerer learned of deal (had gotten no commission from it) & sued for breach of contract on quantum meruit compensation. Trial Court held no contract or basis of payment. Scheerer appealed. HELD: Reversed. Defendants took action to deny Scheerer compensation for services rendered. Although original contract failed, law implies a promise to pay some reasonable compensation for services rendered. Allegations state a valid quantum meruit claim You'll need to know the theory that worked in this case and the outcome of it and why one party won.
