Business law test #2 terms

Mutual Mistake

*mistake of material fact*: generally, no contract - both parties are mistaken, the contract can be rescinded by either party

Exceptions to the Parol Evidence Rule

- Contracts modified later (oral or written) - Voidable or void contracts - Contracts containing ambiguous terms - Incomplete contracts (left some things open) - Prior dealing, course of performance, or usage of trade (UCC) - (Written) contracts subject to orally agreed terms - Contracts with an obvious/significant typo

Promissory Estoppel Requirements

- Justifiable reliance - Detrimental - Reliance must have been foreseeable to person making the promise - Justice requires enforcement of promise

exceptions to assigned rights

- You (obligor) agreed to original contract and terms - You cannot prohibit people from owning land - Cannot prohibit the assignment of interest in land

Exceptions to fraudulent misrepresentation

- expert opinions: (doctor, professional) - naive purchaser: someone who relied on experts advise

Fraudulent Misrepresentation

- misrepresentation can occur by words or actions - concealing material facts - statements of opinion are generally not subject to claims of fraud

When determining whether reliance is justifiable, courts consider the circumstances involved, such as....

- nature of the transaction - form and materiality of the transaction - form and materiality of the representation - relationship of the parties - intelligence - experience - age - mental and physical condition - respective knowledge and means of knowledge

Exceptions to Unilateral Mistake

- other party knows/should have known - obvious, substantial scrivener's error - exceptions must still involve material fact

Misrepresentation by Silence

- silence is generally ok, but cannot lie if asked (remember Vokes) - BUT, must disclose serious problems that cannot reasonably be discovered (latent defects)

Contracts that require a writing

1. Contracts involving interests in land 2. Contracts that cannot be performed within one year 3. Collateral contracts (promises to answer to debt/duty of another) 4. Promises made in consideration of marriage. 5. Uniform Commercial Code

Elements of Fraud

1. Misrepresentation of material fact 2. intent to deceive (scienter) 3. justifiable reliance by innocent party

Third Party Beneficiaries

Creation of rights benefitting a 3rd party at the time the contract is created - exception to the principle of privity of contract

Justifiable Reliance on the Misrepresentation

Deceived party must have a justifiable reason for relying on the misrepresentation - NOT justified if innocent party knows true facts or relies on ridiculous statements - YES justified if defects are hidden/latent (no way of knowing)

Genuineness of Assent - Mistake

Have the parties agreed to the same material facts? Do the parties disagree about the same material fact? material→ means important fact - agreement hinges on this particular fact

Vokes v. Arthur Murray

Plaintiff: Audrey Vokes - 51/widow→ Dance ($30k on lessons) Defendant: Arthur Murray (Daven Port) - told Vokes she was "talented" and "beautiful" - false: she was bad She tried to get her $ back after paying half ($15k)→rescind - trial court ruled with Murray→Vokes appealed

collateral promise

Promise made by a 3rd party to undertake a responsibility of a primary party to a contract IF that primary party does not perform

Fraud Example Charter One Bank owned a 15-story commercial building. A fire inspector told Charter that the building's drinking water and fire-suppression systems were linked, which violated building codes. Without disclosing this information, Charter sold the building to Northpoint Properties, Inc. Northpoint spent $280k to repair the water and fire-suppression systems and filed a suit against Charter One. Is the seller liable for not disclosing the building's defects?

Seller is liable silence is not acceptable - have to disclose

Assignment and Delegation

Transfer of rights or duties by one of the parties at some time after the contract has been created - Exception to the principle of privity of contract

Lying

affected party can generally rescind, *usually damages* - Did the defendant lie to you intentionally knowing you would believe what they said?

innocent mispresentation

affected party can generally rescind, but *usually no damages*

Validity Requirements

agreement - offer - acceptance consideration contractual capacity legal

Duress

agreement is not voluntary if one party is forced into it - must have proof

rights assigned

all rights can be assigned

Form

can be oral or written

Remedies of Fraud

can sometimes get "damages" but have to show court that you endured *harm* that was substantial

intended beneficiary

can sue to enforce the provisions of a contract - life insurance

Parol Evidence Rule

cannot present outside evidence that contradicts the terms of the written contract - prior negotiations/agreements - conversations

Incidental Beneficiaries

cannot sue to enforce the provisions of a contract - benefits to 3rd party are unintentional example: sporting events (tickets-> license to witness game/incident) fans at sporting events: in right place @ right time but only have right to watch game cannot sue

Mallory promises a local hardware store that she will pay for a lawn mower that her brother is purchasing on credit if the brother fails to pay the debt. Must this promise be in writing to be enforceable?

collateral promise - getting nothing in return by paying (solely to help another)

Statute of Frauds

contracts must be in writing to be enforceable - must contain the material terms (parties, subject matter, consideration, time for performance)

The "One- Year" rule

contracts that cannot be performed within one year must be in writing to be enforceable - employment contract thats longer than a year

adhesion contract

contracts we have no say in/on - take it or leave it

Negligent Misrepresentation

defendant neglected to do something/had a duty - affected party can generally rescind, *usually damages* FACT SPECIFIC

Value Simmons finds a stone in his pasture that he believes is some kind of gem. Jenson, who also believes that the stone is some kind of gem, contracts to purchase it for $10. Just before delivery, the stone is discovered to be a diamond worth $1,000. Is the contract enforceable?

enforceable

Contracts involving interests in land

fixture → landscape (trees, plants) Lucy v. Zehmer (farm) - in Lucy's favor bc Zehmers name was on the paper (defendant)

mutual mistake of value

generally enforceable

statement

industry standards change laws try to stay out of it

Partial Performace

land ask: can parties return to their original pre-contract position? examples: moving into house→ painting, changing landscape)

Genuineness of Assent issues

mistake fraud undue influence duress adhesion contracts and unconscionability

Unilateral Mistake

mistake of one party *of value or fact*: contract stands - court is going to say, "sorry, you should have done your due diligence."

prenuptial agreement

must be in writing to be enforced

Contracts for the sale of goods UCC

needs to be in writing to be enforceable (over $500) - only need to list quantity

Fact Simmons finds a stone in his pasture that he believes to be quartz. Jenson, who also believes that the stone is quartz, contracts to purchase it for $10. Just before delivery, the stone is discovered to be a diamond worth $1,000. Is the contract enforceable?

not enforceable

Notice

not legally necessary good idea to give notice to obligor

Undue Influence

one party exercises influence, power, pressure on individuals who don't know better - elderly, minors, cognitive impairment party being taken advantage of does not exercise free will in entering a contract

Sale of Goods under UCC

quantity term, subject matter

Recission

revocation, cancellation of a law or agreement - parties return to original positions (act like it never happened)

Fraud and Misrepresentation example: grad who sued her law school for fraud

she lost - court ruled, "she payed for a law degree and she got it. They cannot be liable for how she is in an interview."

Mistake - Raffles v. Wichelhaus

shipping goods→ cotton two people have come to an agreement to ship the other party cotton *mutual mistake*: should have specified which boat you were shipping the goods on - not going to force buyer to accept the cotton 2 months late and not going to force shipper to resend goods

latent defects

termites, leaks, ghosts

Delegating a duty does not relieve the obligor-delegator

the obligee (the person to whom the duty was owed) can sue both the obligor-delegator and the delegatee (3rd party) for non-performance

Mutual Mistake of Value or Fact (Business Scenarios 15-3): Simmons finds a stone in his pasture that he believes to be quartz. Jenson, who also believes that the stone is quartz, contracts to purchase it for $10. Just before delivery, the stone is discovered to be a diamond worth $1,000. Is the contract enforceable?

they both think its less valuable than it is - mutual mistake of material fact

Delegation

transfer of duty; personal connection any duties can be delegated

Third Party Rights

transfer rights to someone else - once you assign away your rights to pay you cannot go back to it

Specific Performance

you get exactly what you agreed to in contract

Scienter

"guilty knowledge"

Damages

"harm" - proof required - property value had it been delivered as represented (minus actual price paid) - Sometimes punitive damages - Sometimes attorney fees