MGMT 209: Exam 3

You own and live on 10 acres outside city limits. The 50 acre tract beside you sells and the new owner starts a hog operation - 50 sows, a nursery, feeding floors, etc. During the hot summer months in Texas the stench is so strong you can barely stand to be in your own home. What can you do about it? What do you get?

*Private nuisance:* Plaintiff shows he suffers from harm to his property rights and distinct from that suffered by others. Courts balance the harm caused by pollution - here it is air pollution - against the costs of stopping it. Also, you owned your property first and the nuisance came to you. So, you have a pretty good chance of winning $$ damages because you can no longer enjoy your property or an injunction to stop the hog operation and force them to move - depends on what you ask for and what the court allows

Major Provisions of the Sherman Act

1.) "Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several states, or with foreign nations, is hereby declared to be illegal [and is a felony punishable by fine and/or imprisonment]" 2.) "Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several states, or with foreign nations, shall be deemed guilty of a felony [and is similarly punishable]"

Counteroffer by the offeree

1.) A counteroffer is a rejection of an offer and the simultaneous making of a new offer; the counteroffer may be accepted by the original offeror 2.) A counteroffer terminates the original offer 3.) Mirror Image Rule

Elements of Fraud

1.) A misrepresentation of a material fact 2.) Made with intent to deceive 3.) Innocent party justifiably relies on the misrepresentation 4.) If seeking damages and NOT just recession of the contract: Innocent party must prove harm

Delegation of Duties

1.) A party to a contract may transfer, or delegate, his contractual obligation to perform an act 2.) Delegation does not relieve the delegator ( party making the delegation) of the obligation to perform in the event the delegatee (party to whom the duty has been delegated) fails to perform 3.) No special form is required to create a valid delegation of duties. The delegator must only express an intention to make the delegation. 4.) Duties that cannot be delegated: a. Personal duties that depend upon skill or talents of the obligator b. When special trust has been placed in the obligator c. When performance by a third party will materially vary from the performance expected by the obligee d. When the contract expressly prohibits delegation/assignment

Assignments

1.) A party to the contract (assignor) assigns his rights under the contract to a third party (assignee) 2.) The assignor's rights are extinguished upon assignment 3.) The assignee may enforce the contract against the other original party (obligor)

Online offers should include:

1.) Acceptance of terms 2.) Payment 3.) Return Policy 4.) Disclaimer 5.) Limitation on Remedies - remedies if the contract is breached or if product is defective 6.) privacy Policy 7.) Dispute Resolution

4 Requirements of a Valid Contract

1.) Agreement - the mutual assent and agreement of the parties must be evidenced by an offer and an acceptance 2.) Consideration - legally sufficient and bargained-for consideration must be exchanged for contractual promises 3.) Contractual Capacity - each party to a contract must be recognized as being legally competent to enter into contracts 4.) Legality - the purpose and subject matter of the contract must not be contrary to law or public policy

Temporary Impossibility

1.) An occurrence or event that makes it temporarily impossible to perform the act in the contract will suspend performance until the impossibility ceases 2.) When the impossibility ceases, the parties must ordinarily perform the contract 3.) If the lapse of time and change in circumstances make the contract substantially more burdensome to perform, the parties will be discharged

A promisee can incur legal detriment in one of 2 ways:

1.) By doing or promising to do something that he or she (the promisee) had no prior legal duty to do, or 2.) By refrain or promising to refrain from doing something that he or she (the promisee) had no prior legal duty to refrain from doing

Types of Damages in Contracts

1.) Compensatory 2.) Consequential 3.) Punitive 4.) Nominal 5.) Duty to mitigate damages

Two types of behavior violate provision #2 of the Sherman Act

1.) Conduct pursued by a firm that is already a monopolist is condemned as monopolization if the conduct interferes with free trade and is intended to preserve the firm's monopoly 2.) Conduct intended to capture monopoly power is condemned as an attempt to monopolize Ex: predatory pricing

Contracts that "fall under" or "fall within" the Statute of Frauds:

1.) Contracts involving Interests in land a. Real property includes - land, houses, oil and gas b. Other interests in land include - leases, mortgages, and easement 2.) The "one-year" rule - contracts fall under the Statute of Frauds when they are performed in over a year a. Possibility of performance - if yes, then the contract does not fall under the Statute of Frauds b. Even if the the performance actually takes more than one year, an oral contract is enforceable as long as performance was possible within one year 3.) Collateral Promises 4.) Promises Made in Consideration of Marriage (Prenuptial Agreements) 5.) Sale of goods for $500 or more

Mentally Incompetent Persons

1.) Court Declared Incompetent Persons: If a person is declared judicially incompetent, and a guardian is appointed to represent them; contracts entered into by him to her are void 2.) A person not so adjudicated can be considered mentally incompetent if his or her judgement is impaired because he or she cannot understand or comprehend the nature and effect of a particular transaction 3.) A contract that is made by a person who is mentally incompetent (but has not been so adjudicated) is voidable by the mentally incompetent, or within a reasonable time after regaining mental competency, or by his or her guardian or other representative, when one is appointed 4.) Non-adjudicated Incompetent Persons can have Lucid Intervals where every contract formed is valid 5.) Ratification can occur after the incompetent period and during a lucid interval; or by a guardian 6.) A contract for necessaries may be disaffirmed, but the mentally incompetent party is liable for the reasonable value of the necessaries furnished

Exceptions to applicability of E-SIGN Act

1.) Court papers 2.) Divorce Decrees 3.) Evictions 4.) Foreclosures 5.) Health Insurance Terminations 6.) Prenuptial Agreements 7.) Wills

Impossibility of Performance

1.) Death, serious illness, or incapacitation of a party who was to render personal services 2.) Destruction of specific subject matter of contract 3.) Change in law making performance illegal

Discharge by Performance

1.) Full, complete performance in the manner prescribed by the contract discharges the performing party a. Complete performance includes strict compliance with any express conditions b. Failure to comply with an express condition and render the exact performance may discharge the party receiving the defective performance 2.) Tender of compete performance: a. An unconditional offer to perform by a party who is ready, willing, and able to do so b. The tendering party is discharged if his tender is not accepted 3.) Substantial performance: a. Performance which does not greatly vary from the performance that is promised in the contract but is slightly less than that which reasonably could be expected b.If performance is substantial, the other party's duty to perform remains absolute, less damages for the deviation 4.) Performance to satisfaction of another ex: portraits, works of art, tailoring, clothing purchases

Minor's Obligation on Disaffirmance

1.) Generally, if a minor disaffirms, each party must make restitution by returning the consideration received from the other party 2.) Majority of states say - minor must only return goods that are in minor's possession or control. Even if the goods are damaged, minor still has the right to disaffirm 3.) Some states say - if goods are damaged, the minor is required to compensate adult with a "reasonable" amount

Duress

1.) In general, if a party is forced into entering into a contract by threatening a wrongful act, the contract is voidable (lack of relationship) 2.) The act threatened must be wrongful or illegal 3.) Economic need is generally not duress, even when one party demands a very high price for an item that another party needs. Exception to economic duress: party exacting high price is also the party creating the need *** ex: threatening criminal prosecution (cannot be civil suit) ***

Exemptions to Antitrust Enforcement

1.) Labor- the Clayton Act permits unions to organize and bargain without violating antitrust laws and specifies that strikes and other labor activities normally do not violate any federal law 2.) Insurance companies - The McCarran Act exempts the insurance business in states in which the industry is regulated 3.) Exporters - the Webb-Pomerene Act allows US exporters to engage in cooperative activity to compete with similar foreign associations. The export Trading Company Act permits the US Department of Justice to exempt certain exporters 4.) Businesspersons' Joint Efforts to Seek Government Action - The United States Supreme Court gives cooperative efforts by businesspersons to obtain legislative, judicial, or executive action are exempt unless it is clear that an effort is "objectively baseless" and is an attempt to make anticompetitive use of government processes

General Rule for Minors

1.) Minor can enter into any contract that an adult can 2.) Minors have the right to disaffirm - Must be under the age of 18 - Doesn't apply to emancipated minors (married, military before 18)

Fraudulent Misrepresentation

1.) Misrepresentation of a material fact a. can be by words or actions b. Statements of Opinion and Representations of Future facts 2.) Intent to deceive - requires "Scienter" 3.) Justifiable reliance on the misrepresentation 4.) Injury/harm only has to be proven to collect damages

Rejection of the offer by the offeree

1.) Offeree demonstrates his or her intention not to accept the offer 2.) Rejection is effective when *received* 3.) An injury made by an offeree is distinguishable from a rejection and does not terminate offer

Exceptions to the Statute of Frauds:

1.) Partial performance 2.) Admissions

Equitable Remedies for Breach of Contract

1.) Recession and restitution 2.) Specific performance 3.) Reformation

Antitrust laws are principles that:

1.) Regulate business conduct in order to promote the forms of competition that benefit society 2.) Rein in the unrestrained exercise of market power

Acceptance

1.) The offeree accepts the offer when the offeree unequivocally manifests his or her willingness and intention to assent to the terms of the offer 2.) Acceptance must be unequivocal (Mirror Image Rule) 3.) Silence as acceptance - Ordinarily, the offeree exhibits his or her agreement to be bound with words or other overt conduct - Exceptions: a. The offeree accepts the benefits of the offered services or goods when the offeree has an opportunity to reject the offered services and goods and know that such services or goods were offered with the expectation of compensation or b. There were similar prior course dealings

Requirements of the Offer

1.) The offeror must have a *serious intention* to be bound by the offer 2.) The offer must include *reasonably certain terms* 3.) The offer must be *communicated* by the offeror to the offeree

Defenses to the Enforceability of a Contract

1.) Voluntary Consent - if a contract was formed as a result of fraud, undue influence, mistake, or duress, the contract may not be enforceable 2.) Form - some contracts must be in writing and signed by the party being sued (ex: real estate contracts)

Disaffirmance in General

1.) Words or conduct can be used by a minor to express intent not to be bound 2.) Minors may disaffirm contracts during minority and for a reasonable period of time after attaining the age of majority (18) 3.) A minor who is experiencing his or her right of disaffirmance must disaffirm the entire contract 4.) The contract is voidable by the minor, but not by the adult

Attempts to monopolize requires proof 3 elements:

1.) anticompetitive behavior 2.) specific intent to exclude competition and garner monopoly power 3.) "dangerous" probability of success in achieving monopoly power

Val's Foods signs a contract to buy 1500 pounds of basil from Sun Farms, a small organic herb grower. (Sun Farms entire crop was estimated at 1500 pounds.) The contract did not specify where the basil must be cultivated. The day before Sun Farms was to begin the harvest, a giant hailstorm destroyed half the Sun Farms' crop. Sun Farms attempted to purchase additional basil from other farms, but this late in the season the cost is twice the normal market price. Sun farms is too small to absorb this cost and immediately notifies val's that it will not fulfill the contract. 1.) Suppose that the basil does not pass the chemical-residue inspection. What concept might allow Val's to refuse to perform the contract in this situation? 2.) Under which legal theory or theories might Sun farms claim that its obligation under the contract has been discharged by operation of law? 3.) Suppose that Sun Farms contracts every basil grower in the country and buys the last remaining chemical-free basil anywhere. Nevertheless, Sun farms is able to ship only 1,475 pounds to Val's. Would this fulfill Sun Farm's obligations to Val's? 4.) Now suppose that Sun Farms sells its operations to Happy valley Farms. As a part of the sale, all three parties agree that Happy Valley will provide the basil as stated under the original contract. What is this type of agreement called?

1A. Concept: The appropriate concept would be discharge by failure of a condition. Under the contract, Val's does not have to perform (pay) unless the basil meets the stated condition (that it pass an independent inspection for chemical residue). Because the basil did not pass inspection, Val's is not obligated to perform. This condition of the contract would be precedent rather than subsequent or concurrent: the basil must pass the inspectionbefore Val's is obligated to buy. 2A. Theory: The theory of commercial impracticability can excuse parties from their performance obligations when the performance becomes much more difficult or expensive than originally contemplated at the time the contract was formed. For this doctrine to be invoked, the anticipated performance must be extremely difficult or costly. Sun Farms' inability to purchase basil from other sources at twice the normal market price meets this requirement: doing so would bankrupt Sun Farms. 3A.Obligation: Substantial performance is good faith performance that does not vary greatly from the contract and confers the same benefits as promised in the contract. Sun Farms acted in good faith and shipped as much chemical-free basil as it could obtain, which was only 25 pounds less than the contracted amount. A court would likely find that it had substantially performed its obligation to Val's. 4A. Agreement: This is a novation—an agreement between the contracting parties to substitute a third party for one of the original parties. Under a novation, the new contract extinguishes the old contract and discharges the obligations of the prior party to the contract.

Shane Durbin wanted to have a recording studio custom-built in his home. He sent invitations to a number of local contractors to submit bids on the project. Rory Amstel submitted the lowest bid, which was $20,000 less than any of the other bids Durbin received. Durbin called Amstel to ascertain the type and quality of the materials that were included in the bid and to find out if he could substitute a superior brand of acoustic tiles for the same bid price. Amstel said he would have to check the price difference. The parties also discussed a possible start date for construction. Two weeks later, Durbin changed his mind and decided not to go forward with his plan to build a recording studio. Amstel filed a suit against Durbin for breach of contract. Did Amstel's bid meet the requirements of an offer? was there an acceptance of the offer? How is an offer terminated? Assuming that Durbin did not inform Amstel that he was rejecting the offer, was the offer terminated at any time described here?

1A. Offer: A bid can be an offer if it contains all of the requisite elements: a serious, objective intent on the part of the offeror and an offer communicated to the offeree in certain, definite terms comprehensible to both parties. Amstel's bid met the requirements His intent appeared to be that of a serious, reasonable offeree; the terms were sufficiently definite; and the bid was communicated to Durbin. If the price, materials, and start date were left open, these factors might be sufficient to question the status of the bid as an offer. 2A. Acceptance: To create a contract, an offer must be accepted unequivocally. Durbin questioned the materials included in the bid and asked about the possibility of substituting different acoustic tiles and discussed a starting date. Although this does not constitute an acceptance of the offer, neither is it a rejection. His questions were inquiries, not a rejection of the bid. Durbin's later call to say that he had changed his mind, however, was a rejection. 3A. Termination: Yes, Durbin asked about better quality tiles; until that issue was settled, because it likely changed the price, a contract was never formed, so Durbin had the right to cancel the deal. The contract was still being negotiated because Amstel wanted information about alternative materials, which affected the price. Failure to settle that matter means the offer was never accepted and either party had the right to walk away.

The Internet Corporation for Assigned Names and Numbers (ICANN) is a nonprofit entity that organizes Internet domain names. It is governed by a board of directors elected by various groups with commercial interest in the Internet. One of INCANN's functions is to authorize an entity to serve as a registry for certain "Top Level Domains" (TLDs). ICANN and VeriSign entered into an agreement that authorized VeriSign to serve as a registry for the ".com" TLD and provide registry services in accordance with ICANN's specifications. VeriSign complained that ICANN was restricting the services that could make it available as a registrar, blocking new services, imposing unnecessary conditions on those services, and setting the prices at which the services were offered. VeriSign claimed that ICANN's control of the registry services for domain names violates Section 1 of the Sherman Act. Should ICANN's actions be judged under the rule of reason or be deemed per se violations of Section 1 of the Sherman Act? Should ICANN's actions be viewed as a horizontal or vertical restraint of trade? Does it matter that ICANN's directors are chosen by groups with a commercial interest in the Internet? If the dispute is judged under the rule of reason, what might be ICANN's defense for having a standardized set of registry services that must be used?

1A. Per se v. rule of reason: Because ICANN is at a higher level of the distribution process than Verisign, it is imposing a vertical restraint. Since the vertical restraint that Verisign complains of involves restrictions on services that Verisign can offer (customer restrictions) and the setting of prices at which Verisign can sell its services (resale price maintenance agreement), ICANN's action should be judged under the rule of reason. 2A. Horizontal v. vertical restraint: Because ICANN and Verisign are firms at different levels in the distribution of top-level domain names, the actions that Verisign complains of are a vertical restraint. ICANN, which is Verisign's superior, is allegedly placing restrictions on what services Verisign can offer, and how much it can charge for its services. This amounts to a vertical restraint. 3A. Directors: If ICANN's directors were chosen by those with a commercial interest in the Internet, the directors might represent commercial interests with significant market power and restrain trade in violation of the Sherman Act. 4A. Best defense: ICANN's best defense is to assert that a standardized set of registry services is efficient and has the effect of promoting competition rather than suppressing it. Under the rule of reason, as long as an agreement is merely regulatory and does not unreasonably restrain trade, it should not be considered illegal.

Joint Ventures

2 or more individuals in business entities join together in a particular commercial enterprise; judged by Rule of Reason usually

Toxic Torts

A civil wrong arising from exposure to a toxic substance, such as asbestos, radiation, or hazardous waste

Divestiture

A company's sale of one or more of its divisions' operating functions under court order as part of the enforcement of antitrust laws

Release

A contract in which one party forfeits the right to pursue a legal claim against the other party. A release will be binding if it meets 3 requirements: 1.) The agreement is made in good faith (honestly) 2.) The release contract is in a signed writing (required in many states) 3.) The contract is accompanied by consideration

Intoxicated Persons

A contract is voidable if: it was made by a person who was so intoxicated that his or her judgment was impaired and he or she did not comprehend the nature of the transaction and the legal consequences of entering into the contract a. If the contracting party understands the consequences of the contract, even if he or she is intoxicated, the contract will not be voidable b. The contract will be voidable if the other party to the contract fraudulently induced the person to become intoxicated A contract may be disaffirmed while a person is intoxicated or within a reasonable time after he or she becomes sober a. Restitution must be made b. An intoxicated person may pay the reasonable value f necessaries that were furnished

Formal Contract

A contract that by law requires a specific form, such as being executed under seal, to be valid

Informal Contract (simple contract)

A contract that does not require a specified form or formality in order to be valid

Third Party Beneficiary Contracts

A contract that is intended to benefit a third party - stranger to the original contract 1.) The third party beneficiary makes no promises and gives no consideration to the promisor who is the render of the performance 2.) It is the intent of the parties to the contract is to confer a benefit upon the third party beneficiary

Frustration of Purpose

A court-created doctrine under which a party to a contract will be relieved of his or her duty to perform when the objective purpose for performance no longer exists (due to reasons beyond that party's control)

Liquidated Debt

A debt that is due and certain in amount

Unliquidated Debt

A debt that is uncertain in amount

Promissory Estoppel (detrimental reliance)

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. Used with promises which are otherwise enforceable; like promises without consideration. 5 elements generally required for the doctrine to: 1.) clear and definite promise 2.) promisor expected the promisee to rely on the promise 3.) promisee reasonably relied on the promise by acting or refraining from some act 4.) promisee's reliance is definite and resulted in substantial detriment 5.) enforcement of the promise is necessary to avoid injustice

Vertically Integrated Firms

A firm that carries out two or more functional phases (manufacturing, distribution, and retailing, for example) of the chain of production

Environmental Impact Statements

A formal analysis required for any major federal action that will significantly affect the quality of the environment to determine the action's impact and explore alternatives. An EIS must analyze: 1.) the impact that the action will have on the environment 2.) any adverse effects on the environment and alternative actions that might be taken 3.) any irreversible effects the action might generate

Brantley v. NBC Universal

A group of consumers sued NCB Universal, Walt Disney, and other broadcasters, as well as cable and satellite distributors. The consumers claimed that the bundling together of high demand and low demand television channels in cable and satellite programming packages violates the Sherman Act. Bundling forces consumers to pay for channels that they do not watch to have access to channels they watch regularly. A federal appellate court ruled in favor of the defendants and dismissed the case. The court reasoned that the Sherman Act applies to actions that diminish competition and that the bundling of channels does not injure the competition.

Monopoly

A market in which there is a single seller or firm that, although not the sole seller in the market, can nonetheless substantially ignore rival firms in selling price for its product or can in some way limit rivals from competing in the market

Horizontal Merger

A merger between two firms that are competing in the same market

Greg contracts to build a storage shed for Haney, who pays Greg in advance, but Greg completes only half the work. Haney pays Ipswich $500 to finish the shed. If Haney sues Greg, what will be the measure of recovery?

A non breaching party is entitled to his or her benefit of the bargain under contract. Here, the innocent party is entitled to be put in the position she would have been in if the contract had been fully performed. The measure of the benefit is the cost to complete the work ($500). These are compensatory damages.

Potentially Responsible Party (PRP)

A party liable for the costs of cleaning up a hazardous-waste disposal site under the Comprehensive Environmental Response, Compensation, and Liability Act (Superfund). The following persons may be responsible for cleaning up the site: a. the person who generated the wastes disposed at the site b. the person who transported the wastes to the site c. the person who owned or operated the site at the time of the disposal d. the current owner or operator of the site

Nuisance

A person may be liable if they use their property in a manner that unreasonably interferes with others rights to use or enjoy their own property (can be pubic or private)

Per se Violations

A restraint of trade that is so anticompetitive that it is deemed inherently (per se) illegal

Price Discrimination

A seller's act of charging competing buyers different prices for identical products or services

Tying Arrangment

A seller's act of conditioning the sale of a product or service on the buyer's agreement to purchase another product or service from the seller

Raffles v Wichelhaus (1864)

A shipment of cotton is purchased by a merchant in England. The seller is a cotton farmer from Bombay, India. The communication is via telegram which reads: "to arrive Peerless". A ship with the same name arrived in England containing no cotton. It wasn't until two months later that a ship arrived named Peerless containing the cotton. At this point, the English merchant had decided to get cotton from elsewhere since it was so late. The Indian farmer sued for breach of contract and when the issue was brought to the courts, the contract was rescinded on the basis of mutual mistakes of material fact (the ship). So the farmer got nothing.

Penalty

A sum inserted into a contract not as a measure of compensation for its breach but rather as punishment for a default. The agreement as to the amount will not be enforced, and recovery will be limited to actual damages

Mailbox Rule (deposited acceptance rule)

Acceptance becomes binding (valid) when it is deposited with the postal service not when it is received by the offeror

Selleck v. Cuenca

Actor Tom Selleck contracted to purchase a horse named Zorro for his daughter from Dolores Cuenca. Cuenca acted as though Zorro were fit to ride in competitions, when in reality the horse was fit for this use because of a medical condition. Selleck filed a lawsuit against Cuenca for wrongfully concealing the horse's condition and won. A jury awarded Selleck more than $187,000 for Cuenca's misrepresentation by conduct.

US v. Apple (Circ. 2015)

After Amazon released the Kindle, it began selling e-book downloads at $9.99 (lower than the actual cost) and made up the difference by selling more kindles. When the iPad entered the e-book scene, Apple and some book publishers agreed to use Apple's "agency" model, which Apple was already using for games and apps. The agency model allowed the book publishers to set their own prices while Apple kept 30% as a commission. The US government sued Apple and the publishers for price fixing. A federal appellate court held that Apple's agreement with publishers to raise e-book prices was a per se illegal price-fixing conspiracy. As a result, Apply was ordered to pay $400 million to consumers and $50 million in attorney's fees.

Enforcement exemptions for the Sherman/Clayton Acts

Agency actions: a. Department of Justice (DOJ) and the FTC can enforce the federal antitrust laws b. DOJ can prosecute violations of the Sherman Act as civil or criminal c. DOJ/FTC can enforce the Clayton Act as civil cases d. Civil penalties can include divestiture of assets and dissolution of companies

Horizontal Market Divisions

Agreements to divide up the market between rival companies. This includes dividing up the territory or dividing up types of customers; these are generally per se violations

McCollough v. Allstate Property and Casualty Insurance Co.

Allstate Property and Casualty Insurance Company issued a policy to Jerry McCollough, insuring his pickup truck. McCollough loaned the truck to an acquaintance who returned it damaged. McCollough filed a claim on the policy. Allstate treated the claim as involving multiple different claims (each with a $250 deductible) and reported these claims to Versik Analytics Automobile Property Loss Underwiring Service (A-PLUS). Contending that the damage had resulted from only one claim, McCullough filed a suit against Allstate. The insurer agreed to settle the suit for $8,000. McCollough agreed to this amount, but only if Allstate corrected the report to reflect that he was making only one insurance claim and that Allstate paid nothing n that claim. (McCollough felt that the $8,000 settlement was not a payment for the damage to his truck.) Allstate's lawyer sent McCullough an e-mail agreeing to these terms, but the promise was not included in the release and settlement agreement that the parties signed. The release and settlement agreement that the parties signed. The release had a merger clause saying that there were no other agreements, verbal or otherwise, between the parties except as set forth in the contract. Later, McCullough learned that Allstate had reported to A-PLUS that it had $8,000 to him on his claim. He filed a suit in a state court against Allstate, seeking damages for fraud. Both parties filed motions for summary judgement. The court granted Allstate;s motion and denied McCullugh's. A state appellate court reversed the lower court's summary judgment in favor of Allstate, affirmed the court's denial of McCollough's motion for summary judgment, and remanded the case. General issues of material fact precluded summary judgment on McCullough's claim for fraudulent misrepresentation.

Attempted Monopolization

An action by a firm that involves anticompetitive conduct, the intent to gain monopoly power, and a "dangerous probability" of success in achieving monopoly power

Resale Price Maintenance Agreements

An agreement between a manufacturer and a distributor or retailer in which the manufacturer specifies what the retail prices of its products must be. Maximum resale maintenance agreements could increase competition and benefit consumers. These are judged under the Rule of Reason

Group Boycotts

An agreement by 2 or more sellers to refuse to deal with another person or company; per se violations

Click-on Agreement

An agreement that arises when a buyer, engaging in a transaction on a computer, indicates his or her assent to be bound by the terms of an offer by clicking on a button that says, for example, "I agree"

Contract

An agreement that can be enforce by law between 2 or more parties who promise to perform or refrain from performing some act now or in the near future a. A breach of promise leads to liability because the parties have duties to each other prescribed in the terms of the agreement. Contractual promises are duties

Covenant not to Sue

An agreement to substitute a contractual obligation for some other type of legal action based on a valid claim

Exclusive-Dealing Contract

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

Contracts Contrary to Public Policy

An agreement which injures an established interest of society or which has a negative effect on society is void and will not be enforced

Shrink-wrap Agreement

An agreement whose terms are expressed in a document located inside a box in which goods (usually software) are packaged

Liquidated Damages

An amount, stipulated in the contract, that the parties to a contract believe to be a reasonable estimation of the damages that will occur in the event of a breach

Trust

An arrangement in which some party, referred to as a trustee, holds legal title to property for the benefit of another

E-Signature

An electronic sound, symbol, or process attached and executed or adopted by a person with the intent to sign the electronic record

Mistake

An error or unconscious ignorance or forgetfulness of a past or present material fact

Concentrated Industry

An industry in which a single firm or a small number of firms control a large percentage of market sales

Intended Beneficiaries

An intended beneficiary has rights and therefore, may enforce contractual promises, even though not a party to the contract a. Intended beneficiaries can be receiving a gift (called Donee beneficiary) or a creditor of one of the original contracting parties (called Creditor Beneficiary) b. Incidental Beneficiaries do not have the right to enforce the contract (no intent to confer a benefit)

Definiteness of Terms

An offer must have reasonably definite terms so that a court can determine if a breach has occurred. In general, the following terms are required: 1.) Identification of the parties 2.) Identification of the subject matter 3.) Consideration 4.) Time of payment/delivery or performance (not essential) Courts are willing to supply missing reasonable terms when the parties have clearly manifested their intent to form a contract. But when the parties have tried to use a term, but the meaning is vague, courts will *not* supply a "reasonable" term in its place.

Options Contracts

An option contract is a separate contract that exists when an offeror has promised to hold the offer open and the offeree has given consideration for the promise of the offeror a. The offer is irrevocable for the period of time that is stated, or if no period is stated, for a reasonable period of time

Black v. Duffie

Annabelle Duffie was mildly mentally retarded and suffering from dementia. She had lived with her brother, Jerome, for her entire life. When Jerome died, he left Annabelle his property, including 180 acres near Hope, Arkansas, valued at more than $400,000. Less than three months later, Annabelle signed a deed granting her interest in the land to Charles and Joanne Black for $150,000. Later, when Annabelle's nephew, Jack, was appointed to be her legal guardian, he filed a lawsuit agains the Blacks seeking to void the land deal because of Annabelle's lack of mental competence. The trial court ordered the Blacks to return the property to Annabelle, and a state and appellate court affirmed. The evidence showed that Annabelle had been incompetent her entire life. She lacked the cognitive ability to make the complex financial decisions involved with selling property. Therefore, the contract was voidable.

Vertical Restraints

Any agreement between firms at different levels in the manufacturing and distribution process. Vertical relationships encompass the entire chain of production - purchases of inputs, basic manufacturing, distribution to wholesalers, and retail sales

Restraint of Trade

Any agreement between firms that has the effect of reducing competition in the market place

Horizontal Restraints

Any agreement that in some way restrains competition between rival firms competing in the same market. This is in between companies at the same level of operation and in direct competition with each other Ex: retailers of a similar product located in the same geographical market

The Uniform Electronic Transactions Act (UETA)

Applies only to transactions between parties each of which has agreed to conduct transactions by electronic means

Moonbay is a home-building corporation that primarily develops retirement communities. Farmtex owns a number of feedlots in Sunny Valley. Moonbay purchases 20,000 acres of farmland in the same area and begins building and selling homes on this acreage. In the meantime, Farmtex continues to expand its feedlot business, and eventually only 500 feet separate the two operations. Because of the odor and flies from the feedlots, Moonbay finds it difficult to sell the homes in its development. Moonbay wants to enjoin (prevent) Farmtex from operating its feedlot in the vicinity of the retirement home development. Under what common law theory would Moonbay file this action? Has Farmtex violated any federal environmental laws?

As a general rule, a property owner is free to use his or her property in any manner desired so long as such use is not in violation of any statute or does not interfere with the property rights of others. When such use interferes with another's property rights, an action may be brought as a tort of nuisance. In such a case, the court would try to balance the interests of both parties. In an action involving an issue similar to the one in this question, the court enjoined a feedlot operator from continuing operations near a development but required the developer to award damages to the feedlot operator to cover the costs of moving or shutting down the feedlot. There are no federal environmental laws violated in this situation, and thus nuisance suits are still the most viable remedy. Only if federal funds are committed to a particular private venture would an environmental impact statement be required.

Relevant Market

Before a court can determine whether a firm has a dominant market share, the relevant market must be defined. This usually consists of 2 factors: a. relevant geographic market b. relevant product market

Anticipatory Repudiation

Before either party to a contract has a duty to perform, one of the parties may refuse to carry out his or her contractual obligations

Anthony is confined to his bed. He calls a friend who lives across the street and offers to sell her his watch next week for $100. If his friend wishes to accept, she is to put a red piece of paper in her front window. The next morning, she places a red piece of paper in her front window. Has a bilateral or unilateral contract been formed?

Bilateral because she has agreed to exchange $100 for the watch (promise for a promise)

Trade Associations

Businesses in the same general industry or profession organizing to pursue common interests like ad campaigns, lobbying congress, etc. ; judged by Rule of Reason usually

Genuineness of Asent

Consent must be voluntary and not based on: a. mistake b. fraud c. undue influence or d. duress

Uniform Commercial Code

Contracts for the sale of goods for a price of $500 or more

Discriminatory Contracts

Contracts in which a party promises to discriminate on the basis of race, color, national origin, religion, gender, age, or disability are contrary to both statute and public policy and are unenforceable

Ready Foods contracts to buy two hundred carloads of frozen pizzas from Stealth Distributors. Before Ready or Stealth starts performing, can the parties call off the deal? What if Stealth has already shipped the pizzas?

Contracts that are executory on both sides - that is, contracts on which neither party has performed - can be rescinded solely by agreement of the parties. Contracts that are executed on one side - contracts on which one party has performed - can be rescinded only if the party who has performed receives consideration for the promise to call off the deal.

Monopoly Power

Control of the relevant market a. Usually to win, the Plaintiff must show the firm has a dominant share of the relevant market and there are significant barriers for new companies entering that market

Weston v. Cornell University

Cornell University in New York offered Leslie Weston an associate professorship for an initial term of five years. The offer letter described the position as being "with tenure," but it stated that the offer of tenure would have to be confirmed by the university's review process after she was hired. For a variety of reasons, Weston delayed her tenure submission for five years and, when she finally submitted it, she was not awarded tenure. Cornell gave Weston a two-year extension, this time s an "associate professor without tenure," to allow her an opportunity to improve and resubmit her tenure package. Although she resubmitted her tenure request, it was again denied, resulting in her eventual termination. Weston sued Cornell for breach of contract, and lost. The court held that Cornell's two-year extension of Weston's position had clearly modified the original contract by stating that she was working as an associate professor "without tenure." Weston's subjective beliefs and unsupported arguments regarding the modification of her employment agreement were irrelevant.

Clean Air Act

Created the EPA EPA passes regulations on: 1.) *Mobile sources* of air pollution such as cars, other vehicles (Co2 emissions) 2.) *Stationary sources* of air pollution such as electric/utility plants, industrial plants Major sources of pollution must use pollution-control equipment that represents the Maximum achievable control technology, or MACT to reduce emissions - Violations include civil penalties of up to $25,000/day - $5,000/day for things like failure to maintain proper records - Criminal penalties include fines of up to $1 million for knowingly failing to report violations and can be imprisoned for up to two years - Private citizens can sue to enforce the act and can earn up to $10,000 for reporting violations

Oil Pollution Act

Creates liability for damages to national resources, private property and local economies caused by the discharge of oil into navigable water or onto an adjoining shore

United States v. O'Malley

Duane O'Malley owned and operated Origin Fire Protection. Michael Pinski hired Origin to remove and dispose of 2.200 feet of insulation from a building. The insulation contained asbestos, which Pinski, O'Malley, and O'Malley's employees recognized. O'Malley did not have a license to remove asbestos. Origin removed the debris and disposed of it at various sites, including a vacant lot where it spilled onto the soil, resulting in clean-up costs of nearly $50,000. In a federal district court, a jury convicted O'Malley of violating the Clean Air Act.

Safe Drinking Water Act

Empowers the EPA to set maximum levels for pollutants in public water systems Suppliers of drinking water must send to every household a statement containing: 1.) levels of contaminants in the water 2.) possible health concerns 3.) source of water

Bargained for exchange

Exchange that parties engage in that leads to an enforceable contract

Applied Products, Inc. does business with Beltway Distributors, Inc., online. Under the Uniform Electronic Transactions Act, what determines the effect of the electronic documents evidencing the parties' deal? Is a party's signature necessary?

First it might be noted that the Uniform electronic Transactions Act (UETA) does not apply unless the parties to a contract agree to use e-commerce in their transaction. In this deal, of course, the parties used e-commerce. The UETA removes barriers to e-commerce by giving the same legal effect to e-records and e-signatures as to paper documents and signatures. The UETA does not include rules for those transactions, however.

Fruitade, Inc., is a processor of a soft drink called Freshen Up. Fruitade uses returnable bottles, which it cleans with a special acid to allow for further beverage processing. The acid is diluted with water and then allowed to pass into a navigable stream. Fruitade crushes its broken bottles and throws the crushed glass into the stream. What environmental laws has Fruitade violated?

Fruitade has violated a number of federal environmental laws if such actions are being taken without a permit. First, because the dumping is in a navigable waterway, the River and Harbor Act of 1886, as amended, has been violated. Second, the Clean Water Act of 1972, as amended, has been violated. This act is designed to make the waters safe for swimming, to protect fish and wildlife, and to eliminate discharge of pollutants into the water. Both the crushed glass and the acid violate this act. Third, the Toxic Substances Control Act of 1976 was passed to regulate chemicals that are known to be toxic and could have an effect on human health and the environment. The acid in the cleaning fluid or compound could come under this act.

Executed Contracts

Fully perfumed by all parties

Death Rules Regarding Offer and Acceptance

General Rule: Death or incompetence terminates an offer. Option Contract Exception: Death or incompetency of either party DOES NOT TERMINATE the offer and the deceased party's estate is responsible for fulfilling the obligations under the option contract Rational: The option contract is irrevocable

Executory Contracts

Have not been fully performed by one or more party

Mistakes of Value

If a mistake concerns the future market value or quality of the object of the contract, the mistake is one of value, and the contract normally is enforceable and the contract will not be rescinded.

The Caplans contract with Faithful Construction, Inc., to build a house for them for $360,000. The specifications state "all plumbing bowls and fixtures... to be Crane brand." The Caplans leave on vacation, and during their absence, Faithful installs Kohler brand fixtures, an equivalent in the industry. On completion of the building contract, the Caplans inspect the work, discover the substitution, and refuse to accept the house, claiming Faithful has breached the conditions set forth in the specifications.

If the specifications are considered to be express conditions to the Caplans' acceptance and payment under the contract, Faithful must perform fully—that is, must install Crane brand plumbing fixtures—to recover the contract price. Until Faithful does so, the Caplans are not obligated to any performance. If, however, the specifications are merely promises (implied conditions), justice and fairness require only substantial, rather than full, performance for the Caplans' obligation to become absolute. This does not mean that Faithful has not committed a breach. Faithful is liable for any damages that can be proved to have resulted from its less than full performance. In this case, the specifications were stated not as express conditions but as mere promises (implied conditions). To avoid the harsh result of the Caplans having a house on their lot without having to pay Faithful, the courts would require only that Faithful prove substantial performance. Because Kohler brand is equivalent to Crane brand by industry standards, the substantial performance test has been met, and the Caplans are obligated to accept and pay. Whether they can deduct any damages from the contract price for the less than full performance will depend on proof that they suffered monetary damages.

Contracts in Restraint of Trade

If two or more parties enter into an agreement in which they exchange mutual promises not to compete with each other and their only objective is to restrict competition, the agreement is void because it is against a strong public policy of favoring free, fair competition Exception: 1.) The covenant not to compete is ancillary (secondary) to an otherwise enforceable contract; and it is 2.) Reasonable based on: a. time (duration) b. geographic area c. scope

Revocation of the offer by the offeree

In general, an offer may be revoked by the offeror at any time *before acceptance*: a. expressly or b. by acts that are inconsistent with the existence of the offer and are made known to the offeree A revocation is effective when *received*

Record

Information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form

Defenses to Superfund

Innocent landowner defense, which may protect a landowner who acquired the property after it was used for hazardous waste disposal

Jacob & Youngs, Inc. v. Kent (1921 NY)

Jacob & Youngs, Inc. was a builder that had contracted with George Kent to construct a country residence for him. A specification in the building contract required that "all wrought-iron pipe must be well galvanized, lap welded pipe of the grade known as 'standard pipe' of Reading Manufacture." Jacob & Youngs, Inc. installed substantially similar pipe that was not of Reading Manufacture. When Kent became aware of the difference, he ordered the builder to remove all of the plumbing and replace it with the Reading type. To do so would have required removing finished walls that encased the plumbing - an expensive and difficult task. The builder explained that the plumbing was of the same quality, appearance, value, and cost of the Reading pipe. When Kent nevertheless refused to pay the $3,483.46 still owed for the work, Jacob & Youngs, Inc. sued to compel payment. The trial court ruled in favor of Kent. The plaintiff appealed, and the appellate court reversed the trial court's decision. Kent then appealed again to the state's highest court. The state of New York affirmed the appellate court's decision, holding that Jacob & Youngs had substantially performed the contract.

Dr. Jake Lambert signed an employment agreement with Baptist Health Services, Inc., to provide cardiothoracic surgery services to Baptist Memorial Hospital - North Mississippi, Inc., in Oxford Mississippi. Complaints about Lambert's behavior arose almost immediately. He was evaluated by a team of doctors and psychologists, who diagnosed him as suffering from obsessive-compulsive personality disorder and concluded that he was unfit to practice medicine. Based on the conclusion, the hospital suspended his staff privileges. Citing the suspension, Baptist Health Services claimed that Lambert had breached his employment contract. What is Lambert's best defense to this claim?

Lambert's best defense to Baptist's allegation of breach of contract is the doctrine of impossibility. Under this doctrine, if, after a contract has been made, a supervening event makes performance impossible in an objective sense, the contract is discharged. The doctrine applies only when the parties could not have reasonably foreseen the event that renders the performance impossible. One of the situations in which this doctrine applies occurs when a party whose personal performance is essential to the completion of the contract becomes incapacitated prior to performance. In the facts of this problem, Baptist hired Lambert to provide certain surgical services to Baptist Memorial Hospital-North Mississippi. When complaints about his behavior arose, a team of doctors and psychologists conducted an evaluation, diagnosed him as suffering from obsessive-compulsive personality disorder, and concluded that he was unfit to practice medicine. The hospital suspended his staff privileges. Baptist terminated his employment and filed a suit against him for breach. The doctrine of impossibility discharges Lambert from the performance of his contract—his performance was made impossible through no fault of his own. In the actual case on which this problem is based, in Baptist's suit against Lambert, the court issued a judgment in the defendant's favor. A state intermediate appellate court applied the doctrine of impossibility to affirm this judgment.

Italian Sports Car v. Insurance Company

Lamborghini gets stolen and so the owner files a police report and alerts his insurance company that his car has been stolen. A few days later, the police find the car but it is completely trashed. The owner is so pained to see the car the he decides to sell the car as scrap metal for $500. He then sends a claim to the insurance company saying that his car was totaled. The insurance company refuses to pay for the damages to the car and the owner sues. The insurance company has a precedent condition which states that they have to have proof or evidence of damage before handing over the money. Since the owner no longer had the car, the insurance company did not have to pay him anything.

Capacity

Legal ability to enter into a contractual relationship; capacity is lacking or questionable with minors, intoxicated persons and the mentally incompetent

Clean Water Act

Limits discharges of pollutants into water used for navigation, recreation, or swimming. The CPA prohibits the filling or degrading of wetlands unless a permit is obtained from the Army Corp of Engineers. Established the National Pollutant Discharge Elimination System (NPDES) which requires any point source emitting pollutants into water must have a permit. Permits can be issued by the EPA, but only if the discharge will not violate water-quality standards. Permits must be reissued every 5 years. The NPDES system includes: 1.) National effluent (pollution) standards set by the EPA for each industry 2.) Water-quality standards set by the states under the EPA 3.) A discharge permit program that sets water-quality standards to limit pollution 4.) Special provisions for toxic chemicals and oil spills 5.) Construction grants and loans from the federal government for publicly owned treatment works, primarily sewage treatment plants Regulations specify that the best available control technology or BACT be installed before beginning operations. Existing sources must immediately install equipment that utilizes the best practical control technology, or BPCT. - Civil penalties range from $10,000-$25,000/day -Criminal penalties apply if the violation was intentional. Criminal penalties range from $2,500/day and imprisonment for up to 1 year to a fine of $1 million and 15 years of jail time -Injunctive relief and damages can also be imposed

Lucy v. Zehmer (1954)

Lucy, the plaintiff, filed a suit against the Zehmers, the defendants, to compel the Zehmers to transfer title of their property, known as the Ferguson Farm, to the Lucys for $50,000, as the Zehmers had allegedly agreed to do so. Lucy had known Zehmer for fifteen or twenty years for the last eight years or so had been anxious to buy the Ferguson Farm from him. One night, Lucy stopped to visit the Zehmers in the combination restaurant, filling station, and motor court they operated. While there, Lucy tried to buy the Ferguson farm once again. This time he tried a new approach. According to the trial court transcript, Lucy said to Zehmer, "I bet you wouldn't take $50,000 for that place." Zehmer replied, "Yes, I would too; you wouldn't give fifty." Throughout the evening, the conversation returned to the sale of the Ferguson Farm for $50,000. All the while, the men continued to drink whiskey and engage in light conversation. Eventually, Lucy enticed Zehmer to write up an agreement to the effect that the Zehmers would sell the Ferguson Farm to Lucy for $50,000. Later, Lucy sued Zehmer to compel him to go through with the sale. Zehmer argued that he had been drunk and that the offer had been made in jest and hence was unenforceable. The Supreme Court of Appeals determined that the writing was an enforceable contract and reversed the ruling of the lower court. The Zehmers were required to follow through with the sale of the Ferguson farm to the Lucys.

The Resource Conservation Recovery Act (RCRA)

Management of non-hazardous and hazardous solid waste including landfills and storage tanks. Set minimal standards for all waste disposal facilities and for hazardous wastes. A company may be assessed a civil penalty of up to $25,000 for each violation. Criminal penalties include fines of up to $50,000/day of violation and imprisonment for up to 2 years. Prison time can be doubled for repeat offenders.

Territorial or Customer Restrictions

Manufacturers instituting territorial restrictions or attempting to prohibit wholesalers or retailers from reselling the products to certain classes of buyers, such as competing retailers. These are judged under the Rule of Reason

Agreements to Agree and Preliminary Agreements

May constitute valid enforceable agreements - intent and no disputable terms

To establish a violation of provision #2 of the Sherman Act, a Plaintiff must prove both

Monopoly power and intent to monopolize

Already, LLC v. Nike, Inc.

Nike designs, makes, and sells athletic footwear, including a line of shoes known as "Air Force 1." Already, LLC, also designs and markets athletic footwear, including the 'Sugar" and "Soulja Boy" lines. Nike filed a suit against Already, alleging that Soulja Boys and Sugars infringed the Air Force 1 trademark. Already filed a counterclaim, contending that the Air Force 1 trademark is invalid. While the suit was pending, Nike issued a covenant not to sue. Nike promised not to raise any trademark claims against Already or any affiliated entity based on Already's existing footwear designs or any future Already designs that constituted a "colorable imitation" of Already's current products. Nike then filed a motion to dismiss its own claims and to dismiss Already's counterclaim. Already opposed the dismissal of its counterclaim, but the court granted Nike's motion. The US Court of Appeals for the Second Circuit affirmed. Already appealed to the US Supreme Court. The US Supreme Court affirmed the judgement of the lower court. Under the covenant not to sue, Nike could not file a claim for trademark infringement against Already, and Already could not assert that Nike's trademark was invalid.

ICG Hazard, LLC, operates the Thunder Ridge surface coal mine in Leslie County, Kentucky, under a National Pollutant Discharge Elimination System permit issued by the Kentucky Division of Water (KDOW). As part of the operation, ICG discharges selenium into the surrounding water. Selenium is a naturally occurring element that endangers aquatic life once it reaches a certain concentration. KDOW knew when it issued the permit that mines in the area could produce selenium but did not specify the discharge limits for the element in ICG's permit. Instead, the agency imposed a one-time monitoring requirement, which ICG met. Does ICG's discharge of selenium violate the Clean Water Act?

No, ICG's discharge of selenium into the water surrounding ICG's coal mining operation does not violate the Clean Water Act (CWA). The CWA established a permit system—the National Pollutant Discharge Elimination System (NPDES)—to regulate discharges from point sources of pollution. Under the NPDES system, a polluter must obtain a permit before discharging wastes into surface waters. An authorized state agency can issue an NPDES permit for a discharge that will not violate water-quality standards. In this problem, KDOW, an authorized state agency, issued an NPDES permit to ICG for the operation of a surface coal mine. KDOW knew when it issued the permit that mines in the area could produce selenium but did not specify effluent limits for the element in ICG's permit. Instead, the agency included a one-time monitoring requirement, which ICG met. In these circumstances, ICG obtained the required permit from an authorized agency before discharging selenium and complied with the permit's monitoring condition, which qualifies as a "water-quality standard."In the actual case on which this problem is based, Sierra Club filed a suit in a federal district court against ICG, alleging that the discharge of selenium violated the CWA. The court issued a judgment in ICG's favor. The U.S. Court of Appeals for the Sixth Circuit affirmed. ICG's permit shielded the company from liability for the discharge.

The National Collegiate Athletic Association (NCAA) and the NationalFederation of State High School Associations (NFHS) set a new standard for non-wood baseball bats. Their goal was to ensure that aluminum and composite bats performed like wood bats in order to enhance player safety and reduce technology-driven home runs and other big hits. Marucci Sports, LLC, makes non-wooden bats. Under the new standard, four of Marucci's eleven products were decertified for use in high school and collegiate games. Marucci filed suit against the NCAA and the NFHS under Section 1 of the Sherman Act. At trial, Marucci's evidence focused on injury to its own business. Did the NCAA and NFHS's standard restrain trade in violation of the Sherman Act?

No, the standard set by the National Collegiate Athletic Association (NCAA) and the National Federation of State High School Associations (NFHS) for non-wood baseball bats did not violate Section 1 of the Sherman Act. Underlying this section is the assumption that society is harmed if rival firms join in an agreement that restrains competition. Under the rule of reason, the courts analyze anticompetitive agreements that allegedly violate Section 1 of the Sherman Act to determine whether they constitute reasonable—not unreasonable—restraints on trade. The test is whether the agreement "merely regulates and thereby promotes competition" or whether it "suppresses or even destroys competition." Relevant factors include the purpose of the agreement and the effect of the agreement on competition. In this problem, the NCAA and NFHS's standard for non-wood bats was intended to ensure that aluminum and composite bats performed like wood bats in an effort to enhance player safety and reduce technology-driven homeruns and other big hits in high school and collegiate baseball games. Under this standard, four of the eleven bats made and sold by Marucci were decertified for use in the games. Seven of Marucci's products remained available for use, however. And Marucci's competitors did not drop out of the market, bat prices were not significantly changed, and bat quality was not affected. In the actual case on which this problem is based, Marucci filed a suit in a federal district court against the NCAA and NFHS, alleging that their standard violated the Sherman Act. The court dismissed the complaint, and the U.S. Court of Appeals for the Fifth Circuit affirmed, based partly on the reasoning stated above.

I contract to sell a piece of land. The contract includes both the surface and the mineral rights to the land. 6 months after the land has been sold, the buyer strikes oil. Can I sue to get more money for the land claiming the mistake?

No, this is an example of mistake of value. This means that if I sue I would lose as it was a mistake of value on my part. Mistakes of value are never a reason to rescind a contract.

Unilateral Contract

One party makes a promise in exchange for the other party's actually performing some act or refraining from performing some act (*promise for an act*) ex: After you paint the fence, I'll pay you $200. Contract is not formed til after act is substantially performed

Third Party Rights

One who is not a direct party to a particular contract normally does not have rights under a contract. There are exceptions: a. Assignments b. Delegations c. Third party beneficiary contracts

Commercial Impacticability

Performance is executed when there is an extreme change in circumstances that makes performance extremely difficult, burdensome, or costly

Private Actions

Private parties injured due to violations of the Sherman/Clayton Acts can sue for: treble damages, attorney's fees, in some cases injunction relief

Bilateral Contract

Reciprocal promises are exchanged by the parties so that the promise of one party is exchanged fr the promise of the other (*promise for a promise*) ex: You offer to sell your watch for $100 and I accept offer and pay you $100 in exchange for the watch

Toxic Substance Control Act

Regulates chemicals and chemical compounds that are known to be toxic

Superfund Act (CERCLA)

Regulates the clean up of disposal sites in which hazardous waste is leaking into the environment. 4 main elements: 1.) it established an information-gathering and analysis system that enables the government to identify chemical dump sites and determine the appropriate action 2.) it authorized the EPA to respond the emergencies and to arrange for the clean-up of a leaking site directly if the persons responsible fail to clean up the site within a reasonable time 3.) it created a hazardous substance response trust fund to pay for the clean up of hazardous sites using funds obtained through taxes on certain businesses 4.) it allowed the government to recover the clean-up costs from persons who were responsible for hazardous substance releases

Ocean Dumping Act

Regulates the transportation and dumping of pollutants into ocean waters Established a permit program for transporting and dumping materials - Civil penalty of up to $50,000 - Criminal penalty of up to $50,000 and/or imprisonment of up to 1 year -Court can issue injunction

The Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA)

Regulates the use of pesticides and herbicides. These substances must be: 1.) registered before they can be sold 2.) certified and used only for approval applications 3.) used in limited quantities when applied to food corps Penalties for commercial dealers include imprisonment for up to 1 year and a fine of up to $25,000 (producers can be fined up to $50,000). Farmers and other private users who violate the act are subject to a $1,000 fine ad incarceration for up to 30 days.

Price Fixing

Restricting output by eliminating price competition in which companies seek to sell more by charging less than their rivals

Sarvis v. Vermont State Colleges

Sarvis committed fraud at the bank he worked for and had to serve time in prison. When he got out he sent a resume to Vermont State College saying that he was retired for the years when he was actually incarcerated. He got the job as a professor to teach business law ethics and the school later discovered that he had been incarcerated for fraud. They fired him on the spot and he tried to sue the college for breach of teaching contract. He lost the case due to the fact that he had committed fraud by leaving out information on his resume.

Collateral Promises

Secondary promises to answer for the debt or duty of another a. Promise must be made to the director to the creditor to be a collateral promise b. Examples: Guarantor on your lease; executor/administrator of an estate to pay estate debts out of his/her own pocket

What are the major Antitrust laws?

Sherman Antitrust Act, Clayton Act, Federal Trade Commission Act (FTC)

Under what circumstances would Pop's Market, a small store in a small, isolated town, be considered a monopolist? If Pop's if a monopolist, is it in violation of Section 2 of the Sherman Act?

Size alone does not determine whether a firm is a monopoly - size in relation to the market is what matters. A small store in a small, isolated town is a monopolist if it is the only store serving that market. Monopoly involves power to affect prices and output. If a firm has sufficient market power to control prices and exclude competition, that firm has monopoly power. Monopoly power in itself is not a violation go Section 2 of the Sherman Act. The offense also requires that the defendant intended to acquire or maintain that power through anticompetitive means.

The Statute of Fraud

Some contracts must be in writing and signed by the party being sued (defendant)

Dayton Superior Corporation sells its products in interstate commerce to several companies, including Spa Steel Products, Inc. The purchasers often compete directly with each other for customers. For three years, one of Spa Steel's customers purchased Dayton Superior's products from two of Spa Steel's competitors. According to the customer, Spa Steel's prices were always 10 to 15 percent higher for the same products. As a result, Spa Steel lost sales to at least that customer and perhaps others. Spa Steel wants to sue Dayton Superior for price discrimination. Which requirements for such a claim under Section 2 of the Clayton Act does Spa Steel satisfy?

Spa Steel satisfies most of the requirements for a price discrimination under Section 2 of the Clayton Act. Dayton Superior is engaged in interstate commerce, and it sells goods of like grade and quality to several purchases. Moreover, Spa Steel can show that, because it sells Dayton Superior's products at a higher price than competitors, it lost business and thus suffered an injury. To recover, however, Spa Steel will also need to prove that Dayton Superior charged Spa Steel's competitors a lower price for the same product. Spa Steel cannot recover if its prices were higher for reasons related to its own business, such as having higher overhead expenses or seeking a larger profit.

Exculpatory Clause

Statements in contracts that release a party from liability in the event of monetary or physical injury no matter who is at fault Often violate public policy: a. Employment contracts relieving employer of liability for employee's on-the-job injury b. Rental of commercial property c. Residential property leases Exculpatory clauses are sometimes enforced if: 1.) they are reasonable 2.) do not violate public policy 3.) do not protect parties from liability for intentional misconduct 4.) language used is unambiguous 5.) parties have relatively equal bargaining positions ex: health clubs, amusement parks, ski-resorts, etc.

What if a minor misrepresented their age?

Still can disaffirm even though they committed fraud

Orr v. Orr

Struck down law requiring men to pay alimony but exempted similarly situated women from the same obligation

Browse-wrap terms

Terms and conditions of use that are presented to an Internet user at the time a product, such as software, is downloaded but that need not be agreed to before the product is installed or used

ChemCorp generates hazardous wastes from its operations. Disposal Trucking Company transports these wastes to Eliminators, Inc., which owns a site for hazardous waste disposal. Eliminators sells the property on which the disposal site is located to Fluid Properties, Inc. If the Environmental Protection Agency cleans up the site, from who can it recover the cost?

The Comprehensive Environmental Response, Compensation, and Liability Act regulates the clean-up of hazardous waste disposal sites. Any potentially responsible party can be charged with the entire cost of cleaning up the site. Potentially responsible parties include the party that generated the waste (ChemCorp), the party that transported the waste to the site (Disposal), the part that owned or operated the site at the time of the disposal (Eliminators), and the current owner or operator of the site (Fluid). A party held responsible for the entire cost may be able to recoup some of it in a lawsuit against other potential responsible parties.

Vertical Merger

The acquisition by a company at one stage of production of a company at a higher or lower stage of production (as when a company merges with one of its suppliers or retailers)

Objective Theory of Contracts

The apparent intention of a party to enter into a contract is determined by the objective, outward manifestation of his or her assent as it would be interpreted by a reasonable person. Objective factors include: a. words b. actions c. circumstances

Rule of Reason Violations

The court balances the reasons for the agreement against its potentially anticompetitive effects. The factors used by the court are: a. the purpose of the agreement b. the parties power to implement the agreement to achieve the purpose c. the effect or potential effect of the agreement on competition d. whether the parties could have relied on a less restrictive means to achieve their purpose

Market Concentration

The degree to which a small number of firms control a large percentage of a relevant marke

Tabor is a buyer of file cabinets manufactured by Martin. Martin's contract with Tabor calls for delivery of fifty file cabinets at $40 per cabinet in five equal installments. After delivery of two installments (twenty cabinets), Martin informs Tabor that because of inflation, Martin is losing money and will promise to deliver the remaining thirty cabinets only if Tabor will pay $50 per cabinet. Tabor agrees in writing to do so. Discuss whether Martin can legally collect the additional $100 on delivery to Tabor of the next installment of ten cabinets.

The general rule is that a promise to do what one already has a legal or contractual duty to do is not legally sufficient consideration, because there is neither a legal benefit to the promisor nor a legal detriment to the promisee. This is called the preexisting duty rule. Unless there is a change of duties (consideration), the promise to pay for that which was previously contracted is unenforceable. An exception to this rule exists under the UCC for contracts for the sale of goods. The UCC provides that an agreement modifying a contract for the sale of goods needs no consideration to be binding [UCC 2-209(1)]. Therefore, the agreement by Tabor to pay the additional $10 per cabinet (a good) may be binding, even though no consideration (detriment) is given by Martin for the increase in price. (The issue, then, for the courts to determine will be whether Martin is taking unfair advantage of Tabor.)

Intention

The offeror üst manifest his or her objective, serious intention tone bound by the terms of the offer

Offeror

The party making the offer to enter into a contract

Offeree

The party who, if interested in the offer, may accept the contract

Market Power

The power of a firm to control the market for its product

Interlocking Directorates

The practice of having executives or directors from one company serve on the Board of Directors of another company. J. P. Morgan introduced this practice to eliminate banking competition in the 1890s.

The Intent Requirement

The second part of the Plaintiff's case requires intent to monopolize. Intent is usually seen in a powerful act to acquire or maintain monopoly power through anticompetitive means

Altisource Portfolio Solutions, Inc., is a global corporation that provides real property owners with a variety of services, including property preservation - repairs, debris removal, and so on. Lucas Contracting, Inc., is a small trade contractor in Carrollton, Ohio. On behalf of Altisource, Berghorst Enterprises, LLC, hired Lucas to perform preservation work on certain foreclosed properties in eastern Ohio. When Berghorst did not pay for the work, Lucas filed a suit in an Ohio state court against Alticsource. Before the trial, Lucas e-mailed the terms of a settlement. The same day, Altisource e-mailed a response that did challenge or contradict Lucas's proposal and indicated an agreement to it. Two days later, however, Altisource forwarded a settlement document that contained additional terms. Which proposal most likely satisfies the element of agreement to establish a contract?

The terms for a settlement that Lucas originally e-mailed to Altisource are most likely to be considered by a court to satisfy the element of agreement to establish a contract. One of the elements for the formation of a valid contract is agreement—mutual assent to the terms of a bargain. Agreement is evidenced by an offer and an acceptance. An offeree's acceptance of an offer leads to the creation of an enforceable contract. Acceptance is a voluntary act that shows assent. The act may consist of words or conduct. The acceptance must be unequivocal—it must mirror the terms of the offer. In this problem, Lucas was not paid for work for which it had been hired and which it had performed. The contractor filed a suit against Altisource to recover. Before the trial, Lucas e-mailed the terms of a settlement to the defendant. Altisource e-mailed a response that did not challenge or contradict the proposal and indicated agreement to it. Two days later, however, Altisource forwarded a different settlement document that contained additional terms. But because Lucas clearly set out the terms of a settlement in its e-mail and Altisource responded without contradiction or challenge, it is most likely that the original proposal would be held to meet the requirement of agreement to establish a valid contract. In the actual case on which this problem is based, on Lucas's motion to enforce the original settlement without the additional terms, the court issued a judgment to enforce it. A state intermediate appellate court affirmed the lower court's judgment for the reasons stated above.

Express Contract

The terms of the agreement are fully and explicitly stated in oral or written words

Implied Contract

The terms of the agreement are inferred from the conduct of the parties. 3 steps to establish an implied contract: 1.) A plaintiff must furnish some service or good 2.) The plaintiff expected to be paid and defendant knew or should have known based on reasonable personal standard 3.) The defendant had a chance to reject the goods and services but did not

Clayton Act (1914)

There are 4 activities made illegal under this act (but only if they substantially tend to lessen competition or create a monopoly power). Violations of this act are only civil. The 4 actions are: 1.) price discrimination 2.) exclusionary practices (exclusive-dealing contracts and tie-in sale agreements) 3.) corporate mergers 4.) interlocking directorates Defenses: a. cost justification b. meeting a competitor's prices c. changing market conditions

Everett McCleskey, a local businessperson, is a good friend of Al Miller, the owner of a local candy store. Every day on his lunch hour, McCleskey goes into Miller's candy store and stays about five minutes. After looking at the candy and talking with Miller, McCleskey usually buys one or two candy bars. One afternoon, McCleskey goes into Miller's candy shop, looks at the candy, and picks up a $1 candy bar. Seeing that Miller is very busy, he waves the candy bar at Miller without saying a word and walks out. Is there a contract? If so, classify it within the categories presented in this chapter.

There is a contract. This is an example of a bilateral, implied, and executory contract. It is bilateral because it is an exchange of money for the candy. It is implied because it states that he comes into the candy shop everyday, so it is implied that he will pay back the owner the next day. It is executory because he has not yet paid for the candy, so the contract is still in process.

Maple Corporation conditions the sale of its syrup on the buyer's agreement to buy Maple's pancake mix. What factors would a court consider to decide whether this arrangement violates the Clayton Act?

This agreement is a tying arrangement. The legality of a tying arrangement depends on the purpose of the agreement, the agreement's likely effect on competition in the relevant markets (the market for the tying product and the market for the tied product), and other factors. Tying arrangements for commodities are subject to Section 3 of the Clayton Act. Tying arrangements for services can be agreements in restraint of trade in violation fo Section 1 of the Sherman Act.

Jorge's Appliance Corp. was a new retail seller of appliances in Sunrise City. Because of its innovative sales techniques and financing, Jorge's attracted many customers. As a result, the appliance department of No-Glow Department Store, a large chain store with a great deal of buying power, lost a substantial number of sales. No-Glow told a number of appliance manufacturers from whom it made large-volumes purchases that if they continued to sell Jorge's, No-Glow would stop buying from them. The manufacturers immediately stopped selling appliances to Jorge's. Jorge's filed a suit against No-Glow and the manufacturers, claiming that their actions constituted an antitrust violation. No-Glow and the manufacturers were able to prove that Jorge's was a small retailer with a small market share. They claimed that because the relevant market was not substantially affected, they were not guilty of restraint of trade. Was there an antitrust violation?

This is a classic case of an anticompetitive group boycott in violation of the Sherman Act, Section 1. No-Glow Department Store and the manufacturers have reached an agreement whereby the manufacturers boycotted (refused to deal with) Jorge's Appliance Corp. This boycott was intended to eliminate Jorge's as a competitive force in Sunrise City. This is definitely a per se Sherman Act violation, and No-Glow and the manufacturers cannot argue that their actions are permitted as long as Jorge's elimination as a competitor does not substantially affect the relevant market.

Sara contacts Joe, who does lawn maintenance work, and makes the following offer: "After you mow my lawn, I'' pay you $35". Joe responds by saying, "I accept your offer." Is there a contract? Is this an offer to form a bilateral or unilateral contract?

This is an example of a unilateral contract since Joe will not be paid until after he mows the lawn (performs). Since he did not mow the lawn there is no contract in this situation.

Factory in your town causes townspeople to suffer from illnesses due to smoke and soot inhalation and property damages from vibrations of the factory machinery. However, the economy of the town depends on the factory.

This is more of a *public nuisance*. Private nuisance suits can be filed here, too for damages - property values decline, personal physical injuries, etc. If the plaintiff shows distinct harm BUT... the court will probably not issue an injunction to stop the factory from operating. So, although perhaps a public nuisance case is brought, the cost of shutting down the factory is too great to the town at large. Perhaps the government can see if the factory is violating environmental statutes?

Relevant Product Market

This market includes all products with identical attributes (products are made by different manufacturers) and are interchangeable: sugar, stevia, stevia cane, equal, sweet-n-low, etc.

Relevant Geographic Market

This market includes geographic area in which the company and competitors sell the product/services; nationwide vs. local markets

Small Business Liability Relief and Brownfields Revitalization Act

To allow developers who comply with state voluntary clean-up programs to avoid federal liability for the properties that they decontaminate and develop

The Resource Conservation and Recovery Act

To determine which forms of solid waste should be considered hazardous and to establish regulations to monitor and control hazardous waste disposal

Federal Water Pollution Control Act (FWPCA)

To eliminate the discharge of pollutants from major sources into navigable waters

National Environmental Policy Act (NEPA)

To limit environmental harm from federal government activities

Rivers and Harbors Appropriations Act

To prohibit ships and manufacturers from discharging and depositing refuse in navigable waterways

Endangered Species Act

To protect species that are threatened with extinction

Toxic Substances Control Act

To regulate toxic chemicals and chemical compounds

Discharge means

To terminate contractual duties OR, to be finished with duties OR, to be no longer required to perform

Hamer v. Sidway (1891)

Uncle said he would give his nephew 5000 when he was 21 if he refrained from "drinking alcohol, smoking, swearing, playing cards or billiards for money". The uncle died and the executor would not pay. The court found that forbearance was good consideration and ordered the money to be paid.

Juan is an elderly man who lives with his nephew, Samuel. Juan is totally dependent on Samuel's support. Samuel tells Juan that unless he transfers a tract of land he owns to Samuel for a price 35 percent below its market value, Samuel will no longer support and take care of him. Juan enters into the contract. Can Juan set aside this contract?

Undue influence arises from a relationship in which one party can, through unfair persuasion, greatly influence or overcome the free will of another. Any contract entered into under excessive or undue influence lacks genuine assent and is therefore voidable. Here, the influence of Samuel over his Uncle Juan is greatly enhanced by Juan's reliance on Samuel for his support. Although Juan cannot claim duress, the domination of Samuel over Juan's decisions results in undue influence. The contract is primarily for the benefit of Samuel, and Samuel used unfair persuasion in securing the contract from Juan. Juan can have the contract set aside.

Promises Made in Consideration of Marriage

Unilateral promises to pay money or give other property in exchange for promises to marry (Prenuptial agreements)

Accord and Satisfaction

Unliquidated debts between creditor and debtor may be settled by the debtor offering to pay and creditor accepting less than creditor originally claimed

US v. Microsoft (DC Circ 2001)

When Navigator, the 1st popular geographical Internet browser, was introduced , Microsoft perceived a threat ti its dominance of the operating-system market. Microsoft developed a competing browser, Internet Explorer (IE), and then began to require computer makers that wanted to install the Windows operating system to install IE and exclude Navigator. Microsoft included codes in Windows that would cripple the operating system if IE was deleted and paid Internet service providers to distribute IE and exclude Navigator. Microsoft was guilty of a pattern of exclusionary conduct in violation of the Sherman Act.

Past Consideration

When a person makes a promise in return for actions or events that have already taken place, there is no consideration ex: A real estate agent sells a friend's house without charging a commission, and in return, the friend promises to give the agent $1,000. The friend's promise is simply an intention to give a gift.

Predatory Pricing

When one firm attempts to drive its competitors from the market by selling its product at prices substantially *below the normal costs of production*. This eliminates competition and then the predator raises the prices well above the normal competition level to recoup its' losses and earn higher profits

Parking Co. of America v. Wilson

Wilson will get a year salary if he gives the company 30 day notice of his quitting. Wilson has a bad day at work one day and walks out on the job. Wilson sues the company claiming they withheld the year salary that he should have received upon quitting. The court decides since he did not follow the precedent condition which stated that he had to give a 30-day notice in order to earn the year salary, he is not entitled to the money and he gets nothing.

Resource Refining Company's plant emits smoke and fumes. Resource's operation includes a short railway system, and trucks enter and exit the grounds continuously. Constant vibrations from the trains and trucks rattle the nearby residential neighborhoods. The residents sue Resource. Are there any reasons why the court might refuse to issue an injunction against Resource's operation?

Yes, on the ground that the hardships that would be imposed on the polluter and on the community are greater than the hardships suffered by individual residents, the court might deny an injunction. If the plant is the core of the local economy, for instance, the residents may be awarded only damages.

Manitou North America, Inc., makes and distributes telehandlers (forklifts with extendable telescopic booms) to dealers throughout the United States. Manitou agreed to make McCormick International, LLC, its exclusive dealer in the state of Michigan. Later, Manitou entered into an agreement with Geri Company, which also makes and sells tele handlers. The companies agreed to allocate territories within Michigan among certain dealers for each manufacturer, limiting the dealer's selection of competitive products to certain models. Under this agreement, McCormick was precluded from buying or selling Gehi tele handlers. what type of trade restraint did this agreement between Manitou and Geri represent? Is this a violation of antitrust law? If so, who was injured and how were they injured?

Yes, the affiliation between St. Luke's and Saltzer violated antitrust law. Under Section 7 of the Clayton Act, a merger violates antitrust law "where the effect * * * may be to substantially lessen competition." This can occur when a merger results in a combination's obtaining monopoly power in the relevant market. An importantconsideration is market concentration. When a small number of companies control a large share of the market, the market is concentrated. A merger between firms that compete with each other in the same market is a horizontal merger. If a horizontal merger creates an entity with a significant market share, it increases market concentration and may be presumed illegal. But courts also consider other factors, including whether the apparent design of the merger is to establish market power. Here, in Nampa, Idaho, the market for adult primary care providers was highly concentrated—there are only three providers mentioned in the facts. St Luke's emergency clinic acquired the assets of Saltzer Medical Group and entered into a professional service agreement with its physicians. Together, through this horizontal merger, these entities gained a two-thirds share of the Nampa market. This meant that the two could impose a significant increase in the prices charged patients and insurers, and their correspondence indicated that they would. In other words, their combination increased market concentration and could therefore be presumed illegal. And because the entities' apparent design of the merger was to establish and use market power to increase prices, their merger violated antitrust law. In the actual case on which this problem is based, the court found that the "huge market share" of the post-merger entity "creates a substantial risk of anticompetitive price increases" and ordered divestiture. The U.S. Court of Appeals for the Ninth Circuit affirmed the order, based on the reasoning stated above.

Arkansas-Missouri Forest Products, LLC (Ark-Mo), sells supplies to make wood pallets. Blue Chip Manufacturing (BCM) makes pallets. Mark Garnett, an owner of Ark-Mo, and Stuart Lerner, an owner of BCM, went into business together. Garnett and Lerner agreed that Ark-Mo would have a 30-percent ownership interest in their future projects. When Lerner formed Blue Chip Recycling, LLC (BCR), to manage a pallet repair facility in California, however, he allocated only a 5-percent interest to Ark-Mo. Garnett objected. In a "Telephone Deal," Lerner then promised Garnett that Ark-Mo would receive a 30-percent interest in their future projects in the Midwest, and Garnett agreed to forgo an ownership interest in BCR. But when Blue Chip II, LLC (BC III), was formed to operate a repair facility in the Midwest, Lerner told Garnett that he "was not getting anything." Ark-Mo filed a suit in a Missouri state court against Lerner, alleging breach of contract. Was there consideration to support the Telephone Deal?

Yes, there was consideration to support the Telephone Deal. Consideration can consist of a promise, a performance, or forbearance (refraining from an action that one has a legal right to undertake). In this problem, Mark Garnett, an owner of Arkansas-Missouri Forest Products, LLC (Ark-Mo), and Stuart Lerner, an owner of Blue Chip Manufacturing (BCM), agreed to go into wood-pallet enterprises together, with Ark-Mo to have a 30-percent ownership interest in their future projects. When Lerner formed Blue Chip Recycling, LLC (BCR) to manage a pallet repair facility in California, however, he allocated only a 5-percent interest to Ark-Mo. Garnett objected. In a "Telephone Deal," Lerner promised that Ark-Mo would receive a 30-percent interest in their future projects in the Midwest. Garnett then agreed to forego an ownership interest in BCR. Acting on Ark-Mo's behalf, Garnett could have accepted the 5-percent allocation in BCR, but he refrained from doing so. Instead, he accepted Lerner's promise of a 30- percent share in their future projects in the Midwest and made no more demand regarding BCR. In other words, Garnett forwent the opportunity to have an ownership interest in BCR in exchange for Lerner's agreement that Ark-Mo would have a 30-percent ownership interest in certain future projects. In the actual case on which this problem is based, Ark-Mo filed a suit in a Missouri state court against Lerner, alleging breach of contract. The court issued a judgment in Lerner's favor. A state intermediate appellate court reversed, in part on the reasoning stated here. "Valid legal consideration supported the Telephone Deal."

Rocky Mountain races, Inc., sponsors the "Pioneer Trail Ultramarathon," with an advertised first prize of $10,000. The rules require the competitors to run one hundred miles from the floor of Blackwater Canyon to the top of Pinnacle Mountain. The rules also provide that Rocky reserves the right to change the terms of the race at any time. Monica enters the race and is declared the winner. Rocky offers her a prize of $1,000 instead of $10,000. Did Rocky and Monica have a contract?

Yes, these parties had a contract. Contests, lotteries, and other competitions for prizes are offers for contracts. Here, the offer is phrased so that each competitor can accept only by completing the run. At that point, a contract is formed—a unilateral contract— binding its sponsor to perform as promised. Rocky did not breach the contract when the prize was changed. Under the rules, Rocky could change the terms at any time.

Before Maria starts her first year of college, Fred promises to give her $5,000 when she graduates. She goes to college, borrowing and spending far more than $5,000. At the beginning of the spring semester of her her senior year, she reminds Fred of the promise. Fred sends her a notes that says, "I revoke the promise." Is Fred's promise binding?

Yes, under the Doctrine of detrimental reliance, or promissory estoppel, the promise is entitled to payment of $5,000 from the promisor on graduation. There was a promise on which the promisee relied, the reliance was substantial and definite (the promisee went to college for the full term, incurring considerable expenses, and will likely graduate). It would only be fair to enforce the promise.

Melissa Gallegos bought a used 1996 Saturn automobile for $2,155 from Raul Quintero, doing business as Jr's Motors. Their written contract focused primarily on the transfer of physical possession of the vehicle and did not mention who would pay the taxes on the sale. Gallegos paid Quintero $2,200, believing that this amount included the taxes. When she asked him for the title to the vehicle, he told her that only the state could provide the title and only after the taxes were paid. Quintero added that they had orally agreed Gallegos would pay the taxes. Without the title, Gallegos could not obtain license plates and legally operate the vehicle. More than six years later, she filed a suit in a Texas state court against Quintero, alleging breach of contract. Did Quintero substantially perform his obligation under the contract?

Yes. Quintero substantially performed his part of the deal for the sale of the Saturn to Gallegos. The requirements for performance to qualify as substantial are: Good faith. Different or missing performance easily remedied by damages. Performance that creates substantially the same benefits as promised. In this problem, Gallegos bought a used Saturn from Quintero. Their contract did not indicate who would pay the taxes on the vehicle. Gallegos believed that the sale price included the amount of the taxes. When she asked Quintero for the title, however, he told her that the state could provide it only after the taxes were paid. He also told her that they had orally agreed she would pay the taxes. Of course, without the title, she could not obtain license plates and legally operate the vehicle. Importantly, the contract did not state who would pay the taxes on the sale of the car. Instead, the contract primarily considered the transfer of physical possession of the vehicle from Quintero to Gallegos. By the time of the suit for breach, Gallegos had been in possession of the car for over six years. This supports a conclusion that Quintero fulfilled the essential terms of the contract or, in other words, that he substantially performed. The court might order him to pay Gallegos the costs of the taxes and title to make the performance complete. In the actual case on which this problem is based, the court found that Quintero substantially performed and ordered him to pay Gallegos the costs as stated. A state intermediate appellate court affirmed, on the reasoning set out above.

P.M. and C.M. (The "Ms") are married and live in Iowa. Unable to conceive their own child, they sign a contract with T.B., who, in exchange for $13,000 and medical expenses, agreed to be impregnated with embryos fertilized with P.M.'s sperm and the ova of an anonymous donor. T.B. agreed to carry the pregnancy to term, and she and her spouse, D.B., (the "Bs") promised to hand over the baby at birth to the Ms. During the pregnancy, the relations between the parties deteriorated. When the baby was born, T.B. refused to honor the agreement to give up the child. Meanwhile, genetic testing excluded T.B. and D.B. as the biological parents and established P.M. as the father. Iowa exempts "surrogacy" from a state criminal statute that prohibits selling babies. There is no other state law on point. Is the contract between Ms and the Bs enforceable?

Yes. The contract between the two couples was enforceable. Some contracts between private parties are not enforceable because of a perceived negative impact on society. These contracts are considered contrary to public policy. One example would a contract to sell a child. In this problem, P.M. and C.M. were unable to conceive their own child. They signed a contract with T.B., who, in exchange for the payment of her medical expenses and an additional $13,000, agreed to carry embryos fertilized with P.M.'s sperm and the ova of an anonymous donor to term. T.B. and her spouse D.B. promised to deliver the baby at birth to P.M. and C.M. After the baby was born, genetic testing excluded T.B. and D.B. as the biological parents, and established P.M. as the father, but T.B. refused to honor the agreement to give up the child. The facts note that there is no Iowa state statute or other law under which the contract is prohibited or could be considered against public policy. To the contrary, Iowa exempts surrogacy arrangements from potential criminal liability for selling children. This indicates that the state allows such agreements. Besides, the contract in the P.M. case was for gestational services, not for the sale of a child. And arguably, surrogacy contracts are favored by public policy—banning such contracts would deprive infertile couples of perhaps the only way to conceive and gestate their own biological children, and would limit the contractual rights of willing surrogates. In the actual case on which this problem is based, the Ms filed a suit in an Iowa state court against the Bs to enforce their agreement. The court ruled that the contract was enforceable, and awarded the Ms permanent legal and physical custody of the child. The Iowa Supreme Court affirmed. With respect to public policy, the court concluded, "Gestational surrogacy agreements promote families by enabling infertile couples to raise their own children and help bring new life into this world through willing surrogate mothers."

Allitron, Inc., and the Donovan, Ltd., are interstate competitors selling similar appliances, principally in the states of Illinois, Indiana, Kentucky, and Ohio. Allitron and Donovan agree that Allitron will no longer sell in Indiana and Ohio and that Donovan will no longer sell in Illinois and Kentucky. Have Allitron and Donovan violated any antitrust laws? If so, which law?

Yes. The major antitrust law being violated is the Sherman Act, Section 1. Allitron and Donovan are engaged in interstate commerce, and the agreement to divide marketing territories between them is a contract in restraint of trade. The U.S. Department of Justice could seek fines for up to $1 million for each corporation, and the officers or directors responsible could be imprisoned for up to three years. In addition, the Department of Justice could institute civil proceedings to restrain this conduct.

Differences between provision #1 and #2 of the Sherman Act

a. #1 requires 2 or more persons since you can't conspire or contract with yourself. The essence of the illegal activity is the act of joining together b. #1 cases often are concerned with finding an agreement that leads to a restraint of trade c. #2 can apply to either 1 person or to 2 or more persons because it refers to "every persons". So, unilateral conduct can violate #2 d. #2 cases deal with the structure of a monopoly that exists in the marketplace or the so called misuse of monopoly power in the marketplace

Material Breach of Contract

a. A breach of contract - b. A "material" breach.- c. If there is a minor, nonmaterial breach of contract, the breaching party is liable for damages if the breach is not cured. The non breaching party is not discharged and is required to perform d. Any breach gives the other side the legal right to sue; only a material breach discharges the non breaching party

Conditions Precedent

a. A condition precedent is one that must be fulfilled before a party's performance can be required b. If the condition precedent does not occur, the parties are discharged from their contractual obligations ex: buyers of a house unable to get financing, Italian car v. insurance company, Parking Co. of America v. Wilson

Unconscionable Contracts or Clauses

a. A contract may be unconscionable if a party who is receiving an unusually greater benefit has superior bargaining power (a "take it or leave it" situation) b. A contract may be unconscionable if it "shocks the conscience" of the court

Example of Employment Contracts

a. A covenant that an employee will not start a competing business for a certain period after termination of employment b. Such covenant s legal so long as the time period and geographical restrictions are reasonable c. California prohibits enforcement of non-compete agreements d. Texas requires additional consideration in exchange for signing the non-compete agreement to be enforceable

Bankruptcy

a. A discharge in bankruptcy operates as a release of a debtor from most debts and contractual obligations b. After a decree of discharge in bankruptcy is issued by a Bankruptcy Court, a partial payment by a debtor will not revive the obligation

Consideration

a. A legal benefit is received by a promisor if the promisor received something to which he or she is not entitled, but for the contract b. It is not necessary that an economic or material loss be incurred by the promisee or an economic or material benefit be received by the promisor

Voidable Contract

a. A valid contract exists but one or more of the parties has the option of avoiding (cancelling) his or her contractual obligation b. The party with the option can elect to void the contract or ratify it ex: contracts made with minors and mentally incompetent persons and intoxicated persons may be voidable

Void Contract

a. Agreement has no legal effect and is not really a contract b. No legal obligation exists on the part of either party

Contracts to Commit Crimes

a. Agreements are void b. If the purpose/performance of the contract becomes illegal because of the enactment of a statute after the contract has been entered into, the parties are discharged from their obligations by operations of law

Liscensing Statutes

a. All states have statutes that require licenses to be obtained in order to engage in certain trades, professions, or business b. Enforceability of contracts made by unlicensed persons: 1.) Some statutes expressly provide that contracts which are made by unlicensed persons are void and unenforceable 2.) If the purpose of the statute is regulatory (to protect the public from unauthorized practitioners), contracts are void and unenforceable 3.) If the purpose of a statute is merely revenue raising - to raise government revenue, contracts are enforceable ex: doctors

Modes and Timeliness of Acceptance in Bilateral Contracts

a. An acceptance is timely if it is sent to the termination of the offer ("Mailbox Rule") b. Authorized means of acceptance: - expressed means of acceptance - implied means of acceptance 1.) offeree can accept by any reasonable means 2.) lack of choice usually implies offeree can use the same or a faster means c. Acceptance will not be effective until the acceptance is received by the offeror, *IF the acceptance is sent in a manner that is not expressly or implied authorized.*

Discharge by Accord and Satisfaction

a. An accord is an executory contract to perform some act in order to satisfy an existing contractual obligation b. Satisfaction is the performance or execution of the accord agreement

The Function of Contract Law

a. Contracts create expectations as to how parties to agreements will conduct themselves in the future b. If a party to a valid contract does not carry out a promise, a court will enforce the contract and provide some form of relief or remedy to the non-breaching party c. Contract law provides stability and predictability and is the foundation upon which more specialized areas of the law are built

Pre-Existing Duty Rule

a. Doing something that one already had a legal duty to do or promising to do what one already has a legal duty to do is not legally sufficient consideration for another person's promise ex: preexisting duty to not drink til of legal age (21) b. If a party is already bound by a contract to perform a certain duty, that duty cannot serve as consideration for a second contract ex: teacher refusing to do job without more pay

Mutual Recission

a. Executory on both sides - b. Executed on one side -

Situations where intent may be lacking (not offers):

a. Expression of opinion b. Statements of intention to make an offer in the future c. Preliminary negotiations, requests to negotiate d. Invitations to bid e. Advertisements, catalogues, circulars, and price lists f. Live and online auctions

Gambling

a. Gambling or wagering is defined as the creation of risk and distribution of property by chance among persons who have given consideration in order to participate b. In general, gambling contracts are illegal and thus void c. All states have statutes that regulate gambling. but in a few states, gambling is lawful

Unilateral Mistakes

a. General Rule - Contract will not be rescinded by the courts. b. Exceptions: 1.) The other party knew of the mistake or should have known of the mistake and failed to correct the mistake; or 2.) The mistake was made because of an inadvertent mathematical error and the mistaken party was not grossly negligent

Communication of Acceptance

a. If a *unilateral contract* is contemplated, acceptance is affected when the performance is completed; notification of the acceptation is not necessary b. If a *bilateral contract* is contemplated, acceptance is effective when the offeree gives the requisite promise

Material Alteration of the Contract

a. If there is a material alteration of a written contract without consent, the contract is voidable by the party who was unaware of the change b. The party unaware of the change has the option of treating the contract either as discharged or as enforceable in accordance with the original terms or with the terms altered

Time for Performance

a. If time for performance is not stated, a reasonable time is implied b. If time is not the essence the parties must stipulate c. Delay does not destroy performing party's right to payment d. Failure to complain can mean waiver

Mutual Mistakes of Material Fact (Bilateral)

a. In general, the contract is voidable at the option of either party b. If a term in the contract is subject to more than one reasonable interpretation and the parties each attach materially different meanings to the term, the mutual misunderstanding may allow the contract to be rescinded

Termination by Operation of Law

a. Lapse of time - If the duration of an offer is stated in the offer, the offer terminates after expiration of the stated period of time - If the duration of an offer is not stated in the offer, the offer lapses after a reasonable period of time b. Destruction of the subject matter of the offer c. Death or incompetency of the offeror or the offeree d. Supervening illegality of the proposed contract as a result of legislation or judicial decision

E-SIGN Act

a. No contract, record, or signature may be denied legal effect solely because it is in electronic form b. Parties must have agreed to use electronic signatures c. Contract must be in a form that can be retained and reproduced d. E-SIGN Act says if a state has adopted UETA without modification, then that state law stands. If state has modified UETA, then E-SIGN prevails if state law is inconsistent with it

Mirror Image Rule

a. Offeree's acceptance must exactly match the offeror's offer b. A communication from the offeree which contains a material change in addition to the terms of the original offer is a counteroffer, which terminates the original offer

Rights that Cannot be Assigned

a. Statutes expressly prohibit certain assignments of rights to payments of money b. Contract is personal (services) c. A contract right cannot be assigned if the assignment will materially increase or alter the risk of the obligator d. Reasonable contractual prohibitions in anti-assignment clause is in the contract ex: Worker's compensation benefits

Statutes of Limitations

a. Statutes provide that a person who has a cause of action must bring his action or lawsuit within a specified period of time b. Failure to commence an action or suit within the period of limitation bars access to judicial remedies but does not extinguish a debt or underlying obligation

Communication

a. The offeror must have the intention of making the terms known to the offeree and those terms must be received by the offeree b. The offeree must have knowledge of the terms of the offer c. An offer may be made to a specific offeree to whom it is communicated d. Offers can be public

Example of Contract for the Sale of a Business

a. The seller of a business agrees not to open another competing store within the area of the store that he is selling b. The reasonableness of an ancillary covenant not to compete is determined by the nature of the business, period of duration, and geographic area covered

Discharge by Novation

a. The third person is substituted for one of the original parties with the consent of the part entitled to receive the performance b. The original obligation of the prior party is extinguished and the prior party is discharged The requirements of a novation are: 1.) a previous valid obligation 2.) an agreement by all parties to a new contract 3.) The extinguishing of the old obligation (discharge of the prior party) 4.) A new contract is valid

Exceptions to the Preexisting Duty Rule:

a. Unforeseen difficulties b. Recission and new contract

Usury

a. Usury statutes fix the maximum lawful contract rate of interest that can be charged for a loan of money. The rate varies from state to state, and over time. b. Exceptions: 1.) If the borrower is a corporation 2.) If the borrower is seeking a small loan

Undue Influence

a. When a party, who is in a dominant position because of a confidential relationship (trust), secures an unfair advantage in a contract with a weaker, dominated party, the contract is voidable and may be disaffirmed by the dominated party b. There is a rebuttable presumption of undue influence when the parties are in a familiar or fiduciary relationship based upon trust and confidence, and the contract is extremely unfair to the dominated party c. The presumption may be rebutted by showing that a fun disclosure was made, the consideration that was received was adequate and/or competent, and independent advice was received by the weaker party

Legally sufficient consideration exists when either:

a. the promisee incurs a legal detriment b. the promisor receives a legal benefit, or c. both

Which of the following job offers are under the Statute of Frauds (assume you are 22 years old)? a. You have a job with this company, as long as they are in business b. You have a job with this company for life c. You have a job with this company until you reach retirement age d. A & B are both under the Statute of Frauds d. A, B, and C are all under the Statute of Frauds

c. You have a job with this company until you reach retirement age Why? Because options a and b both could be less than a year. In order to fall under the Statute of Frauds the contract needs to exceed a year.

Together, EMI, Sony BMG Music Entertainment, Universal Music Group Recordings, Inc., and Warner Music Group Corporation produced, licensed, and distributed 60 percent of the digital music sold in the United States. The companies formed MusicNet to sell music to online services that sold songs to consumers. MusicNet required all of the services to sell the songs at the same price and subject to the same restrictions. Digitization of music became cheaper, but MusicNet did not change its prices. Did MusicNet violate the antitrust laws?

he participants in Music Net appear to have engaged in a conspiracy to fix the prices (and terms) under which their music would be sold online. This may have violated the Sherman Act. The antitrust laws, including the Sherman Act, are intended to limit restraints of trade—agreements between firms that have the effect of reducing competition in the marketplace. The underlying assumption of Section 1 of the Sherman Act is that society's welfare is harmed if rival firms are permitted to join in an agreement that restrains competition. Not all agreements between rivals, however, unreasonably restrain trade. Under the rule of reason, anticompetitive agreements that may violate the Sherman Act are analyzed with the view that they may, in fact, constitute reasonable restraints of trade. When applying this rule, a court considers the purpose of the arrangement, the powers of the parties, and the effect of their actions in restraining trade. In this problem, the music companies' conduct appeared to be the result of an agreement to fix prices, which would violate the Sherman Act. Parallel conduct—charging all of the online services the same price to obtain the songs in MusicNet's catalogs, for example—is not in itself a violation of the Act, but it can be part of a strategy to restrain trade. A rule of reason analysis could determine whether this was an anticompetitive price-fixing agreement among competitors. In other words, the combination formed by the music companies and represented by MusicNet must be shown to have been unreasonable and anticompetitive for it to violate the antitrust laws.In the actual case on which this problem is based, a coalition of consumers filed a suit against MusicNet's participants, alleging that the service violated the Sherman Act. The court ruled that the consumers could attempt to prove their claim.