POL 319 Exam 1 Package

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uploaded by user Umarzilla Class: Lecture/Exam: School: Semester: Professor: POL 319 Exam 1 Package SBU Fall 2013 Anita Y. Aginian, Esq.
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September 10
Only comes up when there is a breach of contract Source of law: US constitution and state constitution Ethics comes into play as well right or wrong in actions and acting in good faith (major point in business relations). UCC universal commercial code Administrative agencies Fed agencies: FDA, NLRB (National Labor Relations Board) hiring and firing, Independent Fed agencies: Fed Trade Commission State agencies run parallel to fed ones such as EPA (Env. Protective agencies) case law: forms legal precedence aka common law Stare decisis: case that is already, if contract is enforceable. It means to stand on what has been decided. Courts follow precedence but new cases always looking to change it. Cases are written into volumes such as Reporters. When arguing a case the advocate calls on case law precedent to make his case. Legal research. Legal remedy: sought through the court in the form of money damages Sources of contract law. The common law governs all contracts except when modified by or replaced by statutory law such as the Uniform Commercial Code (UCC) or by administrative agency regulations. *Contracts relating to services, real estate, employment and insurance are generally governed by common law of contracts. common law imp term *Contracts for the sale and lease of goods are governed by the UCC to the extent that it has modified contract law by adding certain requirements for enforceability. o insurance and others are governed by common law o UCC for writing to be enforceable
Function of Contract Law Designed to provide stability and marketability. Moral obligation and self-interest. PROMISOR: the person making the promise PROMISEE: person to whom the promise is made Duty and good faith should be enough but the law provided for relief to the innocent party when a breach occurs. you are looking for the benefit of the bargain CONTRACT: legal binding agreement between 2 or more parties who agree to perform or to refrain from performing some act now or in the future. Contract disputes arise when there is a promise in the future If the contract obligation is not performed then there is a contract dispute and the injured party would seek a remedy from the court in the form of monetary damages or specific performance
Ex: buying a specific house. That house is the one you want. For some reason they sell to someone else just b/c he offered more money. You can sue in specific performance.
Objective Theory of Contract Objective Theory of Contract
Requirement of a valid contract An agreement/ much of prefect reasonable
Defense to the Enforceability of a Contract 1) Voluntary consents: the contract we entered into without 2) ?
Types of Contracts: Every contract has 2 parties The OFFEROR makes the offer and the OFFEREE is the party to whom the offer is made Whether a contract is BILATERAL or Unilateral depends on what the offeree must do to accept and bind the offeror to a contract Bilateral contract is a contract where the offeree can accept by simply promising to perform; it is a promise for a promise. Ex: promise to buy cam for $200 on Friday UNILATERAL contracts: a promise for an act, drive to LA, mow the lawn, lottery contest, ethics can allow language to change rules but parties must be aware only on the completion of the act is there a contract. Revocation of Offers for Unilateral Contracts Problem arises when the promisor attempts to revoke contract once performance has begun. Traditional contract law states that the offer can be revoked any time prior Formal contacts: require a special form to be enforceable. Ex: Negotiable instruments-checks, drafts, promissory notes etc. UCC requirements. Informal contracts are simple contract where no special form is required unless UCC requires writing.
Avoidable contract: can be avoided by one of both parties and they are released from their obligations. This is where the defenses come in. Valid contract: Has 4 elements of o o Offer/acceptance Consideration
o o
Legal purpose Capacity
There is no void contract because it cannot be voided Quasi contracts: not imposable but are implied Quantum merit: what someone should receive when the service has been provided. With regard to contract, there must be a meeting of the minds and what their rights and obligations are. If the court determines there isnt, then there is not contract
Expressed contract: terms are specifically and explicitly stated whether oral or written. Implied contract or implied in fact contract. Conduct more than words dictates. Case in point: The contractor who deviated from the terms repeatedly of an express contract without any dispute cannot be denied the extra money on one term.
Requirement for implied contract: 1) The plaintiff furnished some goods or service 2) The plaintiff expected to be paid for that service or properly and the defendant knew or should have known 3) The defendant had a chance to reject the services or properly and did not. I.E. asking an accountant his office a question or at an attorneys office as well.
Interpretation of contract. The plain meaning rule. Rules of interpretation: 1-8 (check pictures) Book page 220 and 221, and page 231 about quantum merit
September 17
Contract issues: civil matter civil court All cases start in a trial court, and then go on the appeals Most judges arent eager to change the law
Unilateral and bilateral contract examples Quasicontracts Courts use a reasonable persons standard Reasonably prudent person what would anybody do?
Agreement: An essential contract Parties must agree on the terms of the contract and show mutual assent to the same bargain Offer and Acceptance to the same bargain and does not necessarily have to be in writing creating enforceable rights and obligations Often words fail to convey the precise meaning under the objective theory of contract a partys words and conduct are held to mean what a reasonable person in the offerees position would think they mean Requirement of the offer: o The offeror must have a serious intention to be bound by the offeree o Terms must be reasonably certain so the parties and the court can ascertain them o The offer must be communicated to the offeree Intention-determined by what a reasonable person in the offerees position would believe the words and actions meant. Offers made in anger, jest, or undue excitement do not meet the serious and objective intent test Cases: Linda and Dina; Lucy v. Zehmer case
Expression of option is not an offer. Ex: Dr gave an option to father of son with hand surgery as to how long it would take to heal. No contract. I plan to sell Preliminary negotiations. An invitation to negotiate is not an offer. o It is not an offer The invitations to submit bids is not an offer but the bids submitted are EX: by a contractorbut the govt or private individual who accepts the bid is bound o Submitting a bid is not an offer. Price lists are another form of invitation to negotiate. Usually the expression prices are subject to change is included Some ads are offers, such as reward offered for a lost pet o if someone finds fluffy who never saw any of the signs and realizes where fluffy belongs, he tells owner that he found in super market, if he never saw the sign he doesnt get the reward Auctions: seller offers to sell goods for sale through an auctioneer but this is not an offer to corm a contract It is an invitation to submit offers. Before the hammer falls, a bidder can withdraw bid or the bid can be rejected. A bid is rejected when a higher bid is called. Auction with and without reserve. In an auction with reserve, the seller can withdraw the item at any time. Most auctions are with reserve Auctions without reserve seller cannot withdraw goods and must sell to the highest bidder
Agreements to agree in modern law can be held to binding when there is evidence of intent to be bound, o Ex: roller coaster incident at six flags. The faxed document that detailed the ride and then the subsequent actions of parties showed intent
Courts have held that if the parties state intend to be bound by future negotiations they can be bound by the agreement The second requirement for an effective offer involves: definiteness of terms Generally the contract must include the following terms either expressed or capable of being inferred from it: 1) the ID of the parties The ID of the object of subject matter of the contract including the work to be performed with specific ID as to items as goods, services and land 3) the consideration to be paid 4) the time of payment, delivery or performance The courts will not rewrite a contract bit will supply a missing term. Ex: offer to sell one to ten machines and the acceptance of purchase of two
Communication Offer must be communicated to the offeree. Termination of an offer The power of acceptance can be terminated by the action of one of the parties or by operation of law Termination by action of one of the parties: o 1) BY revocation. The offerors act of withdrawing the offer is revocation. Could be an express repudiation. I withdraw my offer or by acts inconsistent with the acceptance of the offer such as selling the property in question to someone else A revocation becomes effective when the offeree or his agent actually receives it. Mailed on 4/1 and received 4/3 becomes effective on 4/3 An offer made to the general public must be revoked in the same manner it was made Irrevocable offers: although most offers are revocable some can be made irrevocable Increasingly courts wont allow an offer to be revoked if the offeree has changed position b/c of justification reliance of the offer (doctrine of detrimental reliance or promissory estoppal.) Rejection of an offer by the offeree by words of conduct must be received by the offeror. Merely inquiring about the offer is not a rejection I.E. trying to find out if can get more money for the PlayStation Option contract are considered irrevocable offers. IE holding an offer for a specified period of time in return for money. Counteroffer: it is a rejection of the original offer by making another one I.E. offer at $270k countered with $250k offer. Mirror image rule at common law means the acceptance must mirror the offer. Any deviation is counter offer. If the original offer accepts the counter offer, there is a contract.
Acceptance An acceptance must be unequivocal and must be communicated to the offeror. The acceptance may consist of words or conduct
An acceptance may be unequivocal even though dissatisfaction is expressed as to the terms. Adding language that does not condition the acceptance is unequivocal (clear/plain). Silence as acceptance. Ordinarily not acceptance but if someone starts to work on project can be construed as acceptance. Also when there is an ongoing relationship and this type can be construed as acceptance. Also when there is an ongoing relationship and this type of acceptance is common btwn the parties can be construed as acceptance [generally not perceived as acceptance] Communication of acceptance necessary in a bilateral promise for a promise contract In a unilateral contract performance has begun (need to know it has begun or performed if not self-evident) what if across town? Mode and timeliness of acceptance. Acceptance before offer is terminated would be considered timely. The mailbox rule. Acceptance takes effect when the offeree sends or delivers the communication via mode expressly or implied by the offeror. Presumption of Mailing: when you put something in the mailbox (when you give mail to anything) the presumption is that it is received, and if it gets lost in the mail, its not your fault. o 1) When the acceptance is dispatched by mail, in person, over the phone or email. (email when sent) o Authorized means of acceptance. Parties can agree, looks at prevailing business usage, reasonable means o If substituted means is to be accepted then when it is received and not sent will prevail.
Agreement in E-Contracts Numerous contracts are formed on line and follow the same basis requirements. Disputes concerning e-contracts center on the terms and whether the parties voluntarily enters into those terms. Online contracts may be formed for the sale of goods but also for licensing. The sale of Software generally involves the sale of a license or a right to use it rather than the passage of a title. Online Offers sellers must clearly spell out the terms that will govern their transactions Displaying the Offer. The sellers Web site should include hypertext link to the full contract so that buyers are aware for the terms to which they are assenting The contract must be displayed on line in a readable format with clear provisions.
Provisions must include: 1) Acceptance of terms (box containing I accept) 2) Payment 3) Return Policy 4) Disclaimer 5) Limitations on remedies (for punishment) 6) Privacy Policy 7) Dispute resolution (forum selection etc.) 8) Dispute settlement provisions Forum selection and choice of state law Online acceptance
Common law and the UCC both state written or spoken word as well as conduct will indicate acceptance Both common law and the UCC include the click-on a box indicating I accept or I agree are sufficient to result in a click-on agreement. Refers to a click-on license of software. A party agrees to the terms by opening and keeping what is in the plastic box it came in. The agreement is btwn the buyer and the manufacturer and not the seller. The terms generally deal with warranties, remedies, and issues of use Courts have enforced these agreements. In some instances there is a question to when the buyer became aware of the terms Browse wrap terms are not enforceable as the buyer can download w/o clicking agrees.
E-signature Technologies An e-sig is an electronic sound, symbol, or process attached to or logically associated with a record and executed or adopted by a person with the intent to sing the record. ( diff meanings of record) Two categories: digitized hand written signature and the public key infrastructure based digitized signatures (the first is most used, when swiping credit care and giving signature) State laws governing e-sigs. To uniform the states as to acceptance the Uniform Electronics Transitions Act (UETA) was enacted to prevent an e-sig from being denied legal effect. Fed Law Congress enacted the Electronic Signatures on Global and National Commerce Act. Allows for the validity of e-sigs but both parties have to have consented and the forms is one to be retained for the record. Excludes will, divorce papers evictions foreclosure and health insurance. o these are only for commerce, not for legal documents Only UCC articles 2 and 2a that deal with sales are covered Partnering agreements for parties that frequently do business with each other can adopt business electronically The Acts are to allow commerce to flow smoothly over the Internet In the event of an error, the party must notify the other party not to be bound due to error Timing an electronic record is considered to be sent when it is properly directed to the intended recipient in a form readable by the recipients computer system. Also must be send to place business and if not the residence.
September 24
Oct 22nd is midterm is until ch 15 and 16 (10 and 11, 12 today, 13, 14, 15 and 16) Multiple choices out of 4 E-sigs The date that it was sent out, not when received, but when sent; when you hit send, that is when you have accepted it. When you put something in the mail, it is presumed to have been received, that the offer was accepted. Substituted accepted: the offerer can offer that the method of acceptance will be
Mirror image rule with acceptance: when you make an offer that someone accepts is the same and nothing has been changed in the terms. If something is changed, it is considered a counter offer. When conditioning an offer: its not considered an acceptance
Promissory estoppal: An inquiry is not an offer.
Ch. 12: Consideration: Must be given before a contract can exist Its defined as something of legal value given in exchange for a promise Consideration can come in many forms. The most common types of consist of either a tangible payment such as money or property or the performance of an act (an example such as provide legal service) Written contracts are presumed to be supported by consideration. Of course sufficient evidence can overcome any presumption Less usual forms of consideration include the forbearance of a legal right. Accepting an out of court settlement in exchange for dropping a lawsuit. Other examples could include refraining from using tobacco, swearing or playing cards for a specific period of time.
Often consideration is broken down into 2 parts: o 1) something that of legally sufficient value must be given in exchange for a promise and o 2) usually there must be bargained for exchange Legal Value: May consist of 1) A promise to do something that one has no prior obligation to do 2) The performance or an action that one is otherwise not obligated to take or 3) Restraining from doing something that one has the legal right to do so (forbearance)
The executor of the estate there had claimed there was no valid consideration The court held that the forbearance from those activities provided sufficient and valid consideration Requirement for legal value as consideration are: o 1) the promise suffers legal detriment, and o 2) the promiser receives legal benefit
Bargained for Exchange must provide the basis for the bargain struck between the contracting parties In more business contracts the parties engage in such exchange. It is difference between a gift and a contract Gift promises also called gratuitous promises are unenforceable b/c they lack consideration. To change a gift promise into an enforceable contract the promise must do something in exchange (consideration) for the promise. A completed gift promise cannot be rescinded for lack of consideration Suppose Mrs. Colby promised to give her son $10k and she rescinded the promise. The son would have no recourse because it was a gift promise that lacked consideration. If she promised her son she would give him $10k for getting an A in his business law class the contract would be enforceable if he had performed as required. Suppose on May 1st, Mr. Smith promises to give his granddaughter $10k on June1st, Smith actually gives the granddaughter the $10k. It is a completed gift promise. Mr. Smith cannot recover the money from her even if the original promise lacked consideration. The first case involves an incomplete gift promise. The second case involves completed gifts. Engagement ring. How does it differ from gifts, engagement rings are offer in promise to marry. Those rings can be required to be returned. Other gifts given during the relationship not required to be returned. (rings are a different gift that all other gifts) Courts will not generally consider the adequacy of consideration nor does it try to prevent a bad deal. Avoid frivolous law suits Inadequate consideration may cause a court to examine whether voluntary consent was lacking. Fraud duress undue influence issues are considered when the disparity as to value is great. IF an elderly person sells her $70k car to her neighbor for $5k the judge might want to look into the deal to see if there is a reason for the disparity in the value and sales price. Agreements that lack consideration Preexisting duty: a promise to do what someone already has a promise to do is not legally sufficient consideration Example of the sheriff who wants to collect on the reward money for capturing a criminal. He already had a duty as part of his job to capture the suspect. The same is true when a contractor after entering into an agreement and performs some of the works says he will continue work on the job unless he is paid more. He was already bound by the terms if the contract. Of course if there are unforeseen difficulties in the interest of fairness will allow some exception to the preexisting duty rule Revision and New Contract Rescission is the unmaking of a contract so as to return the parties to their original position they occupied before the contract was made. Parties can agree to cancel the contract to the extent it
has not been carried out. A contract can be formed and the courts will look at the consideration form old contract or if there still existed a preexisting duty from prior one. Past consideration promises made in return for actions that have already taken place are unenforceable. Example: real estate broker who did not change commission but alter gets a promise for a payment is looked at a gift Example: the friend who makes a suggestion as to name a usage and later is told he will get a percentage of the logo profits/proceeds cannot enforce the deal as the consideration was for a past act therefore no consideration. Hernandez was employed and four months later promoted. At that time she signed a noncompete clause. This was not a condition of his hiring nor a condition of his promotion and prior work is not considered consideration Illusory promises: if parties enter into a contract but one or both can choose not to perform their contractual obligation the contract lacks consideration. When the nature or the extent of performances is too uncertain the promise is rendered enforceable or illusory Ex: an employer tells his employees that a bonus of 10% will be paid if the profits remain high and management think it is warranted. Illusory. A contract that provides that one pary has to perform only if he wants to is illusory. Illegal consideration. Contract based on illegal consideration are void. Ex: A statement that I will burn your house down unless you agree to pay $10k is unenforceable Also enforceable are contracts that are made out of some moral obligation (death bed promises and ones made out of love) Options to cancel can make a contract illusory as well. Settlement of claims: Business persons and other enter into contracts to settle legal claims and in many cases it is an effort or settle for less money than was originally owned. Accord is the new agreement and the performance (usually money payment). The amount of the debt has to be in dispute Liquidated debts: A&S cannot take place b/c the terms are definite, Ex: Mortgages. Debts Unliquidated debts: arent fixed and A&S can take place.
Release: A contract in which one party forfeits the right to pursue a legal claim against the other. Releases will be binding if: o 1) given in good faith o 2) started in a signed writing o 3)accompanied by consideration Someone should be clear of the extent of damages or injuries before signing a release: Car accident Covenants not to sue. No always bar recovery. A promise not to sue in torts but can then sue in break of contract
Exceptions to the consideration requirement Promissory Estoppal is also called detrimental reliance A person who has reasonably and substantially relied on the promise of another may be able to obtain some measure of recovery Requirements to state a claim: 1) There must be a clear and definite promise 2) The promiser should expect the promise would rely on the promisee 3) The promisee reasonably relied on the promise by acting or refraining from acting 4) The promisees reliance was definite and resulted in substantial reliance. 5) Enforcement of the promise is necessary to avoid injustice The promiser would be estpposed from asserting a lack of consideration, ex. in text Promises to pay debts barred by the statute of limitation (SOL) A debtor who promises to pay a debt that would have been time barred by SOL makes an enforceable contract. The promise can be implied by a partial payment. It extends the time to sue and creditor can sue on the debt Charitable Subscriptions: Educational, charitable and religious pledges to build a building as to whether there is promissory estoppal.
October 1
Review: Consideration must be given before a contract exists Consideration is defined as something of legal value given in exchange for a promise Any gift during a relationship including engagement are gifts (engagement rind must be returned) Preexisting duty: someone who is supposed to do something cant get a reward for it later
Settlement of claims Accord and Satisfaction; covenant not to sue, accord is new agreement performance. A & S cannot happen when you have a liquidated debt like a loan or home mortgage, those that have an interest rate on it Release: a contract in which one party forfeits the right to pursue a legal claim against the other Covenant not to sue: not suing in torts but in breach of contract Promissory estoppel: [?] relied on a promise of anther may be obtained through promise of a recovery, acting or refraining from action
Lesson:
Capacity and Legality Generally the law presumes that the parties to a contract have the requisite contractual capacity to enter into a contract Certain persons do not have the capacity including minors, insane persons, and intoxicated persons The common law of contracts and certain states protects persons who lack contractual capacity from having contracts enforced against them The part asserting incapacity or his or her guardian or conservator or other legal representative has the burden of proof Historically the law has given special protection to those who bargain with the inexperience of youth of lack he required degree of competence required by law
Minors: Minors do not always have the maturity, experience, or sophistication needed to enter into contracts with adults. Common law defines minors as females under 18 and males under 21 Many states have enacted statues that specify the age of majority and 18 is the prevalent age of regardless of gender Some states recognize the termination of a minority period when there is marriage of the minor or emancipation (when parent of guardian relinquishes legal right to exercise control over the minor The general rule is that a minor can enter into any contract that an adult can provide that the contract is not illegal for minors (sale of tobacco or alcohol) A contract is voidable at the option of the minor subject to exceptions To exercise the option a minor needs only manifest an intention not to be bound by it Disaffirmance the legal avoidance or setting aside of a contractual obligation A contract can be disaffirmed any time during the period of minority or for a reasonable time after the majority (2 months not a usually a year) The adult cannot avoid his obligation on ground that minor can do so A minors obligation on disaffirmance States differ on the obligation of the minor to return goods (whether they are unused, complete or in good condition) as to whether minor is entitled to a full refund The concept of making the adult party whole again (putting him in the same position as he was prior to entering into contract is gaining strength) Ex: minor buying the truck, having problems, and giving only the amount depreciated
There would be no incentive for an adult to enter into contract with a minor Excerption to a minors right to disaffirm
Military and marriage contract are exceptions as would go against public policy as a matter of law Misrepresentation of age In some cases that is enough to bar disaffirmance (cant get out of contract) States will require the return of goods received Contract for necessaries. A minor who enters into a contract for necessaries may disaffirm the contract but remains liable for the reasonable value of the goods Necessaries are whatever is needed to maintain a minors standard of living. (food shelter clothing and medical services) 3 requirements must be met for the minor not to be responsible for value: o 1. Item necessary for subsistence o 2. Value must be appropriate o 3. Minor must not be under the care of someone who is required to provide for it Ex: minor who received medical treatment and parents refused to pay minor is responsible Ratification IF a minor does not disaffirm a contract during the period of majority or within a reasonable time after reaching majority, the contract is considered ratified (accepted) and is now bound by the contract Ex in text: express ratification of contract to by a laptop and if kept using laptop at majority impliedly ratifies Parents liability; generally parents not liable and that is why parents are usually asked to cosign a contract
Intoxication Most states provide that contract entered into by certain intoxicated persons is voidable by those persons. The intoxication may occur due to drugs of alcohol. The other party cannot void the contract if he had capacity If the person was sufficiently intoxicated to lack mental capacity hen the agreement may be voidable even if the intoxication was voluntary/the person must prove that reason and judgment was so severely impaired that she didnt comprehend the legal consequences of entering the contract Courts rarely permit contracts to be avoided due to intoxication because it is difficult to determine if someone was sufficiently intoxicated to avoid legal duties. Within reasonable amount of time after sobering can try to disaffirm contract but must return the goods etc. Acts can ratify the contract after sobering up and fails to disaffirm or other action Mental incompetence Contracts made by mentally incompetent persons can be void. (mental, illness, brain damage, senility and the life)
A contract can be void when a court has previously determined that person is incompetent and a guardian has been appointed A contract will be voidable if there is no prior incompetence judgment but is proven that at the time of the contract the party suffered form that mental defect The other party cannot avoid the contract on the grounds that the other party lacked the capacity Someone who had not been previously declared incompetent and can have moments of lucidity can enter in a contract at the time cannot avoid the contract. [always at the time]
LEGALITY The contract must be formed for a legal purpose. They cannot be contract to statute Contracts to commit a crime. Examples: a contract to dump hazardous waste, a contract to smuggle undocumented workers, sell illegal drugs If the subject of contract is rendered illegal later the contract is dischargeable by law. Case: a married woman takes out a life insurance on her husband whether she is the beneficiary and later kills him. She cannot collect on the life insurance benefits. USUARY state usury laws set a limit as to how high and interest rate can be set. This is to protect unsophisticated borrowers form loan sharks Some states would limit the interest or not allow any interest to be charges and/or the borrower would not have to pay the principal either Some legitimate business are allowed to charge high interest rates and allow high rates to those who could not borrow money otherwise After latest economic recession business have had to limit rates and clearly offer products GAMBLING All states prohibit or regulate gambling , wagering lotteries and games of chance via gambling statues Gambling is the creation of risk for the purpose of assuming it Gambling contract is not enforced as illegal. States have casinos, race tracks, lotteries, charity sponsored bingo are regulated and not illegal Online gambling has been regulated by barring electronic payments. This was due to a money laundering issue Forfeiture of property and funds obtained illegally or through gambling Licensing statues Professions require a license after schooling and exam etc. other licenses require good moral character and a fee All have to be for a legal purpose The license is to protect public from unlicensed practitioners contract could be illegal Unlicensed persons can be fined if licensed is for revenue (contractors) ex: electricians Contracts contrary to public policy. (prohibit marriage, sell a child or commit a tortious act) are not enforceable Contracts in restraint of trade usually adversely affect public policy Must be reasonable and are usually for the sale of an ongoing business and employment contracts
Covenant not to compete and the Sale of an ongoing business Example would be a seller must not open a store in a s geographic area for a specified and reasonable period of time are legal Covenants not to compete in employment contracts means not to work for a competitor or open a business that would compete for a period of time specified Enforcement problems. States vary as to what is reasonable and there is possibility to reform what is reasonable
UNCONSCIONABLE CONTRACTS or CLAUSES Courts do not look at fairness or consideration issues but will relieve parties if terms are too oppressive Procedural Unconscionability: lack of ability to make understand or read the terms. Print too small words unclear. Adhesion contract is where one party cannot negotiate the terms and is considered a take it or leave it. Disparity in the bargaining power Substantive Unconscionabiltiy are overly harsh. A contract gives one side free access to the court to dispute but other party is limited to arbitration/mediation.
EXCULPATORY CLAUSES Clauses that release parties from any liability regardless of fault are not enforceable. Parties would be left with no recourse [nothing will happen to me if I dont perform] A contract that promises to discriminate based on race gender etc. is not enforceable. Effects of illegality one party cannot force enforcement of contract when both sides are deemed to know what they were doing The courts will look at justifiable if ignorance of the facts. EX: not knowing that containers being delivered had illegal goods Members of a protected class, flight attendant working hours over the def mandate. Insurance seller is in violation of law but buyer can still benefit from the insurance policy. If a party enters into contract under duress fraud and undue influence that party can recover for the performance In a severable agreement the court can enforce ethical legal portion
October 8
Capacity and Legality Minors and mentally incapacitated persons Intoxicated people
Adult or minor Minor can get out of a contract if he wants
Genuineness of Assent Voluntarily assent of both parties is necessary to create an enforceable contract Assent is determined by the relevant facts surrounding the negotiations and formation of the contract Assent may be manifested in any manner sufficient to show agreement including words and conduct of the parties A contract may not be enforced if the assent of one of both of the parties was not genuine or real Genuine assent may be missing because a party entered into the contract based on mistake, fraudulent misrepresentation, duress or undue influence
(Lack of consideration, genuineness of assent, etc. on the exam; defense of intoxication can be raised, defenses that one has)
There must be a true meeting of the minds MISTAKE: a mistake occurs when one or both parties have an erroneous belief about the subject matter value or some other aspect of the contract Mistakes occur in 2 forms- unilateral and bilateral. A bilateral mistake of mutual mistake is made by both parties. A unilateral mistake is made by one of the parties Instances where a contract is voidable is when there is a mistake of FACT A bilateral mistake of fact is a mutual misunderstanding concerning a basic assumption upon which the contract was made. Unilateral mistakes occur when only party is mistaken about a fact regarding the subject matter of the contract Normally the contract is voidable by the party adversely affected In the often studied contract case Raffles v. Weilhaus, the parties agreed on sale of cotton that was to be delivered from Bombay by the ship PEERLESS. There were two ships with the same name and each party was referring to the other ship. B/c the sailing times of the two ships was diff neither party was willing to agree on the shipment by the other ship. The court ruled there was no binding contract b/c each had another ship in mind when contract was formed. There are 3 types of situations in which a contract may or may not be enforced due to mistake: o 1. One party makes a unilateral mistake and the other party knew or should have known that a mistake was made o 2. A unilateral mistake occurs because a clerical or mathematical error that is not the result of gross negligence. Error must be readily provable. o 3. The mistake is so serious that enforcing the contract would be unconscionable o Ex in text: DaVink intends to sell his motor home for $32k. He learns Benson is interested in buying a used motor home he faxes him an offer to sell him the home with
a typing error of $23k. It is immediately accepted by fax. Seller is bound by the price unless Benson knew or should have known the price was higher Ex: Trent wants to purchase a car from the showroom floor. He looks at several models. Although he decides to purchase a car with a sunroof, he doesnt tell the sales person of this preference. The model named in the contract doesnt have this feature although he believes it does. Trents unilateral mistake will not relive him of the contractual obligation to buy the car. Mistakes of Value: if the mistake concerns the future of the market value or quality of the object the mistake is one of value and the contract is normally enforceable. The mistakes can be unilateral or bilateral Example of the violin purchased for $250 and was later determined by an antique dealer that the violin worth much more The reason that mistake of value or quality not legally significant is due to fact that value can vary and change due to many factors such as time, place, etc.
FRAUDULENT MISREPRESENTATION: an intentional misrepresentation occurs when one person decides to induce another person to reply and act on misrepresentation Fraud is a tort but also affects the authenticity of the innocent partys consent to contract To prove fraud the following elements must be shown: o 1. The wrongdoer made a false representation of fact o 2. The wrong doer is intended to deceive o 3. The innocent part relied on the representation o 4. The innocent party was injured Ex: when an art seller states that the works are of one artist when they are not and the buyer refrain on statement
Statements of opinions do not qualify. This is especially true as to statements of future value. Exception: when an expert has given his opinion Misrepresentation by conduct: when a party hides facts as to make the deal that is fraud. o Ex: Actor Sekleck buys a horse he is lead to believe is competition worthy. Seller concealed fact that horse had a medical condition. Selleck sued and won Misrepresentation by law. Ordinarily doesnt entitle party relief on the contract as one is presumed to know the law when on certain issues. However if the seller was a prominent in the field and resilience is expected
Silence as misrepresentation. Generally neither party to a contract owes duty to disclose all the facts to the other party Ordinary such silence is misrepresentation unless o 1. Nondisclosure would cause bodily injury or death. o 2. There is a fiduciary relationship between the parties (dr. and patient, lawyer and client). o 3. federal and state law require disclosure Seller must disclose latent defects (one not easily obtained) Intent to deceive: Guilty knowledge or Scienter. Example of the felon who served time in prison and lied about that and his experience as a professor at another school. He sued for breach of contract & lost. The intent to deceive the school who had relied on his misrepresentation made him lose the case Innocent misrepresentation treated a mistake and can rescind the contract Negligent misrepresentation: if a party does not sue his skill and knowledge to be sure facts are presented truthfully and accurately could be thought of that party is misleading the other party.
Reliance on the misrepresentation: must be justified in relying on the statements of the other party and must be a justifiable reason to rely on the misrepresentation. Not in the case of a statement that this Cadillac will get 60 mi/gallon and does not. Injury to the innocent party. Simply rescind and put the parties back to original position Breach of contract matter no punitive damages. Fraud matters do look at punitive damages.
Undue influence can make a contract voidable It arises when one party is in a position to greatly influence another Ex of minor and elderly who are under care of a guardian, doctor and patients, lawyers and clients, parent/child and husband/wife. Party being taken advantage of did not exercise free will when entering into a contract The presumption of undue influence where the dominant person is enriched over the party who trusts him/her. Ex of guardian who enters into contract on behalf of the ward that will benefit the guardian.
Duress: if one of the parties is forced into the contract. (blackmail) Duress is a defense to the enforcement and also a ground for rescission of a contract The threatened act must be wrongful or illegal. Not a threat to exercise a legal right (the right to sue) Economic duress This generally not sufficient unless it creates an economic need
Adhesion contracts and unconsionability: concerns one sided bargains in which one party has substantially superior bargaining power and can dictate the terms of a contract Standard form of contracts that have fine print provisions that shift risks. (Arbitration clauses and limitations/disclaimers of liability) Take it or leave it contracts where one party has no bargaining power and is forced to take the deal (adhesion contracts)
October 15 Covers up to the end of Exam 1

Statute of Frauds Certain contracts must be in writing to be enforceable The intention is to ensure the terms of important contracts are not misunderstood forgotten or fabricated The following contracts must be in writing to be enforceable: o 1) contracts involving the interest in land o 2) Contracts by their terms cannot be completed within one year from the day after the date of formation o 3) collateral contracts in which a person promises to answer for the debt of another [co-signer on a loan] o 4) promises made in consideration of marriage o 5) Contracts for the sale of goods priced at $500 or more. UCC requirement. Contracts involving interests in land A contract that involves the transfer of the interest (ownership) in land must be in writing Real property include the land itself, buildings, trees, soil minerals, timber, plants, crops, fixtures and things permanently affixed to the land or buildings. Ex: built in cabinets are fixtures Mortgages must be in writing as they use the property in question as security on the transaction Leases for renting property for a term over one year must be in writing The ONE YEAR RULE Contracts by their own terms that cannot be performed within one year from the day after the contract was formed must be in writing to be enforceable If the performance of the contract is possible w/in 1 year then it can be oral An extension of an oral contract as to its time frame must be in writing Ex: The owner of a fast food restaurant hires a manager for 6 months (can be oral); however, if they decide to extend his employment for another 8 months that extension must be in writing
Collateral promises. A guarantee contract occurs when one person agrees to answer for the debts or duty of another. Ex: cosigner on a loan. Those guarantees must be in writing. Primary obligation need not be in writing but the secondary or collateral obligor must have a signed writing to be enforceable
Main purpose rule: the secondary or collateral party must not be in position to benefit in order to require a writing to be enforceable. Promises made in consideration of marriage must be in writing. A unilateral promise to pay money, or property in consideration of marriage requires a writing A prenuptial agreement must be in writing outlining what each party brings to the marriage and what will leave upon divorce
Contracts for the sale of goods. Section 201 of the Uniform Commercial Code is the basis Statute of Frauds provision of sale contracts It requires that contracts for the sale of goods costing $500 or more must be in writing to be enforceable An amendment to an oral agreement that was originally less than a $500 price bringing it to over $500 must be in writing A requirement of a written or electronic record of a contract for over $500 must meet the UCC standards. Both parties intentions must be present even if (except quantity) are omitted to satisfy UCC UCC also requires that the writing be signed by the person being sued Exceptions to the Statute of Frauds : Partial Performance Admissions Promissory estoppel (detrimental reliance) SUFFICIENCY of the WRITING Writing can an order confirmation, sales slip, invoice, check, Fax, email or a signed letter referring to the agreement. (an integration of several writings( Several documents can forms the writing if attached There must be an indication that there was an intention of both parties as the meeting of the minds THE PAROL EVIDENCE RULE By the time a contract is reduced to a writing the parties usually have engaged in prior discussions and negotiations and prior writings. Any oral and written words outside of the 4 corners of the contract are called PAROL EVIDENCE [parol = oral] The rule states that if a written contract is a complete and final statement of the parties agreement and prior statements etc. are not admissible that contradict the agreement. A completely integrated contract is the best evidence. Exceptions to the Parol Evidence Rule: Explains ambiguous language Shows contract is voidable or void (due to fraud, mistake, duress etc.) Concerns prior course of dealings or performance as btwn the parties (usage in trade) Fills in gaps Corrects obvious clerical errors
[Parol Evidence: anything that interrupts a meeting of the minds such as qty, time frame, etc., the court will not admit it such as ambiguous language. If a contract appears to be complete and clear, the court
Third party rights: The two parties to a contract have PRIVITY. The contract is between the two sides and the obligation rest with them. The transfer of contractual rights to a third party is assignment The transfer of contractual duties a delegation Assignments: used in business often. Banks assign the rights to receive payments to another party. i.e. sell the loan. Millions of dollars are handled that way. Mortgages and car loans etc. Assignor assigns and the one receiving the rights is the assignee. Obligor and oblige relate to duty and obligation assignments The assignee takes on the same rights as the assignor Rights assigned are subject to the same defenses Can be oral or written but carry more weight if written. Rights that cannot be assigned: When a statute prohibits (workers comp benefits) When a contract is personal in nature (assign a personal tort claim), (an artist or tutor, where risk is based on one insured) When the contract prohibits it. Exceptions to that: o 1) right to transfer property o 2) right to receive funds o 3) in a contract for the sale of goods the right to receive damages for breach may be assigned Notice to should be given as to the assignment but not required Until notice is received through a writing or performance nothing has changed Delegations of duties. The delegator and the delegate. Duties that cannot be delegated: o 1) personal service contracts calling substituted at a concert o 2) Contracts whose performance would materially vary if obligors duties were delegated. Ex: if a person hired a world famous surgeon and a recent med school grad was doing (check pics) Third party beneficiaries. They sometimes claim rights under others contracts. They are either intended or unintended beneficiaries Parties can agree to that third party beneficiary and is then the intended 3rd party beneficiary. Ex: insurance policies, beneficiary in a will
Those 3rd parties can sue for breach of contract. Creditor beneficiaries are intended beneficiaries o 1) a debtor borrows money from a creditor to purchase item o 2) debtor signs agreement to pay the creditor loan plus interest o 3) the debtor sells the item to another party before the debt is paid New buyer promises the debtor that he will pay the remainder of the loan Incidental beneficiaries or unintended beneficiaries are not able to sue on other peoples contracts. That person was not the reason for the contract. Ex of the beauty pageant case. State winner goes on to national pageant. Disqualification does not entitle her an intended beneficiary.

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nerdy-notes.

Objective Theory of Contract Objective Theory of Contract

Requirement of a valid contract An agreement/ much of prefect reasonable

Legal purpose Capacity

Promissory estoppal: An inquiry is not an offer.

Adult or minor Minor can get out of a contract if he wants

October 15 Covers up to the end of Exam 1

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