Law Midterm 2

Question 1

Objective theory of contracts

Answer 1

when deciding whether a contract is valid – have to use the objective theory!!!

• –theory states that the intent to contract us judged by the reasonable person standard not the subjective intent of the parties
• -if reasonable person would conclude that parties intended to be legally bound
• -diff. btwn I WILL BUY for $2M v. are you interested in selling?
• -you check IN THIS ORDER
  1. What the party said (what they put in writing)
  2. What they did (their conduct over past few years)
  3. context - under what circumstances was this contract created
• –problem if you have contract and you were the only 2 in the room — if judge finds both of you equally credible and the defendant is saying he never agreed to something (and its not in the contract) then you lose bc of the burden of proof — need it in writing and need a witness

Question 2

elements of a contract — MUST have these 4 to be enforceable

Answer 2

1. agreement — requires an OFFER and ACCEPTANCE of offer – mutual assent by both parties
2. consideration
   - -a promise MUST be supported by a bargained for consideration that is legally sufficient
3. contractual capacity
   - -parties have capacity for contract to be enforceable against them
4. lawful object (legality)
   - -subject of contract must be lawful – illegal objects are void

contracts are voluntarily entered into by parties - terms become PRIVATE LAW btwn parties and legally enforceable by court

Question 3

defenses - if you want to get our of your contract

Answer 3

1. genuineness of assent
   - –consent must be genuine – if consent was made by duress, indue influence, or fraud there is no real assent
   - -contracts CANNOT be enforced if assent was not real or genuine
2. written contract - signed
   - -law req. certain contracts to be in writing and certain contracts to have a specific form

Question 4

contract law comes form:

Answer 4

1. common law
   - -developed from early court decisions and became precedent for later decisions – primarily STATE courts – there is limited federal common law that applies
2. case law
3. restatement of the law of contracts
   - -a set of good ideas in each state – codifying what used to be in common law to form the utah code for ex.
   - –this is under UCC (uniform commercial code) which is a comprehensive statutory scheme that includes laws that cover aspects of commercial transactions — goal is to create a uniform system of commercial law among 50 states
   - -UCC takes precedence over common law of contracts
   - -divided into 9 articles and the restatement of law of contracts is one of them
   - -sales contracts (equipment, cars, computers) and leases are described in artiles

Question 5

bilateral v. unilateral

Answer 5

BILATERAL

• -MOST common
• -promise to perform in return for a promise to perform – even if you perform much later
• -wording is heavily scrutinized - if there is any ambiguity it is always assumed to be bilateral
• -ex. “If you PROMISE to paint my store by July 1, I will pay you $3000” - when he accepts and says he promises to do it, a bilateral contract is formed — if he doesn’t paint she can sue ad if she doesn’t pay he can sue

UNILATERAL

• -the offeror invites you to accept the contract BY performing!
• -there is NO CONTRACT until the offeree performs
• -you can revoke offer until performance is finished - even if the person does 90% of the work…could still revoke it
• -but modern law says that if person starts the work then contract has been formed and accepted and if offeror revokes it is a breach
• – “If you paint my shop by July 1, I will pay you” - unilateral bc contract only exists if Peter does the act - if he does not paint shop by July 1, he never accepted the contract and she can’t sue him – if he does paint and she doesn’t pay him, then he can sue her

Question 6

quasi-contracts

Answer 6

fake contracts bc doesn’t have all 4 parts of the contract (no agreement)

• -equitable concept - judge puts on fairness hat
• -situations where not doing something for one party would be injust or unfair to the other party
• -implied contracts
• –Ex. Is a surgery – contract to perform the surgery but the person is unconscious so can’t say yes or no or have any say in things

quasi contracts are IMPLIED IN LAW contracts

• –Allows a court to award monetary damages to a plaintiff for providing work/services to a defendant even though no actual contract existed btwn the parties
• -based on reasonable value of services received

Question 7

Equitable doctrine

Answer 7

Court will hold you accountable to what you agreed to — even if after it comes out that it was unfair to one party of the agreement…they will only go against defense to contract
—permits judges to make decisions based on fairness, equality, moral rights and natural law

Question 8

express v. implied-in-fact

Answer 8

express - what is actually sated and written — expressed in oral or written words
–most personal and business contracts are express

implied-in-fact

• -contract where agreement btwn parties has been inferred from their conduct
• -has to meet THREE REQ.:
  1. plaintiff provided property/service to defendant
  2. plaintiff expected to be paid and defendant knows that
  3. the defendant (being performed to) has a chance to reject performance and doesn’t
• —–Ex. Taco bell had people come in and help them find an advertisement (with the chiwawa) one comp. had the idea and gave to taco bell and thought they had a contract and taco bell took another company and used the idea - so orig. company sued
• —Person mowing your lawn…you look out the window and don’t stop them so you let them keep going - they could come claim money and take you to court bc you had the opp. To reject the service and you didn’t
• –Screenwriter meets movie producer and presents script to him - producer reads script but never enters an express contract and does not pay the screenwriter – later producer makes a hit movie very similar to the story the screenwriter showed him – screenwriter can recover damages from producer for breaching an implied-in-fact contract

you would always rather have express contract!!!!!!

Question 9

executed v. executory

Answer 9

Executed - contract has been done by both parties - fully completed contract

Executory - either one or both has yet to perform

Question 10

Valid/Voidable/Void/Unenforceable

Answer 10

Valid - has all the elements
–enforceable by at least one of the parties

Voidable - has to do with a capacity problem - where one or both parties have the option to rescind the contract (minors, intoxicated, mental incapacity)

• -at least one party has the OPTION to void his/her contractual obligations
• -if voided both parties are released –if party with option chooses to ratify then both parties must perform

Void - happens most often — ILLEGAL
–has no legal effect and as if it had never been created

Unenforceable - all elements of contract exist but there is a defect that makes it unable to be enforced under court of law

• -legal defense to the enforcement of the cotract
• —most common is that it doesn’t comply with the statute of frauds – ex. it is req. to be in writing and is not then legally it is NOT enforceable
• -parties may voluntarily perform a contract that is unenforceable

Question 11

offer

Answer 11

manifestations of willingness to enter into a bargain

1. offeror must be OBJECTIVELY INTENT to be bound by the offer – meeting of the minds (both agree)
2. the terms must be definite or CERTAIN
3. Offer muse be COMMUNICATED to the offeree

offers need express terms most often

• -identify the parties
• -the subject matter of the contract
• -the consideration to be paid by each party
• -the time of performance

but CAN imply terms if not express but reasonably certain

• –common law req. an exact specification of terms though
• -modern law is more lenient – req. terms of offer be “Reasonably certain” and allows court to supply a missing term if reasonable term can be implied

Question 12

offer acceptance - direct comm.

Answer 12

An offer CANNOT be accepted if it is not communicated to the offeree by an offeror or a representative – contract is a mutual promise – ex. Where guy had offer in writing but never sent it — the intended offeree’s CFO finds and reads the offer letter and tells it to the CEO (intended offeree) but there is no contract bc it was never communicated to him

Question 13

advertisements

Answer 13

NOT OFFERS – they are solicitations of offers
an invitation to make an offer or an actual offer
—An advertisement is considered an offer if it is SO definite that it is apparent the advertiser has the present intent to bind itself to the terms of the ad
—-Ex. A auto ad to sell “prev. owned white 2015 land rover vin # Salm…. For $38k” is an OFFER bc it advertises and identifies the exact car for sale - first person to accept offer owns the car

Question 14

rewards

Answer 14

an award given for performance of some service or attainment

• –To collect a reward, the offeree must 1. have knowledge of the reward offer prior to competing the requested act and 2. perform the act
• –Ex. A guy loses imp. Briefcase on subway – he places newspaper ad that whoever returns it gets to keep $5000 – a lady finds it and returns to him but had not seen the ad - she is not entitled to the reward money bc she did not know about it when she performed the act

Question 15

Auction

Answer 15

1. Auction with reserve - seller retains the right to refuse the highest bid and withdraw the goods from sale – unless expressly stated otherwise, auction is always auction w/ reserve
   § It is an invitation to make an offer – but not an actual offer
   2. Auction w/o reserve - seller expressly gives up the right to withdraw the gods from sale and must accept the highest bid – it is an offer and seller is bound

Question 16

Termination of offer by acts of the parties

Answer 16

termination - situations where one party takes an action that indicates he is not interested in forming a contract under the terms of the offer

1. revocation of offer by the offeror
   - -under common law, offeror may revoke any time prior to its acceptance by offeree (even if promised to keep it open longer)
   - -recovation - withdrawal of offer by offeror that terminates the offer
   - -usually not effective until it is received by the offeree - needs to be expressed in words or by actions (Selling to another party)
   - -expressed revocation or implied revocation (by acts of offeror…selling to someone else)
2. rejection of offer by offeree
   - –if the orig. offer was rejected, any new attempt by offeree to accept offer is ineffective and becomes a new offer that orig. offeror (now new offeree) is free to accept/reject
   - — Ex. Apple manager offers to sell 4000 IMAC computers to GM for $4M – Gm calls and says not interested = the rejection terminates the offer - if GM later calls Apple It creates an entirely new contract/offer
3. counteroffer by offeree
   - –offeree simultaneously terminates offeror’s offer and creates a new offer - terminates the orig. offer and puts a new one into play – counteroffer is not effective until it is actually received by offeror

Question 17

termination by operation of law

Answer 17

1. Destruction of the subject matter – if subject matter of offer is destroyed through fault of neither party (a fire destroys building that ahs been listed for sale - fire terminates the offer)
   
   2. Death or incompetency of offeror/offeree
   3. Supervening illegality - enactment of a statute, regulation, or court decision that makes the object of an offer illegal and terminates the offer
   4. Lapse of time - stated time period after which offer terminates – if no time is stated, an offer terminates after a reasonable time

Question 18

acceptance of offer

Answer 18

• –acceptance must be clear and unambigious - only have one possible meaning
• -mirror image rule – rule states that for an acceptance to exist, offeree must accept the terms as stated in the offer – any type of modoification is a rejection and making a counteroffer
• – • Ex. Seller offers specific car for 30k, certain brand, color, year, condition - buyer accepts all terms in full and contract is made — but if buyer were to accept all terms but demands radio be installed then mirror image rule has not been met and no contract is created

Question 19

silence as acceptance

Answer 19

silence is usually not considered acceptance (ex. Ignoring a letter with an offer does not bind the offeree)

• —But silence DOES mean assent in these cases:
  1. The offeree has indicated that silence means assent - “Ex. If you do not hear from me by Friday, ship the order)

2. The offeree has signed an agreement stating cont. acceptance of delivery until further notice — ex. Subscription based services – acceptance until cancel
3. Prior dealings btwn parties – course of dealing —indicate that silence means acceptance - (ex. Fish seller delivers 30 lbs. of fish to restaurant each Friday for several years and is paid for fish can cont.. To make deliveries until other notice

Question 20

acceptance timing

Answer 20

Acceptance-upon-dispatch rule (mailbox rule) - under common law of contracts, rule states that acceptance is effective when it is dispatched, even if it is lost in transmission
—-Holds when delivered by FedEx or UPS - even if lost in mail — does NOT usually work for emails though, not valid when email is sent but accepted once it is received

bust acceptance must be PROPERLY DISPATCHED (right address, packaging, posting) – under common law it is not effective if it is not properly dispatched

Question 21

options leading to termination of offer

Answer 21

o Can’t decide and ask for a week to decide – next day you sell to someone else – not ethical but legally speaking you have every right to do it
o Not legally bound to anyone unless they give you CONSIDERATION (something of value - money, personal property, wash their windows, offer to carry their backpack, etc.) – consideration makes you obligated to keep it open for 7 days — recognized consideration is the only way to create an option

Question 22

detrimental reliance

Answer 22

also called promissory estoppel

• –Relied to your detriment on their representations — under court you don’t have a contract but you can sue for detrimental reliance
• –Employment offer — they make it sound like a sure thing by saying you don’t have employment contract but it is just waiting to be approved but go ahead and move out here, we love you and want you to work here – you take action w/o actual contract but did it bc you assumed by their actions it was going to come through

so it LACKS CONSIDERATION but court can enforce

• -estope = prevents
  1. promisor made a promise
  2. promisor should have reasonable expected to induce the promisee to rely on the promise
  3. promisee relied on the promise and engaged in an action or forbearance of a right of substantial nature
  4. injustice would be caused if promise were not enforced

Question 23

mailbox rule pt. 2

Answer 23

every other category of communication are effective when other party receives it, hears it, gets it in the mail, etc. — but ACCEPTANCE are effective once the person SENDS the acceptance
–with THREE exceptions
• 1. If you put a wrong address on your acceptance, then not effective and contract is not formed when you send it
• 2. If don’t want to worry about risk of losing in mail – the offeror puts it explicitly in your offer that they will not form contract until receive in mail
• 3. Rejection first and then acceptance is sent – whichever one gets there first wins! (BUT IF ACCEPTANCE GOES FIRST ALWAYS FORMS CONTRACT WHEN SENT!!!!!)

Question 24

consideration

Answer 24

to be enforceable contract must be supported by consideration - something of legal value

• -contracts not enforceable are usually not enforceable
• –promissory estoppel - equity doctine that permits a court to order enforcement of a contract that lacks consideration

two elements of consideration

1. something of legal value must be given – legal detriment to promisee or legal detriment to promise
2. there must be a bargained for exchange
   - -commercial setting in which business contracts are formed leads to this conclusion

Question 25

gift promise

Answer 25

gratuitous promises – unenforceable bc they lack consideration
— • Ex. Mother promises to pay son $10,000 on 6/1 - on 6/1 she refuses to pay when he comes to collect - he cannot recover the lost $10,000 bc it was a gift promise with no consideration
BUT if she promises to pay $10,000 if he earns an A in his class and the son does earn the A - then the contract is enforceable

Question 26

some examples of promises that LACK consideration

1.. illegal consideration

Answer 26

Contract cannot be supported by a promise to refrain from doing an illegal act - contracts based on illegal consideration are void
Ex. Person threatens business owner that he will burn business down unless agrees to pay $10,000- out of fear owner promises the money - but the contract is not enforceable bc consideration is illegal

Question 27

2. illusory promise

Answer 27

Parties enter into a contract but one or both parties can choose not to perform their contractual obligations - called illusory promises

• —Ex. Contract where the party has to perform the task only if they CHOOSE to do so - not enforceable
• –sleeves off your vest – I promise to give you a raise if I feel like it
• -sounds like you have something but you really don’t

Question 28

3. preexisting duty

Answer 28

• Person promises to perform an act or do something but is already under an obligation to do so - not enforceable bc no new consideration is given
  * Ex. Police officers cannot demand money for investigating criminals or fire fighters cannot demand payment for fighting fires

Question 29

4. past consideration

Answer 29

A party promises to pay someone some money for work they have done in the past - not a new promise and not enforceable
—-Ex. Company promises retiring employee that bc he was such a good employee, they will pay him $100,000 bonus – when he quits the corp. refuses to pay - can’t recover bc it was based on work he had already done

not sufficient consideration – performance came before the promise (gift)
–Ex. Famous basketball player said wow bc of your good work on this deal you saved me so much $ I will give you $200 - the guy sued him bc he didn’t actually pay him…but the performance already happened so it is a past consideration and treated as a gift

Question 30

settlement of claims

Answer 30

one party believes he/she did not receive what was due - that party may attempt to reach a compromise with the other party (pay less consideration than was provided for in the contract) = called a settlement agreement = called an accord
—–If accord is performed called a satisfaction

Type of settlement called accord and satisfaction - or compromise
—- If accord is NOT satisfied - other party can sue to enforce the accord - accord is enforceable even though no new consideration is given bc the parties reasonably disagreed as to the value of the goods/services

Question 31

adequacy v. sufficiency

Answer 31

ADEQUACY

• –Whether it is fair - whether you feel it is a good deal
• —Court does not care whether you feel consideration is ADEQUATE!!! THEY ONLY CARE WHETHER IT IS SUFFICIENT
• —One exception to adequacy is Unconscionability - some circumstances when considerations are SO UNFAIR that court feels consciously they should look into it and help PARTY

SUFFICIENCY - consideration is necessary to be enforceable

• —1. Promise to perform in bilateral contract
• –2. Actual performance in unilateral contract
• –3. A legal detriment - giving up something you otherwise have the legal right to do - promise NOT to do something (have legal right to smoke but promise not to)

—-EACH PARTY HAS TO GIVE ONE OF THESE THREE THINGS TO MAKE IT AN ENFORCEABLE CONTRACT (if one promises and the other doesn’t it does not count)

Question 32

accord and satisfaction

Answer 32

all has to do with the underlying debt

DISPUTED
–we BOTH disagree to what we owe – can resolve it and form a new agreement to make old go away – COMPROMISE and new agreement is sufficient to delete old

UNDISPUTED

• -we both know that I owe you $600 as a mechanic but i don’t have the money rn
• –Here is the reason I can’t pay but I’m not disputing that I owe you or the value I owe you
• –So you say I’ll give you $500 and you can sue me for the rest - undisputed bc you aren’t saying you don’t owe…you agree on it but you have an excuse not to fulfill your side of the bargain

Question 33

conditional acceptance

Answer 33

equivocal
–I want to buy it but I have to think about it —> no contract formed and no obligation

unequivocal

• -I will buy it but I wish it were cheaper
• -a contract is formed even though they aren’t super happy about it

Question 34

minor

Answer 34

can always disaffirm! Even if PROMISE NOT TO DISAFFIRM they still can

• -if value goes down bc of minor’s negligence then minor is NOT liable
• -but if it depreciates bc of minor’s INTENTIONAL, reckless or gross negligence then the minor can still disffirm but they ar liable for loss of value

misrepresentation

• -wasn’t an adult but pretended to be - you can still disaffirm but are liable for any reduction in value
• -but once you become an adult it is automatically ratified

necessaries

• -CAN DISAFFIRM but ARE liable for reduction in value
• -I’m a minor and I buy a hamburger and take a bite out of it — I CAN still disaffirm but I won’t get my money back - it is now worth ZERO so I am liable for paying for it

ratification
—once you reach age of majority if you have not disaffirmed the contract is ratified

Question 35

mental incompetence

Answer 35

by court if they are adjudged then all contracts are VOIDABLE by other party
o If haven’t been through court process so not adjudged but they are mentally incompetent then it is VOIDABLE by the incompetent person
o Somebody who is mentally capable but doesn’t understand terms of deal - that is valid and enforced

Question 36

intoxication

Answer 36

voidable by person but liable for any reduction in value

Question 37

legality - crime

Answer 37

crime - contract to commit a crime are VOID bc illegal

• –Illegal subject v. – nothing wrong with buying a car
• —Illegal purpose – come to care service and planning to use car for getaway car in armed robbery – DOESN’T MAKE THE UNDERLYING CONTRACT ILLEGAL - so you can still make the contract and sell the car bc the car isn’t illegal – but if it was an illegal subject (drugs) the contract would be void

contracts to commit crimes are VOID

• –if the object of contract becomes illegal or after contract is agreed to the gov. creates a statute that makes it unlawful…then parties are discharged from contraact
• –bc they are VOID - parties cannot sue each other for nonperformance

Question 38

4 exceptions to illegality

Answer 38

1. One of the parties is innocent - is ignorant to fact that contract is illegal - if convince court then can get some remedy
   - –ex. innocent person unknowingly purchases insurance from unlicensed insurance comp.
2. If forced, tricked, or undue influence = get a remedy for some relief by court
3. If entered contract but chicken out bc conscious and you withdraw before performing illegal act – you get some form of remedy
4. If one party is less guilty than other

Question 39

licensing

Answer 39

contracts you enter into with someone who IS SUPPOSED TO HAVE A LICENSE
—-Need to know WHY
o If gov. licenses something (guns) bc trying to protect the public (it is regulatory) – then a contract with that party is illegal and can’t do the contract - contractors, lawyers, accountants)
—these are called regulatory licensing statutes
–ex. state law says that legal services can only be given by lawyers who have graduated law school and passed the bar — Marie is first year law student and agrees to draft a will for Randy for $450 – she can do service but can’t sue Randy for money if he doesn’t pay and he also isn’t required to pay her

• But if the gov. is licensing to try and make money then you can enter the contract
–revenue rising statutes – if primary purpose of licensing is to raise rev. for the gov.

Question 40

exculpatory clauses

Answer 40

• —trying to get you to agree to release the other party for any other injuries to you caused by their conduct
• —Negligence, ordinary negligence and gross negligence, recreation
• —Only valid exculpatory clause if is some recreation oriented party gets you to waive their ordinary negligence — not enforceable for any other (never allowed to waive injuries from gross negligence, intentional)
• –Court would not enforce if bus taking kids to school tried to get parents to waive – NOT enforceable
• –Only circumstance it is enforceable is bungee jumping (recreation) ex. - you signed and something breaks on their end and is their fault but this is enforceable by court bc you signed - ANY OTHER TIME IT IS NOT ENFORCEABLE (anything other than ordinary negligence)

expculpatory clauses that affect public interest or result from superior bargaining power are void against public policy

• –ex. a department store has sign above entrance stating that the store is not liable for any ordinary negligence of its employees – this is illegal and would not be enforced
• -Harley davidson example

Question 41

covenant not to compete

Answer 41

only if there is a noncompete - they could say you can’t for 6 months)
o Employment – can’t bring trade secrets to others – have to be specific – limit geographic area and time they can’t share – reasonable in time, business interests (can’t be a web developer for one company and then their competitor but could go be a janitor for competitor), and reasonable by geography
o Must be reasonable in time, in business interests and in geography - three things!!!

noncompete clause

• –Agreement not to engage in a similar business area for a specified period of time
• –reasonable 1. line of business protected, 2. geographic area protected, 3. duration/time of restriction
• -if it is unreasonable in any of those three areas it cannot be enforced

Question 42

adhesion contracts

Answer 42

—Boilerplate (no ability to negotiate)
o Really big contacts that no one will ever read - they are pre-printed – take it or leave it - can’t negotiate terms
o “Take it or leave it”
o Nothing wrong with adhesion contracts – take it or leave it bc cannot negotiate terms

But it is one of the things courts will reference and consider when they are trying to decide whether the contract is unconscionable – but normally there is nothing wrong with adhesion contracts
o But if you had no where else to go (no other hospitals) and the adhesion contract was so ridiculous and limiting to you but you had to accept out of having no other options – then court can come in and say unconscionable

Question 43

unconscionable contracts

Answer 43

o Parties possess severely unequal bargaining power
o Dominant party unreasonably uses this to obtain manifestly unfair terms
o No reasonable alternative

Question 44

mistakes

Answer 44

MUTUAL MISTAKE

1. mutual mistake of FACT — mistake by both parties about the material fact that is imp. to subject matter
   - -ambiguity
   - -contract CAN be rescinded bc no meeting of the minds btwn parties
2. mutual mistake of VALUE
   - -no such thing!!!!!!!
   - -both parties know object but are mistaken on its value – CANNOT be taken back!!!
   - –ex. Ex. Girl is cleaning out her attic and finds a painting - she sells it to someone for $100 who buys it bc she thinks it is “cute” - later finds out it is worth $2M!! CANNOT recover the painting bc neither party knew the value of the painting when they entered into the contract

UNILATERAL MISTAKE – only one party is mistaken about contract – enforce always!!

• –except for 3 exceptions
  1. one party makes unilateral mistake of fact and other party knew about it
  2. occurs bc of mathematical error that is not result of gross negligence
  3. mistake is so serious that enforcing contract would be unconscionable

Question 45

fraud

Answer 45

intentional misrepresentation
–one party consciously decides to induce the other person to rely and act on a misrepresentation

1. wrongdoer made a false representation of fact
2. wrongdoer intended to deceive the innocent party – had sufficient knowledge of truth and that their stmt. was false
3. innocent party justifiably relied on the misrepresentation
   - -doesn’t count if innocent party should have known it was false
4. innocent party was injured

Question 46

inducement, inception, concealment

Answer 46

inducement – force someone to sign

• -party knows what they are signing but has been fraudulently induced to enter contract
• -ex. sign contract to invest $30k in oil field when there is actually no oil field

inception – signed something other than what you told me I was signing == VOID

concealment
–I should disclose this - we have fiduciary arrangement - actively hiding things that buyer would want to know (hiding fact that car was in wreck) — ACTIVELY hiding it

Question 47

silence as misrepresentation and misrepresentation of law

Answer 47

Silence as Misrepresentation
—-failure to disclose – kinda like a half truth…you don’t lie but you don’t say anything either
o Something that you are REQUIRED to show or tell and don’t
1. nondisclosure would cause injury/death
2. fiduciary relatinoship btwn parties
3. federal and state statutes req. disclosure
–ex. info. on property as a home seller

Misrepresentation of Law – not normally fraud unless they should know - if they were an expert/lawyer/doctor - form of fraud

• -only works if they are a prof. and took advantage
• -otherwise if normal ppl each party is assumed to know the law before entering into a transaction

Question 48

innocent misrepresetnation

Answer 48

an honest mistake - if buy something bc of an honest mistake of the seller you can get restitution and out of the contract
• Remedy? – if you are the victim you can get out but you can’t get compensated for it – can’t get your money back!!
–can rescind but cannot sue for damages
–treated as a mutual mistake

Question 49

duress and undue influence

Answer 49

duress

• -being forced to enter contract
• –Duress is NOT when you only have a few minutes to decide and feel pressure or stress - or if they say “I really need this car and I only have this much money!!
• desperation is not duress

undue influence

• –(equity) – unduly persuading someone and taking advantage of them to
• –ell Grandpa that you will kick him out of the house if he doesn’t give you his $1M baseball collection
  1. fiduciary or confidential relatinoship must have existed btwn parties
  2. dominant party must have unduly used his/her influence to persuade the other party to enter contract

Question 50

statute of frauds (MYLGGS)

Answer 50

these ALL HAVE TO BE IN WRITING TO BE ENFORCEABLE
1. marriage
2. 1 year rule
–o If it CAN’T be performed in one year then it HAS to be in writing
o Buy him a Ferrari example – if it will take you over one year to get the money to do it…then verbal is not enough – HAS to be in writing
o JUST HAS TO BE POSSIBLE, NOT LIKELY — so if I am going to build you a house and it is POSSIBLE I can do it in a year…even if it is very unlikely…does NOT have to be in writing

3. land
   - -if improving land or any interest in land (not just land itself) has to be in writing
   - –equitable exception is PARTIAL PERFORMANCE
   - —– if buyer has started improving the land to where you can’t go back to where it originally was (or put both parties back where they were)…court will enforce it even if it wasn’t in writing (even though it was partial performance)
4. goods > $500 must be in writing
5. guaranty
   - -promise to pay the debt of another
   - -MUST be in writing unless reason for paying benefits you too
   - -main purpose exception
6. statute of limitations/bankruptcy
   - -o So if I owe you (As my creditor) $100k and I go bankrupt I can’t pay you and the debt goes away…but if I come up to you and say I promise I will pay you anyway verbally…can’t sue me for it if I don’t – but if I put it in writing then you can

Question 51

parol evidence rule

Answer 51

evidence outside the written contract [generally the judge doesn’t let this evidence in]
• YOU CAN’T TESTIFY ABOUT A CONVERSATION YOU HAD WITH ANOTHER PARTY IF THE CONTRACT IS IN WRITING
o Ex. You had a written contract with me to give me the cookie - then outside the contract I told him verbally that he can eat it – after he eats it I come to sue him for it  the contract to give it to me was in writing and the judge will not consider our conversation as evidence

three exceptions

1. explains an ambiguous term in the contract
   - –ex. promise to give you a pet – contract didn’t classify so you explain what you meant by that!! MOST COMMON
2. evidence makes contract void or voidable
   - -evidence of fraud, duress, undue influences, mistake
3. testify of what the course of dealing has been btwn parties

Merger clause – clause in contract that will emphasize the parol evidence rule – in saying that parol evidence may NOT be introduced to explain, alter, contradict, or add to the terms of the contract

Question 52

assignments

Answer 52

how to transfer rights to third rights – all can be assigned and do not need consideration

• -2 exceptions
  1. personal service
  2. or if try to transfer contract right that inc. your risk

if contract has multiple people who claims contract performance??

• -american rule - whoever you assign to it first is only one who has right to performance
• -English rule - first to give notice

Question 53

delegations

Answer 53

transferring a contract duty even if you put the duty to perform on someone else you are still liable – if person assumed performance also liable
–novation is ONLY way not to be liable

when is delegatee liable – if person ASSUMES responsibiliy – the person receiving performance can either sue you or him but NOT BOTH

1. personal service cannot be delegated
   - -ex. a famous singer hired to give concert on college campus cannot ask another singer to show up in her place
2. OR if alter’s obligatee’s expectations
   - -ex. want the best brain surgeon in the world and I made contract with him to do my surgery - i had expectations so you can’t delegate and transfer responsibilities

declaration v assumption

1. if there is an ASSUMPTION OF DUTIES then the person assumes the duty and CAN be sued if he does not perform
2. if it was DELCARATION of duties - he is not liable to nonperformance and cannot be sued

Question 54

intended v/ incidental beneficiaies

Answer 54

intended
–people who have rights to enforce the contract – know they are intended if names are in contract
—ex. I will pay you $10 to clean my mom’s car (mom is intended beneficiary)
–ex. In ex. Person cleaning car is creditor and mom is
Donee
–they have RIGHTS and can enforce the contract against the promisor
—Either one is still intended and has rights
—–Third party beneficiary
——the way you tell a creditor beneficiary is by the pre-existing debt - a debt exists btwn A and B… A goes to C and C is willing to pay of the debt to B — so B is the third party beneficiary
—-In this case B is the donee and A is the creditor and C is the third party creditor

incidental

• -benefit by its performance but do not have rights – we did not intend you to be part of it
• -no rights to enforce contract

Question 55

concurrent/precedent/subsequent conditions

Answer 55

• Concurrent - happen at the same time

covenant = an unconditional promise to perform!!!
–conditions are a qualification to BECOME a covenant if it is met

First have to identify what the condition is and then second have to ask yourself what happens if the condition comes about

• —Have to perform = condition PRECEDENT (if it is precedent you have to perform now) —ex. hire only if you graduate from college – if does not graduate they will not hire her
• —Don’t have to perform = condition SUBSEQUENT (subsequent you no longer have to perform) (condition that they will fire him if he fails a drug test randomly given throughout his time working there) – condition excuses parties duty to perform

concurrent – condition where parties to contract are obligated to render performace simultaneously – each party’s obligation to perform is conditioned on other party’s duty to perform (ex. duty to pay and duty to deliver goods are concurrent)

Question 56

Changing agreement 4 things

Answer 56

1. mutual rescission - you and I CAN AGREE TO get rid of contract altogether
2. substituted agreement – we still want to do business w/ each other but just with a new contract
   - -discharges duties under orig. bc didn’t like it and wan new one
3. novation – same agreement and new party steps in for me – keep terms but someone else will do it
   - –all 3 parties must agree to the substitution
4. accord and satisfaction – if we resolve dispute, it discharges our duties under orig. agreement - compromise
   - –settlement of a contract dispute

Question 57

under what circumstances does contract AUTOMATICALLY disscharge

Answer 57

has to be OBJECTIVE! subjective - no such thing as subjective impossibility - if not one of these three then failure to perform is a BREACH

1. death and incapacity
2. destruction of subject matter
3. subsequent legality – question of timing - if it happens before you accept it is terminated – if happens after contract was formed then we are discharging duty of contract

Question 58

force majeure

Answer 58

things we agreed will DISCHARGE our duty to perform
–acts of nature - eqarthquakes, floods, fires

statute of limitations and bankruptcy – discharges our duties!!!!

Question 59

damages - complete v. substantial

Answer 59

If complete performance is expected than anything less is a breach and can be sued for damages
• Ex. Contract is to buy car for $1000 and you show up with $999.99 – court will say you do not have to accept offer unless they bring $1000
• You thought the 999.99 was substantial but it is not – they expect complete

complete = discharges obligations under contract once it is complete

substantial performance = a MINOR breach of contract – deviates slightly from agreed performance
–nonbreaching party can sue to recover damages

inferior performance = a MATERIAL breach

• -situation where a party fails to perform express/implied contractual obligations and impairs or destroys the essence of the contract =
• -the nonbreaching party can 1. rescind contract and recover restitution, 2. affirm contract and sue to recover damages

Question 60

damages - material v. minor breach

Answer 60

 Material breach - can still walk away and discharges workers duty and your obligation to pay him/her
• I agree to finish your house and it wasn’t close to being done and I walked away – so I didn’t get paid but it wasn’t done enough to even really get paid for it

Minor breach - SUBSTANTIAL PERFORMANCE - if done almost everything but there are a few things left and can’t get you back to finish – if already paid the contract price…you go find someone else and you sue the orig. person for the cost it takes
• Finished everything in your house but the roof…and can’t come back to finish it — so later you come to collect and I can pay for the work he did and sue him for the extra it costed you to finish

Question 61

anticipatory breach

Answer 61

you told me in advance of what you are supposed to perform and I know already you won’t be able to – I don’t have to sit around waiting, which could increase my damages – let me treat it as a breach right then and go solve it and sue you for the extra costs — better for breaching party too

• –one party informs the other that it will not perform the contractual duties when due
• -nonbreaching party discharges contract immediately and has right to sue right at that point – no point in waiting until performance is due

Question 62

compensatory (expectation damages)

Answer 62

o Puts you in the position where you expected to be if the contract had been performed
o + incidentals (incurred mitigating damages) – avoided losses - THIS IS THE MATH YOU DO!! STUDY AGAIN

compensatory damages – an award of money intended to compensate a nonreaching party for the loss of the bargain
–place nonbreaching party in same position as if the contract had been fully performed by restoring “benefit of the bargain”

ex. contract to hire employee at $20,000 a month for 3 years - one year later they tell her contract is terminated
- -she can sue and recover 24 * 20k = 480,000 in compensatory damages
- -or if 6 months later she finds another job she can recover 6 * 20k = 120,000 in compensatory damages

for sale of goods it is the diff. btwn agreed price and market price
–ex. contract to buy equipment for 80,000 from comp. - does not deliver so you have to go buy at market place for 100,000 from someone else bc price has risen – can recover 20,000 from orig. company in compensatory damages

Question 63

consequential damages

Answer 63

o Foreseeable damages – in additional to compensatory damages you can get consequential if foreseeable
o As long as they are foreseeable by the other party!!
o Most common is lost profits

foreseeable damages that arise from circumstances outside the contract!!

• -to be liable for these damages the breaching party must know or have reason to know that breach will cause special damages to the other party
• -also called SPECIAL damages

these are often disclaimed in a sales or license agreement – means breaching party will not be responsible to pay consequential damages – this disclaimer is lawful in most cases
—ex. student buys a software program on computer for $100 — software was installed, but defective and deleted his notes and other valuable info. — these losses are consequential damages – but software had disclaimer stating they are not liable for any consequential damages – he can recover $100 in compensatory damages for license price he paid for software but not for the consequential damages

Question 64

nominal

Answer 64

o The court decides the case and decides the winning party but the damages are only like $1
o Either didn’t have damages or brought case on principal
o Ex. T Swift sued for sexual harassment etc. – she said she didn’t want money for damages, but wanted to win the case on the principal
– a nonbreaching party sues a breaching party to a contract for nominal damages even if no financial loss resulted from the breach

Question 65

mitigation of damages

Answer 65

o Nonbreaching party has the responsibility to try to limit the damage award!!!! - make sure they don’t have
o Required to do what I can do mitigate my damages – req. to go sell car and sue for differences but req. to try to minimize them
o if you breach the contract for the purchase of my car I just have to try to sell it to someone else and if I do and it is less than what we had contracted I can sue you for the difference – the point is that I still am required to try to sell it

ex. if someone is fired they are required to accept comparable employment — requires them to accept the similar job — but not req. to accept one for lower paying salary or diff. work

Question 66

liquidated damages

Answer 66

an amount that the parties agreed to in ADVANCE where actual damages are difficult to reach (calculate or figure out…ex. Future profits you are unsure about) – then that amount of money within reason is given to the winner
o Ex. 10% of profits
o If court finds that amt. of damages isn’t so excessive that it is considered a penalty – see if they are 1% or 10% (ok) or 50% (excessive and not ok)

damages that parties in a contract agree in advance should be paid if the contract is breached
—to be lawful actual damages must be diff. to determine and liquidated amt. must be reasonable in circumstances

Question 67

rescission and restitution

Answer 67

o Putting you back where you were before you formed the contract
o If already deliver the car you get it back

can rescind if there is a material breach of contract, fraud, duress, undue influence, or mistake
–if someone rescinds both parties must make restitution

Question 68

specific performance

Answer 68

something unique is going on — n
• Who gets it, who doesn’t?
o Personal Services - NEVER GET THE SPECIFIC PERFORMANCE bc court doesn’t require anyone to personally work for you
 Buyer in real estate DOES get specific performance but the SELLER DOES NOT!!!!

specific performance - orders the breaching party to perform the acts promised in a contract
–courts have discretion over this remedy if subject matter of contract is unique

can enforce land contracts bc every piece of real property is unique
–works of art, items of sentimental value, rare coins, stamps, heirlooms

ex. enter contract to buy a house for $1M on Nov. 1st - on Nov. 1st shows up to buy and home owner is not there – he can bring specific performance against the home owner and req. them to sell the house
- -but NOT for personal service contracts – ex. concert hall has contract with famous rap artist to perform series of concerts – can’t req. artist to perform bc it is a personal service contract…but they can sue to recover any payments they made to the rap artist and any damages they may have suffered bc of the breach

Question 69

reformation

Answer 69

rewriting – generally speaking court doesn’t like to rewrite contracts bc wants to keep what companies agreed to
o But in cases of unconscionability they could rewrite a portion of it

–equitable doctrine that permits court to rewrite a contract to express parties true intentions

Question 70

injunction of court order

Answer 70

o Usually to stop doing something — one of the equitable remedies you can qualify for
o Have to argue that money alone isn’t going to put me back where I am supposed to be…have to appeal for equitable remedies

injunction — court order that prohibits a party from doing a certain act

• -the requesting party must show that he/she will suffer irreparable injury if injunction is not issued
• –ex. team has 5 year contract with a basketball player – he breaches contract and enters contract to play for competing basketball team – first team can obtain injunction to prevent basketball player from playing for other team during remaining term of orig. contract

Question 71

torts associated with contracts (2)

Answer 71

1. intentonal interference with contractual relations
   - –saying I know you have a contract w/ someone else but I encourage you to breach the contract
   - -must have a valid, enforceable contract btwn parties, third party knows about contract, third party ipnnduces to breach
2. breach of implied covenant of good faith and fair dealing
   - -every contract has this!!
   - -“bad faith claim

Question 72

integration

Answer 72

the combining of several writings to form a single contract

incorporation by reference
–integration made by express reference in one document that refers to and incorporates another document with it

Question 73

parties in a contract are in privity of contract

Answer 73

meaning they have legal obligation to perform duties specified in their contract

only 2 exceptions where third parties may acquire any rights under others’ contracts

1. assignees – to whom rights are subsequently transferred
2. intended third party beneficiaries - to whom contracting parties intended to give right s under the contract at the time of contracting

Question 74

possession of tangible token rule

Answer 74

says that first assignee who receives delivery of tangible token prevails over subsequent assignees (when transferring rights to receive to third party)

Question 75

If, out of the goodness of your heart, you wash my car one weekend and I’m so grateful that the next Monday during class I promise to pay you $30 for your good deed, my promise lacks consideration because of which of the following rules:

Answer 75

past consideration

–consideration distinguishes between enforceable promises and gift promises