Law Quiz 3 Flashcards
void
synonyms: cancel, not do, invalid, scratched, revoked, null
ex. a contract that was made about selling crack is immediately void, a contract signed by a three year old is void
voidable
something that is capable of being voided
ex. drunk people and incompetent people
rule for contract with drunk people
a contract entered into by an intoxicated party is voidable by them if the other party knew or had reason to know of the intoxication
definition of incompetent person
someone who does not have mental faculties or ability to understand what they’re doing
rule for contract with incompetent people
contracts entered into by incompetent persons are voidable at their options
(but must be voided within a promptly reasonable time, usually 30 days or less)
every contract has ____ and _____
every contract has rights (fruits/benefits of the contract) and duties (obligations/burdens of the contract)
example of rights and duties in contract to work at PC
Rights of teacher: to payment, to space on campus, to materials like computers, to tell the chair when you can teach
Rights of PC: to come in and make sure good teaching, to within reason tell what needs to be taught and what can’t be taught
Duties of teacher: to teach, to advise, to hold office hours, to grade within reasonable time, to follow handbook
Duties of PC: to paying, to giving health insurance, to maintain facilities
3 ways a contract can impact 3rd parties
- a party assigns or gives rights to a 3rd party, giving rights to next few years of a contract payment to someone for some reason
- a party delegates their duties under the contract to a 3rd party, PC has contract with snowplow company, they hire someone else
- the purpose of the contract is to benefit a third party, child support, student loans held by parents,
are partial assignments of contract right permissible
yes
3 situations contract rights wouldn’t be assignable
- where the terms of the contract expressly prohibit assignment
- where the contract involves highly personal contract rights (musician. artist, athlete. highly personal doesn’t mean confidential, it means unique/one of a kind)
- where the assignment would materially increase the risk/burden on the other party
5 ways contracts can end
- full performance by all parties (most common way that it would end, when people do everything it said)
- material breach of a party
- by operation of a law (ex. death of a party, the purpose of the contract becomes illegal (ex. you have a contract to sell a certain chemical, the chemical becomes outlaws))
- expired by its terms (ex. sports contract. could be both 1 and 4 full performance and it just ran out)
- agreement of the parties (to end it)
conditions
sometimes contracts have conditions that must be met before a party needs to preform
if X, then Y
2 types of conditions
- satisfaction of a party
- satisfaction of a third party
satisfaction of a party subjective rule
if the contract involves something subjective (ex. the fit and feel of a suit, taste, opinion, etc.) then all that matters is whether the party is satisfied or not
satisfaction of a party objective rule
if the contract involves something objective (measurable, quantifiable) then the party’s satisfaction must be reasonable. if 100 people would look at it and say its reasonable, can’t rejcet it
material (in terms of material breach)
substantial/significant enough to matter
Contract for 1,000,000 chopsticks, only 999,996 delivered -> missing 34. Did the chopstick supplier breach the contract? Yes. Did the chopstick supplier materially breach the contract? No
rule for determining if a breach was material
we look at the number and kind of things at issue in the breach
Ex. Contract requires a pharmaceutical company to deliver a vaccine that is 100% effective. Due to supply chain issues, the company delivers a vaccine that is 99.9966% effective. Is this a material breach? Depends how many people it’s going to and what it’s treating
force majeure
superior force
sometimes a party can be excused from performing under a contract if a serious external event occurs which prevents the parties performance (an Act of God)
Ex. natural disaster, huge accidents outside of the parties control, disability prevents performance, hurricane, war, riot, pandemic
3 primary remedies for a breach of contract
- compensatory damages ($)
- equitable remedies (fairness)
- resitution
what is restitution
giving something to the non-breaching party which they gave or provided to the breaching party
ie. restoring it to the nonbreaching party
Ex. gold bars used to make custom bracelets by jeweler, if jeweler stopped performing you would want the gold bars back
golden rule of contract law
to put the non-breaching party in the same position they would’ve been in had the contract been performed
most common type of damages people seek
compensatory (money)
for compensatory damages to be recoverable, they must be:
- foreseeable (logical connections between the breach and the damages)
- reasonably calculable (can’t just guess what the numbers are, need to be able to back up the claim by breaking the number down)
- unavoidable (the nonbreaching party must mitigate or minimize its damages after the other party breaches the contract, can’t just let the pipe leak so you could claim more damages/a full new carpet)
formula for calculating compensatory damages
Loss of value + Incidental damages + consequential damages - loss/cost avoided
example using compensatory damage formula
You have a contract to demolish a bridge, you need a jackhammer, you sign a contract with the jackhammer store to buy one for $10,000. The contract promises that jackhammer will run for 10,000 hours. The jackhammer explodes after 7,500 hours.
Loss of value: $2,500
Loss of value = (value of promised performance - value of actual performance)
Incidental (indirect) damages: $250
Ex. you have to pay $250 to FedEx a replacement jackhammer to the project site
Consequential damages: 2*($100)=$200
Ex. your demolition contract imposes a $100/day penalty for each day you are late finishing the jackhammering. It took 2 days to get the new jackhammer. As consequence of jackhammer stores breach you suffered $200 more as a result of breach
Loss/cost avoided: $100 (made up for this example)
You have to pay the operator $30 on weekends but only $20 on weekdays, the item breaking made it so that you couldn’t start again until Monday. Saved money by not having to pay worker weekend rate
TOTAL: $2850
rule of reliance damages
sometimes it is impossible to calculate compensatory damages (usually because they would be too speculative). In those cases, the non-breaching party can still recover what are called “reliance damages’’
reliance damages definition
the damage they incurred in reliance on the other party’s promises under the contract what was breached
agency
a consensual relationship in which one person (the principal) authorizes another person (the agent) to act on the principals behalf with the power to affect the legal rights and duties of the principal
most common form of agency in business
employee
principals authoritizing agents to do what they’re contracted to do, eg. PC hiring teachers to give education which is what they receive payment for
2 reasons the difference between employees and independent contractors matters
- tax reasons
- who can sue who (if someone is injured, can they sue the principal? depends if the agent was an employee or independent contractor)
factors we consider to determine whether an agent is an employee or an independent contractor
- The amount of control that the principal exercises over the work
If a lot of control, then the agent is more likely an employee
Ladder can tell Samantha what to wear when to come etc., can’t tell the painting company much - Whether the principle and the agent are in separate types of business
If they are in different businesses, then they are more likely an independent contractor
Samantha’s boss is working in the same business as Samantha, but not the independent contractor - Whether the principal supervises the agents work
If yes, the agent is more likely an employee - Whether the agent has a skill that the principal does not have
If yes, more likely to be an independent contractor
Boss could do Samantha’s job, boss couldn’t pain the restaurant - Who supplies the tools to do the work
If agent supplies the tools, then most likely an independent contractor - The anticipated length of the engagement
If long, most likely employee. If short, most likely independent contractor - Whether the agent is paid by the job or time worked
If by the job, more likely independent contractor. If by the time, more likely employee - What type of relationship do the principal and agent believe they are creating
Whether the principal is “in business” (are they a business or not) or not
If no, more likely independent contractor
A business would hire an employee, but also they would have both really. So you could only tell from someone that wasn’t in business
power of attorney
a written document in which the principle authorizes the agent to act on their behalf with respect to a particular issue
duties that agents owe to their principals
- Obedience: the agent has to do what the principal asked
- Good conduct: while working for the principal, the agent has to engage in good conduct
- Keep the principal informed with all relevant information: Jack should have called Lamoreaux and tell him about the price and ask what to do
- Account for the principal’s money or property he had to come back with $1000 worth of corn and a receipt or change
- Fiduciary duty, the agent must act in the principal’s best interest at all times
- Avoid conflicts of interest and self-dealing
- Avoid competing with the principal
- Avoid misappropriation misusing the principal’s money or property
- Keep the principal’s confidential information confidential
fiduciary duty
one of the duties that agents owe to their principals
the agent must act in the principal’s best interest at all times
duties that principals owe to their agents
- Compensation have to pay them
- Deal with the agent fairly and honestly
- Reimbursement
- Indemnification
Indemnification
one of the duties that principal’s owe to their agents
if the agent while working for the principal gets injured or suffers property damage, the principal must make the agent “whole” (Humpty Dumpty, had a great fall and fell off the wall while working the king, so the king instructed all of his horses and all of his men to try to put him together again)
ways an agency can end
- principal fires agent
- agent quits
- completion of all tasks/jobs required by the agency
- operation of the law (something legally occurs that results in its ending, like death of a party of purpose of the agency becomes illegal)
- mutual agreement of the parties
- lapse of time
