Priority 1 Flashcards
Agency, Partnership, Corporations, Secured Transactions Civ Pro, Crim Law, Crim Pro, Evidence, Torts
Writing Requirement for Agency
- Appointment of an agent doesn’t require writing unless the agency is for more than one year.
- However, statute of frauds may be required for a specific task becuase of the equal dignities rule.
Actual authority (express and implied)
Express: Authority that’s conveyed by the principal in words (oral or written). Mistake is no defense for the principal.
Implied: Authority that the agent reasonably believes they possess based on the principal’s words/actions. Inlcudes the authority that is necessary to carry out an express power, or is supported by custom, title, position, or acquiescence
Apparent authority
1) the third party dealing with the agent has a reasonable belief in the agent’s authority
2) the belief was generated by some act or omission by the principal, **“holding out” **the agent as possessing the authoirty.
In an apparent authority situation, you need to discuss what transpired between the principal and the third party.
Apparent authority through agent exceeding actual authority
There are situations where the agent exceeds their authority, yet the principal is still bound. These inlcude:
* Prior Acts: Where the principal previously permitted the agent to exceed their express or implied authority and knows that the third party is aware of this.
* Position of Power: The power is implied by the position or title that the princial has bestowed upon the agent, if such title/position customarily confers the power in question.
Death of principal in agency
Apparent authority through Principals omissions
Generally, a principal will not be bound if they did not hold the agent out as having authority. Two exceptions
* Imposters: negligently permitted by principal will create agency by estoppel for any victim 3rd party.
* Lingering Apparent Authority: Agent used to have authority no longer does but principal has not actually or constructively notified third parties who have previosuly dealt with former agent, or has not recovered written evidence of authority.
Authority by ratification
Agent did not have authoirty to do something but the principal subsequently validates the act either:
* expressly: through oral or written affirmation, or
* Impliedly by affirming or accepting the benefit, or by silience if there was a duty to disaffirm.
- requires that the prinicipal knew the material facts, had capacity, and accepted the entire transaction (cannot impliedly ratify a part only)
Limits on principal’s ability to ratify
- Generally, a “principal” may ratify anything unless: (1) performance was illegal at the time of ratification, (2) the third party has withdrawn, or (3) there has been a material change in circumstances
- The majority rule is that a principal may not ratify if they were not disclosed by the agent (the third party either did not know there was a principal, or did not know their identity).
When is the Principal liable on the contract?
Principal is bound where valid authority existed (actual authority, apparent authority, or ratification)
When is the third party liable on the contract?
Third party is bound to principal if valid authority existed and principal enforces.
Third party is bound to agent if principal was unidentified or undisclosed and agent enforces contract, but principal is still entitled to contract benefits.
When is the Agent liable on the contract?
If principle is undisclosed or partially disclosed, the principal is still liable, but so is the agent.
Agent is only not liable if the principal was fully disclosed.
Vicarious Liability Employer – Employee (respondeat superior)
Employer can be held liable if employee acted within the scope of employment.
Detour – minor departure from scope of employment – Employer Liable.
Frolic – major departure from scope of employment – Employee Liable.
Intentional torts tend to be outside the scope of employment unless:
* Employee is acting to further the employer’s purposes(overzealous)
* Force is authorized in the employment (bouncer)
* Friction is generated by the employment (bill collector)
An employer can seek indemnification from employee.
Employers may be liable for their own negligence (not vicarious) in in selecting or supervising an employee.
Meaning of the scope of employment
Was the conduct “of the kind” that the agent was hired to perform?
* similar or incidental to that which was authorized
Did the tort occur “on the job” (that is, within the time and space limits of the employment)?
* Detour – minor departure from scope of employment – Employer Liable.
* Frolic – major departure from scope of employment – Employee Liable.
Was the conduct motivated at least in part to serve the principal?
* The employee’s invitation to passengers, unless expressly authorized by the employer, is generally held to be outside the scope of the employment relationship.
* The employer is not liable for torts caused by the use of substantially different (more dangrous) instrumentalities from those authorized
* If the employee makes a trip with two purposes, it will be within the scope of employment if any substantial purpose of the employer is being served.
**Principal can validly ratify agent’s tortuous actions only if they have all material facts. **
Vicarious Liability Employer – Independent Contractor
Hiring party is not liable for the torts of a contractor.
Exceptions:
A hiring party can be held vicariously liable if:
A) An independent contractor violates a nondelegable duty of the hiring party causing harm to a customer, such as premise safety or a common carrier duty. OR
B) The independent contractor is engaged in inherently dangerous activities
Employer may be liable for their own negligence (not vicarious) in selecting or supervising the independent contractor
Meaning of the Right to Control
hired party is considered an employee if the principal holds the right to control the method and manner in which the agent performs their work.
Factors for right to control:
* The degree of skill required on the job
* Whose tools and facilities are used
* The period of employment
* The basis of compensation (time/job)
* The relationship of work to the business purpose
* Whether the person has a distinct business
* The characterization and understanding of the parties.
* The customs of the locality regarding supervision of work
Principal’s vicaious liability for intentional torts.
The general rule is that the employer is not liable for the intentional torts of an employee unless:
* Employee is acting to further the employer’s purposes(overzealous)
* Force is authorized in the employment (bouncer)
* Friction is generated by the employment (bill collector)
What is a Partnership?
- A partnership is an association of two or more persons to carry on as co-owners a business for profit.
- Doesn’t matter if they didnt intend to form a partnership.
- Profit Sharing = rebuttable presumption of partnership.
- simply loaning money does not create a partnership
- A “person” may be an individual, trust, corporation, partnership, or other entity.
- Co-ownership = control
- Other indicators inlcude capital contributions, mutual agency, property held in joint tenancy or in common, parties designation as partnership, the venture undertaken is extensive, sharing of gross returns.
- can rebut with no right to control or no requirement to join in losses.
- No writing requirement under partnership law, but equal dignity rule applies
- General partnership is the default form.
Other requirements:
* Contracting capacity
* Legality of purpose
* Express or implied consent of all partners.
Partnership agreements
- Not necessary to form a partnership, but will allow partners to contract around statutory provisions.
- Check for a partnership agreement first before seeing of a partnership statutorily exists. usually on the bar there is no agreement so you must learn the default rules.
- A partnership agreement may be written, oral, or implied (for example, by conduct).
Default partnership voting rules
- All partners have equal rights in the management of the business and equal votes regardless of share held.
- matters within the ordinary course of the partnership business = majority vote (number not share).
- Matters outside of the ordinary course of business = unanimous consent
Default partnership indemnification/contribution rule
- A partner has a right to be indemnified by fellow partners for expenses incurred on behalf of the partnership.
- A partner has a right to contribution from fellow partners where the partner has paid more than his share of a partnership liability
Default partnership profits/losses rule
- Profits are shared equally by number.
- Losses follow profits.
Default partnership contract liability to third party rule
a partnership is liable for all contracts entered into by a partner in the scope of
partnership business or with actual or apparent authority of the partnership.
Actual authority in partnership
1) Express Actual authority can can come from the partnership agreement or a vote of the partners. A majority vote of the partners is required to authorizeordinary business; a unanimous vote of the partners is required to
authorize extraordinary acts.
2) Express Actual authority can also be created by the partnership filling a statement of partnership authority with the secretary of state. The effect differs depending on whether the transaction involves a transfer of real property:
- Real estate transactions: Third parties are deemed to have constructive knowledge of both the grants and restrictions of authority of partners only if filings are made with the secretary of state and the county.
- Non-real estate transactions: Third parties are only deemed to have constructive notice of filed grants of authority, never filed restrictions. (cannot cut off apparent authority).
3) implied actual authority is authority that is necessary to carry out an express power (inherent), or is supported by custom or acquiescence.
Apparant authority in partnership
- By statute, a partner is an agent of the partnership and has apparant authority to bind the partnership to transactions within the ordinary course of the partnership’s business unless the third party is aware that the partner lacks actual authority to act.
- Partnership default rules that affect the rights of third parties cannot be changed by agreement.
Sharing of liability rule in partnership
* A defining characteristic of the general partnership is that each partner is jointly and severally liable (so, one or more partners may be sued) for all obligations of the partnership, whether arising in tort or contract.
* The plaintiff must first exhaust partnership resources before seeking to collect from an individual partner’s assets (partners essentially guarantors)
* Each partner is personally and individually liable for the entire amount of partnership obligations (joint and several)
* Where one partner pays the
whole obligation of a partnership, they’re entitled to indemnification from the partnership. They may also require the other partners to contribute their pro rata shares of the payment if the partnership is unable to indemnify.
* Partners cannot limit a third party’s rights without the third party’s consent. The agreement is effective, however, among the partners themselves.
a partner who make an agreement on behalf of the partnership without apparant or actual authority will be personally liable.
Fiduciary Duty
Highest duty the law can impose. Comprises of duty of care and duty of loyalty.
Duty of Loyalty
- Essentially a duty of fairness towards to the principal.
- duty to act in the best interest of the principal in good faith andavoid conflicts of interest (agent cannot put their interests or the interests of third parties above the interests of the principal).
- Cannot be limited by agreement
partnership statutory duty to disclose
Each partner and the partnership shall furnish to a partner
* (1) without demand, any information concerning the partnership’s business and affairs reasonably required for the proper exercise of the partner’s rights and duties; and
* (2) on demand, any other information concerning the partnership’s business and affairs (except to the extent the demand or the information demanded is unreasonable or otherwise improper under
* the circumstances).
* CAN be limited by agreement.
When does property belong to partnership?
partnership property if
* aquired by a partnership
* aquired by a partner with reference to the partnership
* Presumer if partnership funds are used
Presumed partner property if:
* Held in name of partner, not purchased with partnership money, with no sign they were acting for the partnership.
Untitled property
* look at circumstances and intent to determine ownership.
Rights in Partnership property
Partnership: unrestricted rights to property
Partner: Not a co-owner. No interest in property. Can only use for partnership purposes.
Partner’s partnership interest
The partnership interest is the personal property of the partner. Inlcudes:
* financial rights
* management rights (everything else)
Can a partner transfer his partnership rights?
Transfer of rights:
* Default no right to unilateral transfer. The
default rule for the admission of a new partner is that it requires a
unanimous vote of the existing partners.
* Unless otherwise agreed, a partner can unilaterally transfer his financial rights, but the transferee does not become a partner, and the partner retains all management rights.
Dissociation of Partnership
Withdrawal from partnership.
Dissociation can occur via:
* notice of express will to withdraw
* occurance of a contractuall specified event
* valid explusion of partner
* partner’s bankruptcy
* death of incapacity of partner
* court order
* termination of partner business entity
Unlike the other events of dissociation, notice of a partner’s express will to withdraw from a partnership at will automatically triggers dissolution of the partnership. On an essay with this fact you should discuss both dissociation and dissolution.
At-Will Partnership
Partners have not agreed to a timeframe for the partnership. Default.
Consequences of Dissociation for Partnership
Two statutory approaches depending on the circumstance:
1) the partnership is dissolved, its business must be wound up, and the business will be liquidated.
2) the partnership continues in existence. The dissociated partner is entitled to a buyout of their partnership interest.
Consequences of Dissociation for Partner
- Partner’s right to participate in management ceases.
- Partnership buys out interest though either liquidation or going-concern value.
- Partnership indemnifies partner
against known pre-dissociation liabilities and post-dissociation liabilities not incurred by the dissociating partner’s acts.
Note: a partner who wrongfully dissociates a term partnership early is not entitled to payment of the buyout price until the term expires or the undertaking is completed, but interest must be paid on buyout price from date of dissociation.
Dissolution of Partnership
Dissolution and winding up are required only in limited circumstances.
Two circumstances are of particular importance:
1. When a partner dissociates by express will in an at-will partnership, the partnership is dissolved and its business must be wound up.
2. In a term partnership, if one partner dissociates wrongfully, or if a dissociation occurs because of a partner’s death or bankruptcy, dissolution and winding up of the partnership are required only if, within 90 days after the dissociation, at least one-half of the remaining partners agree to wind up the partnership.
Termination of a partnership
The partnership is terminated once the winding up process is complete.
Liability of Dissociated Partner
Pre-Dissociation Liability
* A dissociated partner remains liable for pre-dissociation partnership obligations
Post-Dissociation Liability
* A dissociated partner can be liable for post-dissociation partnership liabilities incurred within two years after the dissociation if (1) when entering the transaction the other party reasonably believed the dissociated partner was still a partner, and (2) did not have notice of the partner’s dissociation.
* Note that a dissociated partner can protect themselves by notifying creditors directly of their dissociation (effective immediately) or by filing a public notice of dissociation (becomes effective 90 days after filing).
Dissociated Partner’s Power to Bind Partnership (Apparent Authority of Dissociated Partner)
- A partnership can be bound by an act of a dissociated partner undertaken within two years after dissociation if: (1) the act would have bound the partnership before dissociation, and (2) the other party to the transaction (a) reasonably believed the dissociated partner was still a partner, and (b) did not have notice of the dissociation.
- The partnership can protect itself by notifying creditors directly of the dissociation (effective immediately) or by filing a public statement of dissociation (becomes effective 90 days after filing).
in what order is the money dispersed in dissolution of a partnership? (winding up)
1) Outside creditors
2) Inside creditors.
3) Reimburse partners for capital contributions.
4) Excess assets are distributed to the partners in cash in accordance with their profit shares OR individual partners must contribute in accordance with their loss shares, inlcuding reimbursing other partners capital consitubutions
What events may trigger the Dissolution of an at will
- notice of an at-will partner’s express will to withdraw
- occurance of a contractually specified event.
- consent of all of the partners to dissolve
- within 90 days after a partner’s death, bankruptcy, or wrongful dissociation, at least half of the remaining partners wish to dissolve;
- Partnership becomes unlawful
- The passage of 90 consecutive days during which the partnership does not have at least two partners.
- court order
Apparent Authority—Partner’s Power to Bind
Partnership After Dissolution
Partners retain apparent authority to bind the partnership to a third party on new business even after an event requiring winding up.
The partnership can protect itself by
* notifying creditors directly of the dissolution.
* Filing a statement of dissolution which gives all persons constructive notice after 90 days.
Partnership will have rights against a partner that binds it in this way if that partner knew about the dissolution when she entered into the contract.
Partners’ waiver of Dissolution
Any time before the winding up of the partnership business is complete, the partners may decide to waive the dissolution and continue the partnership by unanimous vote of the partners who have not wrongfully dissociated.
General Partner v. Limited Partner
The general partner(s) is personally liable for partnership obligations, while the limited partner(s) generally does not have any liability beyond the liability to make agreed-upon contributions.
General Partnership
- A general partnership is an association of two or more persons to carry on as co-owners of a business for profit.
- No formalities are required to form a general partnership.
- Each partner is an agent of the partnership and has authority to bind the partnership in the ordinary course of business.
- Partners are jointly and severally liable
- default allocation of profits/losses - equally
- default allocation of distributions - no provision
Limited Partnership
- A partnership with at least one general partner and at least one limited partner. General partnership principles typically apply unless displaced by LP-specific provisions.
- Requires filing a certificate of formation with the state.
- A limited partnership is an entity distinct from its partners.
- General partners are jointly and severally liable for all obligations of the LP.
- GPs have fiduciary duty
- has a perpetual duration unless otherwise provided.
- Limited Partnership agreement can be written, oral, or implied.
- As in a general partnership, the agreement can displace almost all of the statutory provisions.
- Name must inlcude the phrase “limited partnership” or the abbreviation “L.P.”
- default allocation of profits/losses - no provision
- default allocation of distributions - in proportion to contributions
Management of LP
Role of General Partners
* The LP is managed by the general partner(s).
* Each general partner has equal rights.
* Decisions require a majority of GPs.
Role of Limited Partners
* Generally, limited partners usually have no management rights (can changed by agreement).
* Participation in management does not cause a limited partner to become personally liable.
All Partners
The vote of ALL partners is necessary for certain extraordinary activities, including to:
(1) amend the partnership agreement;
(2) convert the partnership to a limited liability limited partnership;
(3) dispose of all or substantially all of the limited partnership’s property outside the usual and regular course of the partnership’s activities;
(4) admit a new partner; or
(5) compromise a partner’s obligation to make a contribution or to return an improper distribution.
What is an Limited Liability partnership
- An LLP is a essentailly a GP in which all of the partners have limited liability (no partner is personally liable for a partnership obligation beyond their contribution to the partnership).
- Requires filing a certificate of formation with the state.
- In general, you apply the default general partnership rules to LLPs, with some exceptions
- default allocation of profits/losses - Equally
- default allocation of distributions - No provision
Limited Liability Limited Partnership
an LLLP is essentially an LP in which even the general partners have limited liability, meaning they are not personally liable for the debts and obligations of the partnership beyond their investment.
* Requires filing a certificate of formation with the state.
* A limited partnership is an entity distinct from its partners.
* GPs have fiduciary duty
* Has a perpetual duration unless otherwise provided.
* Limited Partnership agreement can be written, oral, or implied.
* As in a general partnership, the agreement can displace almost all of the statutory provisions.
* Name must be indicative
* default allocation of profits/losses - no provision
* default allocation of distributions - in proportion to contributions
Formation/Filing for an LP/LLP/LLLP
A certificate of partnership must be
* be filed with the secretary of state
* be signed by all general partners.
Must inlcude:
(1) the name of the partnership
(2) the names and addresses of the agent for service of process, and
(3) the names and addresses of each general partner.
(4) what types of partnership it is.
If you don’t have these you’ll be a GP!
What is an LLC?
A limited liability company (“LLC”) is a hybrid business organization between a corporation and a partnership that
(1) is taxed like a partnership (except for a single-member LLC),
(2) offers its owners (called members) the limited liability of shareholders of a corporation, and
(3) can be run like either a corporation or a partnership.
- Most common form of new business organization.
- Requires filing a certificate of organization with the state.
- An LLC is treated as a separate legal entity distinct from its owners
- Members are personally liable only if the court decides to pierce the LLC veil or if proper procedures for dissolution and winding up have not been followed.
- An LLC operating agreement may waive the duty of loyalty so long as it is not “manifestly unreasonable”
- business judgment rule applies to LLCs
- default allocation of profits/losses - proportional to contribution in most states
- default allocation of distributions - proportional to contribution in most states.
Formation/Filing for an LLC
An LLC is formed by filing a certificate of organization with the secretary of state.
Certificate must inlcude:
1. The name of the LLC
2. The address of the LLC’s registered office AND
3. The name and address of its registered agent
Name must denote LLC
Must have at least one member
Creditors claims against partners
If a creditor has a claim against an individual partner, the creditor can obtain an interest in the partnership. This includes profits but not management or voting rights.
Dissociation in an LLC
if a member leaves, then it leads to a dissociation of that member, but it does not lead to winding up or dissolution unless the other members unanimously agree to dissolve the LLC.
The business judgment presumption
- presumes that the duty of care, to act with reasonable diligence under the circumstances and to act on an informed basis, is met.
- Plaintiff has the burden to prove that the directors were negligently uninformed or acted unreasonably.
- Directors may rely on information, opinions, reports, or statements of corporate officers, legal counsel, public accountants, etc., in making decisions.
What consitutes a conflict of interest in corporations?
1) conflicting transaction/self dealing: A transaction where the coporation is on one side and on the other side is a director, his close family member, or his business interest.
2) competition between a director and the corporation
3) usurption of a corporate opportunity: A director can’t personally take a business opportunity the corporation would have an interest in it until he (1) tells the board about it and (2) waits for the board to reject the opportunity).
When may a conflicting transaction be upheld? (Not violate the duty of loyalty leading to damages)
1) the transaction was approved by a majority of the disinterested directors IF director disclosed all material facts to the board or the facts were already known
2) the transaction was approved by a majority of votes entitled to be
cast by disinterested shareholders IF director disclosed all material facts to the board or the facts were already known
3) Judged by the circumstances at the time the corporation entered into the transaction, it was fair to the corporation (same terms as an arms length transaction)
some jurisdictions require fairness and either 1 or 2.
What are corporate Directors?
- Directors manage the corporation. They meet regularly.
- Directors must vote responsibly, so they cannot vote by proxy or voting agreement
- To hold a vote there must be quorum (a majority of directors) present throughout the meeting.
- A resolution at a meeting requires a majority vote of the directors present.
- Directors can also take action by unanimous consent, in writing, without a meeting.
- Meeting notice is only required for special meetings. (2 days)
- A director only has actual authority to bind a corporation if authorized by resolution or unanimous written consent.
- Under the business-judgment rule directors are presumed to act reasonably.
- Directors do not have inherent authority to bind the corporation in day-to-day operations.
- Directors cannot authorize fundemtnal corporate changes without the shareholders persmission.
What are shareholders
- Shareholders own the corporation.
- Entitled to annual meetings.
- Meeting notice: 10-60 days + state the time, place, and purpose of the meeting.
- Shareholders can vote by proxy or agreement.
- To hold a shareholder vote, there must be a quorum (a majority of all outstanding shares are present). Qurorum is not quashed by shareholders leaving.
- For most votes, a majority vote of votes actually cast is required
shareholder voting rules
- must be a quorum.
- each share is entitled to one vote
- generally an action requires a majority of actualy voted shares to be approved.
- Fundemental corporate change and removal of a director require a majority of outstanding shares
What are corporate officers
- Officers are agents of the corporation.
- Officers are the president, secretary, treasurer, etc.
- They have the inherent power to enter into ordinary transactions on day-to-day operations on behalf of the corporation.
- A officer must have authorization from the board to enter into extraordinary transactions.
- To implement a fundemental corporate change, an officer must have proper authorization from the board, who must have proper authorization from the shareholders.
- In an Agency combo MEE question, an officer likely has actual or apparent authority to enter into a contract on behalf of the corporation.
Requirements for incorporation
- Articles of incorporation must be filed with the state) in order for a valid corporation to be formed.
The articles must include basic information inlcuding the corporation’s:
* Name
* address
* names of incorporators
* purpose
* number of shares authorized.
Notes
* Additional provisions can be added.
* In a conflict between articles and bylaws, the articles control
* Because the corporation files these with the state, they are public.
What is a “subscription”?
- An offer to buy a certain number of a corporation’s shares.
- In general, the offer must be in a signed writing and state a price.
is a coporation liable for a preincorporation contract?
- A corporating is not generally liable for a contract entered into proor to incorporation unless it expressly or impliedly adopts (ratifies) the contract.
- Express: the board of directors expressly ratifies the agreement.
- Implied: there is a knowing acceptance or retention of the contract benefits.
- Otherwise, the promoter is liable for preincorporation contracts.
What is a proxy vote?
- A shareholder may vote her shares in person or by proxy.
- A proxy is (1) a writing (fax and email are fine), (2) signed by the record shareholder (email is fine if the sender can be identified), (3) directed to the secretary of the corporation, (4) authorizing another to vote the shares.
- a proxy may be revoked by the shareholder attending the meeting to vote themselves, in writing to the corporate secretary, or by subsequent appointment of another proxy.
- for a proxy to be irrecovable (1) the proxy says it’s irrevocable and (2) the proxy holder has some interest in the shares other than voting (such as an option to buy the shares).
What is a voting trust?
a written agreement of shareholders under which all of the shares owned by the parties to the agreement are transferred to a trustee. valid for max of 10 years unless extended.
requires:
1. the agreement be in writing and signed
2. a copy is given to the coproration
3. legal title to the shares is transferred to the trustee
4. The original shareholders receive trust certificates and retain all shareholder rights except for voting
Shareholder direct action
- Can be brought when an officer or director has breached a duty owed to the shareholder personally.
- Inlcudes payment of a dividend or opression in a close corporation.
- In a shareholder direct action, any recovery is for the benefit of the
individual shareholder.
Shareholder derivitve action
- In a derivative suit, a shareholder is suing to enforce the corporation’s claim, not her own personal claim.
- The coporation gets the award.
- The corporation must be joined to the suit as a defendant.
Requirements for bringing a derivative suit.
1) Standing
* A shareholder must have been a shareholder at the time the claim arose or must have become a shareholder through transfer by operation of law (inheretence or divorce) from someone who did own stock at the time the claim arose.
2) Adequacy
* Must adequately represent the coporations interests
3) Demand
* Must make a written demand to the board for action and either wait 90 days, receive notice that the corporation has rejected the demand, or show that wiating 90 days would cause irreperable harm.
* Some states have no demand requirment if demand would be fuitile (such as when directors are the defendant).
Shareholder liability - peircing the corporate veil
- shareholders generally have limited liability and are only liable for their investment.
To piece the corporate veil the shareholders must have abused the privilige of incorporation. Three common scenarios:**
* Alter Ego (Identity of Interests): the corporation may be considered the “alter ego” or a “mere instrumentality” of the shareholders or another corporation. comingling of shareholder and coporate assets/money
* Undercapitalization at the time of formation
* Fraud, Avoidance of Existing Obligations, or Evasion of Statutory Provisions
Notes:
* Veil peircing is more common in tort cases, but extremely rare in contract cases.
consequences of failure to incorporate
- If the incorporators thought they formed a corporation, but they failed to do so, they’d be personally liable for business debts.
- de facto corporation and corporation by estoppel can help avoid liability BUT are abolished in many states
De facto Corporation
doctrine limiting liabilty in the case of an improper incorporation
requirements:
1. a relevant corporate statute exists
2. the parties made a good faith attempt to form a corporation under the statute
3. the parties acted as if there was a corporation
4. parties were unaware that they hadn’t actually fromed a corporation
limitiation of liability applies except against the state.
Corporation by estoppel
- Corporation by Estoppel limits liabilty in the case of an improper incorporation only in contract cases- does not apply to tort victims.
- Persons who have dealt with the entity as if it were a corporation will be estopped from denying the corporation’s existence (they can’t back out of their contracts)
- Corporation cannot avoid liability by claiming it was improperly formed.
A fundmental corporate change requires
- Majority of a quorum of directors to adopt a resolution of fundemental corporate change.
- Resolution is submitted to shareholders for a majority vote of outstanding shares.
- Filing with secretary of state
dissenting shareholder’s right of appraisal
Exclusive shareholder remedy for fundmental corporate change:
1) In a close coporation or a very small corporation
2) Shareholder must prove notice to the corporation before a fundemental coporate change involving:
* Merging or consolidating
* Transferring substantially all assets
* Stock being acquired in a share exchange
* Converting to another form of business
3) Of their intent to demand appraisal if vote succeeds
4) Demand appraisal immediately after successful vote
5) aggree on fair value or have court appoint a neutral appraiser.
What kinds of transactions does article 9 apply to?
- Article 9 of the UCC applies to any transaction, regardless of its form, that creates a security interest in personal property or fixtures by contract.
- the words security interest do not have to be specifically present.
- Also applies to lease agreements that are security interest rather than true leases. Typically occurs when the lease term covers the entire economic life of the goods or when the lessee has an option to purchase the goods for nominal consideration at the end of the lease.
What is a security agreement?
look for
(1) a credit transaction (a sale on credit or a loan) and
(2) an agreement that creates a lien in favor of the creditor in the debtor’s personal property to secure the debt
What is a security interest
a contingent property interest in the debtor’s collateral that the debtor grants to
the creditor. When that contingency (which is default) occurs, the property interest springs to life and the creditor has rights in the debtor’s collateral.
What is a purchase money security interest?
Two types:
1. The secured party sells the goods to the debtor on credit and retains a security interest in the goods sold
2. The creditor loans the funds to the debtor to enable the debtor to buy specific collateral, those specific funds are used by the debtor to
acquire the specific collateral, and the creditor takes a security interest in the specific collateral purchased.
After aquired property clause
- An after aquired property clause extends the secuity interest not only to the debtors present property, but also also to property that the debtor will obtain in the future without additional formalities.
- Even without an after-acquired property clause, a security interest will attach automatically to collateral of a type that’s rapidly depleted and replenished, such as accounts and inventory.
- A security interest will also automatically attach to identifiable proceeds
Future advance clause
Automatically secures future loans to the same collateral as the original secured loan without additional formalities.
what is attachment?
When the rights of the secured creditor become effective against the debtor
What is perfection
- When the rights of the secured creditor become effective against other creditors (gives notice to other creditors).
- Perfection cannot occur until attachment has occured
- There are six methods of perfection:
(1) filing a financing statement;
(2) taking possession of the collateral;
(3) control;
(4) automatic perfection;
(5) temporary perfection.
(6) notation on the certificate of title (automobiles only) - unperfected does not mean unsecured.
What are goods? and what are the four types of goods?
- Tangible movable personal property at the time the security interest attaches (including unborn animals and growing crops).
- The key question is how the debtor intends to use the collateral (original intent rule)
Four types of goods:
1. Consumer goods—goods used or bought primarily for personal, family, or household purposes.
2. Equipment—goods that are used or bought for use in a business. Also the default category for goods.
3. Farm products—crops or livestock or supplies used or produced in farming operations or products of crops or livestock in their unmanufactured states IF they are in the possession of a debtor engaged in farming operations.
4. Inventory - goods held for sale or lease, goods that are to be furnished under service contracts, and materials used or consumed
in a business in a short period of time
What are Intangible or Semi-Intangible Collateral? and what are the 8 types?
8 types depending on the nature of the collateral
1. Instruments—Pieces of paper representing the right to be paid money.
2. Documents—A writing that represents the right to receive goods.
3. Chattel paper—A record or records which evidence both (1) a monetary obligation, and (2) a security interest in or a lease of specific goods. May be electronic.
4. Investment property—Includes items such as stocks, bonds, mutual funds, and brokerage accounts containing such items
5. Accounts—Includes a right to payment for property sold or services rendered. (accounts receiveable)
6. Deposit accounts—An account maintained with a bank. (art 9 only appplied to non-consumer desposit accounts)
7. Commercial tort claim — the claim arose out of the claimant’s business or profession, and the claim does not include damages for personal injury or the death of an individual
8. General intangibles—anythis else such as such as patent and trademark rights, copyrights, and goodwill.
requirements of attachment
Three requirements. Can occur in any order.
1A) Binding Security Agreement with AID:
* Authentication (signature),
* Intent, and
* a Description that reasonably idenfies the collateral.
OR
1B) posession by the secured party.
* an agreement may be oral IF the collateral is in possession f the secured party, but this is often infeasible.
2) Consideration is given by the secured party
* Consideration is usually a loan, but even past consideration will suffice.
3) The debtor must have Rights in the collateral
* Need not be title, possession is sufficient.
What are proceeds?
- Proceeds include whatever is received upon the sale, exchange, collection, or other disposition of collateral or proceeds.
- Even insurance pay out for damage to collateral and claims arising from damage or loss of collateral are proceeds.
- Proceeds must be identifiable (traceable to the original collateral)
- comingled cash uses the lowest intermediate balance rule (cannot exceed original value of cash proceeds)
Perfection by filing a financing statement
=A secured party may obtain perfection by filing a financing statement (either in writing or electronically)
Requires:
1) The debtor’s name and address,
2) The secured party’s name and address, and
3) A description of the collateral covered by the financing statement (may be generic)
4) Must be filed with state secretary of state office of debtor’s location UNLESS involving timber, minerals, or fixtures, in which case must be filed with county office where the item is located.
Issues:
* Use of the debtor’s trade name is insufficient.
* Financing statements are filed by the name of the debtor.
* Error is seriosuly misleading and will invalidate if it cannot be found in a filing office using a search with the correct name. Spelling errors usually seriously misleading. (unless caused by filing office error).
* Errors in secured party name are immaterial.
* In the event of a debtors name change, the financing statement is effective only against collateral acquired by the debtor before the name became insufficient and within 4 months after.
* Unlike with authenitcation, the collateral description may be generic.
* Description need not mention after aquired property if it is broad enough.
* If debtor moves, creditor must refile within 4 months
* Is collateral is transferred to a new owner in new state creditor must refile within 12 months
* Financing statement is valid for 5 years. Continuation statement must be filed within 6 months of end of statement.
perfection by the secured creditor taking possesion
- Most types of collateral are perfected upon posession by the secured creditor.
- This is the only way to perfect a security interest in money.
- Security interests in general intangibles, deposit accounts, nonnegotiable documents, electronic chattel paper, certificate of title goods, and accounts cannot be perfected by possession.
perfection by the secured creditor taking control
- Effective only for nonconsumer deposit accounts, electronic chattel paper, and investment property.
- security interests in nonconsumer deposit accounts can only be perfected by control (unless they’re perfected as proceeds)
- The bank in which a nonconsumer deposit account is maintained automatically has control over the deposit account. Other wise you need the creditors name on the account or a control agreement: lendor-lendee-bank contract
automatic perfection
- A PMSI in consumer goods is perfected as soon as it attaches.
- a security interest in an account or payment intangible is automatically perfected if the amount is not a significant part of the debtors outstanding accounts or payment intangibles
temporary perfection (and continuation for proceeds)
Perefection of security interest in collateral extends to proceeds of that collateral for 20 days.
Will continue beyond 20 days if:
1) the collateral is identifiable cash
2) the original collateral was perfected by filing a financing statement, the new filing statement would be filed in the same place as the original collateral, and the proceeds were direct (not purchased with cash proceeds)
Otherwise creditor must refile.
Perfection by notation on the certificate of title (automobiles only)
- Security interests in motor vehicles can only be perfected by notation on the certificate of title issued by the state.
- HOWEVER: Security interests created by dealers in vehicles held in inventory for sale or lease are perfected by filing a financing statement under the ordinary code rules
which state law governs perfection?
- The law of the state where the debtor is located generally governs perfection of the security interest.
- human - principal residence
- Registered organization - the state under whose laws it is organized
- General partnership - place of business
priority: perfected creditor v. prefected creditor
First to perfect has priority
priority: perfected creditor v. unperfected creditor
- A perfected security interest beats an unperfected one, even if the unperfected creditor has a PMSI
- UNLESS the PMSI has a superpriority
priority: unperfected creditor v. unperfected creditor
The first to attach
has priority.
General rule for sale of an item subject to a security interest
Generally, when a buyer (or lessee) buys or leases something with a security interest on it, the security interest stays on the item.
UNLESS
* The sale or lease of the collateral is authorized by the secured party (can be implied through acquiescence
* The sale is of inventory to a consumer (impliedly sold free of the security interest)
* The sale (or lease) is to a buyer in the ordinary course of business.
What is a buyer in the ordinary course of business
Definition of “Buyer in the Ordinary Course” A “buyer in the ordinary course” is one who buys goods
(1) in good faith,
(2) without knowledge that the sale violates the rights of another person in the goods, and
(3) in the ordinary course of business from a seller in the business of selling goods of the kind purchased.
- The typical case of the buyer knowing that the sale violates the rights of another is where the buyer knows that the sale violates the security agreement.
- Just because you know that there is a security interest on an item, does NOT mean you know someones rights are being violated
What if a buyer is not a BOIC?
Buyers or lessees not in the ordinary course of business:
* Take subject to perfected security interests, and
* Take free from unperfected security interests unless they know of the security interest when they give value or take delivery
The garage sale rule (consumer to consumer sale)
In the case of consumer goods, a buyer takes free of a security interest, even though it’s perfected, if the buyer buys
(1) without knowledge of the security interest,
(2) for value,
(3) for the buyer’s own personal, family, or household purposes, and
(4) before a financing statement covering the goods has been filed.
Note that the goods must be consumer goods in the hands of both the buyer and the seller.
Recall that PMSIs in consumer goods are perfected automatically without filing. Nevertheless, holders of these security interests will still lose to consumer buyers under this rule unless they file.
PMSI super priority
The following PMSIs will have a superpriority over other secured creditors:
* A PMSI in consumer goods – automatically perfected.
* A PMSI in equpiment if the interest is perfected before or within 20 days after the debtor receives possession of the goods.
* A PMSI in inventory or livestock if filing occurs before delivery to debtor and any other secured parties are given authenticated notification before delivery to debtor.
Priority: Secured Party vs. Judicial Lien Creditor
- A judicial lien creditor won a judgment in court AND there has been a seizure of the collateral by the sheriff.
- which ever happens first, perfection or seizure of the collateral by the sheriff, wins.
- if a securied creditor files before seizure but the perfection occurs after, they will still beat the judicial lien creditor.
- PMSI Grace Period Exception: If the secured party files a financing statement with respect to a PMSI within 20 days after the debtor receives the collateral, the secured party will have priority over a judicial lien arising between the time the security interest attaches and the time of filing.
priority: Super PMSI v. Super PMSI
- A secured party who has a PMSI in collateral as a seller (a seller-financed PMSI) has priority over a secured party who has a PMSI in the same collateral as a lender (a financer-financed PMSI)
- Otherwise, the first secured party to file or perfect prevails
Special Priority Rules for Conflicting Security Interests in Investment Property
- A security interest in investment property perfected by control has priority over a security interest perfected by any other method
- For conflicting security interests perfected by control, first to control wins
Special Priority Rules for Conflicting Security Interests in Deposit Accounts
Priority is in the following order:
1) co-owner
2) maintain account
3) control agreement
Priority: Secured Party vs. Possessory (Statutory) Lien Holder
a possessory statutory lien has priority over a security interest (even if perfected) as long as the goods or services were provided in the ordinary course of business and the collateral remains in the lien holder’s possession.
Priority: Secured Party v. Article 2 Claimant.
If Article 2 grants a buyer or seller a possessory security interest in goods (for example, if the buyer rightfully revokes acceptance of goods), the Article 2 claimant has priority over an Article 9 secured party as long as the Article 2 claimant retains possession of the goods.
requirements of notification for strict forclosure (keeping collateral)
Notification to other secured creditors
* A secured creditor who wants to keep the collateral has to notify other known creditors that they plan to keep the collateral by filing a financing statement or noting its security interest on a certificate of titlend
* If other creditors object within 20 days the creditor cannot keep and must be disposed of by sale
Notification to debtor
* The debtor and must recieve written notification of the resale.
* the debtor must have 20 days to object.
Requirement of notification to debtor in case of sale of collateral
Notification to debtor
* The debtor and must recieve written notification of the resale.
* the debtor must have have at least 10 days notice.
* Contents of notice for public sale: notice of the time and place of sale and notice of deficiency liability
* Contents of notice for private sale: notice of the time after which the sale
will occur. Must describe the parties and the collateral. For consumer goods, must also inlcude notice of deficiency liabilty, and telephone or mailing address for more information.
Debtor’s right to redeem
the debtor can redeem prior to the disposition of the collateral by paying full dues.
Which kinds of collateral cannot be perfected with notice through filing?
- Under UCC, all types of collateral can be perfected by notice through proper filing except Deposit Accounts (Control) and Money (Possession)
- State require cars to be perfected via notification on title certificate.
2 step analysis for specific PJ
- The exercise of specifc PJ must:
o 1) fall within a state long arm statute, and
o 2) satisfy the Constitution (due process 14th amendment).
constintutional due process requirement of PJ (international shoe)
- Primarily a fairness analysis
- Does the defendant have such minimum contacts with the forum so jurisdiction does not offend traditional notions of fair play and substantial justice?
- The contact must result from defendant’s purposeful availment
- Defendant can purposefully avail without setting foot in the forum by causing a foreseeable effect in the forum
- Mere accessibility of a company’s website in a state, without more, is usually insufficient contact
General PJ for legal entites
courts have General PJ over a corporation if it is
* the state in which it is incorporated;
* the state in which it has its principal place of business (“PPB”)
* registered to do business in the state and has appointed an agent for service of process there, or
* has been served with process in the state (tag jurisdiction)
Citizenship of a corporation for SMJ
A corporation is a citizen of every state or country in which it is incorporated and of the one state or country in which it has its principal place of business (“PPB”)
the FQ well pleaded complaint rule
- The plaintiff’s claim must arise under federal law, it cannot be anticipated in the answer.
- Ask if the plaintiff is enforcing a federal right (taking away doesn’t count)
Supplemental jurisdiction
- When the federal court has subject matter jurisdiction over one claim, it has discretion to exercise supplemental jurisdiction over related claims that derive from the same common nucleus of fact (“transaction or occurrence”) and are such that a plaintiff would ordinarily be expected to try them in a single judicial proceeding.
- In diversity cases, claims by plaintiffs cannot invoke supplemental jurisdiction.
- There is an exception to the limitation when there are multiple plaintiffs, and the claim by one of them does not meet the amount in controversy requirement.
The erie doctrine
Step 1. Is there some federal law (like the Constitution, federal statute, Federal Rule of Civil Procedure, or Federal Rule of Evidence) on point that directly conflicts with state law? If so, apply the federal law
Step 2. If there is no federal law on point, the federal judge must apply state law if the issue to be decided is “substantive.” Five issues are clearly “substantive”:
* Conflict of law rules;
* Elements of a claim or defense;
* Statutes of limitation
* Rules for tolling statutes of limitations;
* The standard for granting a new trial
Step 3. If there is no federal law on point and the issue is not one of the five just listed above, the federal judge must determine whether the issue is “substantive.” The law is very unclear. Factors include:
* Whether the choice of law would be outcome determinative
* Whether either the federal or state system have strong interest in having its rule applied.
* Whether utilizing federal law instead of state law will cause forum shopping toward federal court.
general rules for venue
The plaintiff may lay venue in any district where:
A) All defendants reside (residential venue) or
B) A substantial part of the claim arose or a substantial part of the property involved in the lawsuit is located (transactional venue).
- If all defendants reside in same state, you can choose the venue in which any of them reside.
- A substantial part of the claim can arise in more than one district. Any is appropriate.
- Improper venue may be waived by defendant
Transfer from a proper venue to a more appropriate venue
- If original venue was proper, court can order transfer based on convenience of parties and witnesses and in the interests of justice.
- Balancing test.
- Burden is on the person seeking transfer
- The transferee court must apply the choice of law rules of the transferor court
- Should be denied if the case could not have been filed in new venue to begin with.
a complaint must inlcude
- SMJ
- plausible claim with sufficient facts
- relief sought
when must a defendant respond to a complaint?
- Within 21 days of being served or within 60 days if waiving process
What are the waivable 12(b) defenses?
- A lack of personal jurisdiction;
- Improper venue;
- Improper process (a problem with the papers); and
- Improper service of process.
waived if not put in first response
what are the non-waivable 12(b) defenses
Motions that can be made as late as at trial.
* A failure to state a claim
* A failure to join an indispensable party.
Motions that can be made any time.
* A lack of subject matter jurisdiction
What are the classic affirmative defenses?
- statute of limitations
- Statute of Frauds
- res judicata
- self-defense
Court may considered them waived if not raised in first response
right to amend
- Plaintiff may amend once, no later than 21 days after Defendant serves rule 12 response.
- Defendant may amend once, no later than 21 days after serving Rule 12 response.
motion for sanctions
- If the other party violates Rule 11, the opposing party cannot immediately file a motion for sanctions. Rather, she serves the motion on other parties but does not file it with the court yet. The party in violation has a safe harbor of 21 days in which to fix the problem and avoid sanctions.
process for joining necessary or indispensible parties
Is the absentee necessary (or “required”)?
* Absentee’s interest will be harmed if not joined, or
* Without absentee, court cannot provide relief to other parties.
* Absentee claims an interest that would subject defendant to multiple obligations.
* joint tortfeasors are NEVER necessary
If the absentee is necessary, can the absentee be joined?
* There is PJ over the absentee; and
* There will be federal SMJ over the claim by or against the absentee.
If the absentee can’t be joined, can the case proceed anyway?
* is a better forum available?
* Can the court shape relief to avoid harm to absentee?
* If the court decides to dismss because of the absentee, the absentee is “indispensible”
counterclaims
There must always be SMJ over the counterclaim
cross claims
Must arise from the same T/O as the underlying action.
impleader (third party)
- defendant brings in third party to contribute/indemnify them for plaintiff’s damages.
- supplemental jurisdiction allowed.
- PJ if third party is within 100miles of summons location, otherwise traditional PJ.
Where does a corporation reside for venue purposes?
Anywhere that it is subject to PJ
Motion for Summary Judgement (FRCP 56)
Summary judgement will be granted if moving party shows that:
1) There is no genuine dispute on a material fact; and
2) movant is entitled to judgment as a matter of law.
- Used after the case has been filed and the plaintiff has survived any Rule 12 motions. Appropriate at any time until 30 days after close of all discovery
- The court can look at “evidence” - usually (1) affidavits, (2) declarations, (3) deposition testimony, or (4) interrogatory answers provided under oath.
- The court views evidence in the light most favorable to the nonmoving party.
- if opponant bears burden of proof, movant doesn’t need to provide evidence.
Temporary Restraining Order (TRO)
- Orders that the defendant either (1) do something or (2) refrain from doing something until a hearing for a preliminary injunction can occur.
- Can be issued ex parte if movant files under oath that they will “suffer immediate and irreparable harm.”
- Effective for max of 14. Can be extended up to total of 28 days.
- not immediately appealable.
Preliminary Injunction
- provides equitible relief until trial, which must take place within 6 months.
- Movant must show that:
1. likely to suffer irreparable harm
2. likely to win on the merits
3. harm to applicant outweighs harm to other party if the injunction is issued; and
4. injunction is in the public interest. - Either grant or refusal is immediately appealable.
- (exception to the general rule is that interlocutory orders are not appealable because they are not final).
Motion to dismiss for failure to state a claim - FRCP 12(b)(6)
- Motion made prior to answer.
- If the plaintiff’s complaint fails to state a claim, the case can be dismissed.
- “if these facts are true, do they state a plausible claim?”
- Judge uses experience and common sense. May allow plaintiff to amend.
motion for judgment on the pleadings
- Same as a motion to dismiss for failure to state a claim, but made after the answer.
- If the plaintiff’s complaint fails to state a claim, the case can be dismissed.
- “if these facts are true, do they state a plausible claim?”
- Judge uses experience and common sense. May allow plaintiff to amend.
Motion for Judgement as a Matter of Law (JMOL or “Directed Verdict”)
- Similar to summary judgment but but comes up at trial rather than before.
- Motion can be made any time before case is submitted to jury, but court may not grant motion until the party opposing the motion has been heard at trial on the issue.
- Standard: reasonable people could not disagree on result.
- Evidence viewed in light most favorable to non-moving party.
Renewed Motion for Judgement as a Matter of Law (RJMOL)
- Same as JMOL but after trial.
- To get RJMOL, the party must have earlier moved for JMOL on the same basis.
- Motion must be made within 28 after entry of judgment.
Motion for a new trial
- Can be granted on any (non-harmless) error that makes the judge think there should be a do-over. A party must move for a new trial within 28 days of the judgment.
- Up to discretion of judge. Reviewed on abuse of discretion if appealed.
- Many possible reasons for granting. These include:
o The judge gave an erroneous jury instruction;
o New evidence was discovered that could not have been discovered before with due diligence;
o Misconduct by a juror, party, or lawyer, etc.;
o The judgment is against weight of the evidence (serious error of judgment); and
o Damages inadequate or excessive.
The Final Judgement rule
- The losing party has a right to appeal if the court’s order is a final judgment. A final judgment is one that determines the merits of the entire case.
- To determine whether an order is a final judgment, ask “after making the ruling”: Does the trial court have anything left to do on the merits of the case? If the answer is “yes,” it is not a final judgment but rather an “interlocutory order.” If the answer is “no,” the judgment is final.
o Denial of summary judgement is not final (no appeal) – but granting is.
o Granting a new trial is not a final judgement (no appeal) – but denying is.
Requirements for claim preclusion
1) Same Claimant Suing the Same Defendant
2) Case 1 must have ended in a valid final judgment on the merits (with prejudice-including default judgments)
3) Case 1 and Case 2 must assert a right to relief arising from the same transaction or occurrence
- Where the claimant won the earlier lawsuit, the claim is said to be merged into the prior judgment.
- Where the claimant lost the earlier lawsuit, the claim is said to be barred by the prior judgment.
Requirements for issue preclusion
1) Case 1 ended in valid, final judgment on the merits.
2) The issue in Case 2 must have been actually litigated and essential to the judgment in Case 1.
3) Against Whom: The Party against whom issue preclusion is used in Case 2 must have been the same party as in Case 1 or have been in “privity” with the party in Case 1.
4) By Whom- who can invoke the issue preclusion?
* Anyone who was a party to Case 1 (or in privity with a party) (traditional mutuality).
* Nonmutual Defense Issue Preclusion: Person asserting issue preclusion is the defendant in Case 2.
* Nonmutual Offensive Issue Preclusion: Plantiff in in case 2 ONLY if fair: defendant in case 2 had opportunity AND incentive to litigate issue in case 1.
Initial required disclosures for discovery
The following information must be given within 14 day of the initial rule 26(f) conference, even if other parties haven’t asked:
* Identities and contact information of Persons with Discoverable Information, and the type of information that they have, that the Party May Use to Support Her Claims or Defenses
* Documents and tangible things, including ESI, that the party has in their control and may use to support her claims or defenses must be disclosed as an initial disclosure
* Calculation of monetary relief supported by documents.
* Relevant insurance coverage.
discoverable is broader than admissible
General Scope of discovery
After the initial Rule 26(f) conference, a party can send discovery requests to another party.
A party can generally discover anything that is relevant to a claim or defense and proportional to the needs of the case.
discoverable is broader than admissible
Work Product Doctrine
- Work product or “trial preparation material,” which is material prepared in anticipation of litigation by a party, her lawyer, or other representative, is protected from discovery.
- “Qualified work product” may be discovered if the requesting party can show substantial need and undue hardship in obtaining the materials in an alternative way
- Some things are considered undiscoverable “absolute work product”, such as “Opinion work product” consisting of mental impressions, conclusions, opinions, or legal theories.
- A party has a right to demand discovery of any previous statement that she has made regarding the case.
Sanctions
If a party fails to cooperate in discovery, she will be subject to various sanctions plus costs.
Less than full response: If moving party have made a good faith attempt to obtain discovery without court intervention, moving marty may make a motion to compel plus costs. If party does not comply with motion, then mertis sanctions plus costs.
No Response: merit sanctions plus costs
Merit sanctions inlcude:
* Establishment order (establishes facts as true)
* Strike pleadings of the disobedient party (as to issues re the discovery)
* Disallow evidence from the disobedient party (as to issues re the discovery)
* Dismiss plaintiff’s case (if bad faith shown)
* Enter default judgment against defendant (if bad faith shown)
protective order
- A party can move for a protective order if they think that thinks a discovery request subjects her to annoyance, embarrassment, undue burden or expense.
- must certify that she tried in good faith to resolve the issue without court involvement; that is, she asked the other side to “meet and confer.”
Court can:
* Deny discovery;
* Limit discovery; or
* Permit discovery on specified terms.
What are the requirements for a contract formation?
Contract = Mutual Assent (Offer+Acceptance) + Consideration – Defenses
Requirements for an offer
- Communication of willingness to enter into a bargain.
- Must be reasonably certain as to parties, subject matter, and price.
definite and certain term requiremtents for land, goods, employment
Land Sale Offers Must Include – (i) Price and (ii) Description of the Land.
Sale of Goods Must Include – Quantity Terms (UCC Gap filler fills in the blank for price)
Employment Contracts – If the duration of the employment is not specified then the acceptance of the contract creates a contract that is terminable at will.
How may an offer be terminated?
Offers are generally revocable prior to acceptance.
Offers may be revoked through:
* lapse of reasonable time
* explicit rejection
* counteroffer
* conditional acceptance
* additional terms
* revocation by seller
* revocation by operation law
revocation is effective upon receipt.
What kinds of offers are irrevocable?
Options Contracts – When an offeree gives consideration to the offeror to not revoke offer for period of time. A mere promise not to revoke an offer, without consideration is still revocable.
Merchants Firm Offer – Merchant promises, in signed writing, to keep an offer open for time stated or reasonable time (enforceable for up to 3 months.)
Unilateral Offer – When an offeree begins performance under a unilateral contract the offeror’s offer becomes irrevocable. Mere preparation to perform is not the same as starting performance.
Foreseeable Detrimental Reliance - makes an offer irrevocable.
is an advertisement/catalog an offer?
- Not an offer but an invitation to deal.
- However, advertisements can become an offer if it: (i) includes a promise (ii) the terms are definite/specific and (iii) the Offeree is identified
what is Acceptance
Acceptance is a manifestation of assent to the terms of an offer.
How may acceptance be made?
Types of acceptance
* Express acceptance
* Beginning performance (such as sending goods)
* Completing performance (unilateral contract)
Additional requirements
* Under the mailbox rule, an acceptance is effective when sent.
* If an offer is irrevocable, then acceptance must be received.
* Rejections Sent Before Acceptance defeats the mailbox rule. Whichever is received first controls.
acceptance/rejection of goods received under article 2
Under Article 2, a buyer accepts if they:
* Indicate goods conform to contract.
* Indicate they’ll keep nonconforming goods.
* Fail to reject within reasonable time.
* Fail to notify seller of rejection.
* Act inconsistent with seller’s ownership!
The buyer may revoke their acceptance if the goods have a defect that substantially impairs their value to the buyer and:
* They accepted the goods on the reasonable belief that the defect would be cured and it has not been, OR
* They accepted the goods because of the difficulty of discovering the defects or because of the seller’s assurance that the goods conformed to the contract
