495 terms

Business Law Final

When is a contract used?
With an agreement, bargain, undertaking, or deal.
What was the evolution of society that required contracts?
- Along with the emerging industrial order were affairs were ordered based on mutual assent, due to the booming mercantile industry, monetary system, agriculture, and manufacturing.
- Different from primitive societies and in feudal Europe, where relationships were fixed.
- Affairs were no longer face to face and became more complicated.
What is a contract?
- Set of promises
- Promise for a Duty

Is a promise or set of promises for the breach of which the law gives remedy, or the performance of which the law in some way recognizes as a duty.
Four elements necessary for a valid contract? Did the parties create a valid contract?
- The parties reached an agreement? (offer and acceptance)
- The consideration was present?
- The agreement was legal?
- Contractual capacity
State case law?
law made by judges
What is state case law derived from?
Made up of the vast cases of judges resolving disputes caused inefficiencies in contract law due to the number of resolutions.
What did the American Law institute do to help make state case law more efficient?
The American Law Institute (ALI) combined all the cases to clarify, simplify, and improve the law into the Restatement of the Law of Contracts (1932) and the Restatement (Second) of the Law of Contracts (1979).
What do State statutes rule on involving merchants/sales?
Real estate, sale of goods, and services
What kind of law is the UCC?
State statutes
What does the the Uniform Commercial Code (UCC) rule on?
Especially Article 2, deals with the sale of goods and unifies commercial law from state to state.
Is the UCC a state or federal law?
Adopted by every state but is not a federal law
What are the articles in the Uniform commercial code?
Article 1: General provisions
Article 2: Sales
Article 2A: Leases
Article 3: Commercial paper
Article 4: Bank deposits and collections
Article 4A: Funds transfers
Article 5: Letters of credit
Article 6: Bulk transfers
Article 7: Warehouse receipts, bills of lading and documents of title
Article 8: Investment securities
Article 9: Secured transactions
What does Article 2 focus on?
Only deals with the present and future sale of goods, which is "all things..which are movable at the time of identification to the contract for sale other than the money in which the price is to be paid."
Contracts can be classified along the four dimensions:
Degree of completion
What are the different forms of explicitness in contracts?
Express or implied or quasi contracts
What are the different forms of contracts define mutuality?
Bilateral or unilateral contracts
What kind of contracts define enforceability?
Valid, void, voidable, or unenforceable contracts
What is explicitness?
Is the degree to which the agreement is manifest to those not party to it.
What are Express contracts?
Terms of the contract is spelled out directly, where both are aware that they have entered the contract.
What are Implied contracts?
The terms haven't been discussed by the parties, but both parties can infer the terms.
- I.e. common law marriage: where people are deemed to be married if they live together with the intent to be married, regardless of their failure to have obtained a license or gone through a ceremony.
What are Quasi-Contract?
is an obligation said to be "imposed by law" in order to avoid unjust enrichment of one person at the expense of another
- May be presumed by a court in the absence of a true contract; but not where a contract (either express or implied) exists covering the same subject.
What is different about a quasi contract compared to actual contracts?
Mutual assent is not necessary
A court may impose an obligation without regard to the intent of the parties.
If a party sues for damages under a quasi contract, what is the remedy?
How are quasi contracts different than express and implied contracts?
Express and implied contracts embody an actual agreement of the parties.
Takes into account whether promises are given by two parties or only one.
Different forms of Mutuality in contracts?:
1. Bilateral contracts
2. Unilateral contracts
What are bilateral contracts?
The parties make mutual promises, were each is both the promisor and promisee and each pledges to do something.
What are unilateral contracts?
One party performs an act in exchange for the other party's promise
- i.e. an offer of a reward - for catching a criminal
Degree to which a given contract is binding.
What are the forms of enforceability that define contracts?
1. Void contract
2. Voidable contract
3. Unenforceable contract
What is a void contract?
An agreement that is lacking one of the legal elements of a contract
What is a voidable contract?
Is one that may become unenforceable by one party but can be enforced by the other.
What is an unenforceable contract?
Some rule of law bars a court from enforcing
- I.e. When the statute of limitations has run out
Contract completion?
Whether the contract is yet to be performed or whether the obligations have been fully discharged by one or both parties.
Executory contract?
Agreement with promises that have not been carried out.
Executed contract?
Agreement with promises that have been completed.
One who makes an offer.
One to whom an offer is made.
The structure of an agreement?
An offer and an acceptance
Objective standard?
Is there a meeting of minds in the agreement? Does the agreement mean what the parties said or did - not what they thought they said or did? Or if not, what impression did they think they were making?
- The bargain of the parties in fact as found in their language or by implication from other circumstances including course of dealing or usage of trade or course of performance
The offer
The manifestation of willingness to enter into a bargain, so made as to justify another person in understanding that this assent to the bargain is invited and will conclude it.
Key elements to have an offer? (TEST)
- Has intent
- The offer must be communicated
- Must be definite.
What are the key elements of definiteness in an offer? (TEST)
- Identity of the parties (offeror and offeree)
- Goods or services to be exchanged.
- Quantity of goods or types of services
- Time to perform the contract.
How should intent be formed? What does intent qualify for in an offer?
- Has to use the objective standard
- Looks at the totality of the circumstances to understand if the offer was spoken in the heat of the moment.
What is the standards for a communicated contract in an offer?
- Has to specify which offer is being assented to (
- Has to be physically communicated to the offeree
What is the the UCC approach to the offer?
If the parties intend to enter into a binding agreement, the agreement is valid in law, despite missing terms. Only if there is a reasonably certain basis for granting remedy, meaning that commercial standards on the point of 'indefiniteness' are intended to be applied, such as to price, performance, and remedies.
- Provides the provisions for filling in the missing terms of price and performance.
Under the UCC, what are the kinds contracts that result from offers?
1. Output contracts
2. Requirement contracts
What are output contracts?
Which a buyer agrees to purchase the seller's entire goods
Requirements contract?
Which a buyer agrees to meet all the buyer's requirements
- Note: A party under such contract cannot offer or demand that is "unreasonably disproportionate" to a stated estimate or past quantities.
Person who made the contract takes it back
What does common law and UCC agree on about revocation?
The Common law and the UCC says that the offeror may revoke his or her offer at any time before acceptance, even if the offer states that it will remain open for a specified period of time.
When is revocation effective?
- When the offeree actually receives it
What are the offers that pose as the exceptions to the proper offeror procedure?
Offers made through the public advertisements - the offeror may revoke a public offering by notifying the public by the same means used to communicate the offer - and the offer is terminated even if a particular offeree had no actual notice
If offers are made through public advertisements, how does revocation occur?
If the offeree has sufficient notice, then revocation may be communicated indirectly.
What are irrevocable offers?
1. Option Contracts
2. Firm offer rule (UCC)
3. Irrevocable by law
What are option contracts?
Where the promisor explicitly agrees for consideration to limit his right to revoke.
- I.e. Arlene tells Neil that she cannot make up her mind in ten days but that she will pay him $25 to hold the offer open for thirty days. Neil agrees. Arlene has an option to buy the car for $5,000; if Neil should sell it to someone else during the thirty days, he will have breached the contract with Arlene.
What are partial performance of a unilateral contract?
- Creates an option
- Before the offeree begins to carry out the contract, the offeree is free to revoke the offer.
- Once the performance begins, the law implies an option, allowing the offeree to complete performance according to the terms of the offer. If, after a reasonable time, the offeree does not fulfill the terms of the offer, then it may be revoked.
What is the firm offer rule?
UCC - A written and signed promise by a merchant to hold an offer to buy or sell goods for some period of time - option is created, no consideration is required, and the offer must remain open for the time period stated (not exceed three months).
What is an example of a contract that is irrevocable by law?
I.e. contract submitting a bid to a public agency - once the period of bidding opens, a bidder on a public contract may not withdraw his or her bid unless the contracting authority consents.
A manifestation of refusal to agree to the terms of an offer
When is a rejection effective?
- When the offeror receives it.
- If offeree changes his mind by accepting after prior rejection, there is no contract, even if the offeror has made no further effort to sell the item.
- Cannot try to accept after rejecting it
A response that varies the terms of an offer; is a rejection of the original offer (therefore, all the terms lapse).
What is the mirror image rule?
The acceptance must match the offer in all its particulars or the offer is rejected.
Acceptance with counteroffer?
Meaning, an acceptance that changes the terms of the offer, which is a counteroffer and terminates the offer.
- For the acceptance with a counter offer to validate the original offer, then you cannot demand that the offeror abide by your request in addition to the original offer.
What happens during a Counteroffer under the UCC?
The UCC attempts to resolve the battle of the forms by providing additional terms or conditions in an acceptance operate as such unless the acceptance is conditioned on the offeror's consent to the new or different terms.
What is the battle of the forms?
- Describes the problem were a buyer and a seller send out documents accompanying or incorporating their offers and acceptances - and the provisions in each document rarely correspond because one side's form contains terms favorable to it but inconsistent with terms on the other side's form.
- Between merchants
What counteroffer is not automatically incorporated in the final offer?
- The offer specifically limits the acceptance to the terms of the offer
- The new terms materially alter the offer
- Notification of objection to them has already been given or is given within a reasonable time after notice of them is received.
- I.e. (of terms that become part of the contract without being expressly agreed to) Clauses providing for interest payments on overdue bills
- I.e. (of terms that would materially alter the contract and hence need express approval) Clauses that negate the standard warranties that sellers give buyers on their merchandise.
How long is an offer valid/ When does an offer lapse?
After some period of time (which can contain its own specific time limitation)
- Common law rule: offer expires at the end of a "Reasonable time," which depends on the case.
- Under the restatement, an offer mailed, the acceptance has to be mailed at any time until midnight of day the offer is received
- For unilateral contracts, both the common law and the UCC require the offeree to notify the offeror that he has begun to perform the terms of the contract.
What are the exceptional conditions that may terminate the offer? (3)
- Death or insanity of the offeror prior to the acceptance terminates the offer (but the estate of a deceased person may be liable on a contract made by the person before death)
- Destruction of subject matter essential to the offer
- Illegality: A statute making unlawful the object of the contract will terminate the offer if the statute takes effect after the offer was made.
Seller called buyer on the telephone and offered to sell his used stereo. Buyer agreed to buy it without asking the price. The next day buyer changed her mind and attempted to back out of the agreement.
Do the parties have a contract?
No because price is not communicated, but under the UCC would have a contract b/c price would be assumed as the market price.
Example: On august 1, Ernie wrote to Elsie offering to sell Elsie his car for $7,600, and he promised to hold the offer open for 10 days. On August 4, Ernie changed his mind; he sent Elsie a letter revoking the offer. On August 5, Elsie e-mailed Ernie, accepting the offer. Ernie's letter of revocation arrived on August 6.
Is there a contract?
Yes, acceptance came before the letter of revocation.
What is an acceptance?
A manifestation of assent to the terms thereof made by the offeree in a manner invited or required by the offer.
What are the ways that the offeree can accept the offer?
- Promise
- Performance
- Partial performance
- Can accept in any manner and by any medium reasonable to the circumstances, unless the offer unambiguously requires a certain mode of acceptance.
Who may accept the offer?
The offeree (i.e. George promises to sell his automobile to Bartley, age seventeen, if Bartley's father will promise to pay $3,500 to George. Bartley is the promisee (the person to whom the promise is made) but not the offeree; Bartley cannot legally accept George's offer. Only Bartley's father, who is called on to pay for the car, can accept, by making the promise requested. And notice what might seem obvious: a promise to perform as requested in the offer is itself a binding acceptance.)
When is the acceptance effective?
Not necessarily always effective when received.
- By the specific means stated in the offer, the acceptance is effective.
- By the "mailbox rule"
- If the offeror fails to specify the mode of acceptance and the offeree uses a mode that is not reasonable, then effective is deemed effective when received
What is the mailbox rule?
Acceptance occurs when the acceptance is sent/dispatched.
Which has priority - acceptance or rejection?
Acceptance - Effective when received
- I.e. When the offeree sends a rejection first and then later transmits a superseding acceptance (arrives first), acceptance
What is consideration?
A set of mutual promises in which the promisor receives some benefit for his promise and the promisee gives up something in return.
- Bargained for price you pay for what you get.
- I.e. Betty offers Lou the book in exchange for Lou's promise to pay twenty-five dollars. Lou accepts.
What is the test for consideration?
- Is there legal value? Could be a benefit or detriment.
- Bargain for exchange - did the promisor specifically intend the act, forbearance, or promise in return for his promise?
How is bargain for exchange shown?
Quid Pro Quo, this for that.
What is a legal detriment?
An act, forbearance, or a promise of such from the promisee.
- Doesn't have to be an actual detriment, but a benefit to the promisee, or not a loss.
- Has to be something that you are legally entitled to.
- I.e. if a "contract" between a father and daughter? → money to give up alcohol, legal value? No, not entitled to alcohol because underaged, therefore not a contract.
Legal benefit?
Money, goods (stereo), services
Legal sufficiency
Was there enough consideration into the acceptance? (usually will not look into this)
Nominal consideration
Nominal consideration is a consideration which has no relation to the value of the contract or article.
- Usually these are option contracts, in which "in consideration of one dollar in hand paid and receipt of which is hereby acknowledged" one party agrees to hold open the right of the other to make a purchase on agreed terms.
- The courts will enforce these contracts if the dollar is intended "to support a short-time option proposing an exchange on fair terms."
- I.e $100,000 painting sold for $10 of friendship to avoid division of assets in a divorce. Not good consideration because there was not a contract, so painting stays within the divorcee relationship
What is past consideration?
An act that could have served as consideration if it had been bargained for at the time but that was not the subject of a bargain.
- Second part of the test, no bargain for exchange.
- I.e. Jenna raked leaves outside neighbor's house. Neighbor gave up $50 and thanked for her time.
- What is the problem regarding consideration? Jenna performed service prior to the offer - consideration of Jenna was already performed. (past consideration)
Is past consideration sufficient to support a promise?
Promissory estoppel?
Means that the courts will stop the promisor from claiming that there was no consideration
What is the doctrine of promissory estoppel?
Contract that courts will enforce without consideration, which prevents one party from withdrawing a promise made to a second party if the latter has reasonably relied on that promise.
- I.e. Injustice would occur if the promisor reneigned on the promise - if Julia tried to find an apartment but there were none that she could afford → prove on damages
What are the three conditions if met, promissory estoppel is invoked?
- Promisor makes a clear and definite promise
- The action or forbearance is taken
- Promisee must rely on that promise, and the injustice can be avoided only by enforcing the promise.
What are the situations for a past valid consideration serving as the basis for another contract under certain circumstances? (I.e If the person then makes a new promise based on the unfulfilled past duty, the new promise is binding without further consideration. )
1. Statute of limitations
2. Voidable duties
3. Promissory estoppel
What is the basic rule with illegality in contracts?
Courts will not enforce contracts of an illegal bargain
- b/c to preserve the name of the institution & to help discourage unlawful behavior
What do the courts do when the promisee who has already performed under the contract involving an illegal act?
The court will leave the parties where it finds them, meaning that one of the parties will have received an uncompensated benefit.
What is the principle of restitution?
Restitution requires that one who has conferred a benefit or suffered a loss should not unfairly be denied compensation.
What are the circumstances where courts will provide remedy to an illegal action?
1. Ignorance of the violation of public policy
2. Withdrawal prior to the illegal act
How is an agreement illegal?
- If it is a bargain that violates a statute
- If it violates public policy, even though not expressly set forth in statutes
What illegal acts are included in breaking a statute?
Extortion, robbery, embezzlement, forgery, some gambling, licensing, and consumer credit transactions
When does gambling include insurance policies? Is life insurance always illegal?
Includes agreements with an insurance agency on a random person because would be gambling on a contingent event - but if you insure your family members then you will have suffered a direct loss.
What is the exception to gambling contracts?
Exception: common law permits the sale or purchase of securities - respectable risk taking in the capitalist system
Why are gambling contracts illegal?
Illegal because tends to be an anti utilitarian activity most attractive to those who can least afford it and to the criminal elements, and that gambling is addictive
Which statutes forbid one from making of a contract or completing some sort of performance agreed upon? (3)
- Usury
- Licensing statutes
- Restrain trade
What do usury statute protect from?
Charging illegal interest rates.
- Usury statutes sets the maximum allowable interest that may be charged on a loan
What is the act of usury?
Charging illegal interest rates
What happens if the plaintiff doesn't have a regulatory/ revenue statute, does it bar recover for unlicensed work?
Failure to hold a regulatory license bars recovery, but the absence of a revenue or registration license does not—the person may obtain the license and then move to recover
What is the general rule about illegality and trade?
Not every restraint of trade is unlawful; only unreasonable ones are
How do the restraint of trade cases usually arise as?
1. The sale of a business and an attendant agreement not to compete with the purchasers
2. An employees agreement not to compete with the employer should the employee leave for any reason.
Why can a non compete be considered illegal?
B/c the prospective employee in a weak bargaining position compared to the employer, might cause underemployment with lower wages or unemployment.
What is contract of adhesion?
Take it or leave it.
What are unconscionable contracts?
oppressive/ result of unequal bargaining power
What happens when a contract is found illegal?
The parties are left were the court found them, and no relief is granted.
Are Exculpatory Clauses illegal? What do they say?
Consumer contracts - Banned clause that says one party will not be liable to another for injuries from wrongful conduct during the performance of the contract
- Need to be reasonable
Exceptions where a court might permit one party to recover from an illegal act
- Party withdraw before performance
- Party protected by a statute
- Party not equally at fault
- Excusable ignorance
Why is contractual capacity significant?
Contract cannot be formed if one of the parties are presumed to lack the capacity to understand what he or she is agreeing to or to understand the consequences of the agreement. (Classes/groups of individuals who lack capacity)
What are the classes of concern for contractual capacity?
People who are mentally ill
Intoxicated persons
What is the general rule for minors?
Can avoid contract up to and within a reasonable time after reaching 18.
- Courts will look at when the person turns 18 and what they do after - if they comply with the contract for a while, then can't get out of the contract
What are the exceptions that prevent minors from avoiding the contract?
Necessities of life: food, medicine, clothing, shelter (binding to contract) -
Why are there exceptions to what minors can avoid?
Shows taking advantage of the system, for those under 18 who don't have houses and should be treated like an adult
How is the list of the exceptions to what minors can avoid expanding?
Mortgages, services to get a job, employment
What are the non voidable contracts that are prohibited for minors to avoid by state law?
Insurance, education, medical care, bank accounts, and third party intervening,
- i.e. Gastonia Personnel Corporation v Rogers - personnel company/fee = necessity because services were to help gain a job.
If the contractual capacity doesn't exist, how do we have an enforceable contract?
Quasi-contract theory
What are the exceptions that sway from the regular procedure of minors (that can either void the contract or accept the contract)?
1. Misrepresentation of age
2. Ratification
Is the exception that allows minors to avoid their contract when they are not allowed to, accepted in all states?
No, states are mixed to holding a minor liable.
What happens when kids misrepresent their age?
- In some states, Individuals can dis-affirm/voiding contract - want out for status quo if admit under 18
- Michigan - signed separate document regarding age
What happens during ratification?
Minor becomes an adult and expressly affirm the contract by continuing to make payments or keep goods
- Note: the age of majority plus a "reasonable amount of time"
What happens when a minor decides to disaffirm a contract?
Duty to return consideration received
Return goods in the condition at the time of disaffirmance
Return the amount of consideration received at the time of disaffirmance
Remember...Dodson vs. Shrader
What happened during Dodson vs. Shrader that is an example of a minor disaffirming a contract?
- 17 year old kid from Tennessee - takes pickup truck that he bought and beat it to death. He said to disaffirm the contract and wanted his money back.
- Some states reverse back to the state it was, except for subtracting the damages out of the total.
What is the general rule for people who are mentally ill?
The contract is voidable = voidable if legal guardian steps in or person returns to sanity.
What are the exceptions to voidable contracts for mentally ill people? Why?
- B/c notion want mentally ill to receive services and prevent against providers to refuse to enter into contract with mentally ill if able to walk away.
What happens when individual with mental illness or guardian disaffirms these types of contracts and the contract is void?
Returns goods at condition at time of disaffirmance
Return same amount of goods at condition received at the time of disaffirmance
What happens when the party had no knowledge of the mental illness? Is the non-mental illness party at a loss?
But if the contract was fair, and the other party had no knowledge of the mental illness, the court has the power to order other relief.
What is the general rule for intoxicated persons?
If the individual is so intoxicated and has no awareness of his or her actions AND the other person knows this, the contract is void.
If the contract is voidable, what occurs after the intoxicated person becomes sober?
If intoxicated individual agrees to ratify contract when sobers up, agree on contract.
What happens when in a contract, all 4 elements: agreement, consideration, legality and contractual capacity exist...is there a defense as to why the contract is not enforceable?
Yes, have to look at how the contract was entered into.
1. Duress
2. Undue influence
3. Misrepresentation
4. Mistake
Forced to do something against his or her will.
Physical duress?
Physical force has been used to compel a party to agree (The contract is void - null)
- I.e pay protection money or building won't burn down, not a valid contract
What happens a party is threatened with duress by threat that he or she feels that there is no alternative but to agree to the contract?
The contract is voidable
What is the test to see if there was duress by threat present?
- The threat must be improper
- There is no reasonable alternative - needed to enter into the contract because necessities were threatened.
- Did the threat induce assent by the victim (subjective) - evidence by the victim, if there was not a threat, then wouldn't have entered into the contract.
What is the test for duress? What is the classification of an improper threat?
- Bodily harm
- To commit a crime
- To instigate civil proceedings if in bad faith (i.e. going to sue you if you don't have a case)
- Economic threats (i.e. Mary tells rick that if he doesn't agree to enter into a contract with her to purchase her goods she will disclose that he has been cheating on his taxes).
What will the court rule for an economic threat? Why?
Contract voidable
- Person might not have an alternative, and negatively impacts how the contract was entered into.
What is the situation of undue influence when entering into a contract?
- Under the domination of the persuader
- Using improper power and trust.
What is a Fiduciary relationship?
Relationship built upon trust (attorney, doctor vs. patient)
What is the situation when the person is a victim of misrepresentation when entering into a contract?
Someone enters into the contract if the other party says something that is false
Kinds of misrepresentation?:
1. Fraudulent
2. Non-Fraudulent
What is the difference between fraudulent and non-fraudulent misrepresentations?
If the misrepresentation is intentional (fraudulent) or not intentional (non-fraudulent)
Non-fraudulent misrepresentation needs materiality - the misrepresentation would likely induce an individual to assent, whereas fraudulent doesn't.
What are the two ways that one can commit fraudulent misrepresentation?
Depends on what part of the contract
1. Fraud in the inducement
2. Fraud in the execution
If the courts find that the misrepresentation was fraud in the inducement, is it void or voidable?
If the courts find that the misrepresentation was fraud in the execution, is it void or voidable?
What is fraud in the execution?
- Misrepresentation of essential terms of a proposed contract
- But the victim doesn't know about the changes
I.e. For example, Alphonse and Gaston decide to sign a written contract incorporating terms to which they have agreed. It is properly drawn up, and Gaston reads it and approves it. Before he can sign it, however, Alphonse shrewdly substitutes a different version to which Gaston has not agreed. Gaston signs the substitute version. There is no contract. There has been fraud in the execution.
What is fraud in the inducement?
It involves some misrepresentation about the subject of the contract that induces assent.
How does one commit a false statement? (3 actions) Applies to fraudulent and non-fraudulent misrepresentations.
1. Misstatement of fact
2. Concealment - not putting facts out there that should be
3. Nondisclosure
What are the extraneous situations/ actions between parties to cause a fraudulent misrepresentation to be committed?
1. Statement made false by subsequent events
2. Statements of opinion
3. Misstatement of the law
4. Assertion of intention
What does it mean "statement made false by subsequent events"?
If a statement of fact is made false by later events, it must be disclosed as false.
What happens when the statement made false by subsequent events continues to stay false?
If the false statement isn't corrected, then the failure to speak is a (intentional) nondisclosure
Normally, do statements of opinion cause a concern to the legitimacy to the contract?
No, if the parties have the same experience levels in the matter, and the person who is bargaining does not give rise to a claim of justifiable reliance on an unwarranted opinion.
What is the situation that warrants for concern to the contract, if the statements of opinion exists?
But if the person is inexperienced and susceptible or gullible to blandishments, the contract can be voided.
- i.e. false advice from a lawyer
When is a common situation when someone would use "assertions of intention"?
Acquisition of land; the cases permit buyers to misrepresent the purpose of the acquisition so as not to arouse the suspicion of the seller that the land is worth considerably more than his asking price.
What is the test for a fraudulent misrepresentation?
- A false statement is made
- Intent to deceive
- Justifiable reliance on the false statement
What are the two ways that one commit the act of non-fraudulent misrepresentation?
1. Negligent misrepresentation
2. Innocent misrepresentation
What is negligent misrepresentation?
Some misrepresentation but without intent to commit the act of misrepresentation (I was expecting the product to do, but that's why I entered into the contract - want out)
What is the test for negligent misrepresentation?
- Negligent Misstatement (Careless)
- Materiality (Would likely induce an individual to assent)
- Justifiable reliance
What is innocent misrepresentation:
Really not intending to misrepresent the item, but didn't check.
What are the two ways a mistake is made in the process of developing a contract?
1. Unilateral mistake
2. Mutual mistake
What is the difference between unilateral and mutual mistakes?
One party (unilateral) or both parties (mutual) make the mistake
Is a contract with a unilateral mistake voidable?
What is the exception to a contract with a unilateral mistake?
If the other side knew or should have known about the mistake
- I.e. customer bought wrong truck to tow his boat, but the seller should have known better of what he wanted.
- Ex: Jack goes into an antique store to collect art: He is then told by a friend that it was not a monet and the painting is worthless.
--Him and the antique store, but the defense...
--Was there some sort of misrepresentation? NO b/c kid at the counter didn't know and didn't say anything
--Shows unilateral mistake - who made a mistake - Jack made a mistake (if he was the only one who made the mistake, he cannot get out of the contract - but to be able to get out of the contract, the other side had to have known)
What is the requirement about the mistake if there is the presence of a mutual mistake in the forming of a contract?
- The mistake has to have a material effect on the agreement
- The mistake relates to a "basic assumption on which the contract was made"
- The mistake has to have an adverse effect on the party that did not agree to bear the risk.
Example: Ex: Jill visits a coin dealer and sees a rare 1912 Denver mined dime for sale. She is given the dime to examine and decides that it is a Denver minted dime. She purchases the dime for $500.
A week later, a friend tells her that the dime was not minted in Denver and it is only worth $100.
- Defense? Fraudulent- misrepresentation
- But, in this case, the dealer didn't know, mutual mistake to the material fact - mistake is not how much it is worth but is the 1912 minted in denver dime.
- She purchased it because she believed it was minted in Denver
- If it is found that there is no defense - jill gets her money back but has to return the coin.
- Where did the coin dealer get it from?
What are the remedies for fraudulent misrepresentation?
Gives the victim the right to rescind the contract (return the parties to the before-contract status), affirm the contract, or bring an action for damages caused by the fraud
What is the statute of frauds?
Requires that some contracts be evidenced by a writing, signed by the party to be bound.
What is the general rule for the statute of frauds?
Contract doesn't need to be in writing to be enforceable
What are the exceptions of the statute of frauds?
The contracts that have to be in writing:
- Promises to pay debt of another
- Agreements of Executor or administrator (resolve the dispute, missing the person who died)
- Marriage promises
- Sale of land (any contract that involves land, needs to be in writing)
- Contracts not to be performed within one year
What is the general purpose of the statute of frauds?
The general purpose of the law is to provide evidence, in areas of some complexity and importance, that a contract was actually made.
What kind of law is the statute of frauds?
Statute → common law
Why do "promises to pay debt of another" need to be in writing?
If the promise to pay the debt of another person is a "collateral promise" of suretyship/guaranty.
- I.e. co-signer
What is a collateral promise?
A collateral promise is one secondary or ancillary to some other promise.
What is the exception to the requirement that "promises to pay debt of another" needs to be in writing?
The main purpose doctrine
What is the "main purpose doctrine"?
It holds that if the promisor's principal reason for acting as surety is to secure her own economic advantage, then the agreement is not bound by the Statute of Frauds writing requirement.
- I.e. Jessica is really the one who wants the fur coat but cannot, for reasons of prudence, let it be known that she has bought one. So she proposes that Lydia "buy" it for her and that she will guarantee Lydia's payments. Since the main purpose of Jessica's promise is to advance her own interests, an oral agreement is binding.
Why do "Agreements of Executor or administrator" need to be in writing?
- To have a record of preexisting obligation
- Where the promise by an executor or administrator of an estate to answer personally for the debt or duty, which the surety position is applicable.
What is the exception to the requirement that "agreements of Executor or administrator" needs to be in writing?
The main purpose exception to the surety provision - It holds that if the promisor's principal reason for acting as surety is to secure her own economic advantage, then the agreement is not bound by the Statute of Frauds writing requirement.
Why does "the marriage provision" need to be in writing?
if any part of the marriage or the promise to marry consists also of a promise to exchange, the agreement needs to be in writing in order to be enforced over the party in denial within the marriage
- I.e. prenuptial agreements
- I.e. postnuptial agreements
What is the exception to the requirement that "the marriage provision" needs to be in writing?
There is no "named" exception here, but courts are free to make equitable adjustments of property of the marriage to avoid an injustice.
Why does "contracts affecting an interest in real estate" need to be in writing?
Almost all contracts involving an interest in real estate are subject to the Statute of Frauds b/c of the broadness in nature and to prevent unjust enrichment (Equitable doctrine)
What is the exception to the requirement that "contracts affecting an interest in real estate" needs to be in writing?
The part performance doctrine - the situation were the buyer had paid the purchase price and the seller refuses to transfer the title, the buyer may recover the purchase price.
What happens if the the buyer has taken possession and made improvements on the property, can they prove that there was an oral contract?
Why does "the one-year rule" need to be in writing?
Because harder to prove something as time goes by...don't want to deal with the back and forth
- Universally interpreted to mean a contract that is impossible to be fully performed within one year
What is the exception to the requirement that "the one-year rule" needs to be in writing?
The possibility test
What is the possibility test?
If there is even the slightest chance of carrying out the agreement completely within the year, an oral contract is enforceable.
What are the statute of frauds under the UCC?
1. Contracts for the sale of goods in an amount greater than $500.
2. Sale of securities (Stocks and bonds)
What are the four exceptions under the UCC. that exempt the written requirement for sale of goods over 500$?
1. The ten day reply doctrine
2. Specially manufactured goods
3. Admission
4. Payment or delivery and acceptance doctrine
What is the Ten-Day-Reply Doctrine, that exempts the written requirement for sale of goods over 500$?
As between merchants, if an oral agreement is reached and one party sends the other a written statement confirming it, the other party has ten days to object in writing or the agreement is enforceable.
What is the case of the specially manufactured goods, that exempts the written requirement for sale of goods over 500$?
If the buyer purchases specially manufactured goods that are unsuitable for sales to others and the buyer repudiates, then the manufacturer will not be stuck.
- i.e in contract, a grocery store purchases more bags than needed, but the grocery store goes out of business and the bag company asks for the rest of the money, the statute of frauds needs to be in writing to be enforceable
What is the case of the "admission," that exempts the written requirement for sale of goods over 500$?
When there is a case when enforcement is sought, and the defendant admits in testimony or legal papers that a contract was made.
- But, the admission will not permit enforcement of all claimed terms of the contract; enforcement is limited to the quantity of goods admitted.
What is the case of the "Payment or delivery and acceptance," that exempts the written requirement for sale of goods over 500$?
The UCC provides that an oral contract for goods in excess of $500 will be upheld if payment has already been made and accepted, or if the goods have been received and accepted.
What does the common law require in the sufficiency of the required writing?
- Essential terms: parties, subject matter, and price.
- Needs the required signature of the party against whom enforcement is sought (party to be charged).
What is a signature?
"Any symbol executed or adopted by a party with present intention to authenticate a writing"
- Similar to electronic communications b/c transaction may not be denied legal effect if in electronic form
How does the UCC differ from the common law's requirements in the sufficiency of the required writing?
- Under the UCC, the writing must be signed by the party to be charged and the parties must be identified.
- The consideration, including the selling price, need not be set forth
- The UCC is not as strict as common law and allows gaps to be filled
What are the two exceptions that prevent a party from rescinding the contract by claiming the statute of frauds?
- Full performance
- Detrimental reliance
Why is full performance an exception to the statute of frauds?
Cannot be rescinded on the ground of statute of frauds because the contract fulfilled its function
Why is detrimental reliance an exception to the statute of frauds?
Second, some relief may be granted to one who has relied on an oral contract to her detriment (similar to the part performance doctrine mentioned already).
What is the Parol Evidence Rule?
To only look at the terms of the contract and disregard any prior and during conversations → if it's not in the contract, doesn't count.
- Bars both written and oral evidence
What is the purpose of the parol evidence rule?
To give freedom to the parties to negotiate without fear of being held to the consequences of asserting preliminary positions, and to give finality to the contract.
Is the Parol evidence rule only valued to those governed by the statute of frauds?
No. All written contracts.
Why are there exemptions to the parol evidence rule?
B/c the parol evidence rule does not negate all prior agreements or statements, nor preclude their use as evidence.
What are the exemptions to the parol evidence rule?
- Not an integrated contract
- Void/Voidable contracts
- Contracts subjected to a condition precedent
- Untrue recital or errors
- Ambiguity
What does it mean "not an integrated contract," as an exemption of the parol evidence rule?
If the parties intended the contract to be written and oral, then the rule does not apply.
- Has to contain the entire agreement language
What does it mean "Void/Voidable contracts," as an exemption of the parol evidence rule?
Information that is not in the final contract is admissible; to show the existence of grounds that would cause the contract to be void and that the contract is void.
- To show an element of the contract is missing
- Show a defense to a contract
- I.e. parol evidence is allowed to show evidence of lack of contractual capacity.
What does it mean "Contracts subjected to a condition precedent" as an exemption of the parol evidence rule?
When two parties orally agree that a written contract is only valid depending on the happening of an event.
- Oral condition negates a term in the written contract
- The parol evidence rule will not permit evidence of an oral agreement that is inconsistent with a written term, for as to that term the contract is integrated.
What does it mean "untrue recital or errors" as an exemption of the parol evidence rule?
Allows the showing of a fact stated in a contract is untrue
What does it mean "ambiguity" as an exemption of the parol evidence rule?
- To enforce a contract, its terms must be understood, so parol evidence would be allowed
- A claim of ambiguity cannot be used to alter, vary, or change the contract's meaning
Under the UCC, What 3 evidence can be used to explain or supplement a written contract for the sale of goods?
1. Course of dealing
2. Usage of trade
3. Course of performance
What does course of dealing mean?
"a sequence of previous conduct between the parties to a particular transaction which is fairly to be regarded as establishing a common basis of understanding for interpreting their expressions and other conduct."
What does a usage of trade mean?
"any practice or method of dealing having such regularity of observance in a place, vocation or trade as to justify an expectation that it will be observed with respect to the transaction in question."
What does a course of performance mean?
Is the conduct of a party in response to a contract that calls for repeated action (e.g., a purchase agreement for a factory's monthly output, or an undertaking to wash a neighbor's car weekly).
What do the words in a contract mean?
Courts attempting to give meaning to the parties' understanding when they wrote the contract.
- By looking at all the circumstances.
- By using the tools of interpretation
What is the test for interpreting the words in a contract? Tools courts use to interpret contracts.
- Specific term, give more weight than the general term
- Writing interpreted as a whole
- Common words given common meaning
- Technical terms given technical meaning
- Courts (in order) look to express terms, course of performance, cause of dealings, usage of trade
- If an amount is given in words and figures that differ, the words control
- Writing controls over typing; typing controls over boilerplate language (not to reinvent the wheel → language from past contracts)
- Ambiguities are construed against the party that wrote the contract
--One reading goes against one party, one is the other, goes against the person who wrote it because it's in their favor of being clear and favorable.
What are the four ways that one can discharge by performance of the duty?
1. Full performance
2. Nonperformance
3. Anticipatory breach
What do you look at to see if there was full performance that enacts the discharge by performance of the duty?
If the contract was fully performed by both sides
How does one become discharged by performance of the duty from non performance?
There has to be a material breach → they didn't do what they were supposed to
How does one become discharged by performance of the duty from substantial performance?
Sometimes remedies say what the breecher has to do
What is an anticipatory breach?
Expect that the party will breach the contract- Oral or by action
- I.e. see that person in contract goes to jail and person in contract makes the call that he's not going to follow it.
What is discharge by conditions?
Obligation to perform a contract is conditioned on an event occurring (happening or nonhappening)
- May be expressed or implied
What is a condition precedent?
An event must happen first - contract w/ condition precedent means add into contract that have to buy the house prior to purchasing services
What is condition concurrent?
Arises when the duty to perform the contract is simultaneous
- I.e. the promise of a landowner to transfer title to the purchaser and the purchaser to tender payment to the seller.
- I.e. when delivery service delivers beer, condition concurrent is that customer pays.
What is condition subsequent?
A condition that terminates an already existing duty of performance
- I.e. Ralph agrees to do preventive plumbing maintenance on Deborah Dairy's milking equipment for as long as David Dairy, Deb's husband, is stationed overseas. When David returns, Ralph's obligation to do the maintenance (and Deb's duty to pay him) terminates.
What are the ways where there is discharge by the mutual rescission agreement of the parties?
- Mutual Rescission
- Waiver
- Substituted agreement
- Accord and satisfaction
What is discharge by mutual recession?
The parties may agree to give up the duties to perform
- This may be by a formal written release saying the obligor is discharged upon delivery of the writing or upon occurrence of a condition, or by a contract not to sue about it.
- The agreement can be by their actions, such as both party's failure to take steps to perform or enforce.
- An agreement to rescind will be given effect even though partial performance has been made or one or both parties have a claim for partial breach.
What is discharge by a waiver?
A party voluntarily gives up a right she has under a contract but doesn't give up the entire right to performance by the other side.
- I.e. Tenant is supposed to pay rent on the first of the month, but because his employer pays on the tenth, Tenant pays the Land lady on that day. If the Land lady accepts the late payment without objection, she has waived her right to insist on payment by the first of the month, unless the lease provides that no waiver occurs from the acceptance of any late payments.
What is discharge by Substituted agreement?
May replace the original one between the original parties
- Let's change terms/service
What is discharge by novation?
New contract or one whereby a new person is substituted for the original obligor, and the latter is discharged.
- I.e. If Mr. Olson is obligated to deliver a car to Jack, Jack and Mr. Olson may agree that Dewey Dealer should deliver the car to Jack instead of Mr. Olson; the latter is discharged by this novation.
What is discharge by accord and satisfaction?
Here the parties to a contract (usually a disputed one) agree to substitute some performance different from what was originally agreed, and once this new agreement is executed, the original contract (as well as the more recent accord) is satisfied.
What are the reasons for Discharge when performance becomes impossible or very difficult?
Commercial impracticability
Frustration of purpose
Impossibility to complete a contract?
- Death or incapacity of a personal services contracter
- Destruction or deterioration of (the agreed) object
- Performance prohibited by government order
Said to exist when there is a radical departure from the circumstances that the parties reasonably contemplated would exist at the time they entered into the contract
- Extraordinary circumstances
- The level of frustration must be severe; that is, the value of the contract to the party seeking to be discharged must be destroyed or nearly destroyed.
Commercial impracticability?
(UCC) May have done it but some event happened to (not reasonably contemplate) that made it impractical, and not worth it monetarily to continue contract
- I.e. war, embargo, natural disasters
- Not more fluctuations of the market or bad weather'
Frustration of purpose?
- The whole purpose that you entered into the contract doesn't exist anymore
- Has to be at the main core of the contract
What are the other reasons for discharge of obligations?
1. Cancellation, Destruction, or Surrender
2. Defense to a contract/ Power of Avoidance
3. Statute of Limitations
4. Bankruptcy
What are the terms for the "Cancellation, Destruction, or Surrender" to be a reason for discharge of obligations?
- The entire document can be handed over to the obligor with the words, "Here, you don't owe me anything." The obligee can tear the paper into pieces and tell the obligor that he has done so because he does not want anything more. Or he can mutilate the signatures or cross out the writing.
- Both parties have to be in agreement.
What are the terms for the "Power of avoidance" to be a reason for discharge of obligations?
A contractual duty can be discharged if the obligor can avoid the contract, by if one of the parties lacked capacity; duress, undue influence, etc.
What are the terms for the "Statute of limitations" to be a reason for discharge of obligations?
- Right to sue in court for a remedy doesn't last forever when the obligor has breached a contract.
- UCC - 4 years
What are the terms for the "Bankruptcy" to be a reason for discharge of obligations?
Certain obligations are discharged once a court declares a debtor to be bankrupt
What is the purpose of a remedy? (3)
1. To put the non-breaching party in the position he or she would have been had there been no breach (want to put them in a good position)
2. Make the party whole (no financial burden)
3. Punishment (under civil law)
What are the two kinds of remedies? (2)
1. Legal remedies
2. Equitable remedies (equal/fair)
What is the legal remedy?
Provision of DAMAGES
What are damages?
Money paid by one party to another
What are the types of damages, depending on the circumstances?
- Compensatory
- Incidental
- Consequential
- Nominal
- Liquidated
- Punitive
What are the three equitable remedies?
- Specific performance
- Injunction (stop doing something)
- Restitution (to make parties whole)
What is a specific performance?
A person is ordered to deliver a unique thing (land or a unique personal property, such as a painting or an antique car)
When is specific performance used?
- An alternative to damages
- Usually invoked for the sale of unusual items/ property
- Never used for a breach of contract for services (this will produce not quality work)
What is an injunction?
A judicial order directing a person to stop doing what he or she should not do (such as competing with a former employer in violation of a non-compete agreement)
When would an injunction be used?
- I.e. non- compete clause/selling land to another
- Request ahead of time to prevent the sale of a property/etc while negotiating terms
What is restitution?
Which means putting the parties back into the position they were in before the contract was made.
When would restitution be used?
When there is a situation of misrepresentation, undue influence, duress, etc.
- I.e. Undue influence - defense of contract: convince aunt to sell the house to me before she died, but because of unde influence, house goes back to the estate to be divided up.
What is the theory of contract remedies?
Parties have the power to breach a contract but not the right to breach a contract
- (But by breaching, will suffer the consequences)
What interests do contract remedies serve to protect?
Expectation interest
Reliance interest
Restitution interest
What is the expectation interest?
What did we expect to get out of the contract? The Benefit for which the party entered into the contract.
What is the remedy for the expectation interest?
The remedy is to put him in a position as good as that which he would have been in had the contract been performed.
- Specific performance
- Monetary damage
What is the reliance interest?
is the loss suffered by relying on the contract and taking actions consistent with the expectation that the other party will abide by it;
What is the remedy for the reliance interest?
The remedy is reimbursement that restores the promise to his position before the contract was made.
- Monetary damage
What is the restitution interest?
- Expect to be made whole and not be out of money
- When the party already gave the other party the value of the contract, restores the party with any value they already provided.
What is the remedy for the restitution interest?
- Restitution
- Monetary damage
What are the types of damages?
1. Compensatory
2. Incidental
3. Consequential
4. Nominal
5. Liquidated
6. Punitive
What are compensatory damages?
Money paid to compensate for what not done/ performed under the contract.
What is the requirement to gain compensatory damages?
- What did you do to reduce the damages?
- The non- breaching party may recover his actual losses, not more.
- Therefore, In all these situations, the losses he has avoided—savings, profits, or value of goods—are subtracted from the losses incurred to arrive at the net damages.
What are Incidental damages?
Non-breaching party incurs expenditures to minimize the loss from the breach of contract b/c to arrange for substitute goods or services, the nonbreaching party might have to pay a premium or special fees to locate another supplier or source of work
What are consequential damages?
- Damages occurred without action on his part because of the breach of contract
- For example, if Ralph does a poor job of plumbing Betty's bathroom and the toilet leaks, damaging the floor, the downstairs ceiling, and the downstairs rug, Ralph would owe for those loses in consequential damages.
What are nominal damages?
Non breaching party has suffered no loss or cannot prove the lossm, receives minimal $$.
What are liquidated damages?
- Parties expect things to go wrong, therefore they create the terms of breech (When parties determine what the damages for a breech will be and put that clause in the contract)
- Good for business b/c caps liability
What are punitive damages?
- Those awarded for the purpose of punishing a defendant in a civil action, in which criminal sanctions are of course unavailable.
- They are proper in cases in which the defendant has acted willfully and maliciously and are thought to deter others from acting similarly.
- Not generally awarded in contract law (b/c purpose is compensation, not punishment)
- Permitted in the law of torts
What is the overall DETERMINATION to if legal remedies are sufficient?
Look at the money spent/money lost + plug it into the damages - if these damages aren't good enough, need something to be equitable
How much of a remedy?
Depends on when the breach of contract occurred - between total non performance and part performance
What is the remedy for total non-performance by the breaching party?
- If monetary restitution, only has the right to gain the exact price agreed in the contract
What is the remedy for part performance and then breach?
Since the party in breach is liable to the injured party for damages for loss, this rule comes into play only when the benefit conferred is greater than the amount the non-breaching party has lost.
- Arlene agrees to sell her property to Calhoun for $120,000, and Calhoun makes a partial payment of $30,000. He then repudiates. Arlene turns around and sells the property to a third party for $110,000. Calhoun—the breaching party—can get his money back, less the damages Arlene suffered as a result of his breach. He gets $30,000 minus the $10,000 loss Arlene incurred. He gets $20,000 in restitution.
What are the several limitations or restrictions that affect when a person can claim remedies, in both law and equity?
The nonbreaching party must be able to articulate with some degree of certainty what her damages are:
- Must be foreseeable
- Non-breaching party must have made a reasonable effort to mitigate damages
- Certain of damages
- Can't seek to avoid a contract if lost the power to do so.
What if the breach of contract also contained a tortious conduct?
- Most statute of limitations are different for tort and breach of contract
- Punitive damages are more often permitted in tort actions (pain and suffering)
- Most insurance policies do not cover intentional torts, so a contract theory would trigger money damages
What was the transition in history that created the base concept of the UCC?
- During Feudal times, there were self sufficient societies were areas were small and trade was transparent.
- Black Death, self-sufficient manors broke up - labor migrated to urban centers and were so far apart that not everyone's needs were met.
- Creation of merchants
- Set own rules and courts to enforce these rules
When the american colonies adopted British law, what was the solution to states' inconsistent rules for trade?
1942 the American Law institute (ALI) worked on a national body of modern commercial law, to provide common ground for states.
What is the Uniform Commercial code made of?
Topics that have to be the same across the states, that affect commerce.
What are the articles within the UCC?
Article 1: General Provisions
Article 2: Sales
Article 2A: Leases
Article 3: Commercial Paper
Article 4: Bank Deposits and Collections
Article 4A: Funds Transfers
Article 5: Letters of Credit
Article 6: Bulk Transfers
Article 7: Warehouse Receipts, Bills of Lading and other documents of title
Article 8: Investment Securities
Article 9: Secured Transactions
What does Article 2 govern?
Only about the sale of goods
What is a sale?
The passing of title (ownership) from the seller to the buyer for a price.
What is a good?
All things...which are Movable at the time of the identification to the contract for sale other than the money in which the price is to be paid.
Would real estate apply to the UCC?
- Land (No, Real estate law will apply)
- Crops (Test)
- Trees
- Minerals
- Oil
- Gas
What is the test for determining if the UCC will govern?
- Item is severed by the Seller (Separated from the land, pulls up the crops or oil, etc)
- Item is severed by the buyer without material harm to the real estate
If there is a case where you are determining if the UCC applies and there is a mixture of goods and services involved, what is the test?
1. Predominant purpose test
2. Look at the contract
What is the predominant purpose test?
Show that the purpose is more goods than services, then article 2 will apply.
Why do people want to use Article II in the UCC over contract law?
- Under Article II, provides warranties & implied warranties
- Much easier prove
- Consumer friendly law
What does Article 2A govern?
The leasing of goods (not transferring ownership, price)
What is the leasing of goods?
A transfer of the right to possession and the use of goods for a term in return for consideration.
- "Lessor transfers the right of possession to the "Lessee"
What are the two kinds of leases?
1. Consumer lease
2. Finance lease
What are consumer leases?
Goods are leased primarily for personal, family, or household purposes and payments are less than 25,000.
What are finance leases?
Acquires the goods or the right to them, and leases them to the lessee
What are the differences between contract law (common law) and the UCC? Look at...
1. The offer
2. The acceptance
3. Revocation
4. Consideration
5. Forms of the contract
6. Meaning of the contract
What is the difference in the offer between common law vs the UCC?
The terms in the offer
- Common law: Definite terms
- UCC: If intent to make a contract, gap fill terms (i.e. price determination = market value)
What is the difference in the the acceptance between common law vs the UCC?
The exactness in the agreement in terms of the offer
- Common law: mirror image rule, therefore rejects counteroffers
- UCC: Acceptance may vary from the offer (but with exceptions)
When will the UCC not allow the acceptance to vary from the offer?
- Offer expressly limits the acceptance to the terms (if offer says not taking anything else, this is my offer)
- Terms materially alter offer
- Notification of rejection
What is the difference in the revocation between common law vs the UCC?
The exceptions to the allowance of the acceptance of the revocation
- Both common law and the UCC allow revocations prior to the acceptance but the exceptions...
- Common law: Unless Options contract
- UCC: Unless firm offer
What is the difference in the consideration between common law vs the UCC?
The consideration needed to modify the sales contract
- Common law: If you need to make changes to a contract, then have to add more consideration to modify the contract.
- UCC: No consideration needed to modify the sales contract if made in good faith.
What is the difference in the form of the contract between common law vs the UCC?
Common law: Statute of frauds
UCC: Over $500
What is the difference in the meaning of the contract between common law vs the UCC?
No difference, both use the parol evidence rule
What are the two general obligations that the UCC Article 2 that are imposed on the parties, in addition to the obligations of the offer, acceptance, perfomance of sales contracts, etc?
1.Deals with unfair contract terms
2. Obligations imposed on merchants
What does the UCC require in contracts as a general obligation on the parties?
Duty of good faith (with honesty & observation of reasonable commercial standards of fair dealing)
If the terms of the contract are unfair, what power does the UCC provide the courts?
UCC gives the courts the power to correct the contracts that they determine is unfair
What obligations does the UCC impose on merchants?
Merchant to non-merchant: the provision of warranties
Who is a merchant?
Who deals in goods of the kind or otherwise by his occupation holds himself out as having knowledge or skill peculiar to the practices or goods involved in the transactions.
Who determines the rest of the obligations, once the UCC's have been settled?
What do the other obligations have to follow?
"Good faith, diligence, reasonableness, and car"
Why didn't we need product liability law back in history?
Beginning: The theory of caveat emptor—let the buyer beware
- Ex: Most foodstuffs 150 years ago were grown at home and "put up" in the home kitchen or bought in bulk from a local grocer, subject to inspection and sampling;
In a typical products-liability case, what are the three legal theories usually asserted?
A contract theory and two tort theories
What is contract theory?
A warranty (expressed and implied warranties), governed by the UCC
What are the two tort theories in a typical products-liability case?
Negligence and strict products liability, governed by common law
What are express warranties?
- Created whenever the seller affirms that the product will perform in a certain manner
- (Doesn't need the expressly state "warrant" or "guarantee"
- Facts of Quantity, quality and description and facts on the packaging
What is the test for express warranties?
(1) an affirmation of a fact or promise relating to the goods, (2) a description of the goods, or (3) a sample or model.
- Where, Any of these will create an express warranty that the goods will conform to the fact, promise, description, sample, or model.
What is the exception to express warranties?
Affirmation merely of the value of the goods or a statement of the seller's opinion of the good.
- The "puff" not the facts
What are implied warranties?
Is one that circumstances alone, not specific language, compel reading into the sale. In short, an implied warranty is one created by law, acting from an impulse of common sense
What is the difference between implied and express warranties?
Expressed focuses on the bargain aspect that has been spoken/written, whereas implied warranties are unspoken/unwritten.
What does the UCC say about the fundamental rule of what goods carry?
Goods carry an implied warranty of merchantability if sold by a merchant-seller.
What are the 6 characteristics of implied warranties of merchantability?
1. Pass without objection in the trade under the contract description
2. In the case of fungible goods, are of fair average quality within the description
3. Are fit for the ordinary purposes for which such goods are used
4. Run, within the variations permitted by the agreement, of even kind, quality, and quantity within each unit and among all units involved
5. Are adequately contained, packaged, and labeled as the agreement may require
6. Conform to the promise or affirmations of fact made on the container or label if any
What are the warranties that automatically attach?
1. Fitness of a particular purpose
2. Good title
What is the test for "Are fit for the ordinary purposes for which such goods are used?"
1. The natural-foreign test: If the substance in the soup is natural to the substance—as bones are to fish—then the food is fit for consumption
2. Reasonable expectations: "unless otherwise agreed, the goods sold are fit for the purposes for which goods of the same description would ordinarily be used.
What is the implied warranty of fitness for particular purpose?
I.e. you go to a hardware store and tell the salesclerk that you need a paint that will dry overnight because you are painting your front door and a rainstorm is predicted for the next day. The clerk gives you a slow-drying oil-based paint that takes two days to dry.
Is it correct to imply that the seller has the degree or skill about every product that he sells to give rise to an implied warranty?
What is the warranty that mentions good title under the UCC's Article 2?
Unless explicitly excluded, the seller warrants he is conveying good title that is rightfully his and that the goods are transferred free of any security interest or other lien or encumbrance.
What are the warranty exceptions to the good faith of title transfer? (2)?
- In some cases, the buyer should know that the seller does not claim title in himself, nor that title will necessarily be good against a third party. (But the circumstances must be so obvious that no reasonable person would suppose otherwise).
- The merchant-seller (that acts as a third party) warrants the goods are free of any rightful claim by a third person that the seller has infringed his rights (e.g., that a gallery has not infringed a copyright by selling a reproduction)
--Only applies to a seller who regularly deals in goods of the kind in question.
--I.e. If you find an old print in your grandmother's attic, you do not warrant when you sell it to a neighbor that it is free of any valid infringement claims.
--I.e. that a gallery has not infringed a copyright by selling a reproduction
What does it mean, "course of dealing or usage of trade" in "the UCC says that unless modified or excluded implied warranties may arise from a course of dealing or usage of trade?"
If a certain way of doing business is understood, it is not necessary for the seller to state explicitly that he will abide by the custom; it will be implied.
- I.e. A typical example is the obligation of a dog dealer to provide pedigree papers to prove the dog's lineage conforms to the contract.
How to invoke warranty theory? (contract)
- The claimant must prove that there was a sale.
- The sale was of goods rather than real estate or services.
- The action must be brought within the four-year statute of limitations under Article 2-725, when the tender of delivery is made, not when the plaintiff discovers the defect.
- Claimant must give notice of breach within a reasonable time - let them know that something isn't working (mitigating damages)
What are the four ways warranties can be disclaimed?
- Exclusion of express warranties (by not giving them)
- Exclusion of implied warranties
- Exclusion of implied warranties of merchantability
- Exclusion of implied warranty of fitness
What does the UCC forbid regarding expressed warranties?
UCC forbids fine print if unreasonable conflicts with express warranties in the rest of the contract. (can't give expressed warranty and try to disclaim it)
What can sellers do to exclude implied warranties?
- Describing the product with language such as "as is" or "with all faults."
- Allow the buyer to examine or have the option to examine goods - The buyer who has either examined or refused to examine the goods before entering into the contract may not assert an implied warranty concerning defects an inspection would have revealed.
What is required by the UCC that permits the seller to disclaim or modify the implied warranty of merchantability?
- The statement has to mention merchantability (must say, built as a joke table) and has to be easily seen
- The disclaimer doesn't have to be in writing
What is important to remember about the exclusion of implied warranty of fitness?
- Must be in writing and conspicuous
- Need not mention "fitness"
-- There are no warranties that extend beyond the description on the face of this contract
What rules does the UCC provide for deciding which should prevail, if there is a conflict between express and implied warranties and their exclusion/limitation?
- All warranties are to be construed as consistent with each other and as cumulative.
- If the warranties aren't consistent and cumulative, then the parties intentions governs the interpretation
What are the rules for if the warranties aren't consistent and cumulative?
(a) exact or technical specifications displace an inconsistent sample or model or general language of description;
(b) a sample from an existing bulk displaces inconsistent general language of description;
(c) express warranties displace inconsistent implied warranties other than an implied warranty of fitness for a particular purpose.
- Any inconsistency among warranties must always be resolved in favor of the implied warranty of fitness for a particular purpose.
In the cases of doubt whether it or some other language applies when the warranty is limited/excluded, what warranty has the superior claim?
The implied warranty of fitness
What is the purpose of the Magnuson-Moss act?
Designed to clear up confusing and misleading warranties
Which authority group is authorized to promulgate regulations and interpret and enforce the act?
The Federal Trade commission
What party does the Magnuson-Moss act cover?
Consumer products (For household and domestic uses)
Why doesn't the Magnuson-moss act cover commercial purchasers?
commercial purchasers are presumed to be knowledgeable enough not to need these protections, to be able to hire lawyers, and to be able to include the cost of product failures into the prices they charge.
Under the FTC regulations, what are the items of information must be disclosed in a single document to meet consumer concerns?
1. The identity of the persons covered by the warranty, whether it is limited to the original purchaser or fewer than all who might come to own it during the warranty period.
2. A clear description of the products, parts, characteristics, components, or properties covered, and where necessary for clarity, a description of what is excluded.
3. A statement of what the warrantor will do if the product fails to conform to the warranty, including items or services the warranty will pay for and, if necessary for clarity, what it will not pay for.
4. A statement of when the warranty period starts and when it expires.
5. A step-by-step explanation of what the consumer must do to realize on the warranty, including the names and addresses of those to whom the product must be brought.
6. Instructions on how the consumer can be availed of any informal dispute resolution mechanism established by the warranty.
7. Any limitations on the duration of implied warranties—since some states do not permit such limitations, the warranty must contain a statement that any limitations may not apply to the particular consumer.
8. Any limitations or exclusions on relief, such as consequential damages—as above, the warranty must explain that some states do not allow such limitations.
9. The following statement: "This warranty gives you specific legal rights, and you may also have other rights which vary from state to state."
What does the Magnusson-Moss Act require the warranty to be labeled as?
A full warranty or limited warranty
What is a full warranty?
(1) the defective product or part will be fixed or replaced for free, including removal and reinstallation;
(2) it will be fixed within a reasonable time;
(3) the consumer need not do anything unreasonable (like shipping the piano to the factory) to get warranty service;
(4) the warranty is good for anyone who owns the product during the period of the warranty;
(5) the consumer gets money back or a new product if the item cannot be fixed within a reasonable number of attempts.
- The full warranty may not cover the whole product; and has to state what parts are included and excluded
What is a limited warranty?
Less inclusive;
- It may cover only parts, not labor;
- It may require the consumer to bring the product to the store for service;
- It may impose a handling charge; it may cover only the first purchaser.
What exclusions are allowed in both full and limited warranties?
Consequential damages
What are Phantom warranties?
- The express warranty contained disclaimers of implied warranties,
- Leaves the consumer with fewer rights than if no express warranty had been given at all.
How does the Magnusson-act protect against phantom warranties?
- Phantom warranties were abolished by this act
- Provides the rules that...If the seller gives away a written warranty, cannot dsclaim implied warranties.
& If a limited warranty, can limit implied warranties to the time frame of the limited warranty.
What kind of law is the UCC? What does this mean about the seller's ability to disclaim implied warranties?
State law - so each state is free to limit a seller's ability to disclaim implied warranties
What is the second problem with warranty law?
What is privity?
Privity is the legal term for the direct connection between the seller and buyer, the two contracting parties.
What is the doctrine of privity?
Can only sue another if they are in privity
What is horizontal privity?
-Non-contracting parties who suffer damages from defective goods, such as non-buyer users, consumers, and bystanders.
- Horizontal privity determines to whose benefit the warranty "flows"—who can sue for its breach.
What happens if someone other than that buyer is injured by the defective product?
The state is given three options to conclude the extension of the seller's warranty
- (Not the UCC)
What is Alternative A?
Seller's warranty extends "to any natural person who is in the family or household of his buyer or who is a guest in his home"
- provided (1) it is reasonable to expect the person suffering damages to use, consume, or be affected by the goods and
- (2) the warranty extends only to damages for personal injury.
What is alternative B?
People beyond the buyers home: "extends to any natural person who may reasonably be expected to use, consume, or be affected by the goods, and who is injured in person by breach of the warranty."
- I.e. if Carl took the lamp to a neighbor's house to illuminate a poker table: under Alternative B, anybody at the neighbor's house who suffered injury would be covered by the warranty
- Does not extend protection to organizations; "natural person" means a human being.
What is alternative c?
"extends to any person who is injued by breach of the warranty who may reasonably be expected to use, consume, or be affected by the goods, and who is injured in person by breach of the warranty."
- Provides redress for damage to property as well as for personal injury
- and it extends protection to corporations and other institutional buyers.
What is vertical privity?
The entities in the distribution chain are those in vertical privity to the buyer.)
Who can a buyer sue for a breach of warranty?
Chain of distribution
After disclaimers and privity issues are resolved, what are the other possible issues facing the plaintiff in a products-liability warranty case?
Issues of assumption of the risk, contributory negligence, and comparative negligence
How is the evidence in Tort law case proved?
Beyond the preponderance of the evidence
What is tort law?
Something that someone does to someone else (party against party) that is wrong
- This is separate from criminal law
A wrong for which the law will provide a remedy, most often in the form of money damages.
How were the law of torts developed?
Developed almost entirely in the common-law courts (judicial decisions). Using past cases, a series of rules have been developed by the courts to govern the conduct of individuals in their non contractual dealings with each other.
What is the accountability system developed by tort law, in the absence of contracts?
Tort law holds individuals legally accountable for the consequences of their actions.
What is the difference between criminal law and tort law?
Criminal: Society is the persecutor (brings the action) and does not compensate the family of the victim. The judgement are prison times or fines.
Tort law?
The victim/family brings the action, nd the judgement against the defendant is usually expressed in monetary terms.
What are the two kinds of tort?
Intentional torts, negligent torts, and strict liability torts.
What are intentional torts?
Arise form intentional acts
What are negligence torts?
Unintentional, that arise from carelessness (i.e. when a surgical team fails to remove a clamp from a patient's abdomen when the operation is finished)
What are the similarities of between intentional torts and negligence torts?
Imply some fault on the part of the defendant
What are strict liability torts?
There may be no fault at all, but tort law will sometimes require a defendant to make up for the victim's losses even where the defendant was not careless and did not intend to do harm.
Dimensions of Tort Liability?
1. Fault
2. Type of injury
3. Types of damages
4. Excuses
What is the differences between criminal and tort law - in terms of the fault dimension? (Similarities and differences)
Like criminal law, tort law requires a wrongful act by a defendant for the plaintiff to recover.
Unlike criminal law, however, there need not be a specific intent (reasons for the defendant's actions - i.e. innocent act)
What is the model of the fault dimension?
- At one end, is the deliberate desire to do injury.
- The middle ground is occupied by careless conduct.
- At the other end is conduct that most would consider entirely blameless, in the moral sense.
Strict liability?
- The defendant may have observed all possible precautions and yet still be held liable.
(i.e. the manufacturer of a defective product that is placed on the market despite all possible precautions, including quality-control inspection. In many states, if the product causes injury, the manufacturer will be held liable.)
What are the type of injuries?
- Physical harm to the person or property
- Mental injury
- Damages
What is the requirement to prove a mental injury in tort law?
If the mental injury is a result of a physical injury (shock and depression following an automobile accident)
What are the terms of the damages in tort law?
To a person's...
1) Reputation (injured by defamatory statements or writings)
2) Privacy (injured by those who divulge secrets of his personal life)
3) and economic interests (misrepresentation to secure an economic advantage, certain forms of unfair competition).
What are the common rule of exculpation/ excuses for committing an apparent wrong in tort law? What makes the plaintiff not be able to gain recovery from tort law?
1. Assumption of risk
-- (i.e. A baseball fan who sits along the third base line close to the infield assumes the risk that a line drive foul ball may fly toward him and strike him. He will not be permitted to complain in court that the batter should have been more careful or that management should have either warned him or put up a protective barrier.)
2. Negligence of the plaintiff:
-- I.e. two boxers in the ring consent to being struck with fists (but not to being bitten on the ear).
-- I.e. If two drivers are careless and hit each other on the highway, some states will refuse to permit either to recover from the other.
How are damages measured?
By the extent of the injury - expressed in monetary terms
Compensatory damages?
Replacement of property destroyed, compensation for lost wages, reimbursement for medical expenses, and dollars that are supposed to approximate the pain that is suffered.)
Punitive damages?
The purpose is to punish the defendant's actions by exactin an additional and sometimes heavy payment, and deter others from similar conduct.
When are punitive damages allowed?
In aggravated situations (when the defendant has deliberately committed a wrong with malicious intent or has otherwise done something outrageous) because it is at odds with the general purpose of tort law.
- Rarely allowed in negligence cases
What are the kinds of intentional torts? (7)
1. Assault and battery
2. False Imprisonment
3. Intentional infliction of emotional distress
4. Trespass and nuisance
5. Intentional interface with contractural relations
6. Malicious prosecution
7. Defamation
8. Invasion of privacy
What is assault?
(1) the threat of immediate harm or offense of contact or (2) any act that would arouse reasonable apprehension of imminent harm.
What is battery?
Unauthorized and harmful or offensive physical contact with another person that causes injury.
What is the doctrine of transferred intent?
Intended to hurt the plaintiff but ended up hurting a random passerby
- I.e. if Draco aims his wand at Harry but Harry ducks just in time and the impact is felt by Hermione instead, English law (and American law) would transfer Draco's intent from the target to the actual victim of the act. Thus Hermione could sue Draco for battery for any damages she had suffered.
What is false imprisonment?
People have a right to be free to go as they please, and anyone who without cause deprives another of personal freedom has committed a tort.
What are the damages to false imprisonment?
Damages are allowed for time lost, discomfort and resulting ill health, mental suffering, humiliation, loss of reputation or business, and expenses such as attorneys' fees incurred as a result of the restraint (such as a false arrest).
What is the plaintiff's burden in emotional distress/intentional infliction cases?
Showing that the mental distress is severe.
- Many states require that this distress must result in physical symptoms such as nausea, headaches, ulcers, or, as in the case of the pregnant wife, a miscarriage.
- Other states have not required physical symptoms, finding that shame, embarrassment, fear, and anger constitute severe mental distress.
What is trespassing?
Intentionally going on land that belongs to someone else or putting something on someone else's property and refusing to remove it.
What happens when someone trespassing is injured by the negligence of the landowner?
In some states, a trespasser is only protected against the gross negligence of the landowner. In other states, trespassers may be owed the duty of due care on the part of the landowner.
What is the test to prove tortious interference with a contract?
1) There was a contract between the plaintiff and a third party.
2) The defendant knew of the contract.
3) The defendant improperly induced the third party to breach the contract or made performance of the contract impossible.
4) There was injury to the plaintiff.
- I.e. Texavo vs. Pennzoil: Texaco was sued by Pennzoil for interfering with an agreement that Pennzoil had with Getty Oil.
Malicious Prosecution tort?
The tort of causing someone to be prosecuted for a criminal act, knowing that there was no probable cause to believe that the plaintiff committed the crime.
What does the plaintiff have to do to prove that malicious prosecution was present?
The plaintiff has to show that the defendant acted with malice or with some purpose other than bringing the guilty to justice. The defendent filed the action for an improper purpose and had no reasonable belief that his cause was legally or factually well grounded.
- The criminal proceeding must terminate in the plaintiff's favor in order for his suit to be sustained.
What is defamation?
Injury to a person's good name or reputation.
What is slander?
If the harm is done through the spoken word - one person to another, by telephone, by radio, or on television
What is libel?
If the defamatory statement is published in written form
What is the definition of defamatory communication based on the Restatement (Second) of Torts?
One that "so tends to harm the reputation of another as to lower him in the estimation of the community or to deter third persons from associating or dealing with him."
- You cannot be libeled by one who sends you a letter full of false accusations and scurrilous statements about you unless a third person opens it first
What is the test of defamation?
- Has to be false
- The statement must be "published"—that is, communicated to a third person.
- Must have a reference to a particular person, but he/she need not be identified by name (i.e. "the company president is a crook")
Which parties are able to be defamed and which ones are not?
- The dead are not capable of being defamed
- Corporations, partnerships, and other forms of associations can also be defamed, if the statements tend to injure their ability to do business or to garner contributions.
Why is the law of defamation largely built on Strict liability?
Doesn't matter about intent (even if it was an error or if you exercised due care)
- Though a plaintiff may be able to prove that a statement was defamatory, he is not necessarily entitled to an award of damages.
Product disparagement?
Publishing false information about another business's product
What would the plaintiff have to prove?
- If there was actual damages that resulted from the slander of quality
- The extent of the economic harm
What is absolute privilege?
Statements made during the course of judicial proceedings, meaning that they cannot serve as the basis for a defamation suit.
- Accurate accounts of judicial or other proceedings are absolutely privileged
What is the right to privacy? (4)
1. The right to control the appropriation of your name and picture for commercial purposes
- I.e. someone else placing your photograph on a billboard or cereal box as a model or using your name as endorsing a product or in the product name. Allows for the aggrieved person to sue and to recover damages for unauthorized profits and also to have the court enjoin (judicially block) any further unauthorized use of the plaintiff's name, likeness, or image.
2. The right to be free of intrusion on your personal space or seclusion
- I.e. Taking photographs in a private space (i.e. locker room) or reading someone's emails
3. Freedom from public disclosure of embarrassing and intimate facts of your personal life
- (True statements about facts without legitimate concern to the public)
- Those in the "public eye" cannot claim the same protection
4. The right not to be presented in a "false light."
What if tort committed wasn't done intentionally?
Negligent tort
What is the test to determine negligence?
1. A duty to care
2. Breach of the duty to due care
3. Connection between cause and injury
4. Actual damages or loss
What is the test to determine a duty to due care?
1. Reasonable man standard:
2. Objectively look at the situation?
3. There may not be an obligation to act - the law imposes no obligation to act in a situation to which we are strangers. But, if we do act, If we do act, the law of negligence requires us to behave with due regard for the foreseeable consequences of our actions in order to avoid unreasonable risks of injury.
What is the reasonable man standard?
The reasonable man stops for traffic lights and always drives at reasonable speeds, does not throw baseballs through windows, performs surgical operations according to the average standards of the medical profession, ensures that the floors of his grocery store are kept free of fluids that would cause a patron to slip and fall, takes proper precautions to avoid spillage of oil from his supertanker, and so on.
What is the purpose of the negligence standard?
To protect others against the risk of injury that foreseeably would ensure from unreasonably dangerous conduct.
What is the rule of privity?
A manufacturer or supplier owed a duty of care only to immediate purchasers, not to others who might use the product or to whom the product might be resold.
Negligence per se?
A doctrine common to all US state courts that eases an established breach of the duty of due care where the defendant has violated a statute or municipal ordinance.
What are the two kinds of causes that a plaintiff must prove?
Actual cause and proximate cause.
What is actual cause (Causation in fact)?
can be found if the connection between the defendant's act and the plaintiff's injuries passes the "but for" test
What is the "but for" test in actual cause?
If an injury would not have occurred "but for" the defendant's conduct, then the defendant is the cause of the injury.
What is proximate cause?
A cause (the injuries to the plaintiff) that is not too remote or unforeseeable
What is the requirement in terms of damages for a plaintiff to win a tort case?
There has to be immediate damages for the plaintiff to allege and prove that she was injured.
Are perceived damages/ fear that she might be injured in the future sufficient basis for a suit?
Not enough, the fear that she might be injured in the future is not a sufficient basis for a suit.
What is the problem with immediate damages?
The problem is that the damage/injury may not appear for years and the tort statute of limitations might have run out, barring from the victim from suing at all.
What is the exception that the law allows to the general rule?
That damages must be shown when the plaintiff stands in danger of immediate injury from a hazardous activity.
- I.e. If you discover your neighbor experimenting with explosives in his basement, you could bring suit to enjoin him from further experimentation, even though he has not yet blown up his house—and yours.
How has the court helped the problem with immediate damages?
Courts eased statute of limitations → many as 6 yrs
What does the plaintiff have to prove in a tort suit?
1) The defendant took the actions complained of as negligent,
2) The defendant demonstrated the circumstances that make the actions negligent
3) Prove the occurrence and extent of injury
How does the law allow certain presumptions and rules of evidence that ease the plaintiff's task, on the ground that without them substantial injustice would be done?
Res ipsa loquitor
What is res ipsa loquitur?
Meaning "the thing speaks for itself." The best evidence is always the most direct evidence: an eyewitness account of the acts in question. But eyewitnesses are often unavailable, and in any event they frequently cannot testify directly to the reasonableness of someone's conduct, which inevitably can only be inferred from the circumstances.
What is the problems of gaining direct evidence to prove negligence?
Hard to gain direct evidence: Sometimes the eyewitnesses are often unavailable, and in any event they frequently cannot testify directly to the reasonableness of someone's conduct, which inevitably can only be inferred from the circumstances.
What is circumstantial evidence?
- Evidence that is indirect
- Will be the only evidence or will constitute the bulk of the evidence
- Res ipsa loquitur is a rule of circumstantial evidence that permits the jury to draw an inference of negligence.
- There must be reasonable evidence of negligence but where the thing is shown to be under the management of the defendant or his servants, and the accident is such as in the ordinary course of things does not happen if those who have the management use proper care, it affords reasonable evidence, in the absence of explanation by the defendants, that the accident arose from want of care."
What are the excuses to negligence - that will completely or partially excuse the negligence of the defendant?
1) Contributory negligence/ comparative negligence
2) Assumption of the risk
3 Act of god
How does Contributory negligence/ comparative negligence provide an excuse:
I was negligent but plaintiff was also the negligent party
What is contributory negligence?
Even if the plaintiff was only mildly negligent, most of the fault being chargeable to the defendant, the court would dismiss the suit if the plaintiff's conduct contributed to his injury
Why was contributory negligence unfair?
Because the plaintiff's only error in such cases is in being less careful of himself than he might have been, whereas the defendant is charged with conduct careless toward others.
How has contributory negligence changed to comparative negligence?
Under the rule of comparative negligence, damages are apportioned according to the defendant's degree of culpability.
- For example, if the plaintiff has sustained a $100,000 injury and is 20 percent responsible, the defendant will be liable for $80,000 in damages.
In what three situations does the assumption of risk doctrine come up?
1. The plaintiff may have formally agreed with the defendant before entering a risky situation that he will relieve the defendant of liability should injury occur.
- I.e. ("You can borrow my car if you agree not to sue me if the brakes fail, because they're worn and I haven't had a chance to replace them.")
2. Or the plaintiff may have entered into a relationship with the defendant knowing that the defendant is not in a position to protect him from known risks
- I.e. (the fan who is hit by a line drive in a ballpark).
3. Or the plaintiff may act in the face of a risky situation known in advance to have been created by the defendant's negligence (failure to leave, while there was an opportunity to do so, such as getting into an automobile when the driver is known to be drunk).
What is the difficulty in applying the assumption of risk doctrine?
To determine the dividing line between subjectivity and objectivity b/c if the plaintiff had no actual knowledge of the risk, he cannot be held to have assumed it. On the other hand, it is easy to claim that you did not appreciate the danger.
If the plaintiff claimed that they did not appreciate the danger, what standard would the courts apply?
An objective standard of community knowledge (a "but you should have known" test)
What is an act of god rule?
The rule that no one is responsible for an "act of God," or force majeure as it is sometimes called, is not an excuse but a defense premised on a lack of causation.
- I.e. If a force of nature caused the harm, then the defendant was not negligent in the first place. A marina, obligated to look after boats moored at its dock, is not liable if a sudden and fierce storm against which no precaution was possible destroys someone's vessel.
How does an "act of god" transition into a liability?
If it is foreseeable that harm will flow from a negligent condition triggered by a natural event, then there is liability.
What is vicarious liability?
- Liability for negligent acts does not always end with the one who was negligent - the liability is imputed to others
- I.e. For example, an employer is responsible for the negligence of his employees if they were acting in the scope of employment.
What is respondeat superior?
The higher authority must respond to claims brought against one of its agents - and the agent is also liable too.
-Note: Respondeat superior is not limited to the employment relationship but extends to a number of other agency relationships as well.
- Legislatures in many states have enacted laws that make people liable for acts of certain people with whom they have a relationship, though not necessarily one of agency
--i.e. Business lending: Lending an automobile to someone has some liability
--I.e. Bar and Tavern owners: Dram shop statutes - operating under the influence and get pulled over, the police ask where did you have your last drink? Liable if you over serve someone.
Frollicking detour?
scope of employment, employee wasn't were he wasn't supposed to be, the employer is off the hook, but the employee is still negligent.
Strict liability?
Liability without fault
If product is defective, you are at fault → your product/manufactured
What is the standard/test to strict liability?
1. Product must be defective when the defendant sells it and left it.
2. The product must be unreasonably dangerous to the user or consumer because of its defective condition.
3. Defective condition must be proximate cause of the injury or damage (But, for)
4. Goods must not have been substantially changed from the time the product was sold to the time injury was sustained.
--B/c of alteration, the goods became defective.
5. Product can be defective if there is not adequate warning to people
What is the chain of distribution?
Designer → Manufacturers → Distributors → Assemblers → Wholesalers → Retailers
Where does liability stand in the chain of distribution?
All can be liable but each may have a defense
How does the emotional overtones range?
Prolitigation position of consumer advocates to the conservative of the manufacturers.
What does employment law rule on?
Hiring, wages, and working accommodations
What is the general rule in employment law, up to the 60's?
Employment at will of the employer (employer decides)
What are the exemptions to the general rule in employment law?
Trade unions
Employee contract
Why did this general rule shift during the 60's?
There was a shift from work performance determination to discrimination of race, gender, religion determination.
What did Article 7 in the Civil Rights Act of 1964 discuss?
- About discrimination on the basis of race. Sex. religion, national origin, and color.
- In the areas of employment, hiring, promotion, layoff, discharge
- Created protected categories.
What was the 13th amendment?
Abolished slavery (given rights)
What was the 14th amendment?
Gives full rights to those who are born here.
What are the 15th & 19th amendment?
The right to vote
What was the background that led to the Civil Rights Act of 1964?
- Plessy vs. Ferguson
- Brown vs. Board of Education
- Abolishing the "Poll Tax" (1940's)
What was Plessy v Ferguson?
Separate but equal
What was Brown vs. Board of Education?
Everyone should have the right to enjoy the same school, reversed Plessy v. Ferguson
What was the Poll tax?
In order for you to vote, you have to pay a tax = if you couldn't pay tax. Couldn't vote.
What are the requirements for employers that applies the Civil Rights Act of 1964?
- Employers with 15 or more employees whose business affects interstate commerce
- All employment agencies
- Labor unions with 15 or more members
- State and Local governments and their agencies
- Most federal government employment
What is the EEOC, Equal Employment Opportunity Commission?
Administration agency that investigates violations to the Civil Rights Act of 1964
- Cases are if people are treated differently b/c of protected class (Federal level & There are also committees in the state level)
What happened in 1984 in enforcing the Civil Rights Act of 1964?
Apply to partnerships as well as corporations.
- Ex: Promotion of a female lawyer to partner
What is the remedy for unlawful discrimination?
Hiring, promotion, reinstatement
Back pay
What are the two major types of EEOC cases?
- Disparate treatment
- Disparate impact
What is the test of disparate treatment EEOC case?
- Must show company intended to discriminate because of membership in protected class.
- Must show if there is a pattern-and-practice situation of systematic discrimination on the grounds of membership in protected class.
- Must show if there is a reprisal and retaliation case.
What is a reprisal and retaliation case?
Employer discriminated against employee for asserting rights under Title VII
What are the requirements to show disparate impact?
- Need not show intent to discriminate
- Need to show that affect or impact of employers action was discriminatory
- Reason for employer's action was not job related (legitimate business reason).
Prove disparate treatment?
- Pattern to pattern cases
- Reprisal or retaliation cases
What are pattern to pattern cases?
Employer systematically discriminates on grounds of membership in protected class
What are Reprisal of retaliation cases?
Employer discriminated against employee for asserting rights under Title VII.
What do you have to show for disparate impact?
- Need not to show intent to discriminate
- Need to show that affect or impact of employers action was discriminatory
- Reason for employer's action was not job related (legitimate business reason)
Who does disparate impact usually impact
- Employees = class of employees
- Employers = hire/promotion
How are employees tested for hire/promotion?
Must bear a genuine relationship to performance - can't be a frivolous (i.e. police officers = 6 feet)
What was the case of Griggs vs. Duke Power?
Entry level - higher paid jobs that requires a diploma - race discrimination, found that they didn't need a high school diploma to get the job (showing impact - race of individual that wasn't going to get job)
What are the terms of discrimination based upon religion?
- Refusal to hire/ promote due to religion
- Refusal to provide "reasonable accommodation" (i.e. dress code)
What must you prove to exempt discrimination based upon religion?
The Employer has to demonstrate
- "Undue hardship on the conduct of the employer's business"
- I.e. Accommodating burka was not an undue hardship, interfere with functions as a police officer.
What are the most common situations where sex discrimination is apparent?
1. Hiring/promotion
2. Pregnancy
3. Equal pay
What are the most common sex discrimination cases during the hiring/promotion process?
1. Pregnancy
2. Equal pay for equal work
What is sex discrimination?
Quid pro quo - one thing in return for another
What are the characteristics that define a hostile work environment?
Ex: "What is the reasonable person when looking at that situation?
What are the exceptions of an allegations of discrimination?
- Merit (Person is a better employee)
- Seniority
- Bona Fide Occupational Qualification (BFOQ)
What is a bona fide occupational qualification?
Need to be a member of the protected class (class with class, i.e. for this position we are only hiring females because in the situation, it allows for the person to feel more comfortable)
- Religious jobs
- Caretaking jobs
What are the exception that provides an Employer in a sexual harassment case a defense to a liability? (2)
- It exercised reasonable care to prevent and correct any sexual harassment behaviors and
- The plaintiff employee unreasonably failed to take advantage of any preventive or corrective opportunities provided by the employer or to otherwise avoid harm
What are the exceptions to the civil rights act of 1964?
Affirmative action
What is the purpose of affirmative action?
- To remedy the effects of past practices or achieve diversity within the workplace
- Executive orders
Age Discrimination in employment act (ADEA)?
- Prohibits discrimination based upon age (How old is old? 40)
- Prohibits forced retirement in most jobs
What are the exceptions to the prohibition of forced retirement by the Age Discrimination in employment act (ADEA)?
- Firefighters
- Police
- Tenured University Professors
- Executive with annual pensions exceeding $44,000
- A BFOQ exception (Requirement of certain physical condition)
The Americans with Disability Act (ADA)?
Prohibits discrimination on the basis of a disability
- Employee cannot disqualify an employee or job applicant b/c of disability as long as she can perform the essential functions of the job...
- Cannot ask questions about an individual's disabilities
- Requires reasonable accommodations (i.e. providing ramps, establishing flexible hours, etc) without undue hardship to the employer
What is the basis of a disability?
Physical or mental impairment that substantially limits a major life activity (walking)
Or someone that is regarded as having an impairment (If you think they have a disability, the are classified as having a disability)
- includes mental illness, epilepsy, visual impairment, dyslexia, aids, recovering from alcoholism
Is drug testing okay under the Americans With Disability Act?
Yes, as long as it is job related and given to everyone.
How has the supreme court narrowed the definition of a disability?
Disabilities except correctable conditions, meaning Disability under the ADA will be measured by how a person functions with corrective drugs or devices
Equal pay act of 1963?
Protects both men and women from pay discrimination based upon sex
Who isn't protected under the Equal pay act of 1963?
Federal workers
What does equal skill mean?
What does equal effort mean?
Comparable mental and/or physical exertion
What does equal responsibility mean?
Supervision, accountability
What is the criteria used for justifying differences in wages?
1. Seniority
2. Merit
3. Quantity or quality of product
4. Or any other factor other than sex
What is important to remember about state discrimination laws over federal discrimination laws?
Remember.....State laws can also provide protection to workers that go above and beyond the protection afforded the Federal Law
What are the protected classes in State law?
Religious creed
National origin
Gender identity
Criminal record (inquiries only)
Mental illness
Sexual orientation
Military personnel
Genetics (cancer in family)
Under common law, what is an at will employee?
An employee without a contract guaranteeing a job for a specific period was an employee at will and can be fired at any time for any reason, or no reason at all.
How has Federal and State law changed the old notion of the "at will employee?"
Now....cannot fire an at will employee for a "wrong" reason