Bus 207- Mid #3
Terms in this set (73)
Purpose of Contract
promise that the law will enforce
to make business matters more predictable
makes the law more flexible, but less predictable
makes the law less flexible, but more predictable
Elements of a Contract
Agreement-one party makes a valid offer and the other accepts it
Consideration-bargaining that leads to an exchange between the parties
Legality-contract must be legal
Capacity-parties must be of sound mind and 18 yr older
even no contract, a plaintiff can use to enforce the defendants promise if he can show:
-the defendant made a promise knowing the plaintiff would likely rely on it
-the plaintiff did rely on the promise
-only way to avoid injustice to enforce the promise
No contract, but use to compensate a plaintiff who can show:
-gave some benefit to the defendant
-reasonably expected to be paid for the benefit and defendant knew that
-defendant would be unjustly enriched if she did not pay
-quantum meruit:"as much as he deserves" damages awarded
When UCC applied
Governs many aspects of commerce, including the sale and leasing of goods, negotiable instruments, bank deposits, letters of credit, investment securities, secured transactions, and other commercial matters
Battle of the forms-UCC
an acceptance that adds additional or different terms may form a contract for sales and goods in certain cases.
parties believe they have formed an agreement
new terms added not void unless accepted by other party
changes the terms of agreement, the court will use the UCC to create a fair contract
party wants a contract on its terms only, it must clearly indicate that
Meeting of the Minds
must understand each other and intend to reach an agreement
judge wil make an objective assessment of any disagreements about whether a contract was made-whether a reasonable person would conclude that there is an agreement
Ways to eliminate an offer
offeree must say or do something to accept
bilateral: accept through promise
unilateral: accept by performing
Mirror image rule: accept on precisely same terms as offer
bargaining that leads to an exchange between the parties
-another promise or action
-an action rather than a promise
-promise to do something or to refrain from doing something
Demasse vs. ITT Corp
Company changed the employee handbook and 10 days later 6 employees were laid off
Verdict: IIT did not have the right to unilateraly change the layoff policy. There was an implied contract that layoffs would be based off of seniority.
Novak v. Credit Bureau Collection Service
Novak refused to pay medical bills. Claimed he didnt give consent.
Verdict: The credit bureau was entitled to damages based on quasi contract. He would be unjustly enriched if he did not pay (the doctors saved his life)
Baer v. Chase
The Sopranos case.
Verdict: The promise between the two men was too indefinite to be enforced. The parties didn't agree on the essential terms.
Culbertson v. Brodsky
Brodsky wanted land from Culbertson but wanted to inspect it first. He decided to purchase it but Culbertson wouldn't uphold their option contract.
Verdict: Brodsky won
both parties make a promise to each other
one party makes a promise to the other that the other party can accept only by doing something specific
2 parties to the contract explicitly state all of the important terms of their agreement
words and conduct of the parties indicate that the parties intended to make an agreement
when 1 or more parties has not fulfilled their obligations
all parties fulfilled obligations
a contract that is illegal is void and unenforceable
a court will not assist either party in an illegal agreement even if it leaves one party clearly shortchanged
part of a contract that attempts to release you from liability for injury to another party. generally unenforceable when:
it attempts to exclude an inentional tort or gross negligence
affected activity is in the public interest such as medcare, public transport, or some essential service
parties have generally unequal bargaining power
not clearly written and readily visible
a court refuses to enforce because of fundamental unfairness.
-oppression: one party used superior power to force a contract on the weaker party
-surprise: weaker party did not fully understand he consequences of the agreement
legal ability to enter into a contract except minors and those with mental impairment usually lack capacity
may be canceled by the party who lacks capacity
May disaffirm-give notice of refusal to be bound by an agreement
has option to file suit to rescind the contract
restitution: restoring injured party to original position
Mentally Impaired Persons
generally creates a voidable contract
intoxication: makes a contract, it is voidable.
Misrepresentation and Fraud
knows statement is false
rescind: false statement of fact-puffery
statement fraudulent or material (relied on heart of matter) injured person justifiably relied on statement
remedy: injured party usually has choice of rescinding the contract or suing for damages
Special Problem: silence-non disclosure of fact is misrep only when disclosure is necessary
nondisclosure of fact is misrepresentation only when disclosure is necessary.
to correct a previous assertion, a basic mistaken assumption, a mistaken understanding about a writing or in a relationship of trust
one party enters a contract under a mistaken assumption
to rescind, must show there was a factual error
both parties negotiate based on the same factual error. Parties contract based on important factual error, the contract is voidable by the injured party.
conscious uncertainty: no rescission is allowed where one of the parties knows she is taking a risk
Statute of Frauds
many agreements are enforced unless it or some memorandum of it is in writing and signed.
must be written: interest on land, agreements that cant be performed in 1 yr, promise to pay debt of another (collateral promise), promise made in the consideration of marriage, must be signed by the defendant and state with reasonable certainty
Baker v Daves
Baker received property from her parents but they divorced. She was forced to sell the property and her parents would split the rest of the money. She later decided she wasnt going to. Her father, Daves, sued her.
Verdict: Lisa was not obligated to sell the house. There is not written evidence of a contract.
UCC-basic rule:written contracts
contract for sale of goods worth $500 or more is not enforceable unless there is some writing, signed by the defendant, indicating that the parties reached an agreement
King v. Head Start Family Hair Salons, Inc.
King worked for Head Start but then left and managed Sports Clips Salon in the same mall. Head Start sued claiming in their agreement that King was prohibited from working at a competing business within a 2 mile radius for 12 months
Verdict: The non competition agreement was partially valid. The contract was a blanket restriction because they had 30 locations throughout 2 counties. She just couldnt work within 2 miles from Head Start
Sawyer v. Mills
Mills owed Sawyer money off of a case, but stopped the payments a part of the way through. Sawyer sued him
Verdict: The statue of frauds barred Sawyers claims. There was no written contract and it could not be performed within a year.
3rd Party Beneficiaries
someone who was not a party to the contract but stands to benefit from it
any party beneficiary who is not an intended beneficiary is an incidental beneficiary and may not enforce the contract
Assignment of Right
contracting party may transfer his rights under contract, unless:
substantially change the obligor's rights or duties under the contract
forbidden by law or public policy
validly precluded by the contract itself
Delegation of Duties
contracting party may transfer her duties pursuant to a contract to someone else. Most duties are delegable but does not relieve the delegator of his own responsibility to perform the contract, unless:
delegation would violate public policy
contract prohibits delegation
obligee has substantial interest in personal performance by the obligator
release obligator with another under a contract. If novation isnt made or signed they are still liable
no more duties under contract. Most are discharged by full performance. Parties may discharge contract by agreement. Rescind only by mutual agreement
exactly what is promised usually not expected and failure to do so does not cause for discharge
party that substantially performs its obligations will receive the full contract price minus the value of any defects. party that fails to perform substantial receives nothing on the contract and will only recover the value of work
Personal Satisfaction Contracts
promisee makes a personal, subjective evaluation of the promisors performance.
court uses subjective standard only if assessing the work involves feelings, taste, or judgement and contract explicitly demands personal satisfaction.
Time of the Essence Clause
will generally make contract dates strictly enforceable. Merely including date for performance does not make time of the essence
courts will generally discharge only if a party committed a material breach-one that causes substantial harm
committed by one party making it unmistakably clear that he will not honor the contract
Statue of Limitations
will limit the time within which the injured party may file suit
something has happened making it utterly impossible to fulfill the promise
destruction of subject matter
death of promisor in personal services contract
designated to put the injured party in the position she would have been in had both sides fully performed their obligations
injured part may be unable to demonstrate expectation damages but may prove expended money in reliance
designed to returned the injured party a benefit that he has conferred on the other party, which it would be unjust to leave with that person
something more than money is needed, such as an order to transfer property to the injured party or force one party to stop doing something (injunction)
those that flow directly from contract
most common monetary award.must prove it caused damages
result from the unique circumstances of the plaintiff. also known as "special damages"
damage calculated complex- companies that specialize in doing the work on behalf of litigants or other interested parties
the relatively minor costs that the injured party suffered when responding to the breach
specific performance: order contract unless land or unique asset
injunction: require to do or not do something
reformation: "re-write" a contract
Mitigation of Damages
keep damages as low as possible
a party may not recover for damages that could be avoided with reasonable efforts
Schauer v. Madarin Gems of CA
Schauer sued Madarin because they appraised her engagement ring too high and now she isnt getting what she thought what was its worth.
Verdict: Shauer does have the right to sue for breach of contract. She was a 3rd party beneficiary to the ring.
Brunswick Hills Racquet Club Inc v. Route 18 Shopping Center Associates
Tennis property case.
Verdict: Route 18 did breach its duty of good faith and fair dealing by not responding to Brunswick in time.
BI-Economy Market Inc v. Harleysville Ins. Co.
Fire destroyed Market and Harleysville was their insurance co. They stopped payment and the company never reopened.
Verdict: The contract the parties entered into did not contemplate damages for termination of the business
Development of UCC
as trade increased throughout history, the need for a uniform modernized business law grew greater
in 1952 the uniform commercial code (UCC) was published by a group of scholars whose goal was to draft a modern law of commerce
the UCC has been revised serval times but the most recent was in 2003
Article 2- Statute of Frauds
requires writing for any sale of goods worth $500 or more
writing sufficient to indicate a contract- the writing must be signed by the defendant
incorrect or omitted term- court may still enforce
enforceable only to the quantity stated: only up to the quantity of goods stated.
Article 2- Added Terms
Acceptance that adds or alters terms will often create a contract.
add: raise issues not covered in the offer
different: contradict those in the offer. cancel each other out. No clear agreement, code supplies its own cover price, delivery place, etc
"gap fillers": UCC supplies missing terms
expressed with words or actions. Any affirmationof fact-or any promise creates express warranty. Any description of goods, sample, or model
guarantees created by UCC and imposed on the seller of the goods
of merchantability: unless excluded, modified, merchantability requires the goods be fit for their normal pieces, if a merchant of goods of that kind
for particular purpose: seller knows the buyer plans to use the goods for particular purpose, seller generally is held to warrant that the goods are in fact fit for that purpose
Plaintiff must claim: negligent design, manufacturing, or failure to warn, not obvious danger.
no remedy when sale contracts include proper disclaimers or remedy limitations
need not prove conduct was unreasonable imposed if:
defective condition dangerous to user
seller in business to sell this product
product reaches user w/o substantial change
even if seller exercised all reasonable care or there is not contractual relationship
Jannusch v. Naffziger
Festival Food Cart sold to Jannusch. At the end of the season they gave the cart back and wouldnt pay claiming the income was lower than they expected. Jannusch sued.
Verdict: The parties did form a contract. The essential terms where in their contract even if other parts were not. Jannusch won.
Keller v. Inland Metals All Weather Conditioning, Inc.
The Kellers bought a dehumidifier from Inland. They even went there with a model and assured them it would take care of the problem. It didn't and the Kellers sued.
Verdict: Inland made an expressed warranty by bringing in a model. Keller won.
Goodman v. Wenco
Goodman broke his tooth by eating a hamburger at Wendy's that had too much bone in it. Wenco (the meat co) claimed it was a natural part of the food. Goodman sued under breaching the implied warranty of merchantability.
verdict: The hamburger was unfit for its ordinary purpose. Goodman won.
Uniroyal Goodrich Tire Co. v. Martinez
Martinez put a 16in tire on a 16.5in tire rim. It blew and cause him serious damages. There was an alternative available but Goodrich didnt do it because it was more costly. Martinez sued Goodrich.
Verdict: The manufacturer was obligated to use a safer design. Martinez won.