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285 Cards in this Set
- Front
- Back
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persons who are under the age of majority (usually 18 years) |
Minors |
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Three points for Minors |
also assume that the legal age is 18 lack the demonstrative majority, judgment and wisdom adults can take advantage of a minor |
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A minor's contracts ___ ________ at the minor's option |
are voidable |
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avoidance of the contract |
disaffirmance |
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When can disaffirmance be done? |
during minority and for a reasonable time after reaching majority |
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What is the exception for disaffirmance? |
when a contract is entered into between two minors that involves a transaction with real estate |
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What does a minor have to do when there is real estate involved? |
has to wait until he or she is 18 to disaffirm the contract. |
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affirmation of the entire contract, may be done upon reaching majority |
ratification |
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If a minor attempts to ratify a contract when he's 17, then... |
even the ratification is susceptible to disaffirmance because he's not 18 yet |
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A minor is liable for the reasonable value of... |
necessary items (those that reasonably supply a person's needs) |
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Example of why Liability for necessaries is required |
Don't want minors to be able to go to WalMart, spend 100$ and then come back with their receipt and say "I want to disaffirm that" |
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If an item is not a necessary, the minor... |
just has to return it in whatever condition it is in to get the money back |
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When their is a liability for misrepresentation of age, the prevailing view is that a minor may... |
disaffirm the contract |
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If a minor misrepresents his age to an adult, they are... |
still able to disaffirm |
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If a tort and contract are so intertwined that to enforce the tort, the court must enforce the contract, then... |
the minor is not liable in tort |
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something prevents them from knowing the full point of what they must do |
incompetent |
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one point for incompetent and intoxicated persons |
can be void or voidable |
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courts do not bend over backwards to help those who were... |
voluntarily intoxicated |
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contracts made by a person placed under guardianship by court are... |
void |
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Any contract a person under guardianship makes is... |
null and void |
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a contract entered into by a mentally incompetent person is... |
voidable |
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One who is unable to understand the nature or consequences of an act |
mentally incompetent person |
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Mental problem |
voidable |
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a contract entered into by an intoxicated person is... |
voidable |
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Incapacity (3) |
minors nonadjudicated incompetents intoxicated |
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Berg vs. Traylor Case |
o Child actorin Hollywood. Has to deal with hisagent. Traylor was about 13 years oldwhen he got his agent. She helped him land Malcolm in the Middle. Somewhere around 2001, he’s on thisprogram. How do agents get paid?Percentage of Earnings. The agent was tobe paid 15% of moneys earned and future earnings. When the show gets into syndication, theyboth get money. When we revisit thecontract that he signed, we are told that his mother appeared on his behalf andthe reason that the agent did it that way is because she knew that the minorhad the ability to disaffirm the contract. “I don’t want to be bound to thisagreement.” Traylor was well younger than 18 when the mom sends notice that shedoesn’t want the agent to represent them anymore. “We can’t afford to pay you15% anymore, we have to pay Uncle Sam.” Take her to arbitration, where thearbitrator awards the agent hundreds of thousands of dollars. Mom appeals and the court agrees. His mother did not have the right todisaffirm the contract. This contractdealt with my agent and my son. We wantthe whole contract voided. Court said“No, we will protect Craig, but we are not protecting you. You are liable forthe whole amount.” |
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in Re the Scoreboard Inc |
o Kobe Bryant had a contract to enter the NBA when hewas 16 or 17. Once he was in, he had asports company that was in the business of manufacturing and selling tradingcard. We want you to grant us permissionand a license to sell these things. Ascompensation, we’ll give you a base salary and we’ll pay you everytime you signyour name. In entertaining the deal, hedecided to negotiate a better deal. No, I’ll give you the first 500 autographs,then after I get paid. I get 5000 upfront and then 5000 when I sign it. Theyagreed. Nothing was done when he was 18. They were never able to do a contract. This counteroffer gets put in a drawer. On his 18th birthday, he is sent10000. He signs autographs for 18months. The company that’s paying himhas to file for bankruptcy. The companyis trying to sell his contract. He comesin and says the contract is worthless because it is void. “It was never anygood.” The trial court says “Yeah, it’s void.” ßWRONG. Minors contracts arevoidable. The appellate court said “It’snot void, it’s voidable, but lets look at what he did.” Did he do anything tosay that he wasn’t bound by his agreement? NO, he cashed the 10k check. He also kept signing autographs for 18months. If he didn’t intend to be bound,he wouldn’t have kept signing it. Heimplicitly ratified the contract by cashing the check. |
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Zelnick vs. Adams |
o Thought her child was a grandchild and she needed toget money. However, there was nothing bythe family that her child was part of the family and would get a piece of thetrusts. She was getting the hush hushtreatment. She felt that her child was getting slighted. She goes to the attorney and fesses up thatshe doesn’t have the money to pay him his hourly rate. He wanted to look at the case and the willbefore deciding. What he saw was a lotof zeros on the agreement. He says“Look. I’m going to get 1/3 of whateverJonathan gets to him.” She says “okay, better than nothing.” Months later, heis declared a beneficiary. He is agrandchild. The attorney didn’t reallyhave to do that much to win. The fatherenters the picture and he wants to cut the attorney loose and disaffirm thecontract. Jonathan turns 18 and says “Iwant to disaffirm the contract. I was a minor when I signed it.” The attorney says “you can’t disaffirm thisone without giving me the money because this was for a necessary item.” Are legal services considered necessary forpurposes of disaffirmance? The case saysthat attorney’s fees are GENERALLY going to be classified as necessaries, butit has to be addressed on a case by case basis. Depends upon the facts andcircumstances on that particular case. |
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First State Bank of Sinal v. Hyland |
o Father signed for a note for their son. The son Randyis being called upon to pay the bank back. The bank has dealt with the fatherdozens and dozens of times. They loveMervin. When Randy can’t pay the loanback, he asks for an extension and they tell him they’ll extend it if Mervinsigns. When the 6 months is up, hedoesn’t pay it. Next he needs anotherextension. Mervin won’t sign it. Mervin sends them the interest, but not theprincipal. The bank sues Randy and Randyfiles for bankruptcy so they can’t sue them. The bank sues Mervin and says “We need the money, you obligated yourselfto pay it if Randy wouldn’t pay it. Mervin said “I was always drunk throughout that time.” He was a ragingalcoholic and he went to rehab before the second one. Alcoholics are more or less thought to beinvoluntarily intoxicated because they can’t help it. If I did it, I had to be hammered because Iwas always hammered. When he was sober,he sent the check for the interest on the loan. That act amounted to a ratification of the contract that he could’vedisaffirmed. Because he sent that check,it was an acknowledgement of the ratification. |
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Contracts within the statutes of frauds |
I make a statement that is not correct to get you to do somethin |
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What is the rule for statute of frauds |
Contracts within the statute of frauds must be evidenced by a writing to be enforceable |
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If something is, "within the statute of frauds", it must be... |
written |
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If something is "outside the statute of frauds", it can be... |
verbal or written |
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Full effect is given to... |
electronic contracts and signatures |
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Many commercial transactions are... |
electronic and can be signed online |
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How can electronic records be signed? |
checking a box signing with a mouse. |
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What cannot be used as a excuse for electronic records? |
cannot say "yeah, I checked the box, but I didn't even read the terms and conditions" |
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Applies to promises to pay the debts of others |
suretyship provision |
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For a suretyship provision, promisor must be... |
secondarily, not primarily, liable. |
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If the primary object is to provide an economic benefit to the surety, then... |
the promise is not within the statute |
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If making this loan would benefit me, then... |
the verbal agreement is okay. |
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Example of the suretyship provision |
§ My mother wants a 5000$ signatureloan. They want to have a surety because she is 75 years old. They want her son to come in and sign aguarantee that he will pay it if you do not.· I am coming in sideways and agreeingto pay it off even though she is the primary person on the account (they willlook to her first)· I have to have made that promise inwriting. |
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applies to promises to answer personally for duties of decedents |
executory-Administrator Provision |
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An executory-administrator provision is an agreement by an estate representative to... |
personally pay the debts of the deceased. |
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a person who is nominated inside of a deceased's last will and testament to take care of the estate |
executor |
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appointed by the law to act as an executor when there is no will |
administrator |
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Example for an executory-administrator provision |
§ Let’s say my mother got money fromher life-long friend and she dies before she can pay it back. I might go to the friend and say “hey, wemight not have enough after everything, I’ll pay you out of my own pocket” ß has to be written |
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The marriage provision applies to promises made in consideration of marriage, but..
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not to mutual promises to marry |
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Discusses what's going to happen between the spouses should the marriage terminate in terms of finances and property agreements |
pre-nuptial agreements |
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Pre-nuptial agreements are not enforceable is... |
said verbally |
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applies to promises to transfer any rights, privileges, powers, or immunities in real property |
Land Contract Provision |
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Three points for Anything permanently attached to land or deal with land |
mortgages leases oil and gas agreement |
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applies to contracts that cannot be performed within one year |
one-year provision |
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Example for one-year provision for hiring |
§ If you are signing a contract nextweek for a company to hire you on July 1 for one year, then you want it to bein writing because it cannot be done within one year from the time you sign it. |
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Another example for one-year provision
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§ Two girls were bffs for the longesttime and went to Caesar’s Palace because one of them had a dream about winningbig at Caesar’s Palace. They won about 2mil dollars. When that happens, theywondered if the promise to sell the proceeds was ever made? “If you do go,anything we win, we’ll split!” Theagreement did not happen as her friend recalled and in any case, it could notbe performed within a year, so it should have been written down. Caesar’s Palace pays out within 20years. “Yeah but if you would’ve won200, you could’ve done it in one year.” Because it was POSSIBLE, it held up |
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Why don't hiring contracts always have to be in writing? |
§ If I hire you for the rest of yourlife, you might die within a year. |
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The criterion is whether it is... |
possible, not likely, for the agreement to be performed within one year |
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The year runs from... |
the time the agreement is made, not the time that performance starts |
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Full performance of one party makes the promise of the other party... |
unenforceable under majority view |
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One-year provision is... |
not used to unwind contracts partially or fully performed by one party |
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A contract for the sale of goods for the price of $500 or more must be evidenced by... |
a writing or record to be enforceable |
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an admission in pleadings, testimony, or otherwise in court makes the contract... |
enforceable for the quantity of goods admitted |
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an oral contract for specially manufactured goods is... |
enforceable |
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Delivery or payment and Acceptance validates the contract only for... |
the goods that have been accepted for which payment has been accepted |
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Six contracts within the statute of frauds |
suretyship executor-administrator agreements made upon consideration of marriage agreements for the transfer of an interest in land agreements not to be performed within one year sale of goods for $500 or more |
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a promise to answer for the duty of another |
suretyship |
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Three exceptions for suretyship |
main purpose rule original promise promise made to debtor |
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a promise to answer personally for debt of decedent |
executor-administrator |
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Three exceptions to executor-administrator |
main purpose rule original promise promise made to debtor |
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Exception to agreements made upon consideration of marriage |
mutual promises to marry |
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Two exceptions for agreements for the transfer of an interest in land |
part performance plus detrimental reliance seller conveys property |
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Two exceptions for agreements not to be performed within one year |
full performance by one party possibility of performance within one year |
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Three exceptions for sale of goods for $500 or more |
admission specially manufactured goods delivery or payment acceptance |
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Oral contracts modifying existing contracts are unenforceable... |
if the resulting contract is within the statute of frauds |
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How can you tell if the modification needs to be in writing? |
If the end result needs to be in writing to be enforceable then the statute of frauds apply |
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Verbal contracts are only enforceable if... |
there is an agreement that there is a verbal contract |
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Example of Verbal contracts |
§ You and I have a verbal agreementthat you will work for me for three months. Two months in, I think that you are the greatest intern and I am lookingto hire you and extending 3 months to 18 months or more. Since it is more thana year, it must be written down.· Reverse is true 18 months to 3 neednot be written down |
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What is the general contract law? |
The writing(s) or record must: specify the parties to the contract, specify the subject matter and essential terms, Be signed by the party to be charged or by her agent |
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What has to be there to specify the parties to a contract? |
At least names |
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Specify the subject matter and essential terms (2) |
what it is that the contract is dealing with how much is going to be paid, when will it be due, how will it be paid? |
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Who needs to sign a contract? |
the person who will be charged with performance. Don't need both parties, only need the one who will be sued. |
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For a general contract... |
it could be written on a bar napkin as long as the three required things are there. It doesn't have to be notarized or witnessed |
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provides a general method of compliance for all parties and an additional one for merchants |
sale of goods |
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Writings or records for the sale of goods must (3) |
be sufficient to indicate that a contract has been made between the parties be signed by the party against whom enforcement is sought by her authorized agent specify the quantity of goods to be sold |
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We don't need the essential terms, as long as the... |
quantity of goods to be sold is there. |
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Even if you leave out a price, in litigation, the courts will... |
pull out industry guidelines on prices and delivery dates using historical methods used by the seller and the relationships about the parties. |
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Between merchants, a written confirmation that is sufficient against the sender is also... |
sufficient against the recipient unless the recipient gives written notice of his objection within ten days. |
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Instead of needing the specific terms, we only need the... |
quantity to be sold. |
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The court can go and find the market price, but... |
they cannot find the quantity. |
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If we have a contract that doesn't meet the rules, it is... |
unenforceable. |
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For the most part, verbal agreements are enforceable unless... |
it is one of the six in the statute of frauds. |
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Statute of frauds will not serve a a... |
trap door to get out of a contract that has been completed |
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Oral contract within the statute of frauds is... |
unenforceable |
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The statute of frauds does not apply to... |
executed contracts, this is called full performance |
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Restitution is available in quasi contract for benefits conferred in... |
reliance on the oral contract |
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If it was never written down, but one person has given up money or something else... |
they will be able to get it back |
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oral contracts will be enforced when the party seeking enforcement has reasonable and justifiably relied on the... |
promise and the court can avoid injustice only by enforcement |
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The Promissory Estoppel reminds us that any time we have a promise justifiably to their detriment, the courts can use promissory estoppel to... |
enforce the promise to avoid gross unfairness, injustice to one party. |
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When parties express a contract in writing that they intend to be complete and final expression of their rights and duties, then... |
evidence of their prior oral or written negotiations or agreements of their contemporaneous oral agreements that vary or change the written contract are not admissible. |
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What does the Parol evidence do? |
Prevent a person from saying "yeah, this is what we signed, but this is not what we meant." |
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Example of the parol evidence rule |
o Imagine that you have a 150 pagesingle spaced contract that governs a transactions for a merger of 2companies. Before that contract, theremay have been months of discussion about this. The parol evidence rule prevents somebody from going back and time andusing previous information to contradict the terms of the contract that issigned. |
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Parol evidence only applies to an... |
integrated contract, which is often evidenced by a merger clause |
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What is a merger clause?
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a simple sentence or paragraph that acknowledges that all the previous correspondence is merged into this final contract. |
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Example for parol evidence rule? |
o You’ve been negotiating for a monthwith your landlord. It’s time to signthe lease. You end up having to contactthe landlord because you have an issue with it. Your rent is due on the first, no grace period. $50 a day penalty. You’re rarely paid before the 5thof the month. You get in touch with the landlord and say “look, I’m about tosign this, but I won’t be able to get this paid by the fifth.” Landlord says“no problem. As long as it’s in by the 5th.” And you sign thelease. After the first month, if you getsomething saying they received it on the fifth, so you have to pay 100extra. If you say “hey, that’s not whatwe agreed,” you have a problem. Your discussion was before the signing of thecontract. To use it to your advantage,you have to send them writing of what you discussed so that it is after thecontract is signed. |
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What should you do on the test regarding parol evidence? |
focus on the timeline |
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In which four situations does the parol evidence rule not apply? |
a contract that is not an integrated document correction of a typographical error showing that a contract was void or voidable showing whether a condition has in fact occurred showing a subsequent mutual rescission or modification of the contract |
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Two point for a contract is not an integrated document |
partially in writing and partially verbal is not fully integrated cannot challenge a verbal contract |
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One point for the correction of a typographical error |
If the reason to bring it out is to correct a typo, then you're fine. |
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One point for showing that a contract is void or voidable |
allows evidence to show that the contract was not sufficiently made because the consent was not fully voluntary |
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Supplemental evidence... |
may be admitted |
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previous conduct between the parties |
course of dealing |
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practice engaged in by the trade or industry |
usage of trade |
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conduct between the parties concerning performance of the particular contract |
course of performance |
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Supplemental Consistent evidence (2) |
how the parties have done business in the past historical information that the parties can point to. |
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Rosewood Care Center Inc. vs. Caterpillar inc. |
o An employeeis hurt on the job and wants worker’s compensation (used to providecompensation to their injured workers). Catepillar called up the nurse and saidthat they were sending money for 4 weeks worth of treatment for their employee.“We are behind this financially as far as we need to be.” Employee gets a 181kbill and now caterpillar is now being sued because they don’t want to payit. The appellate court sent the caseback down to the trial court because whether or not they are acting as asuretyship is for a jury to decide. Theyarticulated the Main Purpose Doctrine rule. |
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MacKay v. Four Rivers Packing Co. |
o An employeeis claiming that he was promised a job until the time that he retired(supposedly ten years out). The companyis having financial problems and he is let go. He is suing for breach ofcontract because he was fired. Thecompany says “we didn’t write it out and then exceeds the one year provision.”“Yeah but he could’ve retired within a year.” If it is possible at all, then it is enforceable as a verbal agreement. |
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Kalas v. Cook |
o Plaintiffis a lady who owns a printing company. She printed pamplets, etc for other businesses. The deceased, who was her customer for a longtime ordered a lot of pieces of printed information for her farm. She ordered a lot more than she could everhouse at her place. There was anarrangement with the plaintiff where she would manufacture these items in largequantities and the lady would call and say “hey could you send 144 of these?Send me the invoice and I’ll pay it.” Thetown that they lived in ended up getting rid of the printer’s property. It onlytook about 5 or 6 years before she needed to clear out. Instead of moving her business, she justclosed down. She told her customer thatshe wanted her to pick up all of the stuff that she was storing because she wasclosing down. Meanwhile, the lady died with a lot of materials left a 20000invoice. The executor asked “where is evidence that this agreement is inplace?” “A verbal agreement. We’ve been doing this for years.” “If that’s thecase, then the agreement is not enforceable because it is the sale of goodsthat far exceeds 500$.” Her legal team said “specially manufactured goods arean exception. These goods cannot be readily marketed to anybody else except forthe customer. |
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Estate of Jackson v. Devenyns |
o Dealsprimarily with whether or not the writing that is held up complied with thestatute of frauds. Dealt with realestate. George, who owned the propertyuntil he died, had a neighbor who had been negotiating with to sell 79 acres ofhis property. He wanted to reserve about1.3 acres. They eventually put this downin writing and signed it. George diesright at about 2 months after he agrees. The estate representative is faced with a claim with somebody to turnover the profit. This estaterepresentative doesn’t want to do that. They want to keep the property in the family. The neighbor wants to force them to deed theacres over to them. The court points outthat an agreement that deals with land that doesn’t sufficiently describe theland is not going to be valid. The courtsays that there is not real way to determine which 1.3 acres he wanted toreserve. The two knew that it was the property around his residence, but thereis a lot of ways to carve out 1.3 acres even around a house. SUBJECT MATTER WAS NOT SUFFICIENTLYDESCRIBED. |
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The subject of contractual discharge concerns the... |
termination of contractual duties. |
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Most people have to sign an agreement when they buy a home to... |
purchase it at the price the seller wants. There will always be one condition |
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Two conditions when buying a house |
condition upon me qualifying and receiving a mortgage at an interest rate no higher than "s" want to make sure it doesn't have a defect |
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Until the day comes that the condition is met, you have... |
no obligation to perform |
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In general, there are 4 kinds of discharge: |
performance by the parties material breach by one or both of the parties agreement of the parties operation of law |
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an event whose occurrence or nonoccurrence affects a duty or performance |
condition |
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contingency explicitly set forth in language |
express condition |
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an express condition can be... |
stated verbally or written down |
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express condition making performance contingency upon one party's approval of the other's performance |
satisfaction |
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What is an example of satisfaction? |
I am going to have an inspector come through the house and I want him to be satisfied with the house. |
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approval based upon a party's honestly held opinion |
subjective satisfaction |
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Example of subjective satisfaction |
· Before I pay a Tailor $1500, you say“I am only going to pay you if I am satisfied with the suit.” Won’t have to payhim since it fails to meet your satisfaction |
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Three points for subjective satisfaction |
taste judgment opinion |
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approval based upon whether a reasonable person would be satisfied |
objective satisfaction |
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Two points for objective satisfaction |
utility and fitness satisfaction |
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example for objective satisfaction |
· Satisfaction is objective on an airconditioner because his repairwork is dealing with fitness and utility. If It is blowing what any reasonable personwould think is cold air, but I wanted a freezer, I still have to pay him. |
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contingency understood by the parties to be part of the agreement, though not expressed |
implied-in-fact conditions |
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in order for somebody to perform in the contract only if they have complete information, then... |
it is implied in fact |
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example of implied-in fact condition |
§ I am somebody that always wanted aswimming pool. I contract one of thecompanies in town and I have determined the size of the thing I want. The deal that we strike is tied to theprice. It will cost me 50000$ to havethe pool dug out and concrete poured. For the 50k, it is up to me to choose from 1 to 10 potentialdesigns. He is going to, within 5 daysof me letting him know what style I want, begin work. It will be completed in 60. We don’t talk about the fact that my decisionis what remains to be done, it is implied by the facts. It is implied without me saying that I haveto let him know what my decision is. |
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continegency not contained in the language of the contract but imposed by law |
implied-in-law conditions |
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Another named for implied-in-law conditions |
constructive condition |
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Conditions that are... |
concurrent with each other |
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example for implied in law conditions |
§ I agree to sell you my home for50k. We have a deal although we don’ttalk about the dates everything will be signed. It is implied by law that my obligation to sign over the deed and yoursto pay me occur simultaneously. This isimplied by law. |
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conditions that take place at the same time |
concurrent conditions |
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an event that must or must not occur before performance is due |
conditions precedent |
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What do I need to be looking for on the exam? |
the hypothetical where what needs to occur happens before |
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Anything that must occur prior to the obligation to perform |
conditions precedent |
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example of conditions precedent |
§ Obligating myself to purchase thepiece of property IF I can get a loan at a certain interest rate. I must get the loan before I purchase theproperty. |
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an event that terminates a duty of performance |
conditions subsequent |
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example of a conditions subsequent |
§ Buy a DVD player on credit from BestBuy. Have to pay them. If you get ithome and you are not satisfied then you can return it in ten days and we willtear up the contract. The event thatoccurred after the contract was signed. The condition? You return the television. |
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Common occurrence of conditions subsequent = |
sale and return policy |
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You can have conditions that fit into... |
more than one category |
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What is the most common way of discharge? |
by performance |
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What happens when you are discharged by performance? |
you did what you promised to do. you can walk way, no further obligation. Most people do what they are committed to do, especially when they put it in writing and sign it. |
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termination of a contractual duty |
discharge |
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fulfillment of a contractual obligation resulting in a discharge |
performance |
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example of discharge by performance |
o Ipromise to sell you my house for 300k and you purchase. We set the closing date and we set the place(30 days away). Between the time that weagree and the time that we close the sale, I find someone else who is willingto pay 30k more. I no longer want tosell it to you. I decide not to show upat the closing and hope for the best. Ihope that when you get there, you drive away. You’re smarter than that. You show up and make your offering of thepurchase price and tender performance. You are now off the hook. Youhave performed. You are free and clear of me ever suggesting that you have notperformed and freeing me of the deal. |
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a wrongful failure to perform the terms of a contract that gives rise to a right to damages by the injured party |
breach |
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Two points for breach |
You say you are going to do something and you don't do it If there is no excuse for that failure to perform, the other side is free to go and they can pursue rights against you |
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a nonperformance that significantly impairs the injured party's rights under the contract, and discharges the injured party from any further duty under the contract |
material breach |
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As opposed to a technical breach or a nominal breach, a material breach... |
impedes the other party's ability to get what they wanted out of the deal. |
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With a material breach, we are looking for... |
breaches that makes some kind of significant difference. |
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require the other person to perform in a certain time. |
Time is of the essence |
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If someone fails to pay on time, then ____ ___ ____ _____ _______ is a material breach |
time is of the essence |
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Where is time is of the essence seen a lot? |
real estate |
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one's party's substantial interference with or prevention of performance by the other constitutes... |
a material breach and discharges the other party to the contract |
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Example of prevention of performance |
· Pool guy who is going to make a poolcomes out to do his job because I let him know what I wanted, but every time heshows up, I give him an excuse about why he can’t start that day. I keep preventing him from doing what he istrying to do. |
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standard under the uniform commercial code that a seller's performance under a sales contract must strictly comply with contractual duties and that any deviation discharges the injured party |
perfect tender rule |
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Perfect tender rule is punitive in the sense that... |
the only way you can be discharged is to complete it 100% as promised. |
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example of perfect tender rule |
· Having an event at my house andordering 1000 chairs. I’ve obligated myself to pay. The company shows up and brings me 999chairs. That is a material breach ofcontract under the UCC because they didn’t comply PRECISELY as promised. Anything shy of perfection in completion ofthe contract discharges me from having to pay unless I decide to acceptdelivery. |
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performance that is incomplete but that does not defeat the purpose of the contract |
Substantial performance |
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Substantial performance does not... |
discharge the injured party but entitles him to damages |
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example for substantial performance |
§ A guy who is coming in to build amaster bedroom/bathroom suite. (100k project). I pay him half and want to pay him the other half when he’s done. It turns out that he made a mistake. It’s10000$ worth of work that I’ll have to do to fix his mistake. If it was the UCC, I could tell him that I’mnot paying him. However, with this doctrine, they will provide that I only haveto pay the net value of that which I received. In other words, I can reduce it by 10000$. |
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Why do we have the substantial performance rule? |
because we want people to build things. If we had people out there building things and they didn't finish a 100% perfect building then they couldn't get paid, then nobody would build stuff and we need people to build stuff. |
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an inability or refusal to perform, before performance is due, that is treated as a breach, allowing the non repudiating party to bring suit immediately. |
anticipatory repudiation |
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With anticipatory repudiation, it is... |
your choice of whether you want to sue immediately or wait. |
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A material and fraudulent alteration of a written contract by a party to the contract... |
discharges the entire contract |
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Example for material alteration of written contract |
§ If one party pulls the contract outand decides to alter it that rises to the level of being fraudulent (the otherparty has no idea); the alteration is made with intent and falsifies what thecontract says, they are susceptible to damages. |
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an agreement between the parties to terminate their respective duties under the contract |
mutual rescission |
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Separate agreement that two parties make to... |
terminate a prior agreement is a mutual rescission |
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example of a mutual rescission |
§ The pool guy and I get together andwe decide that I can’t make a decision on the pool I want, so let’s just agreeto tear this contract up. BOTH people voluntarily agree to terminate the contract |
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a new contract accepted by both parties in satisfaction of the parties' duties under the original contract |
substituted contract |
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example for substituted contract |
§ Take the old and say “we don’t likeit anymore, we’re gonna put another one in it’s place.” I don’t want a groundpool; I want an above-the-ground pool. Pool guy and I have anothercontract. All of the obligations of thefirst one are satisfied |
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substituted duty under a contract |
accord |
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the discharge of the prior contractual obligation by performance of the new duty |
satisfaction |
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an agreement to substitute a new performance for an old one that is part of a contract that already exists |
accord |
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actual agreement to perform |
accord |
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performance itself |
satisfaction |
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example for accord and satisfaction |
§ I set a whole contract up for you andit costs 2500. We have an agreement that you can pay me the 2500 in about 6months. 8 months later, I haven’t heardfrom you and you’re still around. Asluck would have it, 9 months past our agreement, my AC goes out. You come out to my house, tell me what’swrong and say you can fix it for $1500. You and I then say “instead of you paying me 2500, you are going toperform this repair job and it will satisfy completely your obligation to payme. The accord is you saying “deal. I will do it.” Satisfaction occurs when youshow up at my house and complete the repairs. |
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a substituted contract involving a new third-party promisor or promisee |
novation |
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What is the difference between novation and accord & satisfaction? |
you will always see the entry of third party in a novation |
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example of novation |
§ You come to me, I set you up, you oweme 2500. You tell me that while you arenot going to be able to come in and satisfy the debt, you have someone elsethat is going to pay me for you. We havean agreement that this other person will come in and pay you and that willsatisfy the agreement. |
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performance of the contract cannot be fone |
impossibility |
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The law lets at least the promisor out when... |
it cannot be done. |
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Can't be done might not mean tha... |
nobody can do it, it might mean that only I can't do it. |
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the promisor--but not all promisors--cannot perform |
subjective impossibility |
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Example of subjective impossibility |
· If I order paper but then before theydeliver it to me there’s a fire and it’s burnt up, it is impossible for them todeliver it to me. However, they COULD goto office depot and buy me paper and bring it to me. It’s easily replaceable, so they still haveto perform despite their fire. |
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What do subjective and objective impossibility do? |
subjective does not discharge the promisor objective does discharge the promisor |
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no promisor is able to perform |
objective impossibility |
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What type of impossibility do you have to prove to get out of a contract? |
objective impossibility |
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example for objective impossibility |
· If a band has a contract, but the leadsinger has pneumonia, they will be released from the contract because theycannot see her. However, the money hasto be returned. |
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example of Objective impossibility Arthur Murray |
· A guy who went into Arthur Murray’sstudios (a dance school) that was very prevalent. They would put out vouchersthat entitled someone to 2,3,4,5 dance classes. Mr. Parker goes in, he’s in his mid thirties and have no talent atall. They told him “wow you have greatabilities. We can make a dancer out ofyou.” Parker had prepaid dance classes. They elevated him through particular levels. The guy racked up 25000$ worth of unuseddance lessons. The contract stated thatit was non-cancellable. Once they have theirmoney, if you decide not to dance anymore, you cannot get it back. He ends up in a car accident. It’s a bad accident that impairs him longterm and he couldn’t dance if he wanted to. They tell him “sorry. Non-cancellable.” The ultimate winning dart thathe threw was that he could no longer perform the dance classes because he wasdisabled. So, he got to cancel thecontract. |
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will discharge contract is it occurs without the promisor's fault |
destruction of subject matter |
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If a performance becomes illegal or impractical as a result of a change in the law... |
the duty of performance is discharged |
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example of subsequent illegality |
· If we had a winery that came up witha way to make a fantastic tasting wine and had a 25% alcohol content (twicewhat most wines have). After theycontract to sell this wine, the state passes a law stating that you can’t sellwine with an alcohol contract greater than 18%. Performing the contract would literally be illegal. |
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principal purpose of a contract cannot be fulfilled because of a subsequent event |
frustration of purpose |
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example of frustration of purpose |
· If I have a place on St. Charles aveand it is a perfect place for parades. Ilease my house out to be there for a number of days and I enter into thatcontract with you. You agree to pay me,I make my house available to you. The parade gets cancelled. So the wholereason that you were there has now been frustrated |
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where performance can be accomplished only unforeseen and unjust hardship, the contract is... |
discharged under the Code and the restatement |
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With Commercial Impracticability to not declare it impossible would be... |
grossly unfair and oppressive to the point that the court would rule it impossible |
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Simply being in a position where it is financially inconvenient to perform is.. |
not impossible |
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example for commercial impracticability |
§ A milk company made a contract a yearin advance to deliver milk to all the schools. They no longer want to do it ayear later because the price of milk went up. The court said “no, you still have to deliver it because you didn’tspecify ‘or the market price of milk’. You will bear the loss on that.” |
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discharge available to a debtor who obtains an order of discharge by the bankruptcy court |
bankruptcy |
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Three points for bankruptcy |
debts discharged in bankruptcy courts are erased forever a person who renews their promise to pay after is still required to pay though not all debts are dischargeable, but most are. |
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after the statute of limitations has run, the debt is not discharged, but the creditor cannot... |
maintain an action against the debtor. |
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If you wanna sue the party... |
you only have so much time to do so. |
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You should waste no time in at least calling an attorney so that you can... |
at least preserve your right to sue |
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What will cause A to be discharged when A enters into a contract with B? (4) |
A fully performs B materially breaches A and B agree to substitute C for A (novation) A discharged in bankruptcy |
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What will cause A and B to be discharged when A enters into a contract? (6) |
Failure of a condition mutual rescission of the contract substituted contract accord and satisfaction subsequent illegality of the contract impossibility of performance |
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What will cause B to be discharged when A enters into a contract with B? (4) |
B fully performs A materially breaches A and B agree to substitute C for B (novation) B discharged in bankruptcy |
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Silvestri v. Optus Software, Inc.
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o Mike getshired by Optus software as the director of tech support. Tech support is a big deal. When Mike went to work, he and the CEO gotalong famously. Mike thinks highly ofhimself, but the customers start complaining that tech support is far belowpar. They don’t like dealing withMike. The CEO has to pull him aside andpoint out that they’re having these problems. Three months later, he tells him that he’s fire. In the contract, Optus had a contract thatsaid that Mike could be fired at any time if the company being dissatisfiedwith his performance. Mike filed to suitto challenge whether or not the satisfaction that was assessed was done so in avalid way. He said that the CEO was anunsatisfiable man. The court said that the satisfaction clause was going to beheld to a subjective standard, meaning that we don’t look at what a reasonableman would determine, we are looking at the person who is making the call. His satisfaction was based on personaljudgment, his opinion, his taste and preferences. Don’t care about whether his evaluation wasreasonable or not. It’s a matter oftaste and opinion. A SATISFACTION CLAUSEIN AN EMPLOYMENT AGREEMENT THAT APPLIES TO TASTE AND PREFERENCE IS SUBJECTIVE. IF IT IS MANUFACUTRING, IT IS OBJECTIVE. |
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Höchster v. De La Tour |
o Young manserved as a tour guide on travel excursion. Mr. Delatour decides to take a triparound Europe and hires Mr. Hoxter. Thetrip is to begin in June and this deal takes place in April. This takes place in the 1850s, so it washarder to let people know things. If youare a travel guide, you want to get your ducks in a row to get paid forsummer. Delatour waits until a monthbefore to let Hoxner know that he doesn’t need him and will not be payinghim. Hoxter files suit and the suit isabout 2 to 3 weeks before their scheduled departure. Delatour says “How can you sue me for breachof contract when we weren’t supposed to take off for another two weeks?” Ifsomeone tells you before that they are going to breach a contract, can you suethem for damages or must you wait for the performance to occur. It’s dealer’s choice (plaintiff’schoice). The court recognized Mr.Hoxter’s choice to sue immediately or wait. |
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McDowell Welding & Pipefitting v. United States Gypsum Co. |
o Dealt withaccord and satisfaction. This decisionbasically exists to explain what an accord and satisfaction is and what asubstituted contract is. Just know whatit dealt with and that it served to distinguish the difference between accord,satisfaction, and substitution. |
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Northern Corporation v. Chugcah Electrical Association |
o NorthernCooperation enters into a contract with Tuga was renovations that are necessaryto a damn in Alaska near a lake. The gigthat Northern gets in repairing this damn requires them to haul big stones overto where the damn is. They contemplate using this huge lake astransportation. Lakes freeze in Alaskathough, starting in October and lasting until April. The essence of the contract contemplates thatNorthern will use their trucks to collect these stones, drive across thisdeeply frozen lake and deliver the stones. This is going to take over ayear. As any prudent business would do,they inspect the lake and find that the condition of the lake is substandardfor the purpose of hauling rocks. Theycleared the road to increase the freeze and gave it a go. Eventually the ice breaks and a truck sinksto the bottom. Northern tells Tuga thatthey can’t do this right now. Theirplayers are responsive and understanding until they tell Northern “we need youto complete this over the next several months or you have breached thecontract.” The next time a truck goesinto the lake, neither truck nor drivergets out. This happens again. Northern tells Tuga that “we can’t dothis. It’s impossible, so we want toterminate the contract on the grounds of impossibility. PART OF THE CONTRACT WAS THAT THE STONE WOULDBE HAULED ACROSS THE LAKE. Tuga issaying “yeah you’re losing drivers and trucks, but there’s another way for youto get the stones over to the damn. Instead of driving across the lake, you drive around the lake.” Thatcosts a lot more in time and labor to do it that way. Tuga said that it could be done, so you stillowe us the performance. Impossibilityhas become sort of a coat of various colors. It evolved from being a harsh doctrine to one that is adaptable to factsand circumstances. CommercialImpractibility. This case becamecommercially impractible for northern to perform under this contract. Both sides had contemplated a particularmethod and that method no longer made commercial sense. If the project had involved not going acrossthe lake then the parties couldn’t have come to that conclusion in the firstplace. |
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When one party to a contract breaches the contract by failing to perform his contractual duties... |
the law provides a remedy for the injured party. |
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The court system is there to... |
resolve disputes |
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The most common judicial remedies available for breach of contract are... |
monetary damages specific performance injunction restitution reformation |
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Contract remedies are available to protect... |
one or more of the following interests of the injured party |
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What is true about contract remedies? |
can have multiple interests |
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The _________ ______, which is his interest in having the benefit of his bargain by being put in a position as good as the one he would have occupied had the contract been performed |
expectation interest |
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Two points for expected interest |
one that protects a party's rights to get the benefit of the bargain As the judge, will calculate what position they would have been in if the other person had performed |
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his interest in being reimbursed for loss caused by reliance on the contract by being put in a position as good as the one he would have been in had the contract not been made |
reliance intérêts |
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second part of reliance interest |
whatever lost that happened because of reliance on the contract that was not performed |
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his interest in having restored to him any benefit that he has conferred on the other party |
restitution interest |
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One point for restitution interest |
anything of value, you get the return of it. |
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Types of monetary damages |
Compensatory Damages Nominal Damages Reliance Damages Damages for Misrepresentation Punitive Damages Liquidated Damages |
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contract damages placing the injured party in a position as good as the one he would have held had the other party performed |
compensatory damages |
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Two points for compensatory damages
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equals loss of value minus loss avoided by injured party plus incidental damages plus consequential damages. Protects the expectation interest |
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Example for compensatory damages |
§ LSU agrees to pay me 30000 for the9-month academic calendar. Two weeksbefore I am supposed to start, they tell me “nevermind”. I hold up the contract and say “No, I willteach at LSU.” It doesn’t matter because you won’t be teaching. I have the right to sue for breach. The value that I will receive is 30000because they were supposed to give me 30k and they gave me 0. · However, if I went to a comparablejob that will pay me 20k, I can still sue LSU for 10k. |
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value of promised performance minus value of actual performance |
loss of value |
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loss or costs the injured party avoids by not having to perform |
cost avoided |
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example for cost avoided |
· Let’s say I spend 75$ a month parkingat LSU. Since I won’t have to spend that 75$, there will be credit given forit. I won’t be able to correct it. |
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damages not arising directly out of breach, but arising as a foreseeable result of the breach |
consequential damages |
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example 1 for consequential damages |
· Same contract, but I am breaching thedeal. I’m not teaching. You’ll figure it out. They find someone else to teach it and end uphaving to pay them 40000. Now they cancome after me for 10k. |
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If you can prove through evidence consequential damages, then... |
you can collect them |
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Walmart example for consequential damages |
· Walmart secures an exclusiveagreement with a Toy company to buy tens of thousands of dolls for a specialprice. Walmart tells them that they will sell the dolls for 35k. If Walmart doesn’t buy from them then Walmartcan’t buy them at all. Walmart can suefor consequential damages because Walmart made it know that they would make $15on the doll. It is very wise tonegotiate what consequential damages might be.§ You are only allowed to collectattorney’s fees if that is written in the contract. |
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You are only allowed to collect attorney's fees if that... |
is written in the contract |
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a small sum awarded where a contract has been breached but the loss is negligible or unproved |
nominal damages |
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Sometimes someone breaches a contract and it's a... |
technical breach. |
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Technical breach |
you weren't really hurt but you want to sue anyway |
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example for nominal breach |
§ LSU tells me that they will not honorthe contract, but that I can teach a Finance class for the same amount ofmoney. I can still sue, but I haven’t suffered any damages. If I decide to sue on principle, the best Ican get is a judgment to a judge is that he’ll say “LSU breached the contact, Iaward x amount of dollars”. (very small sum) |
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contract damages placing the injured party in as good as a position as she would have been had the contract not been made |
reliance damages |
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Damages are designed to put the non-breaching party in as good a position as if they... |
had never met the other party. |
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difference between the value of the fraudulent party's performance as represented and the value the defrauded party received. |
benefit of the bargain damages |
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damages for misrepresentation |
benefit of the bargain damages out of pocket damages |
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example for benefit of the bargain damages |
· I go to a local art dealer andthere’s a painting that I am interested in by a local artist who died a longtime ago. This painting is worth 7500 ifit is authentic. This art dealer agreesto sell it to me for 5000. Thetransaction goes down. Later I find outthat this is probably one of the best art forgeries ever accomplished. With high-tech testing, I can verify thatthis painting was done 2-3 years ago and is only worth maybe 100$. I would be entitled to the value of the performanceas represented (7500$). The amount thatI actually got was $100. I will be ableto collect $7400. |
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difference between the value given and the value received |
out-of-pocket damages |
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are generally not recoverable for breach of contract |
punitive damages |
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You are not typically talking about punitive damages when you are in a contract dispute because... |
these damages apply to tort actions |
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Contract law is designed to compensate, not to...
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punish |
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reasonable damages agreed in advance by the parties to a contract |
liquidated damages |
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predetermined amount of damages |
predetermined amount of damages |
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Two points for liquidated damages |
Whether or not a court is going to accept them as recoverable and enforceable. Whether or not the court believes that they are designed to compensate the non-breaching party. |
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If the damages are there to compensate for a loss rather than to... |
punish the person who breached, then they will be enforceable. |
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Three limitations on damages |
foreseeability of damages certainty of damages mitigation of damages |
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potential loss that the party now in default has reason to know of when the contract was made |
foreseeability of damages |
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damages are not recoverable beyond an amount that can be established with reasonable certainty |
certainty of damages |
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point for certainty of damages |
want to see the numbers and how it is being asked for. If they see something that is speculative, they will not award it. |
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injured party may not recover damages for losses he could have avoided by reasonable efforts |
mitigation of damages |
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example for mitigation of damages
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· If a landlord could’ve tried to findanother renter and he didn’t, then he won’t get damages. People must try to minimize their damages. |
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Remedies in Equity are available only in cases in which there is... |
no adequate remedy at law. |
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Types of remedies in equity |
specific performance injunction reformation restitution |
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court decree ordering breaching party to render promised performance |
specific performance |
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Specific performance is not about damages, but about... |
mandatory action |
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Two points for specific performance |
reserved for contracts that include unique objects (always land) things that are one of a kind |
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court order prohibiting a party from doing a specific act |
injunction |
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Two points for injunction |
trespassing can be used to prevent somebody from competing when they sign a contract that restraints their ability to compete |
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restoration of the injured party to the position she was in before the contract was made |
restitution |
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Point for restitution |
order that the person who breached give back whatever they received of value from the other person (the non-breaching party) |
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What is the difference between monetary damages, remedy and equity? |
People seeking remedy and equity are not seeking money. The focus is court action and not court-awarded money |
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Welding Case |
1. Acontractor and subcontractor were working together. The subcontractor believed he was owed xamount of dollars and the contractor didn’t think so. Be familiar with that this case describesaccord and satisfaction thoroughly. Thecourt was asked in this case to address the issue of accord separate fromsatisfaction. The court decides that another performance that varies from theperformance owed will discharge another promise. Accord is the writing, satisfaction is theperformance. |
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Can you explain the one-year provision? |
1. The statueof frauds requires a writing to a anything that can’t be performed within oneyear. If it can possibly be performedthen it can be verbal. There is a testof probability. The court looks at the slightest possibility. If you have an employment contract that partyA will employ party B for the rest of his life, this is a verbal agreement(fine) because you could die in a year. COUNTING THE YEAR FROM THE TIME THATTHE CONTRACT IS MADE. |
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Case 15-4
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1. Case dealtwith family members who were asked to transfer ownership of property becausetheir deceased father had promised to sell just under 80 acres to aneighbor. He wrote out on a scratchpaper that he intended to sell 80 acres but retain ownership of 1.3 acres. This was held to be an insufficient writingunder the statutes of frauds because these requirements required that thewriting show the specificity of the land. The court didn’t acknowledge that carving out 1.3 acres wasspecific. Even if the two knew which 1.3acres, it still needed to be specifically written in the document. |
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When can a minor disaffirm? |
At any point before they turn to the age ofmajority up until a reasonable time after. ONE SITUATION WHERE THE RULE IS DIFFERENT: WHEN A MINOR IS INVOLVED IN ACONTRACT WITH REAL ESTATE (BUYER OR SELLER), MINOR HAS TO WAIT UNTIL 18 TODISAFFIRM. |
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When can a minor ratify a contract? |
After they turn 18. Cannot ratify a contract while they are still a minor. |
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What if there is a verbal modification after? |
1. If you signa contract and then so a different verbal modification after, it depends if theend contract that is revised looks like. If there is a verbal agreement to modify a contract that is performablewithin a year, if it changes it to a contract that cannot be performed within12 months, then it must be in writing. But the other way, if you’re going from a written 18-month contract andverbally modify it to be less than one year, then this is okay. If the final resulting contract doesn’t needto be in writing, then the modification doesn’t need to be in writing. |
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Benefit of the bargain |
someone has misrepresented and the result ismonetary damages. Represented to beworth 10k and is actually worth 100, and I paid 7k. In the benefit of the bargain theory I wouldget 10k less 100. |
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Out of pocket expenses, |
1. Out ofpocket expenses it would be 7500 less 100 and I would have a lower result. |
