BUSN 283 Test Study Guides
BUSN 283 Test Study Guides BUSN 283
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This 98 page Bundle was uploaded by Chelsea Carey on Tuesday October 4, 2016. The Bundle belongs to BUSN 283 at Gonzaga University taught by Donald D. Hackney in Spring 2015. Since its upload, it has received 4 views. For similar materials see Business Law in Business Administration at Gonzaga University.
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Chapter 9 General Principles: Tort= civil wrong that interferes with one’s property or person 1) What Is Tort? a) Remedies- protection after the wrongs are committed i) Civil remedies for acts of interference by others 2) Tort and Crime Distinguished a) Crime- wrong that arises from violation of public duty i) For the government b) Tort- wrong that arises from a violation of private duty i) Person who experiences direct harm c) When act is both crime and tort- the gov may persecute the wrongdoer for violation of criminal law, and the indiv who experiences the direct harm may recovr damages 3) Type of Tort a) Intentional- wrongdoer engages in intentional conduct; civil wrong i) E.g. striking another person in fight b) Negligence- failure to exercise due care under the circustances in consequence of which harm is proximately caused to one to whom the defendant owed a duty to exercise care; careless actions or actions taken without thinking i) May not be intended but still liable ii) E.g. Run a red light and hit another driver c) Strict Liability- civil wrong for which there is absolute liability bc of the inherent danger in the underlying activity i) E.g. The use of explosives, crop dusting, storage of flammable material, Product Liability ii) Impose liability w/out regard to whether there was intent to harm or any negligence occurred; Imposed w/out regard to fault Intentional Tort 1) Assault- intentional conduct tht threatens a person with well found fear of imminent harm couple w/the present ability to carry out the threat of harm a) Usually only insulting words arnt suffienct enough to constitute assault b) Threat to use force 2) Battery- intentional and wrongful touching of another person w/out that person’s consent a) Actually use of force b) Plaintiff must prove damages 3) False Imprisonment- intentional detention of a person w/out that person’s consent a) Does not have to be for any specific amount of time b) Shopkeeper’s tort- when shoplifters are unlawfully detained i) Shopkerper’s priveldge- right of a store owner to detain a suspected shoplifter based on reasonable cause and for reasonable time w/out resulting liability of false imprisonment 4) Intentional Infliction of emotional Distress (IIED)- involves conduct that goes beyond all bounds of decency and produces mental anguish in the indiv a) Requires proof of outrageous conduct and resulting emotional distress in vict 5) Invasion of Privacy- tort of intentional intrusion into the private affairs of anther, includes 3 different torts: a) Intrusion into plaintiffs private affairs b) Public disclosure of private facts c) Appropriation of another’s name/image for commercial advantage d) Right to Publicity:- designed to protect the commercial interests of celebrities in their identities; commercial misappropriation of a name or likeness i) Appropriation of the plaintiffs name or likeness for the value associated with it ii) Identification of plaintiff in publication iii) An advantage or benfit to defendant 6) Defamation- untrue statement by one party about another to a third party a) Slander- defamation of character by spoken words or gestures b) Libel- written or visual defamation without legal justification c) Elements of Defemation: i) Statement abt a person’s reputation, honesty, or integrity that is untrue ii) Publication iii) A statement directed at a particular person iv) Damages that result from the statement d) If the person is a public figure- they must prove malice- what was said or written was done with knowledge that the info was false or with recless disregard for whther true or false e) Defense against defamation= truth f) Some statement are priveldged and this priveledge provides full or partial defense to the tort of defamation i) E.G. members of Congress enjoy absolute privledge- complete defense against the tort of defamation, as in the speeches of member of Congress on the floor and witness in a trial g) Media has qualified privilege – print inaccurate info w/out liability for defamation, so long as a retraction is printed and there is no mailice i) Statement is made to protect the interests of the private employer on a work-related matter h) Statutoty privelge- respect to letters of rec i) Employer act in good faith 7) Product Disparagement ] a) Slander of title- malicious making of false statements as to a seller’s title b) Trade libel- written defamation about a product or service c) Product disparagement- false statements made about a product or business i) A false statement about a particular business product or about its service in terms of honesty, reputation, ability, or integrity ii) Communication of the statement to a third party iii) Damages 8) Wrongful Interference with Contracts a) Contract Interference- tort in which a third party interferes with others freedom to contract i) The law affords a remedy when a third party intentionally causes another to break contract already in existence 9) Trespass- unauthorized action w/ respect to land or personal property a) Trespass to land- any unpermitted entry below, on,across, or above the land of another b) Trespass to personal property- is the invasion of personal property w/out the permission of owner Negligence Widest range of tort liability Injured person must demonstrate: o A duty o Breach of duty o Causation o Damages Elemnts of Negligence 1) Duty to Exercise Reasonable Care a) Act as responsibly prudent person-duty of care b) Professionals have duty to perform their jobs at the level of reasonable professional i) Avoid liability for Malpractice c) People who own property have duty of care keep in condition that is not hazardous i) Businesses have duty to inspect/repair property and provide adequate security 2) Breach of Duty- imposed by statute or by the application of the reasonable person stndrd i) Eval against what a reasonable person would have done under the circumstances 3) Causation- element that connects duty and the breach of duty to the injuries i) “But For” test of causation ii) Once cause is established, plaintiff must establish proximate cause-the harm suffered by the injured person was a foreseeable consequence of the defendants negligent actions (1)General danger- must be forseeable 4) Damages- plaintiff must establish actual losses cause by defendants breach of duty of care and is entitled to be made whole for all losses Entitled to: i) Past and future pain and suffering (mental anguish) ii) Past and future physical impairment iii) Past and future medical care iv) Past and future loss of earning capacity (life and work life capacity) v) Joint and several Liablity- each defendant may be held liable to play the entire judgement vi) Punitive (exemplary) damages when breach of duty was shocking (1)When defendants tortious conduct is attended by circumstances of fraud, malic, or willful or wanton coduct 5) Defenses to Negligence a) Contributory Negligence- negligence of plaintiff that contributes to injury and at common law bars from recovery from the defendant although the defendant may have been more negligent than the plaintiff i) Gives way to Defense of comparative negligence b) Comparative Negligence- defnse that permits a negligent plaintiff to recover some damages but only in proportion to the defendants degree of fault c) Assumption of the Risk- i) Express assumption of the risk- written exculpatory agreement under which plaintiff acknowledges the risk involved in certain activity and release defendant from prospective liability (1)E.g. ski lift tickets, permission for high school cheerleading activity, parking lot claim checks (2)Enforceable as written but some considered unenforceable bc they violate public policy ii) Implied Primary assumption of the risk- plaintiff has impledly consented, often in advance of any negligence by defendant. To relieve a def of a duty to the plaintiff regarding specific known and appreciated risks (1)Subjective standard—specific to plaintiff and situation (2)E.g. Sporting events, iii) Many states have either abolished or eliminated assumption of the risk terminology d) Immunity- governments are generally immune from tort liability i) Recovery of damages from the US Strict Liability- provide guaranteed protection for those who are injured by conduct the law deems both serious and inexcusable; high degree of protection; absolute liability 1) Company or person who has caused the injury or damages by the conduct will be required to compensatefor those damages in an absolute sense 2) Few is any defenses apply 3) Imposing Strict Liability- situations in which a statutory duty is imposed and in product liability Chapter 37 Nature of the Agency Agency based on consent of parties—consensual relationship Agency relationship is contractual 1) Definitions and Destinctions a) Agency- Relationship between a person identified as a principal and another bt virtue of which the latter may make contracts with third persons on behalf of the principal (Parties: Principal, agent, third party) i) Agent- person or firm who is authorized by the principal or by operation of law to make contract with third person on behalf of the principal ii) Principle- person or firm who employs an agent; person who, with respect to surety, is primarily liable to the third person or creditor, property held in trust b) Employees & independent contractors are defined by/differentiated control and authority i) Possible to be both employee and agent but an agent is not necessarily an employee ii) Independent contractor- contractor who undertakes to perform a specified task according to the terms of a contract but over whom the other contracting party has no control except as provided by the contract (1)Principal cannot control indep contractor in regards to performance of work iii) “Right to control test” determines whether an idivutal is an agent, employee or an indpen contractor iv) Separate identity of indepen contractor may be concealed so that the public believes that it is dealing with the principal— principal is liable as though the contractor was an agent or employee 2) Classification of Agent a) Special agent- authorized by principal to handle to handle a definite business transaction or to do a specific act i) E.g. one who is authorized by another to purchase a particular house b) General Agent- authorized by the principal to transact all affairs in connection with a particular type of business or trade or to transact all business at a certain place i) E.G. person who is appointed as manager by the owner of a store c) Universal Agent- agent authorized by the principal to do all acts that can lawfully be delegated to a representative i) E.g. when a person is absent bc of being in military service gives another person a blanket power of attorney to do anything that must be done during such absence 3) Agency Coupled with Interest a) Agent has Interest in Authoriry- form of agency in which an agent has been given or paid for the right to exercise authority (Lender/Borrower) b) Agent has an interest in the subject matter- form of agency in which an agent is given an interest in the property w/which that agent is dealing i) When agent is authorized to sell the property of principle and is given a lien on such prop as security for a debt owed to her by the principal Creating the Agency—may arise by: Appointment Conduct Ratification Operation of Law 1) Authorization by Appointment a) Express authorization (usual method)- authorization of an agent to perform a certain act—act for, or on behalf of another b) May be made orally c) Many states require appointment to be in writing i) Power of Attorney- written authorization of agency by principal (1)Attorney at Fact- agent authorized to act for another under a power of attorney 2) Authorization by Conduct- conduct consistent w/the existence of an agency relationship a) Owner puts another person in charge, Third persons may assume that the person in charge is the agent for the owner b) Apparent authority- appearance created, appearance of authority but no actual authority i) Extends to all acts that a person of ordinary prudence, familiar w/business usages and the partic business. Would be justified in belieing that the agent has authority to perform ii) Third person reasonably believe that the agent has authority 3) Agency by Ratification-notification may be express, where the principal explicitly approves the contract, or implied, where the principal does not object to the contract and accepts the contracts benefits a) Intention to Ratify- may be expressed in words or it may be found in conduct indicating i) Ratification is a question of Intention b) Conditions for Ratifcation- following conditions must be satisified: i) Agent must have purported to act on behalf of or as agent for the identifies principal ii) The principal must have been capable authorizing the at both at the time of the act and at the time it was ratified iii) The principal must have full knowledge of all material facts c) Effect of Ratification- when unauthorized act is ratified, the effect is the same as though it had originally been authorized i) Principal and third party are bound by the contract 4) Proving the Agency Relationship a) Burden of proving existence of agency relationship lies on person who is seeking to benefit (third party) i) Must prove that it is an authorized agent of the principle & posseses the authority to do the act in question Agent’s Authority (scope) 1) Scope of Agents Auhority- may be expressed or implied a) Express Authority- orally or written; principle tells agent to perform certain action b) Incidental Authority- authority f agent that is reasonably necessary to execute express authority c) Customary Authority- authority of an agent to do any act that, according to the custom of the community, usually accompanies the transaction for which the agent is authorized to act d) Apparent Authority- appeacence of authority created by the principals words or conduct leads the third party to reasonably believe the person has authority 2) Effect of Proper Exercise of Authority- agent w/ authority properly makes a contract w/third person that purports to bind the principal, = binding contract btwn principal and third party; a) Agent is not a party to this contract 3) Duty to Ascertain Extent of Agent’s Authority a) Agent’s acts Adverse to Principal i) Third person is required to take notice of any act that are clearly adverse to the interest of the principal ii) Only way for third person to protect themselves is to inquire of the principal 4) Limitations of Agents Authority Person who has knowledge of a limitation on the agent’s authority cannot ignore the limitation a) Obvious Limitation i) When third party is dealting with a representative of a gov agency they should recognize that such a person will ordinarily have limited authority (1)Recognize that contract made with such a rep may not be binding unless ratified by the principal (2)Fed gov places risk of any individual making arrangement with the gov to accurately ascertain that the gov agent is within the bounds of his/her authority b) Secret Limitations i) If principal gives secret instructions that limit the agent’s authority, the third person is allowed to take the authority of the agent at face value (1)Third person is not bound by secret limitations that they have no knowledge of Duties and Liabilites of Principal and Agency 1) Duties and Liabilities of Agent during Agency- owed to principal a) Loyalty- must not obtain secret benefits from agency i) Agent cannot sell property to principal w/out disclosing the ownership ii) Contract voidable by principal- if agent who was employed to sell the property purhases the property w/out disclosure iii) Agent cannot act as an agent for both parties iv) Agent must not accept secret gifts/commission from the third party v) Agent is prohibited from aiding competitors of Principal or disclosing info vi) Breach of duty- to knowingly deceive principal b) Obedience and Performance- agent under duty to obey all lawful instructions c) Reasonable Care- duty of agent to act with care that a reasonable person would exercise under the circumstances d) Accounting- agent must account to the principle for all property or money belonging to the principal that comes into agents possession i) w/in reasonable time, give notice of collections made and render an accurate account of all receipts e) Information- duty of agent to keep principal informed 2) Duties and Liabilites of Agent after Termination of Agency a) Duties continue only to extent necessary to perform prior obligations 3) Duties and Liabilites of Princial Agent Perform Contract Compensate Agent for services Make Reimbursement for proper expenditures Indemnify agent for loss (certain cases) a) Employment according to terms of Contract i) Principal is obligated to permit the agent to act as an agent for contracted amount of time ii) If principal gives agent exclusive right to act in such capacity they cannot give anyone else that authority b) Compensation- Principal must pay agent the agreed compensation i) Repeating Transaction- agent receives compensation or certain percentage of commissions on all subsequent renewal or additional contracts (1)E.g. Insurance agent ii) Postagency transactions (1)Agent is not ordinarily entitled to compensation in connection w/transactions occurring after termination of the agency (a)Unless employment contract call for such Termination of Agency 1) Termination by Act of Parties a) Either part has power to terminate the agency relationship at any time i) Terminating party may be liable for damges b) Notice of an agents termination must be given to third party— agent has power to bind until notice is given 2) Termination by Operation of Law a) Death of either principal or agent terminates authority of an agent—even if unknown b) Insanity of Principal or agent c) Bankruptcy of the principal or agent d) Impossibility of performace, such as destruction of the subject matter e) When country of the principal is at war with that of agent 3) Disability of the Principal under the UDPAA a) UDPAA- permits the creation of an agency by specifying that “this power of attorney shall be affected by subsequent disability of incapacity of the principal” i) Must designate in writing b) UDPAA changes common law and the general rule that insanity of the principal terminates the agents authority to act for the principal c) Best interest to hire attorney to act as the principal d) Durable powers of attorney- grant only those powers specficed in the instrument i) May be terminate by revocation by a competent principal and by death of the principal 4) Termination of Agency Coupled with an Interest- an agency coupled with an interest is an exception to the general rule as to termination of agency; cannot be revoked by the principal before the expiration of the interest—not terminated by death or insanity 5) Protection of Agent from termination of Authority a) Exclusive agency contract b) Secured transaction c) Escrow deposit d) Standby letter of agreement e) Guarantee agreement 6) Effect of Termination of Authority a) Authority to act for principal is not terminated until the agent receives notice of termination Chapter 38 Third Persons in Agency Liability of Agent to Third Person 1) Action of Authorized Agent of Disclosed Principal a) Agent has no personal liability if they properly execute, has proper authority, discloses the principle a contract b) Agent cannot be held liable by the thirds party if the principal fails to perform the contract 2) Unathorized Action a) Person makes a contract as an agent without the authority to do socontract does not bind principal, breach of warranty b) If agents acts cause loss to third person the agent may general hold the agent liable for the loss 3) Disclosure of Principal- agents liability w/the third person is affected by the degree of disclosure a) Disclosed Principal- agent makes known the identity of the principal as well as the fact that the agent is acting on the principal’s behalf i) Agents is not a party a party and not bound by contract b) Partially Disclosed Principal-principal whose existence is made known but identity is not i) Agent is a party to the contract c) Undisclosed Principal- principal on whose behalf an acts w/disclosing to the third party the fact of agency or the identity of the principal i) Third person is making the contract w/agent; agent is party to the contract 4) Assumption of Liability- agents may intentionally make themselves liable on contracts with the third person a) The agent makes a contract that will be personally binding if the principal is not disclosed, the agent is necessarily the other contracting party and is bound by the contract i) Even when principal is disclosed, agent may be personally bound—to further principal’s business 5) Execution of Contract- to avoid any question of interpretation an agent should execute an instrument by signing the principals name either :by or per a) Parol evidence is admissible as btwn the original parties to the transaction for establishing the character in which the agent is acting; when ambiguous 6) Torts and Crimes a) Agents are liable for harm caused third persons by the agents fraudulent, intentional, or negligent acts i) Agent is liable for the crime w/out regard to whther the agent acted in self-interest or sought to advance the interest of the principal Liability of Principal to third Person 1) Agent’s Contracts a) Liability of a principle to a third person on a contract made by an agent depends on the extent of disclosure of the principal and the form b) Simple Contract w/ Principal Disclosed- disclosed principal w/contractual capacity authorized or ratifies an agents transaction w/a third person i) Agents cannot sue for breach of contract c) Simple Contract w/Principal Partially Disclosed i) A partially disclosed principal is liable for a simple contract made by authorized agent (1)Third person may recover from either the agent or the principal d) Simple Contract w/ Principal Undisclosed i) Undisclosed principal is liable for a simple contract made by an authorized agent (1)When third person learns of existence of undisclosed principal may sue for damages 2) Payment to Agent a) When third person makes payment to authorized agent, the payment is deemed to the principle i) If agent never delivers payment to principal, the principal must give third person full credit ii) Apparent Athourity has same effect as actual authority 3) Agent’s Statement- principal is bound by statement made by an agent while transacting business within scope of authority 4) Agent’s Knowledge a) Principal is bound by knowledge or notice of any fact that is acquired by an agent b) Principal is not charged w/knowledge of an agent when: i) Agent is acting adversely to the principal’s interests ii) The third party acts in collusion w/agent for the purpose of cheating the principal Liability of Principal for Torts and Crimes of Agent 1. Vicious Liability for Torts and Crimes a. Vicious liability- imposing fault for the fault of another— principal or employer is liable although personally free from fault and not guilty of any wrong b. Respondeat Superior- doctrine that the principal or employer is vicariously liable for the unauthorized torts committed by an agent or employee while acting within the scope of the agency or the course of employment, respectively c. Nature of Act- may give rise to civil liability of employer or prosecution of employer for crime i. Negligent Act- liability is imposed under act within the scope of employment ii. Intentional- employer liable for an intentional tort committed by an employee for the purpose of furthering emplyer’s business iii. Fraudulent- employer is liable 1. Common law- principal is not liable iv. Violation of gov regulation- employer may be liable 1. Prominent in protection of environment d. Course of Emplyment- must be shown that individual is acting w/in the scope of authority to constiture vicarious liability e. Employee of the US- FTCA i. US is liable whenever a fed employee driving a motor vehicle in the course of employment causes harm under such circumstances that a private employer would be liable 1. Statute exempts the employee driver from liability 2. Negligent Hiring and Retention of Employees a. Negligence of employer in the hiring process b. Respondeat Superior- Employer is liable only for those torts committed within the scope of employment i. Employer knew or should have known that the employee was incompetent, violent, dangerous, criminal c. Need for Due Care in Hiring i. Employer should have reasonably forseen injury to the third party ii. Due care= have prospective employees fill out employment app, then check their work experience d. Employees w/ Criminal Records i. Hiring of an indiv w/ crim record does not by itself establish the tort of negligent hiring 1. Employer should investigate to determine whether the nature of the conviction in relationship to the job to be performed creates unacceptable risks to third parties e. Negligent Retention- employer knew or should have that the employee would create an undue risk 3. Negligent Supervision and Training-principal held directly liable for it’s negligence in regard to training and supervision of its employees and agents 4. Agent’s Crimes a. Principal is liable for crimes of an agent commiteed at the principal’s direction (however not when the agents actions are unauthorized) b. Courts hold employer criminally liable when the employee has in the course of employment violated environmental protection laws, liquor sale laws, pure food laws, etc 5. Owner’s Liability for Acts of an Independent Contractor a. Owner is not liable for harm when work is done by independent contractor b. Exceptions to Owner’s Immunity- i. Impose liability on owner when work of independent contractor is inherently dangerous ii. Liable for tort when owner controls the conduct of the independent contractor c. Undisclosed Indepen Contractor i. Case: owner appears to be doing the act in question bc the existence of the indep contractor is not disclosed or apparent 1. Owner is liable for torts and contractos of undisclosed indep contractor 6. Enforcement of Claim by Third Person a. Lawsuit may be brought by third person against the agent of principal if each is liable Transactions with Sales Personnel 1. Soliciting and Contracting Agents a. Giving order to salesperson does not ordinarily give rise to a contract i. Salesperson= Soliciting Agent- authority is limited to soliciting offers form third persons and transmitting them to the principal for acceptance or rejection 1. Does not have authority to make binding contract between principal and third party ii. Contracting agent- agent w/authority to make contracts; perso with whome the buyer deals 1. Contract arises when agent accepts the customer’s order Chapter 12 Nature and Classes of Contracts: Contracting on the Internet Nature of Contracts 1. Defintion of a Contract a. Contract- legally binding agreement based on the genuine assent of the parites, made for a lawful object, between competent parties, in the form required by law, and generally supported by consideration i. By mutual Agreement/assent parties create enforceable duties or obligation 2. Elements of a Contract a. Agreement b. Between Competent Parties c. Based on Genuine Assent of the parties is d. Supported by consideration e. Made for a lawful objective and f. In form required by law 3. Subject Matter of Contracts a. May relate to performance of personal services b. May provide for transfer of ownership 4. Parties to a Contract a. Promisor- person who makes the promise b. Promisee- person to whom a promise is made c. Obligor=promisor if the promise is binding; promisor has obligation d. Privity- succession or chain of relationship to the same thing or right, such as privity of contract, privity of estate, privity of possession; parties to contract stand in privity e. Privity of contract- relationship between a promisor and the promise f. In written contracts—parties may be reffered to by name— special names to identify each party i. (E.g. landlord & tenant, shipper & carrier, etc) g. Contract may be individual, partnership, a limited liability company, a corporation, or a gov h. Contract binds only the parties of the contract i. Ordinarily only a party to a contract has rights against another party to the contract 5. How a Contract Arises a. An agreement arises when one person the Offeror makes an offer and the offeree accepts—Must be offer and an acceptance 6. Intent to Make a Binding Agreement a. Parties must have an intent to enter into an agreement that is binding 7. Freedom of Contract a. Law does not require parties to be fair, or kind, or reasonable, or to share gains or losses equally Classes of Contracts Form The Way they were created Their binding Character Extent to which they have been performed 1. Formal and Informal Contracts a. Formal Contracts- written contracts or agreement whose formality signifies the parties’ intention to abide/bound by the terms; are enforced i. Contracts under Seal- contract executed by affixing a seal or making an impression of the paper or some adhering substance such as wax attached to the document ii. Recognizance (Contracts of Record)- obligations that have been entered before a court of record 1. E.g. appear at a later date for a hearing iii. Negotiable Instruments b. Informal Contracts- simple oral or written contract; everything else that is not a formal contract; are enforceable i. Enforceable because they represent agreement of the parties 2. Express and Implied Contracts- simple contracts a. Express Contracts- agreement of the parties manifested by their words; whether spoken or written b. Implied Contracts- contract expressed by conduct or implied or deduced from the facts; arises when: i. A person renders services under circumstances indicating that payment for them is expected ii. The other person, knowing such circumstances, accepts the benefit of those services iii. Cannot Arise when: there is an existing express contract on the same subject 1. Existence of an implied contract does not bar recovery on an implied contract for extra work that was not covered by the contract 3. Valid and Voidable Contract and Void Agreements a. Valid Contracts- agreement that is binding and enforceable b. Voidable Contracts- agreement that is otherwise binding and enforceable but may be rejected at the option of one of the parties as the result of specific circumstances c. Void Agreements- agreement that can not be enforced; without legal effect; cannot be made binding 4. Executed and Executory Contracts a. Executed Contracts- agreement that has been completely performed b. Executory Contracts- agreement by which something remains to be done by one or both parties 5. Bilateral and Unilateral Contracts a. Bilateral Contract- agreement which one promise is given in exchange for another i. Each party is bounded by obligation b. Unilateral Contract-contract under which only one party makes a promise; offeree does not act i. Common with reward situations ii. Offeree does not accept the offer by express agreement, but rather by performance c. Option and First Refusal Contracts i. Parties may make a contract that gives a right to one of them to enter into a second contract at a later date ii. Option contract- contract to hold an offer to make a contract open for a fixed period of time; initial contract iii. Right of First Refusal- right of a party to meet the terms of a proposed contract before it is executed, such as a real estate purchase agreement 1. Imposes only the duty to make the first offer to the party having the right of first refusal 6. Quasi Contracts Quasi Contract- court-imposed obligation to prevent unjust enrichment in the absence of a contract o Obligation imposed by law a. Prevention of Unjust enrichment i. Court does not seek to enforce ii. Even in absence of a promise to pay, a court may impose an obligation to pay for the reasonable value of that benefit to avoid unjust enrichment iii. Apply the law “outside the box” and fill in cracks where common civil law and statutes fail to achieve iv. Successful claims for unjust enrichment requires: 1. A benefit conferred on the defendant 2. The defandents knowledge of the benefit 3. A finding that it would be unjust for the defendant to retain the benefit without payment 4. Burden of proof is on the plaintiff v. Quantum meruit- (as much as deserved); an action brought for the value of the services rendered the defendant when there was no express contract as the purchas price b. Preclusion by an Express Contract i. Courts award relief based on quasi-contractual principles, implying by law a contract where one did not exist in fact 1. Where an express contract exists, it precludes an unjust enrichment claim ii. Extent of Recovery 1. Plaintiff recovers the reasonable value of the benefit conferred on the defendant—reasonable value of work performed 2. Customary calculation of damages= actual job costs+ an allowance for overhead and profits minus amount paid Contracting on the Internet 1) Basic purchasing principal= buyer beware a) Generally website terms become the contract if the parites and are legally enforceable b) Basic legal rules that govern contracts offline are the very same rules that govern online contracts, and basic legal civil procedure rules apply Chapter 13 Formation of Contracts: Offer and Acceptance Requirements of an Offer Offer- expression of an offeror’s willingness to enter into a contractual agreement o Promise that is conditional upon an act/forbearance/return of promise 1) Contractual Intention a) Offer must appear to intend to create a binding obligation i) Intent is determined by objective standards b) Test for a valid binding offer is whether it induces a reasonable belief in the offeree that he can by accepting it bind to the offeror c) Invitation to Negotiate i) There may be a preliminary discussion or an invitation by one party to the other to negotiate or to make an offer ii) Advertisments- offeres that called for an act on the part of the customerforming a unilateral contract (e.g. reward for lost property) iii) Quotations of prices are not offers d) Agreements to Make a Contract at a Future Date i) No contract when parties merely agree that at a future date they will consider making a contract or will make a contract on terms to be agreed at that time (1)Contract to enter a contract in the future is of no effect 2) Definiteness Offer and the resulting contract must be definite and certain Minor, ministerial and nonessential terms are left for future determination does not make an agreement too vague to be a contract The law does not favor the destruction of contracts bc that would go against the social force of carrying out the intent of the parties o Court will try to find the intent of the parites and thereby reach the conclusion that the contract is not too indefinite Court may not rewrite the agreement of the parties in order to make it definite a) Definite by Incorporation i) An offer and the resulting contract that by themselves may appear “too indefinite” may be made definite by reference to another writing ii) Agreement may also be made definite by reference to the prior dealing of the parties and to trade practices b) Implied Terms i) Although an offer must be definite and certain, not all of its terms need to be expressed ii) Terms may be implied form conduct c) Best Efforts Clauses i) Decades ago it was generally accepted that a duty defined only in terms of “best efforts” was too indefinite to be enforced but such a view is no longer widely held d) Divisible Contracts-agreement consisting of two or more parts, each calling for corresponding performance of each part by the parties e) Exceptions to Definiteness i) Situations in which contract is desireable but it ies either impossible or undesirable to adopt definite terms in advance (1)Indefinite terms is often tied to good-faith performance or some indep fact that will be definitely ascertainable at some time in the future (a)(e.g. Indef term might be tied to market price, production, sales requirements, cost to complete) (2)Requirements contract- contract to buy all requirements of the buyer from the seller—recognizes as binding contract (3)Output contracts- contract of a producer to sell its entire production or output to a given buyer (a)Binding contracts even though they do not state the exact quantity of goods that are being bought or sold 3) Communication of Offer to Offeree a) Offer must be communicated to the offeree i) Unilateral contracts often oforee performs the act called bt the offorer w/out knowing of the offer’s existence. Such performance does not constitute an acceptance. Termination of An Offer Offeree cannot accept a terminated offer 1) Revocation of Offer by Offeror Offeror can revoke the offer before it is acceptedofforee can not create contract Offer may be recoked at any time before it is accepted even if Offeror expressly promised that offer will be good for a stated period and that period has not expired a) What constitutes a Revocation? i) Any words indicatinf the oferors termination of the offer are sufficient b) Communication of Revocation i) Effective only when it is made known to the offeree ii) If offeree accepts an offer before it is effectively revoked a valid contract is created c) Option Contracts- binding promise to keep an offer open for a stated period of time or until a specified date i) Requires that the promisor receive consideration as the price for the promise to keep the offer open ii) Contract to refrain from revoking the offer d) Firm Offers- offer stated to be held open for a specified time which must be so held in some states in the absence of an option contract, or under the UCC, with respect to merchants i) Offeror cannot revoke the offer prior prior to its expiration when the offeror makes a firm offer (1)Irrevocable for a stated period of time 2) Counteroffer by Offeree a) Offoree rejects the offer when she ignores the original offer and replies with a different offer b) Counteroffer- proposal by an offeree to the offeror that changes the terms of, and thus, rejects the original offer i) No contract arises unless the original offeror accepts the counteroffer 3) Rejection of Offer by Offeree a) If offeree communicates a rejection of offer to the offeror then the offer is terminated 4) Lapse of Time a) When the offer states that it is open until a particular date the offer terminates on the date if it has not yet been accepted b) When time limitation is imposed on an option the option cannot be exercised after the expiration of that time; i) Regardless of whether the option was exercised w/in what would have been held a reasonable time if no time period had been specified c) If offer does not specify a time it will terminate after the lapse of a reasonable time i) Reasonable time depends on circumstances (1)Nature of the subject matter (2)Nature of the market in which it is sold (3)Time of the year (4)Other factors of supply and demand ii) When a seller purports to accept an offer after it has lapsed by the expiration of time, the seller’s acceptance is merely a counteroffer and does not create a contract unless the buyer accepts that counteroffer 5) Death or Disability of Either Party a) If offeror or offeree dies or becomes mentally incompetent before the offer is accepted the offer is automatically terminated 6) Subsequent Illegality a) If the performance of the contract becomes illegal after the offer is made the offer is terminated Acceptance of Offer Acceptnce- is unqualified assent to the act or proposal of another; as the acceptance of a draft (bill of exchanges), of an offer to make a contract, of foods delivered by the seller or of a gift or deed. 1) What Constitues an Acceptance? a) No particular form of words or mode of expression is required, but there must be clear expression 2) Privilege of Offeree a) The fact that there had been a series of contracts between the parties and that one party’s offer had always been accepted before by the other does not create any legal obligation to continue to accept 3) Effect of Acceptance a) Acceptance creates a binding agreement or contract b) No party can withdraw from or cancel the contract w/out the consent of the other party 4) Nature of Acceptance a) Acceptance= offeree’s intent to enter into a binding agreement on the terms states in the offer i) Objective or outward appearance that is controlling rather than the subjective or unexpressed intent of the offeree ii) Acceptance must be absolute and unconditional 5) Who May Accept? a) Only the person to whom an offer is directed may accept it b) When a person to whom an offer was not made attempted to accept it, the attempted acceptance has the effect of an offer 6) Manner and Time of Acceptance a) Offer may specify the manner and time for accepting i) When offeror specifies there must be written acceptance no contract will arise when the offeree makes an oral acceptance ii) If reasonable or specified time expires, the offeree’s power to make a contract by accepting the offer “lapses” b) When the offeror calls for the performance of an act or certain conduct, the performance thereof is an acceptance of the offer and creates a unilateral contract c) Offeror is the master of the offer d) Silence as Acceptance i) In most cases the offeree’s silence and failure to act cannot be regarded as acceptance ii) A party to an existing contract effect a modification of that agreement w/out the other party’s actual acceptance or approval e) Unordered Goods and Tickets i) No acceptance if the recipient ignores the offer and does nothing (1)The fact that items are not returned does not mean that they have been acceptred; offeree is not required to pay for or return items received ii) Unordered merchandise that is mailed must have attatched to it a clear and conspiscious statement of the recipeients right “retain, use, discard, or dispose of”—Postal Reorganization Act 7) Communication of Acceptance a) Acceptance by the offeree is the last step in the formation of a bilateral contract b) Mailbox Rule i) Properly affressed postage paid mailed acceptance takes effect when the acceptance is placed into the control of the US Post Serv, or by judicial extension, is placed in the control of a private 3 party carrier (e.g. FedEx, UPS) ii) Acceptance is effective upon dispatch even before it is received by the offeror iii) Offeror may avoid the application of this rule by stating in the offer that acceptance shall take effect upon receipt by the offeror c) Determining the Applicable Means of Communication i) Approporiate medum of communciatio of acceptance is that unless otherwise unambiguously indicated in the offer, it shall be construed as inviting acceptance in any manner and by any medium reasonable under the circumstance d) Telephone and Electronic Communication of Acceptance i) US courts have applied mailbox rule- telephone acceptances are effective when and where dispatched ii) Email- assuming that courts will apply mailbox rule e) Effects of the Mailbox Rule i) If the acceptance is properly dispatched by the offeree on the final date the acceptance is timely and the contract is formed, even though the offeror actually receives the acceptance after the specified date has passed 8) Auction Sales a) Statements made by the auctioneer to draw forth bids are merely invitations to negotiate i) Each bid is offer; not accepted until the auctioneer indicates that a particular offer or bid is accepted (1)Because bid is an offer, the bidder may withdraw the bid at any time before it is accepted by the auctioneer. ii) If sale is announced as “without reverse” the property must be sold to highest bidder no matter how low the bids are iii) “with reverse” the auctioneer takes bids as agent for the seller with the understanding that no contract is formed until the seller accepts the transaction Chapter 14 Capacity and Genuine Assent A contract Is binding agreement o Must be made between parotes who have the capacity to do so Contractual Capacity 1) Contractual Capacity Defined Contractual Capacity-ability to understand that a contract is being made and to understand its general meaning Every1 is presumed to have capacity unless proven otherwise a) Status Incapacity i) Some classes of persons lack contractual capacity (e.g. minors) b) Factual Capacity i) May exist due to mental condition caused by drugs, medication, alcohol, illness, or age bc Person does not understand that a contract is being made or understand its general nature 2) Minors- lack contractual capacity a) Who is a minor? i) Age of majority has been reduces from 21 to 18 (1)Day before the birthday rule b) Minor’s Power to Avoid Contract i) Contract made by minor is voidable at the election of the minor ii) Minor may affirm or ratify the contract on attaining majority by performing the contract, by expressly approving the contract or by allowing a reasonable time to lapse w/out avoiding the contract (1)What Constitutes avoidance? (a)Minor may avoid or disaffirm a contract by any expression of an intention to repudiate the contract (b)Any act inconsistent w/the continuing validity of the contract (2)Time for Avoidance (a)A minor can disaffirm a contract only during minority and for reasonable time after attaining majority (i) After lapse of reasonable time contract is deemed ratified (3)Minors Misrepresentation of Age (a)Generally if minor has misrepresented his or her age does not affect the minors power to disaffirm the contract (b)Form of fraud and have to pay damages (c)Other party to the contract may disaffirm the contract bc of the minor’s fraud c) Restitution by minor After Avoidance i) Original Consideration Intact (1)Minor must return the what was received on contract when he disaffirms the contract (2)Status Quo Ante- minor must put things back to the original positions of the parties ii) Original Consideration Damaged or Destroyed (1)If what has been received is damages or destroyed minor can still disaffirm contract and not have to pay damages d) Recovery of Property by Minor on Avoidance i) When minor disaffirms a contract, the other contracting party must return the money or property received ii) If property has ben sold to a third person who did not know of the original seller’s minority, the minor cannot get the property back (1)Minor is entitled to recover the property’s monetary value or money received by the other contracting party e) Contracts for Necessaries i) Minor can disaffirm a contract for necessaries but must pay reasonable value for furnished necessaries (1)What Constitutes Necessaries? (a)Necessaries- things indispensable or absolutely necessary for the sustenance of human life (e.g. relating to health, education, comfort) (i) (e.g. rental of a house used by a married minor is necessary) (2)Liability of Parent or Guardian (a)When a 3 person supplies the parents or guardian of a minor w/goods or services that the minor need, the minor is not rd liable for thse necessaries bc the 3 persons contract is with the parent or guardian not with the minor (b)When medical care is provided to minor a parent is liable for expenses but if they are unable or unwilling to pay then minor can be held contractually responsible f) Ratification of Former Minor’s Voidable Contract i) A former minor cannot disaffirm a contract that has been ratified after reaching majority ii) What constitutes Ratification? (1)Any words or any conduct of the former minor manifesting an intent to be bound by the terms of a contract made while a minor iii) Form of Ratification (1)No special form is required for ratification a minors voidable contract iv) Time for Ratification (1)Of necessity, can ratify a contract only after attaining majority g) Contracts that Minors Cannot Avoid i) Educational loan, contract for medical care, contract made while running a business, contract approved by court, contract made in performance of a legal duty, and a contract relating to band accounts, insureacne policies, or corporate stock h) Liability of Third Person For Minors Contract i) Parent is liable to a seller for the reasonable value of necessaries supplied by the seller to the child id the parent has deserted the child ii) Liability of Cosigner (1)Cosigner is bound independently of the minor (2)If minor disaffirms contract, cosigner is still bound by it 3) Minor Incompetent Persons a) Must demonstrate that at the time the agreement was executed he or she was suffering from mental illness or defect; or by reason of mental illness the party was unable to control his/her conduct b) Effect of Incompetancy i) Incompetent person can avoid the contract in same manner as minor (1)Upon removal of disability the formerly incompetent can either ratify or disaffirm the contract ii) Mentally incompetent person or his estates is liable for reasonable value of all necessaries furnished that individual iii) Treat incompetent person contract as binding when its terms and surrounding circumstance are reasonable and the person is unable to restor the other contracting party to the status quo ante 4) Intoxicated Persons a) Contract not affect by a party’s being impaired by alcohol at the time of making contract as long as the party knew the contract was being made i) If intox is such that person doesn’t knowcontract is voidable b) Excessive intox is viable defense to contract arising between casinos and their patrons c) Impairment by drugs is treated same way as alcohol Mistake 1) Unilateral Mistake- mistake by only one party a) Party making the mistake may avoid the contract if the other contracting party knew or should have know of the mistake; 2) Mutual Mistake a) Both Parties enter into contract under a mutally mistaken understanding contract is voidable by the adversely affect party; b) Contract based on mutual mistake in judgment is not voidable by the adversely affected party c) Mutual mistake of fact is voidable 3) Mistake in the Transcription of Printing of the Contract: Reformation a) If mistake in printing or writing of manuscript the aggreviated party may petition the court to reform the contract to reflect the actual agreement of the parties i) Reformation- remedy by which a written instrument is corrected when it fails to express the actual intent of both parties because of fraud, accident, or mistake ii) Burden of proof is heightened to clear and convincing evidence that such a mistake was made Deception One of the parties may have been misled by fraud no true genuine assent to the contractis voidable by innocent part 1) Intentional Misrepresentation a) Fraud is tort b) Fraud adverselt affect the genuineness of assent of the innocent party 2) Fraud- making of a false statement of a past or existing fact, with knowledge of its falsity or w/reckless indifference as to its truth, w/the intent to cause another to rely thereon, and such person does rely thereon and is harmed thereby a) To prove, there must be a material misrepresentation; this misrepresentation is one that is likely to induce reasonable person to assent to the contract b) Statement of Opinion or Value i) Matter of opinion of value or opinions about future events are not regarded as fraud ii) Person hearing the statement should recognize that it is merely the speakers personal opinion not fact iii) Statement of opinion may be fraudulent when the speaker knows of past or present fact that make the opinion false c) Reliance on Statement i) Fraudulent statement made by one party has no importance unless the other party relies on the statement’s truth d) Proof of Harm i) For an individual to recover damages for fraud, proof of harm to that individual is required ii) Fraud can receive punitive damages 3) Negligent Misrepresentation a) Predicated on a negligently made false statement i) Speaker failed to exercise due care regarding material information communicated to the listener but did not intent to deceive b) When neg misrep of material fact that the listener relies on causes harm to the listener the contract is voidable by injured 4) Nondisclosure a) Nondisclosure serves to make a contract voidable especially when nondisclosure consists of active concealment b) General Rule of Nonliability i) A party to a contract has no duty to volunteer information to the other party ii) Nondisclosure of infor that is not asked for does not impose fraud liability or impair the validity of a contract c) Exceptions i) Unknown Defect or Condition (1)Seller who knows of serioud defect must disclose that info to the other party whre the defect is unknown to the other person and is of such nature that it is unlikely that the other person would discover it ii) Confidential Relationship-relationship in which, bc of the legal status of the parties or their respective physical or mental condition or knowledge one party places full confidence and trust in the other (1)May be regarded as fraudlent iii) Active Concealement (1)Positive act of hiding info from another party by physical concealment, or may consist of knowingly and recklessly furnishing the wrong infor= fraud Pressure 1) Undue Influence- influence that is asserted upon another person by one who dominates that person a) One person is helpless in the hands of another; not exercising free will b) Contract is voidable c) In cases of Confidential relationships; one person is dominating 2) Duress- enter into contract to avoid threatened danger a) Physical duress- threat of physical harm to person or property i) Contract is voidable at the victims election b) Economic duress- threat of financial loss i) Deprive one of the exercise of his own free will Chapter 15 Consideration 1) Consideration defined and Explained a) Consideration- promise or performance that the promisor demands as the price of the promise b) Bargained- For Exchange i) Consideration=bargain-for exchange between parties to contract (1)Something of value must be given or promised in return for the performance or promise of performance c) Benefit-Detriment Approach i) Consideration is a benefit received by the promisor or a detriment incurred by the promise 2) Gifts a) Promises to make a gift are unenforceable promises bc they lack consideration b) A completed gift cannot be rescinded for lack of consideration c) Charitable subscriptions are binding to the extent that the donor should have reasonably realized that the charirt was relying on the promise d) Love and affection alone are not recognized as consideration 3) Adequacy of consideration a) Ordinarly courts do not consider the adequacy of the consideration given for a promise i) Courts do not interfere to make sure that each side is getting a fair return 4) Forbearance as Consideration a) Forbearance- refraining from doing an act which you legally have the right to do b) Relinquish the right to sue for damages will support the promise for payment of money given in return for the promise relinquish the right 5) Illusory Promises- promise that in fact does not impose any obligation on the promisor a) Party making the promise is not bound bc he/she has made no real promise i) Other party who has made a real promise is not bound bc received no consideration ii) Contract falls for lack of mutuality b) Cancellation Provisions- crossing out of a part of an instrument or a destruction of all legal effect of the instrument or a destruction of all legal effect of the instrument, whether by act of party, upon breach by the other party, or pursuant to agreement or decree of court c) Promise may authorize a party to cancel the agreement under certain circumstances on giving notice by a certain date; does not make promise illusory d) Conditional Promis
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