New User Special Price Expires in

Let's log you in.

Sign in with Facebook


Don't have a StudySoup account? Create one here!


Create a StudySoup account

Be part of our community, it's free to join!

Sign up with Facebook


Create your account
By creating an account you agree to StudySoup's terms and conditions and privacy policy

Already have a StudySoup account? Login here

busi law FINAL study guide!!!

by: kmb0095

busi law FINAL study guide!!! ACCT 2700

Marketplace > Auburn University > Accounting > ACCT 2700 > busi law FINAL study guide
GPA 3.67

Preview These Notes for FREE

Get a free preview of these Notes, just enter your email below.

Unlock Preview
Unlock Preview

Preview these materials now for free

Why put in your email? Get access to more of this material and other relevant free materials for your school

View Preview

About this Document

all notes, one practice test and all cengage questions
Business Law
Robert Hollis Cochran
Study Guide
50 ?




Popular in Business Law

Popular in Accounting

This 57 page Study Guide was uploaded by kmb0095 on Thursday April 28, 2016. The Study Guide belongs to ACCT 2700 at Auburn University taught by Robert Hollis Cochran in Spring 2016. Since its upload, it has received 367 views. For similar materials see Business Law in Accounting at Auburn University.


Reviews for busi law FINAL study guide!!!


Report this Material


What is Karma?


Karma is the currency of StudySoup.

You can buy or earn more Karma at anytime and redeem it for class notes, study guides, flashcards, and more!

Date Created: 04/28/16
Intro to Law 3/25/16 {material for test 3} Chapter 11: Contracts—Nature and Terminology  Prevalence of Contracts  Sanctity of Promises o Rooted in our Western tradition  A person’s word is their bind o Morally important  It is immoral to break promises o Economic necessity  At the heart of why contracts are important to business  Responsibility and “Taking Care of Your Own Self-Interest o No one can take care of your self interests better than you o Contracts require personal responsibility  Everyone has to worry about contracts o All businesses rely on their contracts to succeed  Sources of Contract Law o Common Law for all contracts (except sales and leases) o Contract Law at the heart of Law Merchant (which was absorbed into Common Law) o Sales and lease contracts—Uniform Commercial Code (UCC) (don’t have to know for test)  Function of Contract Law o Provides stability and predictability for commerce  Definition of a Contract o Promise or set of promises o For breach of which:  (Breach = we don’t fulfill our promise)  The law provides a remedy or  The performance of which the law in some way recognizes as a duty o Damages are the foremost remedy o Court most of the times make the defendant fulfill that promise  Objective Theory of Contracts o We determine what a contract and/or its terms means by which the parties did, not by what the parties tell us they meant  Court looks at what the party did, not what they say  What people say is subjective and change over time o “Actions speak louder than words” o What a contract is or what it means can be inferred from the parties’ conduct  You can figure out the party meant by what they did o Determined by the “Reasonable Person” standard Intro to Law  What would a reasonable person think happened? The most important reason courts enforce contracts is/are: Contracts are a foundation of our economy  “A person’s word is their bond” (it’s the moral thing to do)  The law says one will keep one’s promises, so you must obey the law  Keeping one’s promises shows you can be trusted  (All of these statements are true but (T/F) Contract law emphasizes personal responsibility and accountability True  Elements of a Contract o Agreement  Not all agreements rise to the level of contracts o Consideration (Value)  Value is a good synonym for consideration o Contractual Capacity  Parties have to be able to do a contract o Legality  It has to be for a legal reason  Contract Formation o Bilateral vs. Unilateral  Bilateral—a promise for a promise; most common  Unilateral—a promise for an act o Formal vs. Informal  Formal—requires a special form for creation; specified by law  Informal—requires no special form for creation; most common o Express vs. Implied  Express—formed by words; terms are clearly expressed; oral or written  Implied—formed by the conduct of the parties; parties haven’t stated the terms but they’re following them 3/28/16 Chapter 12—Contracts: Agreement in Traditional and E-Contracts {ignore sections 3 & 4} A bilateral contract is an exchange of a promise for a promise Consideration is the respect you pay the other person in a contract. False  Agreement o Parties are the offeror and the offeree  Offereor—makes the offer  Offeree—accepts or rejects the offer Intro to Law o Parties must show mutual assent to terms of contract. o Once an agreement is reached, if the other elements of a contract are present, a valid contract is formed. o Do nothing response = the same as rejection  Requirements of the Offer. o Offeror’s Serious Intention o Definiteness of Terms—other party knows what they are agreeing to o Communication to Offeree—Joe and Bill’s boat  Offeror’s Serious Intention. o Contract is judged by what a reasonable person in the Offeree’s position would conclude about the offer (Under the Objective Theory of Contracts) o {CASE 12.1} Lucy v. Zehmer (1954)  Lucy and Zehmer are lifelong friends  Neighbors and farmers  Between them is the Old Thompson place  Thompson’s died and the sons got it  The sons don’t care about farming and they live in Philadelphia  Zehmer and Lucy both tried to buy it but the sons said no  Lucy goes on vacation  Thompson boys show up  Offer house to Zehmer even though they tried to offer it to Lucy first because they knew him better than Zehmer  Zehmer bought farm for $6,000  Lucy wanted farm more than Zehmer  Lucy wanted Zehmer to sell the farm to him, but Zehmer said no  Lucy kept bugging him  One Christmas Eve, after Zehmer and Lucy had some drinks Lucy said he would pay Zehmer $50,000 for the land  Zehmer’s wife gets pencil and paper napkin to write contract  Zehmer wrote contract about selling land; had to rewrite it 3 times (1 contract left out Mrs. Zehmer, 2 nd got liquid spilt on it, 3 was the final one)  Lucy goes to lawyer with contract  Zehmer didn’t think Lucy had the money so they said the contract was a joke  Goes to court  Judge asks: you didn’t intend the contract? Zehmer: no, I was too drunk to know what I was doing Intro to Law  Judge says that Zehmer did intend it because they had to rewrite the contract 3 times  Objective theory of contracts 4/4/16 Chapter 12 (cont’d)  Where Intent May Be Lacking o Expressions of Opinion—not offers o Statement made in jest, frustration, or anger—not offers  Girl bought $63,000 car  Went to see her friends for drinks  When she left the car wouldn’t crank  Friends start making fun of her  Out of frustration she said she would sell it to anyone for $100  Not an actual offer o Statements of Future Intent—not offers  Bob would offer his paralegal a bonus at the end of the long summer if they had had a good summer  Even though he always gives her the bonus, it wasn’t a binding offer o Preliminary Negotiations, or invitations to negotiate—not offers  Only is an offer when they get to the same negotiation point (T/F) Bill offered to pay Jenifer $100 for her bike if she would paint it blue. Jennifer agreed and painted the bike a beautiful Carolina Blue. Bill refused to buy the bike saying it wasn’t a manly blue and Jennifer should have known that. T/F Bill wins and Jennifer loses False—Jennifer won and Bill lost  Special Offer Situations o Advertisements—not offers (invitations to negotiate)  Mrs. Cochran (Bob’s mom) loves lobster  Normally Winn-Dixie sells lobster for $16.99 a pound  In an ad, it said they were selling it for $3.99 a pound  Mrs. Cochran goes to Winn-Dixie with $500 and asks the fish guy how much lobster he has, he says 100 lbs., Mrs. Cochran asks for all of it  The fish guy says hold on wait a minute, that was a mistake in the ad. It was supposed to be $13.99 a pound  She says the law says that they had to stick to the $3.99/lb. (she didn’t know a damn thing about the law)  She got in an argument with the fish guy Intro to Law  Manager hears this and asks what is going on  Manager lets Mrs. Cochran have it even though they will be losing lots of money because if she didn’t get that lobster then she would bad mouth Winn-Dixie and they would lose more money o Auctions  Not an offer, but invitation for offers through an auctioneer  Auctions with and without reserve  With reserve can withdraw goods  Without reserve: cannot withdraw goods 4/6/16 “The golden opportunity you are seeking is in yourself. It is not in your environment; it is not in luck or change, or the help of others; it is in yourself alone.” –Orison Swett Marden “The best helping hand that you will ever receive is the one at the end of your own arm.” –Fred Dehner  Agreement: Offer o Definiteness of terms  Identification of the parties  Object or subject matter of the contract  Consideration to be paid  Time of payment, Delivery, or Performance  A court can supply missing terms if the parties intend to form a contract o Termination of offer  An offer may be terminated prior to acceptance by either:  Action of the parties OR o Offeree accepts o Revocation of the offer by the Offereor  Offer can be withdrawn anytime before offeree accepts the offer  Why revoke it? Common reason: o Bill & Joe are drinking in a bar o Bill is very successful, Joe isn’t doing bad o Childhood friends o Bill realizes Joe doesn’t have a lot of extra money o Bill says dude remember my bass boat ($25,000), I’ve only taken it out once, my wife’s going crazy bc I can’t use it and she wants me to sell it Intro to Law o Joe, wanna buy it for $15,000? o Joe wants it, thinks he can get the money together but Joe says I want it but lemme check with my wife first o Bill’s wife got frustrated that he offered it for so much less o Bill’s in a bind, he can call Joe and say jk I can’t sell it for $15,000 o That’s a revocation  Effective when the offeree or Offeree’s agent receives it o Rejection of the offer by the offeree  Rejection by the offeree (expressed or implied) terminates the offer o Joe says sorry fam I can’t the wife says no o That’s a rejection  Effective only when it is received by the offeror or the Offeror’s agent o Counteroffer by the offeree  Rejection of original offer and the simultaneous making of a new offer  Someone wants a house, not for $350,000 so they offer $300,000 (counteroffer) o Offeror is now offeree  Hell no I’ll do $340,000 (effecto – rejecting counteroffer & making a new offer) o Offeree is now offeror  HAHAHAH no I’ll do $320,000??? o Offeror is now offeree  Eh okay o Boom acceptanceeeeee  Mirror image rule: at common law, any change in terms automatically terminates the offer and substitutes the counteroffer  If they are, contract  If they aren’t, counteroffer  Ex) I’ll sell my house for $350,000 Intro to Law o Guy says I accept IF you include patio furniture o This is a counteroffer: new offer is $350,000 + patio furniture  Termination by operation of law o Lapse of time  Offer terminates by law when the period of time specified in the offer has passed  If no time period for acceptance is specified, the offer terminates at the end of a reasonable period of time o Destruction of the Subject Matter: if it occurs before acceptance of the offer, then the offer is canceled  Think of Katrina, New Orleans was basically destroyed  Estimated that when Katrina hit, over 100,000 residential units for sale but all were destroyed  So, all offers were terminated o Death or incompetence of the offeror of offeree: automatically terminates unless it is an irrevocable offer  Agreement: Acceptance o Unequivocal acceptance: “the mirror image rule” o Silence as acceptance  General rule: offeree should not be legally obligated to affirmatively reject an offer  Silence is generally a rejection 4/8/16 “There are no shortcuts to any place worth going.” “Anything worth having is worth working for.” o Mode and Timeliness  General rule: in bilateral contracts, acceptance is timely if made before offer is terminated  Mailbox rule: acceptance is effective when offeree places the acceptance in the mailbox (default rule)  Any communication required in contracts has to be received by the other party to be valid EXCEPT by the mailbox rule  Substitute method of acceptance  If the offer calls for a specific way of acceptance that should be the only way you accept Intro to Law  Use an alternative way at your own risk o Ex) Cali warehouse case  Downturn in economy, in LA there’s this landlord that owns warehouses in a high price, industrial area  Bc he’s having trouble getting tenants he dropped his prices  One large, prime location warehouse, rents it for $1mil a year which is half from when econ was good  Lease is 3 years, renewal clause in there  Says if the tenant wants to renew lease for an additional 3 years on exact same terms, must notird landlord in writing on July 31 on the 3 year  Pays all 3 years, landlord reminds of renewal clause  6 months later, landlord reminds him again  one month before July 31, landlord reminds him again  landlord already has people lined up willing to pay $2mil  one week before, landlord calls every day reminding of renewal, tenant every day said okay okay  July 31 rolls around, tenant hadn’t said anything  All the people waiting said we want to rent this, landlord picked the best guy, lease signed  The guy shows up at the warehouse but the old tenant is still there  Landlord said dude leave we already have a contract with someone else  Tenant says “oh shoot I meant to get to you but I want it for the next 3 years, I can’t get anywhere else at this price”  Tenant sues, goes to court and says this is unfair & unjust, he’s screwing me over, saying the landlord said he should’ve known I wanted to renew it, evil businessman  Landlord could’ve appealed, someone would’ve overturned it Intro to Law  BUT he didn’t appeal  Agreement in E-Contracts o Full contract should be available to both parties (at least hyperlink) o Terms of acceptance should be clear  Forum-selection clause  Choice of law clause  Click on agreements: “I accept” or “I agree” o E-signature technologies  Any electronic means of agreeing to an electronic contract is valid if it clearly indicates “intent to be bound:”  “X” or “check marks” are valid  digitized signatures valid  typing your name is valid  e-signatures and E-documents are valid under Federal law unless the parties both specifically agree otherwise, no exceptions In contract law, the term consideration refers to the serious thought that underlies a party’s intent to enter into a contract. False In contract law, if a promise is made it will be enforced. False Ch.13 “No cause of action arises from a bare promise.” –Legal Maxim  bare promise – promise without consideration or value  Elements of consideration o Generally, consideration must have:  “legally sufficient value” AND  a “bargained-for-exchange”  occurs when the parties have the right to say yes or no  they have a choice; do I want to get in this deal or nah  ex) Chevron o when you pull into a Chevron gas station, gas is usually $0.25 more than others o you have a choice, just because they wont bargain with you doesn’t mean it isn’t a bargain-for-exchange o you have other choices o younger people buy that gas more bc we don’t know the value of money fr compared to older Intro to Law people who usually go to a little cheaper gas station o first element, “legal value”  value  promise  performance OR  forbearance  {Case 13.1} Hamer v. Sidway (1891) 4/11/16 o Hamer was a fellow in Iowa, he was a farm boy o Most people in Iowa went through grade 8 and then stopped so they could work on the farm o Hamer wanted to go through grade 12 o His Yale alumni teacher said that would be fantastic o First one in his state to go to college o Went to Yale because his teacher wrote a later to the dean and got him a full scholarship o Uncle Hamer wrote a letter about how he was really proud of Hamer going to college but I’m afraid that college student take up drinking, cussing, womanizing, smoking, etc. and I don’t want you to do that o I will promise you $10,000 (about $250,000 for that time) if you graduate and refrain from all that o Hamer did none of that during his 4 years at Yale o Uncle Hamer couldn’t make it to graduation because of bad health but promises Hamer he will be there with his money as soon as Hamer gets off the train in Iowa o Uncle Hamer isn’t there; Uncle Hamer’s kids are there; Uncle Hamer died o Even though we know he promised you $10,000 we’re not giving it to you because you think you’re better than everyone else and you didn’t do anything to deserve it o Hamer sues his uncle’s estate (represented by Sidway) o Sidway said that Hamer didn’t do anything to get that money o Judge says: each one of those things is legal (maybe they weren’t moral but he still gave up that right); he still gave that right up because Intro to Law he was leaning on Uncle Hamer’s promise so he had good consideration o Second element—bargained for exchange  Must provide basis for the bargain  Both parties must be able to say “yes” or “no”  Something of legal value must be exchanged between the parties; Key point: both parties must get and give consideration  Ex)  Jennifer promises Bill her bike for $100  Jennifer gives the bike and gets $100  Bill gives $100 and gets the bike Henry promises not to open Hank’s Lunchbox Café before 10 AM if Danni who owns Danni’s Danish & Donuts next door, promises to close by 1 PM; Henry’s consideration is: forbearance  Adequacy of Consideration o General Rule  Courts typically will not consider adequacy of consideration; people can’t say what the value of an object is for someone else; value changes over time (usually decreases)  In general, the law does not protect a person from entering into an unwise contract  Rarely, courts may look at the contract, if there is a large “shockingly inadequate” disparity in the amount consideration exchanged. Is there really “consent?”  “Shocks your conscience”  Bible seller example o Door to door bible selling company o Made on average $10,000 a summer o Sold along the bible belt but most people along the belt were illiterate o Every single bible story had a piece of artwork o Bible costs $795, the buyers were only earning $80/week o Set up payment plan of $20 per paycheck o If any had paid the $20 down payment and tried to back out, they would sit down and talk about it with them prayerfully and say that good Christian people don’t back out on their promises o Courts shut down because of adequacy of consideration Intro to Law o Bibles cost $49.95 in a store o Shocks your conscience because the company was selling this $50 bible for $800 to poor, illiterate people 4/13/16 “Excellence is not a skill, its an attitude.” –Vince Lombardi  Where is consideration in the contract?  Ex1) $$$  Uncle Joe says I’ll give you $15,000 bc I like you nephew  You bring nothing to the table  Look like there’s consideration  BUT consideration has to be received & given by both parties  This contract has no consideration  Ex2) iPhone  Someone buys an iPhone for $399 and the company uses $65 to make the phone  Consideration on both ends  Why do we have to have consideration in a contract before it is enforced?  Has nothing to do with morals, right & wrong  Has everything to do with economics and our financial system  Expansion of the money supply o Let’s say you spend $10 at Target for a product o Target pays supplier, what they owe is about 10-35% o Let’s say its 10% so $1 goes to the supplier o Maybe they got it from a manufacturer, goes & pays them o Manufacture pays raw materials provision o They pay for the rights for those materials o Target also pays utilities, insurance, salaries, all other bills o Pay all that, if there’s anything left over that’s profit o When the person gets the profit, they spend it or save it or invest it whatever they do o Rule of thumb: spend a dollar, we have ultimately the impact if you spent $6 bc it keeps getting turned over Intro to Law Consideration has to be essentially equal in any contract? False (think about iPhone contract, $399 one side and $65 other side, there’s consideration on both sides BUT it isn’t equal) The most important consideration in determining value is the cost involved. False (cost has nothing to do with value, Samsung made a phone for $100 and sold for $200 but nobody bought it, value is the value to the customer)  Agreements that lack consideration o Preexisting duty  Promise to do what one already has a legal duty to do does not constitute legally sufficient consideration  Contractor realized things were booming  Brick mason realized things were getting way better  Contractor had the brick masons working on a project, $50,000 paid to do the 6 month project  Towards the end they were worried about the next project  Contractor said business is good so y’all will probz get another job asap, I have another project right after this, I want to go ahead & hire y’all  But since the econ is improving, y’all need more pay  Same amount of work & project, sign a contract that says y’all will work for me and I’ll pay $100,000  They signed it  As they got close to finishing this project, econ was booming & brick masons were hard to find  Another developer (not knowing they had a contract) said sos help work for me do my project similar to this one and I’ll pay $250,000  But they realized we’re already contracted  Went to contractor & said sorry can’t do it, he freaked, they said sorry we can’t pass this up  We can work for other contractor or you at $250,000  Signed a new contract for $250,000 but he only paid them $100,000 bc that’s all his lawyer said he had to pay them  Brick masons went to court, freaked out  Cochran said they had a contract for $100,000 dated before the $250,000 contract  Used the new offer as extortion, new contract has lack of consideration  Were they cheated of $150,000? Intro to Law  No  Contract they signed was a Future’s Contract  Look at what they have when they signed the $100,000 contract, guarantee payment, gave up right to bargain with anyone else during the term of the contract  When they signed they really wanted the deal but they didn’t think of future options  Wasn’t evil to them, good brick masons but not very good businessmen o Past consideration  Not consideration because the bargained-for exchange element is missing  Exam question o Illusory promises  Promisor has not definitely promised to do anything (no promise at all) o Gift promises 4/15/16 “Do not pray for easy lives. Pray to be stronger men.” –John F. Kennedy  Uncle Chester says I’m going to give you $10,000 for your th 18 birthday  No consideration  Doesn’t count as consideration unless consideration on the other side Past consideration is consideration. False You agree to pay Eddie $1,000 if he quit smoking. This is a valid contract. True  Settlement of claims o Accord and satisfaction  Debtor offers to pay a lesser amount than the creditor purports to be owned  The debt (amount owed) must be in dispute  The accord is the new agreement  The satisfaction occurs when the new agreement is completed (Release)  Bill & Jennifer are in their agreement situation  Jen “I’ll sell you this bike for $100”  Bill “I’ll give you $100 if you paint it blue”  Jen paints it, Bill says no I wanted a different blue  Jen says well you asked for blue, this is blue Intro to Law  1) Bill says no, they go to court, judge determines the bike is blue so he has to pay  2) Jen says just pay it, Bill says yeah I want it but I hate painting  he asks what it’ll take to paint it navy, she says another $10  bill agrees to $110 for navy blue  avoided court and lawyers & whatnot due to the accord o all obligations are discharged / satisfied o once this is done, you can’t go back to the original contract or anything before “Insane people are always sure that they are fine. It is only the sane people who are willing to admit that they are crazy.” –Nora Ephron  contractual capacity o contractual capacity  legal ability to enter into a contractual relationship  not all persons have the capacity … o incompetency  adjudging by a court to be mentally incompetent (“insane”) – void  not adjudging by a court to be mentally incompetent but later determined by a court to be mentally incompetent – voidable  “Lucid” intervals – valid  incompetence because of intoxication – today mostly “valid” 4/18/16 o Minors  The Age of Majority is either 18 or 19 depending on the state (Common Law was 18 for females and 21 for males)  A contract entered into by a minor is generally voidable at the option of the minor (can be disaffirmed)  Girls mature faster than boys  Disaffirmance  Contract can be disaffirmed at any time during minority, or for a reasonable period after minor is emancipated (reaches the age of majority) o Example: CE Fitness for Women  Women only fitness place in Auburn Intro to Law  Selling point: women don’t feel comfortable in all these muscle places  Every fall, they could find out every female who had just been admitted to Auburn and would send them an advertisement to go work out there  Freshmen were generally not 19  $200 membership fee; $50/month  About 20% of freshmen girls went  When first credit card bill showed up to dad  If she was less than 19, you can send them a note that you aren’t going to keep paying  The fitness place would sue for non- payments and would take them to court  Some parents would just pay and some actually went to court (each time the Fitness place would lose because the girl was 18)  The court made a motion that whenever the fitness place came in to sue a minor, the fitness place would be fined  Fitness place eventually sold out to another place  Minor must disaffirm the entire contract  2 general rules for disaffirmance: o minor disaffirms and must return the Consideration in the condition it is in at time of disaffirmance to receive his total Consideration back o Minor disaffirms but his conduct has been willful, wanton, egregious, and/or irresponsible; the minor must return the Consideration in the condition it was in upon receipt  Example = 2 Tennessee Cases o 1 case  Young boy from poor family realized that when he was 8-9 that he wanted to buy a car but his parents couldn’t afford one  He saved every single penny he made  Saved up $6,000  Went to used car lot and found one he could buy Intro to Law  Car lot dealer says it’s his and gets the $6,000 cash  Car dealer tells the kid he needs insurance  Gets rear-ended on the way out at a red- light  Car gets totaled  Cop tells him he can disaffirm the contract and get his money back because he’s a minor o 2 ndcase  Kid with no money, saves up to buy a car  Saves up $6,000 and buys off car  Drives off lot  First red light, friends pull up next to him and starts picking at him  As soon as the light turns green, there was a drag race  He was going about 95 mph  Turned over 8 times, car was totaled  He can only get the salvaged parts in money left (about $100)  Exceptions: o Misrepresentation of Age  Generally, minor can disaffirm the contract  But some states prohibit disaffirmance and hold the minor liable o Necessaries (not on exam)  Contracts for food, clothing, shelter may be disaffirmed by minor, who remains liable for the reasonable value of goods or services. Why? If you don’t have contractual capacity, you may not enter into a contract. False (it can be voidable) The age of majority in the US is 19. False (depends on state)  Legality o For a contract to be enforceable, it must be formed for a legal purpose o A specific clause in contract can be illegal but rest of contract can be enforceable o A contract to commit a tortious act is illegal (see chapter 6) Intro to Law o Contracts Contrary to Statute  Contracts to do something prohibited by federal or state statutory law is illegal and therefore void (never existed)  Contracts to Commit a Crime  Contracts for Usury  Gambling  Licensing Statutes—only remember that where a license is required, a contract without a license is unenforceable 4/20/16 “Yesterday was the first day of the rest of your life and you messed it up again.” –Patrick Murray o Contracts contrary to public policy: generally, VOID  Health, safety, welfare, morals  Ex) stripper from Columbus o Saturday, she was hired by guys in Auburn, hired for $2,500 o Issue: after it was over, they wanted additional special services but didn’t pay for that o She said roughly $3,000 for a total of $5,500 o She wanted to sue them to get the money o Strip clubs aren’t legal in Auburn so if she sues she’d just get arrested o She said she will get the money bc friends in Columbus would help her o Cochran said come back Thursday morning and bring your birth certificate and we can fix this o He knew the group of guys were meeting Wednesday night, he called the ‘head’ of the guys and went to their meeting Wednesday o He said a stripper said they owe her money, Cochran said she could go to Montgomery and talk to the US Attorney and tell her story and he’d be ecstatic for this case bc a federal judgeship, he’d call all the news stations & tell them he’s going to arrest them for violation of the Mann act because its illegal to transport women across state lines for immoral practices o They gave him $4,500 (she was claiming $3,000) o Thursday morning Cochran met the stripper and she paid him his fees o She had to sign a statement that she recognized she and her clients participated in illegal activity, in exchange for this money she Intro to Law keeps quiet (no liquidity to this document but he wanted to protect her and the guys) o He wanted her birth certificate because she said her name was Cinnamon Fox & he didn’t believe her but that was her birth-given name  Contracts in restraint of trade are generally void  Exception: covenant not to compete and sale of an ongoing business o Contracts in restraint of trade  Covenant not to compete in a sale of a business is enforceable as long as type of business restriction, time, and geographic terms are reasonable (same business/2 years/75 miles)  Covenant not to compete in employment is enforceable as long as time and geographic terms are reasonable  (not on exam) o discriminatory contracts  party promises to discriminate on the basis of race, color, national origin, religion, gender, age, or disability are not… o effect of legality  generally, illegal contracts are void  if contract is executory, cannot be enforced  unjust enrichment is not an issue – courts just leave the parties where they find them 4/22/16 Chapter 15: contracts – mistakes, fraud, and voluntary consent “Luca Brasi held a gun to his head and my father assured him that either his brains, or his signature, would be on the contract.” –Michael Corleone to Kay “I’m going to make him an offer he can’t refuse.” –Vito Corleone (the Godfather)  Intro o Contract may be unenforceable if the parties have no genuinely assented to its terms by:  Mistake  Misrepresentation  Undue influence  Duress  Mistakes o A mistake of fact might allow a contract to be canceled o Unilateral mistakes cannot be canceled unless:  If other party to the contract knows or should have known that a mistake of fact was made, OR  If mistake was due to an inadvertent mathematical and without gross negligence Intro to Law o Bilateral (mutual) mistakes can be rescinded by either party  Ex) raffles v. Wichelhaus  Raffles had orders, Wichelhaus is a shipper  Raffle asks for a shipload of cotton  W says okay I’ve got a shipload that I’m expecting (this was in August)  In December, the load of cotton arrives and raffles is down watching the load arrive  W says what’re you doing here? Raffle says I’m just waiting for my cotton  W says that isn’t your cotton, Raffles says you sold me that cotton that’s mine  W says no your cotton is due in March, this cotton goes to someone else  Judges don’t have an opportunity to make both parties happy, no chance  Came up with a ruling: contract has to start with an offer and an acceptance, but the offer was for a shipload of cotton in December, acceptance was for a shipload in march, they didn’t agree to the same thing, so this is a mutual mistake of fact  No agreement in this case o Mistakes of value  Generally, contract is enforceable by either party  Judges see that when you agree to the contract, at that instance that’s what you believe the value is, that’s the value you placed on that contract so they usually don’t let you out of the contract  Ex) auction  A piece of furniture looked like dirt so the lady sold it to some guy for $5 at a yard sale but he figured out it was worth $1.5mil  She goes to court saying this isn’t fair, I should have that money  I made a mistake of value  The Korean guy who sold the furniture didn’t do anything wrong A bilateral contract is the exchange of a promise for performance. False, that’s a unilateral contact  Fraudulent misrepresentation o Intentionally said something that’s false with the intent to deceive the other party and cause them damages Intro to Law o Ex) used car dealer  Trades a odometer that says 250,000miles for one that says 200,000miles  Lies so the person will pay more for the car  Intentional misrepresentation  Innocent misrepresentation o When a person makes a statement he believes to be true but actually misrepresents facts  Undue influence o Contract lacks voluntary consent and is voidable  Based on confidential of fiduciary relationship, or relationship of dependence  Undue influence or persuasion is presumed if weak party talked into doing something not beneficial to him or herself  Ex) a political candidate had an STD 30 years ago  Ever since then he’s been a great family man and a good person but a doctor comes forward and says sign this contract paying me $1mil a year or I can’t promise your info will be safe  Undue influence  Ex) child with an elderly parent  Child has to take care of parent  Parent in 90s or so, didn’t want to go to nursing home, one of their children was their caregiver bc the other children had careers and whatnot elsewhere  The one in town was doing all the work, became a 24hour a day job  Father so thankful, child realizes my siblings aren’t doing anything so I deserve more  Child says dad can you at least give me the house bc I’m doing everything, can I get this & this & this  Child eventually gets everything, dad so scared of going to the home he just keeps saying yes  Other children are pissed, questionably undue influence here  If undue influence, could overturn contract 4/25/16  Privity of Contract o Only original parties to a contract have rights and liabilities under the contract  Exceptions o Assignment or Delegation o Third Party Beneficiary Contract Assignments Intro to Law  Transfer of contractual rights is an assignment  Effect of an Assignment o Assignor—party assigning rights to third party o Assignee—party receiving rights o Obligee—person to whom a duty or obligation is owed o Obligor—person who is obligated to perform the duty o When rights of an assignor are unconditionally assigned, her rights are extinguished o The third party (assignee) has right to demand performance from original party to contract  Rights That Cannot Be Assigned o When a statute expressly prohibits assignment o When a contract is personal in nature o If assignment materially changes risks or duties of obligor *** o When the contract expressly prohibits assignment *** o ***—know these for the test Delegations  Transfer of contractual duties is a delegation  Contractual duties in a bilateral contract that are delegated to a third party  Terminology: o Delegator—party making the delegation of duty. o Delegatee—party to whom the duty is owed.  Important things: o If you delegate duties to a third party and they don’t perform those duties, then the original party has to perform o The person to whom the duties are given to must agree  Duties That Cannot Be Delegated o When Duties Are Personal in Nature (special trust) ***  Something that you can recognize is not personal in nature Intro to Law o When Performance by a Third Party Will Vary Materially from that Expected by the Obligee o When the Contract Prohibits Delegation  Effect of a Delegation o Delegator remains liable  Assignments of “All Rights” When an “assignment of all rights” is made this is both an assignment and a delegation  Important for test: o “Assignment of rights”—just assignment o “Assignment of all rights”—assignment and delegation Third Party Beneficiaries  Second Exception to Privity of Contract  Types of Intended Beneficiaries o Distinguish only between intended and incidental beneficiaries  Incidental/Unintended Beneficiaries—not intended to be benefited  Intended Beneficiaries—intended to be benefited o Ignore information in textbook about “donee” and “creditor” beneficiaries  Intended Beneficiary Example: Life Insurance Policy  Unintended Beneficiary Example: Richland Road Land o Guy buys property across from where the county was going to build tennis courts o County decides not to build tennis courts there o Guy can’t sue the county because he would’ve been an unintended beneficiary 4/27/16 “You cannot help men permanently by doing for them what they could and should do for themselves.” –Abraham Lincoln Intro to Law Privity contract means that contracts are private agreements and the parties therefore have an expectation of privacy concerning their contract. False You may not delegate duties which are personal in nature. True  Intro o A party may be discharged (released) from a valid contract by:  A condition occurring – or not occurring  Full performance or material breach by the other party  Agreement of the parties  Operation of law  Ex) finally paying mortgage  Conditions o A possible future event, the concurrent or nonoccurrence of which will trigger the performance of a legal obligation or terminate an existing obligation under a contract o Types of conditions:  Precedent  Jill sells Bill a bike but he only buys if its blue  Most common  Subsequent  Pharmacy grads aren’t true pharmacists until they take their boards (3-6months from now) but companies are hiring them as fully certified pharmacists bc the lack of pharmacists  Hiring depends on them passing the boards as soon as they can take them  Think of Greys (April and O’Malley)  Concurrent  Discharge by performance o Types of performance:  Complete (100%)  Substantial (90-99%)  Ex) house built but a few rooms aren’t painted, don’t pay in full but you can pay bc the house is usable  Inferior (<90%)  Inferior performance is the same as no performance at all in the law  Ex) someone has a house built, but the contractor stopped before they put the sinks and toilets in, not usable so you wont pay for it  Ex) airbus plant built an aircraft, totally complete but no landing gear; no use to anyone so no pay Intro to Law  Cost has nothing to do with the value o Performance to the satisfaction of another  Reasonable person standard: for most contracts, unless contract explicitly states third party approval  Ex) rich lady had her portrait painted  she isn’t that pretty but she thought with this painter she’d look gorgeous  she looked as bad in the painting just as much as in person, so naturally upon seeing this she didn’t like the portrait  she didn’t want to pay even though it was a pretty good likeness of her, not a reasonable withholding of payment o Material breach of contract  Occurs when performance is not substantial  Non-breaching party is excused from performance entitled to damages o Non-material breach of contract  Duty to perform is not excused and the non-breaching party must resume performance of the contractual obligations undertaken o Time for performance  If no time is stated in contract, reasonable time is implied  Discharge by agreement o Discharge by mutual rescission  If executory, parties must make a new contract, oral or written  If one party has performed, agreement to rescind must have additional consideration o Discharge by novation  Both parties agree to substitute a new third party for one of the original parties  Requirements:  Previous valid obligation  Agreement by all parties  Extinguishment of all old obligations  New valid contract o By accord and satisfaction  Accord is a new agreement made to resolve a contract dispute  Satisfaction: performance of accord  Discharge by operation of law o Impossibility of performance (not inconvenience) Intro to Law  Objective impossibility of performance: supervening event was not foreseeable  When performance is impossible:  Death or incapacitation in personal contract prior to performance  Destruction of the subject matter  Change in law makes contract illegal  Contract discharge chart o All the different ways to be discharged from a contract 4/29/16 Last day of class “Lawyers are the first refuge of the incompetent.” –Aaron Allston  Intro o Most common remedies:  Damages  Rescission and restitution  Specific performance  Reformation Not on final  Recovery based on Quasi Contract Not on final  Damages o (legal remedies) o most common Breach of Contract remedy o goal is either to ‘make the party whole’ or give them the ‘benefit of their bargain’ o types of damages: (similar to damages of torts but this is a breach of contract, not wrongs done to a person)  compensatory  car wreck, someone totaled their car  out of pocket (new car, doctors) aka “actual costs”  consequential  hurt in a wreck, out of work for a month  the money lost while not working  ex) Hadley v. Baxendale o early 1800s in England o Hadley mills grain into whatever he does o Mill only operated during harvest season (4 weeks in Hadley’s eye) o Made his entire pay in those 4 weeks o First day of harvest season, his mill broke & only way to get it fixed is at the foundry Intro to Law o One day of lost work to him is like 3 weeks to us o Foundry said if you can get it to us tomorrow we can fix it and send it back the next day o Hadley asks Baxendale to ship it there o Baxendale says okay since its rush order we need more $$ o Hadley says don’t mess this up this is my annual income you can’t delay this; they say yeah of course this is what I do o Foundry tries to ship it back, can’t get in touch with Baxendale, finally find B and B ‘gets busy’ so B doesn’t ship until 3 ½ weeks later o Hadley sues, gets compensatory damages which is the money he paid for shipping which isn’t much compared to what he lost from those 3 ½ weeks o Hadley was like what no this isn’t enough I didn’t just lose the 100lb ($) I paid to ship, I lost all that income from 3 ½ weeks o Common law tries to find something that’s fair and just, judge was persuaded by Hadley in this o Got consequential damages  Punitive  Not common  To get this in a contract case, the breaching party must have also committed a criminal-type act in conjunction with their breach o Is a breach of contract considered “wrong?” o Is a breach of contract considered a “crime?” 


Buy Material

Are you sure you want to buy this material for

50 Karma

Buy Material

BOOM! Enjoy Your Free Notes!

We've added these Notes to your profile, click here to view them now.


You're already Subscribed!

Looks like you've already subscribed to StudySoup, you won't need to purchase another subscription to get this material. To access this material simply click 'View Full Document'

Why people love StudySoup

Bentley McCaw University of Florida

"I was shooting for a perfect 4.0 GPA this semester. Having StudySoup as a study aid was critical to helping me achieve my goal...and I nailed it!"

Amaris Trozzo George Washington University

"I made $350 in just two days after posting my first study guide."

Jim McGreen Ohio University

"Knowing I can count on the Elite Notetaker in my class allows me to focus on what the professor is saying instead of just scribbling notes the whole time and falling behind."

Parker Thompson 500 Startups

"It's a great way for students to improve their educational experience and it seemed like a product that everybody wants, so all the people participating are winning."

Become an Elite Notetaker and start selling your notes online!

Refund Policy


All subscriptions to StudySoup are paid in full at the time of subscribing. To change your credit card information or to cancel your subscription, go to "Edit Settings". All credit card information will be available there. If you should decide to cancel your subscription, it will continue to be valid until the next payment period, as all payments for the current period were made in advance. For special circumstances, please email


StudySoup has more than 1 million course-specific study resources to help students study smarter. If you’re having trouble finding what you’re looking for, our customer support team can help you find what you need! Feel free to contact them here:

Recurring Subscriptions: If you have canceled your recurring subscription on the day of renewal and have not downloaded any documents, you may request a refund by submitting an email to

Satisfaction Guarantee: If you’re not satisfied with your subscription, you can contact us for further help. Contact must be made within 3 business days of your subscription purchase and your refund request will be subject for review.

Please Note: Refunds can never be provided more than 30 days after the initial purchase date regardless of your activity on the site.