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by: Minjee Kong

Chapter9-11Notes_March23.pdf BADM 4101

Marketplace > George Washington University > BADM 4101 > Chapter9 11Notes_March23 pdf
Minjee Kong
Business Law and Ethics
Kirsten Martin

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About this Document

Class notes from the week of March 23. Covers chapters 9-11, as lectured in class.
Business Law and Ethics
Kirsten Martin
Class Notes
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This 6 page Class Notes was uploaded by Minjee Kong on Wednesday March 25, 2015. The Class Notes belongs to BADM 4101 at George Washington University taught by Kirsten Martin in Spring2015. Since its upload, it has received 77 views.


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Date Created: 03/25/15
March 23 2015 Chapter 9 Introduction to Contracts A Development of the Law of Contracts Common Law The Uniform Commercial Code UCC Types of Contracts Outside the Code B Definition of a Contract Contract binding agreement that the courts will enforce Promise manifests or demonstrates the intention to act or to refrain from acting in a specified manner Breach failure to properly perform a contractual obligation C Requirements of a Contract 1 Mutual assent 2 Consideration 3 Legalityof object 4 Capacity D Classification of Contracts Express and Implied Contracts Bilateral and Unilateral Contracts Valid Void Voidable and Unenforceable Contracts 0 Va1139d Contract one that meets all of the requirements of a binding contract 0 Lid Contract no contract at all without legal effect 0 Voidable Contract a contract capable of being made void I Example Calvin uses fraud Voidable a contract has been formed however Maria at her option may rescind contract 0 Unenforceable Contract a contract for the breach of which the law provides no remedy Example GW Housing Contract 0 Mutual Assent Housing Agreement apply for housing get assignment accept assignment 0 Consideration Housing for payment of housing fee 0 Legality of Object Not a crime 0 Capacity Part time or full time student trusted institution E Promissory Estoppel Definition a doctrine enforcing noncontractual promises where there has been justifiable reliance on the promise and justice requires enforcement Requirements a promise made under circumstances that should lead the promisor reasonably to expect that the promise in reliance on the promise would be induced by it to take definite and substantial action or to forbear and the promise does take such action or does forbear Example Anna is about to buy a house 0 Betty s promise is not binding and there is no contract The essential elements of a contract mutual assent consideration legality amp legal capacity are not all present 0 However the doctrine of promissory estoppel may be applicable If a jury finds that Anna acted reasonably in reliance on Betty s promise Betty s promise will be enforced F Quasi Contract Definition obligation not based upon contract that is imposed to avoid injustice Example Williard delivers by mistake to Roy a plain unaddressed envelope with 1 00 in tended for Lucia 0 Roy is under no contractual obligation to return but Williard is permitted to recover 100 from Roy 0 Requirements A court will impose a quasi contract when 1 The plainti YWIlliard confers a benefit 100 upon the defendant Roy 2 The defendant Roy knows or appreciates the bene t and 3 The defendant s Roy retention of the benefit is inequitable Chapter 10 Mutual Assent I Offer A Essentials of an Offer Mutually agree to essential terms and conditions gathered from language employed and manifested in words or acts 1 Communication offeree must have knowledge of the offer and the offer must be made by the offeror to the offeree 2 Intent determined by an objective standard of what a reasonable offeree would have believed I Important to distinguish an offer from proposals that invite an offer I Preliminary Negotiations I Advertisements I Auction Sales with reserve price v without reserve price I Example Rowe advertised in newspapers Ford is not entitled to the 5000 as he did not accept Rowe s offer and therefore no contract was formed The gift of the nine books by Ford to Rowe was not an acceptance Ford had no knowledge of the offer he did not have and could not have had such intention 3 Definitiveness the offer s terms must be clear enough to provide a court with a basis for giving an appropriate remedy I Example Crystal received a telephone call from Akers The mutual promises exchanged were definite and certain B Duration of Offers 1 Lapse of Time stated or reasonable period of time 0 Example David and Elizabeth Kidd s dog bit Mikaila I An offer to form a contract is open only for a reasonable time I A reasonable time for an offeree to accept an offer depends on the nature of the contract and the character of the business in which the parties were engaged 2 Revocation cancellation of offer by offeror 0 Generally an offer may be terminated at any time before it is accepted subject to the following exceptions 1 Option Contract Firm Offer Statutory irrevocability Irrevocable Offer of Unilateral Contract Promissory Estoppel noncontractual promise that binds the promisor because she should reasonably expect that the promise will induce the promise offeree to take action in reliance on it 9195 0 Example jordan o ers Karlene 300 if Karlene will climb to the top of the agpole Karlene starts to climb When 5 feet from the top ordan yells quotI revokell I Contract stands Obligation begins when offer is accepted by Karlene 9 Rejection 4 Counteroffer Example Original o er is 300 to purchase a TV 5 Death or Incompetency either offeror or offeree usually terminates the offer exception is offer contained in an option 6 Destruction of Subject Matter terminates the offer Subsequent Illegality gt1 11 Acceptance of Offer A Communication of Acceptance General rule B Variant Acceptances Common law under the common law an acceptance must be positive unequivocal and must not change the provisions of the offer Code Chapter 11 Conduct Invalidating Assent A Duress Duress wrongful or unlawful act or threat that overcomes the free will of a party Two types 1 Physical Compulsion coercion involving physical force renders the agreement void 2 Improper Threats improper threats or acts including economic and social coercion render the contract voidable o The test is subjective did the threat actually induce assent on the part of the victim Example Anita and Barry were negotiating 0 Yes decision in favor of Anita and against Barry Barry s defense that the contract was not binding upon him because he had not and could not have read it prior to signing it is not valid I His signature to the contract was voluntary and was not induced by fraud or misrepresentation I Moreover Barry could not prove a defense based upon duress since Anita did not physically compel nor force Barry by threats to manifest assent to the proposal I Barry could easily have had someone read the contract to him or have it reviewed by his attorney Example Adler owes Perreault a police captain 500 0 No will not be able to enforce his claim I The facts presented in the problem state a clearcut case of duress by the use of improper threats I Duress as a manifestation induced by an improper threat by the other party that eaves the victim no reasonable alternative the contract is voidable by the victimquot Moreover a threat is improper if the resulting exchange is not on fair terms and a the threatened act would harm the recipient B Undue In uence Definition taking unfair advantage of a person by reason of a dominant position based on a confidential trust amp confidence relationship 0 Example guardianward physicianpatient Effect renders a contract voidable C Fraud Fraud in the Execution rate renders it w ex sign for something that is actually a contract Fraud in the Inducement renders the agreement voidable if the following elements are present 0 A false representation positive statement or conduct that misleads 0 Of a fact the event occurred or the thing exists 0 That is material of substantial importance 0 With knowledge of falsity amp intention to deceive 0 With justifiable reliance Example Harris owned a farm that was worth about 600 per acre 0 Fraud in the Inducement decision in favor of Pringle 0 Because Pringle was fraudulently induced to buy the farm Pringle had the right to disaffirm the transaction Example William amp Carol 0 Answer Fraud Materiality I A Decision for William Carol is not entitled to the return of her 255000 as long as William actually believed his farm was worth approximately 300000 William s statement with respect to the value of the farm was merely the expression of an opinion and not the statement of a material fact upon which Carol had a right to rely there is no indication of an appraisal or other expert opinion upon which William s opinion is based I B Decision for Carol William s statement to Carol that he paid 150000 for the farm was an untrue statement of a material fact upon which Carol had a right to and did rely D Nonfraudulent Misrepresentation Negligent misrepresentation without due care in ascertaining its truthfulness Innocent Misrepresentation without knowledge of its falsity but with due care The parties understanding not in accord with existing facts 0 Mutual Mistake both parties have a common but erroneous belief forming the basis of the contract renders the contract voidable by either party 0 Unilateral Mistake Example Dorothy amp Fred 0 Answer Mistake I Yes judgment for Fred for 25000 against Dorothy I The payment was made under a mutual mistake of material fact Both Fred and Dorothy mistakenly believed that Dorothy s barn had been negligently burned by Fred s son Example Iones amp Smith 0 Answer Mistake Nature of Subject Matter I No Iones cannot void the sale Mutual ignorance upon the part of Jones amp Smith of the value of the subject matter did not prevent the formation of a valid contract They both understood that the two hundred dollars was to be exchanged for the stone They both understood that the two hundred dollars was to be exchanged for the stone There was no mistake as to the subject matter of the agreement There was neither fraud nor misrepresentation E Mistake


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