Legal Environment for Business
Legal Environment for Business BUS 201
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This 13 page Class Notes was uploaded by Chelsie Beer on Saturday September 26, 2015. The Class Notes belongs to BUS 201 at Grand Valley State University taught by Jones-Rikkers in Fall. Since its upload, it has received 22 views. For similar materials see /class/214383/bus-201-grand-valley-state-university in Business at Grand Valley State University.
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Date Created: 09/26/15
Chapters 11 and 12 Common Law Contracts 1 Common Law Contracts 11 Contract agreement between two parties that is legally binding Empowering to understand them Ex Harry potter this is magic because you can do magic with this You get better in time with the practice A Elements Let s open up the frog There is a similarity dissecting things in high school This girl Barb thinks that the teacher is a retard Apparently there were a lot of things that they didn t know about the inside of the frog I know the contract but you want to know why and what is binding 1 Offer brain of the contract the idea of the contract comes from Serious not a joke and objective manifestation to be bound Example Lucy vs Zehmer this was a serious conversation Acceptance give them your heart the yes to the offer Considerationthe gut they are stuck and now they are really obligated Demonstrates that you are truly committed to the contract WN B Special Termsbe very aware of these term will be on the test and also a quiz coming up on Wednesday Every contract exchanges rights and obligations Adjectives used to describe the contracts Ex Hat purchasing agreement 1 Bilateral the parties are exchanging promises two promises 2 Unilateral only one promise promise is exchanged for an act Promise to have somebody to clean her office He doesn t promise to clean the office he just goes and cleans the office Valid that it is a legally binding contract Voidable simply means that one or both parties can cancel the contract 5 Unenforceable there is a contract but the courts wont enforce it 6 Void no contract exists ho 7 Express is one in which is stated verbally or written is bilateral 8 Implied comes out of circumstances You know you will have to pay the doctor 9 Executed both parties have preformed the part of the contract 10Execut0ry l or both have yet to perform the duty llF0rmal most places they would encounter this is realestate statements Examples witnesses notary 12Inf0rmal most contracts don t need notary signed or sealed The quiz Offer wants to sell bracelet for 1000 Acceptance puts up picture of Obama Consideration they have agreed It is valid expressed executory not executive until money and bracelet are exchanged informal contract bilateral 111 Special NonContract Situations Not a good offer Want to stick the parties together A QuasiContract Unjust enrichment Unjust enrichment means somebody is getting something for nothing Refuses to reciprocate Landscapers come to her house and they install a waterfall in the yard End of the day they have a bill Looks really nice but she refuses to pay and there is not contract here Have never had negotiations but you knowingly accepted the bene ts The court will award them but not necessarily for everything You have to knowingly accept B Promissory Estopple detrimental reliance need these three things 1 One party making representations to another and intending that they rely on them 2 The party does reasonably rely 3 Suffer harm detriment Example Very famous case Hoffman vs red owl red owl was the franchise owner and kept telling Hoffman that he could start up the franchise Red owl ended up refusing in the very end There was no contract but red owl made promises and reasonably relied and then he was harmed So he received damages Will post this case on BB Written assignments coming up so may want to go online and look Will have a ow chart to get a system started to answering question On Friday do author and then last do what the Friday work Contract Elements The Offer This is serious not a joke and objective manifestation to be bound Example Lucy vs Zehmer this was a serious conversation A Elements Serious and objective manifestation of intention to be bound Reasonably certain and definite terms some reasonable basis of what the terms are l 2 A U Auctions 2 types Communicated to the offeree has to be communicated well These are special circumstances important to understand dvertisements if every ad was an offer everybody would be accepting unlimiting They are not offers but a invitation to come in and make an offer 139 l J1 Alf 7 FT With reserve minimum bid and without reserve Your bids are offers under the reserve They must be offers The minimum was 500 The reserve is met It gets difficult to tell what are the offer and the acceptance Rewards This is an offer to enter in a unilateral contract because they are asking something in return It is an act The performance that is unique because when you tum in the dog you are accepting saying yes and doing your contractual obligation If you didn t know about the reward you cannot get the reward A non communicated offer is not an offer at all Termination once an offer terminates it is dead and gone and ceases to eXist once it terminates When does an offer terminate or how a by its own terms What are the terms of the offerSell car at 1000 by 4am if got there at 401 then uses last offer to make a new offer Lapsed by its own terms is when they come at 402 You can ask for a higher price because the terms that you had have lapsed b by lapse of time expired after a reasonable amount of time c Revocation another way that you can terminate Offerer can revoke their offer any time before they are accepted They can totally do this but this communication can come in two forms i actual notice being told that the offer is revoked ii Constructive notice you learn from a reliable source or through the observation that the offer is revoked Learn through own observation or someone else that it has been sold to someone else iii An optionpaid to keep the offer open and cannot revoke until this time is up Rejection is the NO i ExpressNo I don t want your car ii ImpliedYes but for 1 700 not 1800 This is a counter offer He is making an offer e misc termination rules last way 1 If the subject matter is destroyed branch fell on top of the car 2 Becomes illegal 3 If the offerer because mentally disabled or passes away 9 ExamplelSt person to get to star on top of statueunilateral have to be doing it The Lauren exception is once they started you could give Lauren a reasonable amount of time to do it and rule two the beginning of performance and made promise to finish then it becomes bilateral and then you can t revoke Offeree can say yes or no I The Acceptance it s the yes response A Elements 1 Voluntaryofferee isn t being manipulated of coerced not forced Mirror imageHas to be the mirror image of the offer There has to be a match up Sometimes this matching up is complaining but they still want it and they will give it to them also known as a grumbling acceptance N 3 Communication has to be communicated to the offeree How you go about communicating the yes response Only person that agrees to the offer is the only one that can give the acceptance Offeror has to specify a method of acceptance that they want the offeree to do a Silence the rule your silence cannot constitute your acceptance Example ill sell you a car but you don t say anything unless you say if I don t call you at 5pm then I ll take the car valid acceptance specified methodhave to email at 10am suggested method suggest that you use a certain method Example Kathy says Lynda can send a yes response in any way such as Hedwig the owl But it isn t an acceptance because it won t arrive at the same time like an email or a fax no specified or suggested method any type of reasonable means are ne to be used no owl to be used or smoke signal Mailbox rule The acceptance is affective by dispatch dropped in the mailbox and not in your possession and not by when they receive the letter a contradictory responses the two letters first rejection then acceptance Which one you opened first is the one that is the acceptance b way to avoid the mailbox rule have to receive by the certain time and the receipt is used Example payment must be received by a certain date Specify the acceptance Acceptance is affective of the point of dispatch Acceptance is only the yes response Rejection is effective only when it is received 06 9 A H The Consideration the mortar or glue Found in the offer and the acceptance The gut I m stuck really obligated Both parties are committed to the contract Consideration must come from the offeror and the offeree A Elements 1 Something of legal value not necessarily monetary value have not exchanged money but they have exchanged a promise and promise to refrain 2 Bargained for and given in exchange for a promise or an act Did the opportunity for bargaining exist Could they have bargained Don t care about not matching up It can be a bad deal Just have to have the promises for consideration Later will see if you can get out of the contract Problem areas with consideration A Nothing of value 1 Illusory promisesnot really a promise at all when you look into it Example sell car for 2000 but can cancel wheneverl want free absolute way out so there is no value Not committed 2 preexisting duty rule you cannot use what you are legally obligated to do as your consideration example cop takes police report give 1000 dollars if you find the perp but they are already obligated to nd the perp no contractual obligation 1y estoppels can bind you B No bargained for exchange Could the parties have bargained l Moral obligations in place to protect something we in society value In other words this moral obligations exception is that you should not bargain back and forth over something that we should be morally doing Example person hanging from a cliff and they ask if you can throw down the rope You ask how much money they have 2 Past consideration Bargain over something that has already occurred Classic Example name child after wealthy uncle So sure enough the wealthy uncle will give them money for the named child But the child has already been named so no money C Special situations that can come up If you are doing an analysis and cannot nd consideration but can make contract like situation example Promise to give 100 for a charity and get there promise to change society Some courts say it is a contract and others don t think it s a contract Assignment for Fridayexample of a contract Now look for ways out of the contract based on some aw with the parties themselves Problems with Contractual Elements 1 Contractual Capacity some people that can enter into contracts but their contracts can be ended because they are in a weakened state These people can be easily ripped off Example When I was a little kid loved comic book They used to have advertisements in them An ad for sea monkeys caught her attention They looked like monkeys on top of sea horses Thought they would worship her and they end up just being little bugs Kids believe stupid stuff like this A lVlinors 1 Can enter into contracts but can disaf rm anytime while a minor and a reasonable time after reaching the age of majority a special rules regarding disaffirmance b special rules regarding rati cation Once a reasonable time has passed and no longer are a minor you can collect from the beginning Example can bring car back after they crash it and get money back 2 Upon disaffirmance minor must restore a special rules regarding misrepresentation of age lie about their age Show ID and it was fake They must be held up but good luck with that Special rules of necessities need these things to live they are food and clothes Comes from Hawaii to GR and needs somewhere to live and eat Parents are too far away to help Still can disaffirm but they have to pay it back Kid from Hawaii needs meds took 2 pills then has to pay for them B Mental Incapacity Person has dementia But early on they are still able to understand and act reasonably because they understand Now it progresses the contract will be valid if still ok but when adjudicated mentally ill the courts award legally l Able to understand valid 2 Unable to understand voidable 3 Adjudicated incapacitated void does not exist C Intoxicated persons 1 can understand valid 2 so high can t understand and act reasonably and the other party knows about the intoxication voidable contract 6 Extra credit is online II Reality of consent A lIistake an untrue belief about a past or existing fact 1 Bilateral Mutual involves both parties having an erroneous belief of thin that they are going to the contract about a relates to a basic assumption on which the contract is made a material fact b injured party does not bear the risk of the mistake Example the golden retriever both thing it is pure bred Both can cancel the contract Estate sale artwork and piece of work was for 1 and found out that this artist was famous and was well known Say you are the people who were selling the artwork and made a mistake You knew that you didn t know the value so you don t get paid back for your mistake 2 Unilateral must show in addition to the above one of the following a The nonmistaken party caused or had reason to know of the mistake b Unconscionability or shockingly unfair B Misrepresentation 1 Elements innocent and fraud a untrue assertion of past or existing fact Untrue Statement A lie that the other party acts on Nondisclosure something that the one party does is passive and is untrue Don t give the whole truth i iii halftruths failing to correct a mistake when you know about it failing to correct a true statement that becomes false say the roof doesn t leak then it rains and it does leak Fiduciary relationships are responsible for what you do and are close to the relationship of business relationship Need to disclose all information to them or else it is a nondisclosure Concealments do something to hide or cover up the truth Put plaster over the leaky spot on the roof Buy car that the mileage was changed opinions in these limited circumstances that you will be held liable professional person suffers from some weakness can t read fiduciary relationships example giving a professional opinion ask about the car that you are going to buy person doesn t speak the language or can t read or give the opinion to your fiduciary b fact asserted is 39 innocent misrepresentation 1 Have to show a material fact I ll buy the dog only if it s a pure bred Then the person says yes it s a pure bred and make the statement even though you don t know if it s true ii intentional misrepresentation aka fraud intentionally purposefully made doesn t have to be material you know it s a mixed breed dog purposely lied and said it was reliance they enter into the contract and bought the dog reliance is reasonable or justified as long as you obViously knew that this statement was false Duress must sign or otherwise gun to the head have to do it or you are going to be shot or say coercion on test D Undue Influence Unfair persuasion or manipulation More powerful party and a weaker party Someone uses their dominance to unfairly manipulate or pressure a person into a contract Dominant person exploits the less dominant party Example kid and an adult E Unconscionability l Substantive shocking unfairness in the writing of the QC 0 contract 2 Procedural shocking unfairness in process entering into the contract It wasn t coercion but it was shocking 3 Adhesion Finally look for a way out of the contact based on some aw with the agreement itself Legality Formality writing limited number of contracts that have to be written There are certain bilateral executive contracts that must be in writing to be enforceable 1 Contracts Violating a statute A Wagering B Blue Laws Makes it illegal to enter into certain contracts on certain days of the week C Usury Sets the max rate of interest someone can charge 11 Contracts Violating the purpose 0fa statute A Licensing statutes Must have a license and be quali ed to perform a job Not uncommon for states to have an organization gets a license for contracting there for two purposes a Making money b Helping the public protection B Agreements that would result in the commission 0fa crime If one or both of the parties know that the result of a legal contract would lead to a crime it is unenforceable III Contracts violating public policy A Negative impact on society price ling monopolies Shows that the contract would have a negative outcome on society B Covenants not to compete agreement not to compete with another company a Part of another valid contract i Partnership agreement ii Buysell for a business iii Employee contract has to fill additional elements 1 And cannot undo hardship on employee 2 Has to serve a legitimate business purpose trade secrets 3 EX Leaving Herman miller to go work for a competitor b Only last for reasonable amount 0ftime c C0ver a reasonable geographic area C Releases tries to release themselves from tort liability of the performance of the contract a EX parasailing liability contract won t sue them if it is hurt Can never release you from grossly negligent or intentional acts IV Effect of illegality A Divisible contracts B Reformation Formality Bilateral executory contracts that must be in writing to be enforceable I History of the statute 11 Coverage of the statute MY LEGS Must be in writing to be enforceable A Marriage B Year Something that is more than a year into the future C Land Leases mortgages D Estate The personal representative of an estate who promises to pay the decedents debt with the personal representatives own money must do so in writing E Goods A contract for a sale of goods over 500 must be in writing receipt F Secondary Promises to pay another party debt in the case that the first party fails to pay ID the parties Elements offer acceptance consideration Capacity Content Agreement Legality oxmgswww The video in class End of Contractual Liability 1 Contractual Liability ends upon A Occurrence or failure of a condition B Performance or breach C Agreement of the parties D Operation of the law E Excuse H Conditions A When the occur in relation to the duty precedent 2 concurrent 3 subsequent B How they are created I express 2 impliedinfact 3 impliedinlaw III Performance A CompleteStrict totally within the expectations of the parties B Substantial C Inferiormaterial breach failure to perform or is terrible and cant be counted as complete D Anticipatory breach IV Discharge by action agreement of the parties Mutual Agreement Accord and Satisfaction Waiver Alteration Discharge by Law Bankruptcy Expiration of the statute of limitations wgtlt U0wgt VI Discharge by Excuse A Impossibility B Frustration of purpose Dealing with Breach of Contract Remedies for Breach A Legal remedies money 1 reasonable certainty need to show losses with reasonable certainty need receipts 2 foreseeable at time of contracting they were reasonably foreseeable at the beginning of the contract Ex big meteorite falls into the yard Rain causes runoff and then existing stuff in yard starts caVing in o Meteorite not foreseeable o Runoff issue was 3 duty to mitigate your losses show the court you took action and cut the flow of money that is a result of the breech 0 Ex need to show the court that you tried to get someone else into the apartment You are trying to not let waste occur B Types of Damages aka legal remedies
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