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by: Coralie Doyle


Coralie Doyle
GPA 3.84

Barbara Danos

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Barbara Danos
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This 44 page Class Notes was uploaded by Coralie Doyle on Tuesday October 13, 2015. The Class Notes belongs to BLAW 3201 at Louisiana State University taught by Barbara Danos in Fall. Since its upload, it has received 20 views. For similar materials see /class/222653/blaw-3201-louisiana-state-university in Business Law at Louisiana State University.

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Date Created: 10/13/15
59 01 NF 500quot x O x x xx x 60 I x 01 x G xx 13V x 0 MM O MM COM I A I 01 Terms and Notes for Final Exam 6 Actionable Capable of serving as the basis of a lawsuit Actual malice A condition that exist when a person makes a statement with either knowledge of is falsity or a reckless disregard for the truth In a defamation suit a statement made about a public figure normally must be made with actual malice for liability to be incurred Appropriation ln tort law the use by one person of another person s name likeness or other identifying characteristic without permission and for the benefit of the user Assault Any word or action intended to make another person fearful of immediate physical harm a reasonably believable threat No contact necessary Battery The unprivileged unexcused and harmful or offensive physical contact and intentional touching of another Business Tort The wrongful interference with the business rights of another Conversion The wrongful taking using or retaining possession of personal property that belongs to another taking for your own use without permission Cyber tort A tort committed via the internet Defamation Any published or publicly spoken false statement that causes injury to another s good name reputation or character Disparagement of property An economically injurious false statement made about another s product or property A general term for torts that are more specifically referred to as slander of quality or slander of title Fraudulent misrepresentation fraud Any misrepresentation either by misstatement or omission of a material fact knowingly made with the intention of deceiving another and on which a reasonable person would and does rely to his or her detriment Intentional tort A wrongful act knowingly committed Ex forcefully pushing another even if done in jest and without any evil motive is an intentional tortif injury results because the object of a strong push can ordinarily be expected to go flying Libel Defamation in writing or other form such as in a videotape having the quality of permanence Privilege ln tort law the ability to act contrary to another person s right without that persons having legal redress for such acts Privilege may be raised as a defense to defamation Public figure Individuals who are thrust into the public limelight Public figures include government officials and politicians movie stars wellknown businesspersons and generally anybody who becomes know to the public because of his or her position or activities Puffery seller s talk A salesperson s exaggerated claims concerning the quality of property offered for sale Such claims involve opinions rather than facts and are not considered to be legally binding promises or warranties Ex I am the best architect in town Slander Defamation in oral form Slander of quality trade libel The publication of false information about another s product alleging that it is not what its seller claims Slander of title The publication of a statement that denies or casts doubt on another s legal ownership of any property causing financial loss to that property s owner Spam Bulk unsolicited junk email Tort A civil wrong not arising from a breach of contract A breach of a legal duty that proximately causes harm or injury to another Tortfeasor One who commits a tort Trade libel The publication of false information about another s product alleging it is not what it s seller claims also referred to as slander of quality Trespass to land The entry onto above or below the surface of land owned by another without the owner s permission or legal authorization Trespass to personal property The unlawful taking or harming of another s personal property interference with another s right to the exclusive possession of his or her personal property NOTES Intentional Torts Against Persons 0 Assault and Battery Example lvan threatens Jean with a gun then shoots her The pointing ofthe gun at Jean is an assault the firing of the gun if the bullet hitsjean is a battery Unwelcome kiss is considered as a battery i Defenses to Assault and Battery 1 Consent allowing and giving someone permission to hurt you O O O O 2 SelfDefense in situation of real or apparent danger a person may use whatever force is reasonably necessary to prevent harm 3 Defense ofothers individual can act in a reasonable manner to protect others who are in real or apparent danger 4 Defense ofProperty reasonable force may be used to remove intruders from one s home but force that is likely to cause death or great bodily injury normally cannot be used just to protect property False imprisonment intentional confinement or restraint of another person s activities without justification Person being restrained does no comply with the restraint willingly Defense of probable cause can be used in delaying a suspected shoplifter if the merchant has probable cause Any detention must be conducted in a reasonable manner and for no more than a reasonable length of time Example Businesspersons are often confronted with suits for false imprisonment after they have attempted to confine a suspected shoplifter for questioning Intentional infliction of emotional distress Exampleprankster telephones an individual and says that the individual s spouse hasjust been in a horrible accident As result individual suffers intense mental pain or anxiety prankster s behavior is actionable Defamation i Publication requirement Publication requires communication to a third party Example If Thompson writes Andrew a letter falsely accusing him of embezzling funds the action does not constitute libel does NOT have to show actual injury lf Peters falsely states that Gordon is dishonest and incompetent when no one else is around the action does not constitute slander must prove special damages but the exception is slander per se where no proof of special damages is required for it to be actionable In neither case was the message communicated to a third party Courts have generally held that even dictating a letter to a secretary constitutes publication and if a third party overhears defamatory statements by chance it constitutes as publication Slanderperse 1 A statement that another has a loathsome communicable disease 2 A statement that another has committed improprieties while engaging in a profession or trade 3 A statement that another has committed or has been imprisoned for a serious crime 4 A statement that a woman is unchaste or has engaged in serious sexual misconduct ii Defenses to defamation Truthstatement is true it must be true in whole not in part 0 0 M4 Privileged speechstatement is privileged absolute made in a judicial or legislative proceeding or quali ed for example made by one corporate director to another and was about corporate business 3 Public guresstatement is about a public figure made in a public medium and related to a matter of general public interest To recover damages a public figure must prove a statement was made with actual malice knowledge of its falsity or reckless disregard for the truth Invasion of Privacy every person has a fundamental right to solitudefreedom from public scrutiny Four Acts that qualify as invasions of privacy i The use of a persons name picture or other likeness for commercial purposes without permission Exampleusing without permission someone s picture to advertise a product or someone s name to enhance a company s reputation invades the persons privacy ii Intrusion on an individuals affairs or seclusion Exampleinvading someone s home or illegally searching someone s briefcase is an invasion of privacy includes eavesdropping by wiretap unauthorized scanning of bank account compulsory blood test and window peeping iii Publication of information that places a person in a false light Examplestory attributing to someone ideas not held or actions not taken by that person iv Public disclosure of private facts about an individual that an ordinary person would ne objectionable Examplenewspaper account of a private citizens sex life or financial affairs could be an actionable invasion of privacy 0 Appropriation Ford had a television commercial in which a Bette Midler soundalike sang a song that Midler had made famous the court held that Ford for their own profit in selling their product did appropriate part of her identity Fraudulent misrepresentation intentional deceit for personal gain i Fraud exist when a person represents as statement offact something helshe knows is untrue Example it is fraud to claim that the roof of a building does not leak when one know that it does ii Sometimes reliance on statement of opinion may involve the tort of fraudulent misrepresentation if the individual making statement ofopinion has a superior knowledge of the subject matter Example when a lawyer in a state which helshe is licensed to practice makes a statement of opinion about the law a court would construe reliance on such a statement to be equivalent to reliance on a statement of fact 0 0 Business Torts o Wrongful Interference with a Contractual Relationship Example Wagner was under contract to sing for a man named Lumley for a specified period of years A man named Gye who knew ofthis contract nonetheless enticed Wagner to refuse to carry out the agreement and Wagner began to sing for Gye Gye s actions constituted a tort because it interfered with the contractual relationship between Wagner and Lumley Wagner s refusal to carry out the agreement also entitled Lumley to sue Wagner for breach of contract i The Intent Factor plaintiff must prove that the defendant actually knew of the contract s existence and intentionally inducedthe breach of contractual relationship ExampleCarlin has a contract with Sutter that calls for Sutter to do gardening work on Carlins large estate every week for 52 weeks at a specified price per week Mellon who needs gardening services contacts Sutter and offers to pay Sutter a wage that is substantially higher than the offered by Carlinalthough Mellow knows nothing about the SutterCarlin contract Sutter beaches his contract with Carlin so that he can work for Mellon Carlin cannot sue Mellon because Mellon knew nothing of the SutterCarlin contract and was totally unaware that the higher wage he offered induced Sutter to breach that contract ii Required Elements 1 Valid enforceable contract must exist between two parties 2 Third party must know contract exist 3 Third party must intentionally cause one of the two parties to breach contract so helshe can benefit from the breach 0 Wrongful Interference with a Business Relationship relationship btw customer amp business Exampleshopping center contains two shoe stores an employee of store A cannot be positioned at the entrance of store B for the purpose of diverting customers to store A i Required Elements There was an established business relationship 2 Tortfeasor by use of predatory methods intentionally caused this business relationship to end 3 Plaintiff suffered damages as a result of tortfeasor s actions ii Defenses to Wrongful Interference Bona de competitive behavior is a permissible interference even if it results in the breaking of a contract ExampleJerrod s meats advertises so effectively that it induces Sam s restaurant to break its contract with Burke s meat company Burke s meat company will be unable to recover against Jerrod s meats on a wrongful interference theory Intentional Torts Against Property Real Property is land and things permanently attached to the land Personal Property consists of all other items which are basically moveable o Trespass to land Examplewalking or driving on another s land shooting a gun over another s land throwing rocks at or spraying water on a building that belongs to someone else building a damn across a river causing water to back up on someone else s land posted trespass signs expressly establish as a trespasser a person who ignores these signs and enters onto the property Person who enters onto another s property to commit an illegal act such as a thief entering a lumberyard at night to steal lumber is established impliedly as a trespasser without posted signs Landowner may have duty to post a notice that the property is patrolled by guard dogs i Defenses against trespass to land Exampleperson who enters another s property to read an electric meter is a licensee Property owner asks a meter reader to leave and the meter reader refuses to do so the meter reader at that point becomes a trespasser l Trespasser on property without permission 2 Licensee on land wpermission one who is invited allowed to enter usually a guess in the home 3 lnvitee on a business premise strictest duty of care 0 Trespass to personal property ExampleKelly takes Ryan s business law book as a practical joke and hides it so that Ryan is unable to find it for several days prior to the final exam Kelly has engaged in a trespass to personal property 0 Conversion Example Store clerk who steals merchandise from the store commits a crime and engages in the tort of conversion at the same time Example Someone who buys stolen goods has committed the tort of conversion even if he or she did not know the goods were stolen i Defenses to conversion Owner does not in fact own the property or does not have a right to possess it that is superior to the right of the person in possession ofthe property Abrams takes Mendoza cat Abrams is guilty of conversion Mendoza sues Abrams Abrams must return the cat or pay damages If however the cat had rabies and Abrams took the cat to protect the public Abrams has valid defense of necessity o Disparagement of property i Slander of quality tort also given name trade libel Example Statement that disparages the quality of a product may also by implication disparage the character of a person would sell such a product third party refrained from dealing with the plaintiff because of the improper publication but also the plaintiff suffered damages 50 00 001 N x O x x xx COM x A x 01 x G x 1 ii Slander of title Example It would be difficult for car dealer to attract customers after competitors published a notice that the dealers stock consisted of stolen autos intentional tort in which someone knowingly publishes an untrue statement about another s ownership of a certain property with the intent of discouraging third party to do business with the person slandered 7 Assumption of risk A defense against negligence that can be used when the plaintiff is aware of a danger and voluntarily assumes the risk of injury from that danger Business invitees Those people such as customers or clients who are invited onto business premises by the owner ofthose premises for business purposes Causation in fact An act or omission without but for which an even would not have occurred Comparative negligence A theory in tort law under which the liability for injuries resulting from negligent acts is shared by all parties who were negligent including he injured party on the basis of each person s proportionate negligence Compensatory damages A money award equivalent to the actual value of injuries or damages sustained by the aggrieved party Contributory negligence A theory in tort law under which a complaining party s own negligence contributed to or caused his or her injuries Contributory negligence is an absolute bar to recovery in a minority of jurisdictions Dram shop act A state statute that imposes liability on the owners of bars and taverns as well as those who serve alcoholic drinks to the public for injuries resulting from accidents caused by intoxicated persons when the sellers or servers of alcoholic drinks contributed to the intoxication Duty of care The duty of all persons as established by tort law to exercise a reasonable amount of care in their dealings with others Failure to exercise due care which is normally determined by the reasonable person standard constitutes the tort of negligence Good Samaritan statute A state statute that provides that persons who rescue or provide emergency services to others in perilunless they do so recklessly thus causing further harmcannot be sued for negligence Malpractice Professional misconduct or the failure to exercise the requisite degree of skill as a professional Negligencethe failure to exercise due careon the part of a professional such as a physician or an attorney is commonly referred to as malpractice Negligence The failure to exercise the standard of care that a reasonable person would exercise in similar circumstances torfeasor neither wishes to bring about the consequences of the act nor believes that they will occur Negligence per se An ac or failure to act in violation of a statutory requirement Proximate cause Legal cause exists when the connection between an act and an injury is strong enough to justify imposing liability Punitive damages Money damages that may be awarded to a plaintiff to punish the defendant and deter future similar conduct Reasonable person standard The standard of behavior expected of a hypothetical reasonable person The standard against which negligence is measured and that must be observed to avoid liability for negligence Res ipsa loquitur pronounced rehs ehpsuh lowquuhduhr A doctrine under which negligence may be inferred simply because an event occurred if it is the type of event that would not occur in the absence of negligence Literally the term means the facts speak for themselves Strict Liability Liability regardless of fault In tort law strict liability may be imposed on defendants in cases involving abnormally dangerous activities dangerous animals or defective products NOTES Negligence plaintiff must prove each ofthe following to succeed in a negligence action 1 Defendant owed a duty of care to the plaintiff 2 Defendant breached that duty 3 Plaintiff suffered a legally recognizable injury 4 Defendant s breach caused the plaintiff s injury 0 The Duty of Care and Its Breach defendant owes duty to protect plaintiff from foreseeable risks hat defendant knew or should have known about i Tort law measures duty by the reasonable person standard O 0 Example courts ask how a reasonable person would have acted in the same circumstances It is society sjudgment of how an ordinarily prudent person should act ii Duty of Landowners expected to exercise reasonable care to protect individuals coming onto their property from harm Example if you entered supermarket slipped on a wet floor and sustained injuries as a result the owner of the supermarket would be liable for damages if when you slipped there was no sign warning that the floor was wet Some risk are so obvious that an owner need not warn of them business owner does not need to warn customer to open a door before attempting to walk through it Hardware store owner may not think its necessary to warn customers that if climbed a stepladder leaning against the back wall of the store could fall down and harm them iii Duty of Professionals Example professionals like physicians dentists architects engineers accountants and lawyers are required to have standard minimum level of special knowledge and ability Accountant cannot defend against a lawsuit for negligence by stating But I was not familiar with the general principle of accounting If a professional violates hisher duty of care toward a client client may bring a malpractice suit against the professional Patient might sue a physician for medial malpractice client might sue an attorney for legal malpractice iv No Duty to Rescue Example assume that you are walking down a city street and see a pedestrian about to step directly in front of an oncoming bus You realize that the person has not seen the bus and is unaware of the danger Do you have a legal duty to warn that individual NO Most states require a motorist involved in an automobile accident to stop and render aid Failure to do so is both a tort and a crime The Injury Requirement and Damages plaintiff in a tort lawsuit must prove that helshe suffered a legally recognizable injury Exampleif you carelessly bump into a passerby who stumbles and falls as a result you may be liable in tort if the passerby is injured in the fall If the person is unharmed there normally can be no suit for damages because no injury was suffered Although the passerby might be angry and suffer emotional distress few courts recognize negligently inflicted emotional distress as a tort unless it results in some physical disturbance or dysfunction i Compensatory Damages are the Norm to make the plaintiff whole reimburse plaintiff for actual losses or future losses compensate the plaintiff for property damage and physical injury which may include medical expenses lost wages and benefits pain and suffering and sometimes even emotional distress ii Punitive Damages are Rare punish the tortfeasor and deter others from wrongdoing rarely awarded in lawsuits for ordinary negligence and usually are given only in cases involving intentional torts they may be awarded however in suits involving gross negligence which can be defined as an intentional failure to perform a manifest duty in reckless disregard ofthe consequences of such a failure for the life or property of another Causation if a person breaches a duty of care and someone suffers injury the wrongful activity must have caused the harm for a tort to have been committed Causat ion in Fact and Proximate Cause Court must address two questions in deciding whether the requirements of causation are met Is there causation in fact Did the injury occur because of the defendant s act or would it have occurred anyway If an injury would not have occurred without the defendant s act then there is causation in fact Usually determined by the but for test but for the wrongful act the injury would not have occurred Was the act the proximate cause of the injury 0 ExampleAckerman carelessly leaves a campfire burning The fire not only burns down the forest but also sets off an explosion in a nearby chemical plant that spills chemicals into a river killing all the fish for a hundred miles downstream and ruining the economy of a tourist resort only responsible for forest because that s what s foreseeable and what would typically occur in the course of events Forseeability The consequences of an act are legally foreseeable if they are consequences that typically occur in the course of event Whether an act is foreseeable is generally considered a matter of fact determined by the reasonable person standard Defenses to Negligence o Assumption of Risk Knowing the risk and Voluntarily engaging in the act Plaintiff does not assume a risk differen tor greater than the risk normally carried by the activity Example Driver entering an automobile race knows there is a risk of being injured or killed in a crash The driver has assumed the risk of injury but not the risk that the banking in the curves of the track will give way during the race because of a construction defect not normally occurring in a race 0 Superseding Cause a unforeseeable intervening act that occurs after the defendant s act that breaks the causal relationship between defendant s act and plaintiff s injury relieving defendant of liability Example Suppose that Derrick while riding his bicycle negligently hits Julie who is walking on the sidewalk As a result of the impact Julie falls and fractures her hip While she is waiting for help to arrive a small aircraft crashes nearby and explodes and some ofthe fiery debris hits her causing her to sustain severe burns Derrick will be liable for the damages caused by Julie s fractured hip but normally he will not be liable for the wounds caused by the plane crash because the risk of a plane crashing nearby and injuring Julie was not foreseeable o Contributory and Comparative Negligence 39 Contributory Negligence plaintiff who was also negligent could not recover anything from the defendant Last Clear Chance if defendant had last clear chance to avoid injury to plaintiff but does not take that opportunity plaintiff s contributory negligence will not bar his recovery Comparative Negligence enables the plaintiff and defendants negligence to be comput I ed and the liability for damages distributed accordingly Pure System allows plaintiff to recover damages even if hisher fault is greater than defendants in determining liability the amount of damages a plaintiff causes to herself are subtracted from the amount of damages suffered by the plaintiff and only the remainder is recoverable from the defendant Mixed System 50 percent rule if plaintiff is more than 50 at fault heshe receives nothing For example a plaintiff who is 35 at fault could recover 65 of hisher damages but a plaintiff who is 65 over 50 at fault could recover nothing Special Negligence Doctrines and Statutes 0 Res Ipsa Loquitur burden of proof on defendant defendant must prove heshe was not negligent Exampleperson undergoes knee surgery and following the surgery has a severed nerve in the knee area that person can sue the surgeon under theory of res ipsa loquitur In this case the injury would not have occurred but for the surgeon s negligence For res ipsa loquitur to apply I the event must have been within the defendant s power to control 2 must not have been due to any voluntary action or contribution on the part of the plaintiff and 3 does not ordinarily occur in absence of negligence o Negligence per se in or of itself Example Statute may require a landowner to keep a building in safe condition and may also subject the landownerto a criminal penalty such as a fine ifthe building is not kept safe The statute is meant to protect those who are rightfully in the building Thus if the owner without a sufficient excuse violates the statute and a tenant is thereby injured a majority of courts will hold that the owner s unexcused violation of the statute conclusively establishes a breach of a duty of care that is that the owners violation is negligence per se 0 Injured person must prove 1 that the statue clearly sets out what standard of conduct is expected when and where it is expected and of whom it is expected 2 that he or she is in the class intended o be protected by the statute and 3 that he statute was designed to prevent the type of injury that heshe suffered 0 Danger Invites Rescue doctrine liable for injured party and the third person that attempted to rescue the endangered party Example Ludlum while driving down a street fails to see a stop sign because he is trying to end a squabble between his two young children in the cars backseat Salter on the curb near the stop sign realizes that Ludlum is about to hit a pedestrian walking across the street at the intersection Salter runs into the street to push the pedestrian out of the way and Ludlum s vehicle hits Salter instead n this situation Ludlum will be liable for Salter s injury as well as for any injuries the other pedestrian sustained 0 Special Negligence Statutes 0 Good Samaritan Statutes persons whom others aid voluntarily cannot turn around and sue the Good Samaritan for negligence protects physicians and medical personnel who voluntarily render their services in emergency situations to those in need 0 Dram Shop Acts tavern owner or bartender may be held liable for injuries caused by a person who became intoxicated while drinking at the bar or who was already intoxicated when served by bartender social host is liable when hosting parties for any injuries of intoxicated persons Example father of a minor who hosted a bring your own keg party could be liable for injuries caused by an intoxicated guest Strict liability prima facie at first sight on the face of it answerable for all damages 0 Abnormally Dangerous Activities i Defendant is strictly liable if 1 It involves serious potential harm of a serious nature to persons or property 2 Activity involves a high degree of risk that cannot be completely guarded against by the exercise of reasonable care 3 Activity is not commonly performed in the community or area looks to nature of activity rather than fault of defendant 0 Exampleblasting with dynamite is performed with all reasonable care there is still risk of injury Balancing that risk against the potential for harm it seems reasonable to ask the person engaged in the activity to pay for any injury it causes o Other Applications of Strict Liability 0 Exampleowner of domestic animals may be strictly liable for harm caused by those animals if the owner knew or should have known that the animals were dangerous or had a propensity to harm others Product Liability liability of manufacturers and sellers for harmful or defective products based on public policy Manufacturers distributors sellers should bear the cost because they re making money off of its activities Consumers must be protected from unsafe products Manufacturer should be liable to any user of the product Ch 10 1 Bilateral contract A type of contract that arises when a promise is given in exchange for a return promise 2 Contract An agreement that can be enforced in court formed by two or more parties each of whom agrees to perform or to refrain from performing some act now or in the future 3 Contract under seal A formal agreement in which the seal is a substitute for consideration A court will not invalidate a contract under seal for lack of consideration 4 Executed contract A contract that has been completely performed by both parties 5 Executory contract A contract that has not yet been fully performed 6 Express contract A contract in which the terms of the agreement are fully and explicitly stated in words oral or written 7 Formal contract A contract that by law requires a specific form such as being executed under seal to be valid 8 lmpliedinfactcontract A contract formed in whole or in part from the conduct of the parties as opposed to an express contract 9 Informal contract A contract that does not require a specified form or formality in order to be valid 10 Objective theory of contracts A theory under which the intent to form a contract will be judged by outward objective facts what the party said when entering into the contract how the party acted or appeared and the circumstances surrounding the transaction as interpreted by a reasonable person rather than by the party s own secret subjective intentions 11 Offeree A person to whom an offer is made 12 Offeror A person who makes an offer 13 Promise A person s assurance that eh or she will or will not do something 14 Promisee A person to whom a promise is made 15 Promisor A person who makes a promise 16 Quantum meruit pronounces kwahntuhm mehroowhut Literally as much as he deserves an expression describing the extent of liability on a contract implied in law quasi contract An equitable doctrine based on the concept that one who benefits from another s labor and materials should not be unjustly enriched thereby but should be required to pay a reasonable amount for the benefits received even absent a contract 17 Quasi contract A fictional contract imposed on parties by a court in the interest of fairness and justice usually quasi contracts are imposed to avoid the unjust enrichment of one party at the expense of another 18 Unenforceable contract A valid contract rendered unenforceable by some statute or law 19 Unilateral contract A contract that results when an offer can only be accepted by the offeree s performance 20 Valid contract A contract that results when elements necessary for contract formation agreement consideration legal purpose and contractual capacity are present 21 Void contract A contract having no legal force or binding effect 22 Voidable contract A contract that may be legally avoided cancelled or annulled at the option of one or both of the parties NOTES 0 An Overview of Contract Law 0 The Function of Contract Law formation and enforcement of agreements between parties Designed to provide stability and predictability as well as certainty for both buyers and sellers in the marketplace Necessary to ensure compliance with a promise or to entitle the innocent party to some form of relief Example when you purchase a DVD or when you borrow funds to buy a house you acquire rights and obligations 0 Objective Theory of Contracts Intention to enter into a legally binding agreement or contract is judged by outward objective facts as interpreted by a reasonable person rather than by the party s own secret subjective intentions Elements of a Contract 0 Requirements of a Valid Contract four requirements must be met before a valid contact will have been formed 1 N 00 Je Agreement Agreement to form a contract includes an offer and an acceptance One party must offer to enter into a legal agreement and another party must accept the terms of the offer Consideration Any promises made by the parties to the contract must be supported by legally sufficient and bargainedfor consideration something of value received or promised such as money to convince a person to make a deal Contractual Capacity Both parties entering into the contract must have the contractual capacity to do so the law must recognize them as possessing characteristics that qualify them as competent parties Legality The contracts purpose must be to accomplish some goal that is legal and not against public policy 0 Defenses to the Enforceability of a Contract even if abovelisted requirements are met a contract may be unenforceable ifthe following are not met 1 Genuineness of assent The apparent consent of both parties must be genuine For example if a contract was formed as a result of fraud undue influence mistake or duress the contract may not be enforceable Form The contract must be in whatever form the law requires for example some contracts must be in writing to be enforceable Types of Contracts 0 Contract Formation i Bilateral Contracts offeree must promise to perform promise for a promise no performance such as payment of money of delivery of goods need to take place Example Jeff offers to buy Ann s digital camera for 200 Jeff tells Ann that he will give her the money for the camera next Friday when he gets paid Ann accepts Jeff39s offer and promises to give him the camera when he pays her on Friday Jeff and Ann have formed a bilateral contract ii Unilateral Contracts promise for an act offeree can accept the offer only by completing the contract performance Example O Malley says to Parker If you carry this package across the Brooklyn Bridge I ll give you 20 Only on Parker39s complete crossing with the package does she fully accept O Malley s offer to pay 20 If she chooses not to undertake the walk there are no legal consequences Contests lotteries and other competitions involving prizes are examples of unilateral contracts unilateral contracts are formed binding the organization offering the prize when the person complies with the rules of the contest like submitting the right lottery number at the right time and place Problems with Unilateral Contracts A problem arises in unilateral contracts when the promisor attempts to revoke the offer after the promSee has begun performance but before the act is completed Traditional view says that offer can be revoked at any time before the offer is accepted Presentday view is that although the offer has not yet been accepted the offeror is prohibited from revoking it for a reasonable time period iii Express Contracts words oral or written If a classmate calls you on the phone and agrees to buy your textbook from last semester for 45 an express oral contract has been made A signed lease from an apartment or house is an express written contract ImpliedinFact Contracts conduct creates and defines terms of contract Example Suppose that you need an accountant to complete your tax return this year You look through the yellow pages and find an accountant at an office in your hood so you drop by to see her You go into the accountant s office and explain your problem and she tells you what her fees are The next day you return and give her administrative assistant all the necessary info and documents You then walk out the door without saying anything expressly to the assistant You have entered into an implied in fact contract to pay the accountant the usual and reasonable fees for her services The contract is implied by your conduct and hers She expects to be paid for completing your tax returns and by bringing in the records she will need to do the work you have implied an intent to pay her Requirements for ImpliedinFact Contracts 1 Plaintiff furnished some service or property 2 Plaintiff expected to be paid for that service or property and the defendant knew or should have known that payment was expected 3 Defendant had a chance to reject the services or property and did not v Formal Contracts Example contract under seal see term Informal Contracts simple contracts no special form is required except for certain contracts that must be in writing iv vi 0 Contract Performance classified according to the degree to which they ve been performed executory and executed Example assume that you agree to buy ten tons of coal from the NCC Further assume that N00 has delivered the coal to your steel mill where it is now being burned At this point the contract is executed on the part of N00 and executor on your part After you pay N00 for the coal the contract will be executed on both sides 0 Contract Enforceability a valid contract that can be enforced because there are no legal defenses against it 1 Valid Contract a contract that has the necessary contractual elements agreement consideration legal capacity of the parties and legal purpose 2 Voidable Contracts a party has the option of avoiding or enforcing the contractual obligation 3 Unenforceable Contracts A contract exists but it cannot be enforced because of a legal defense Example some contracts must be in writing and ifthey are not they will not be enforceable except in certain exceptional circumstances 4 Void Contracts no contract Contract can be void because one of the parties was adjudged by a court to be legally insane or because the purpose of the contract was illegal I Quasi Contracts implied in law imposed on parties in the interest of fairness and justice equitable remedies quantum meruit Example suppose that a vacationing physician is driving down the highway and encounters Potter lying unconscious on the side ofthe road The doctor renders medical aid that saves Potters life Although the injured unconscious Potter did not solicit the medical aid and was not aware that the aid had been rendered Potter received a valuable benefit and the requirements for a quasi contract were fulfilled The law will Ch 1 O x impose a quasi contact and Potter normally will have to pay the physician for the reasonable value of the medical services rendered 0 Interpretation of Contracts i Plain Meaning Rule A court will enforce a contract according to its clear and unequivocal obvious terms lfterms are unclear or ambiguous the court will attempt to interpret ambiguous contract terms in a reasonable lawful effective manner 11 Acceptance 1 ln contract law the offeree s notification to the offeror that the offeree agrees to be bound by the terms of the offeror s proposal Although historically the terms of acceptance had to be the mirror image of the terms of the offer the Uniform Commercial Code provides that even modified terms ofthe offer in a definite expression of acceptance constitute a contract 2 ln negotiable instruments law the drawee s signed agreement to pay a draft when presented Agreement A meeting of two or more minds in regard to the terms of a contract usually broken down into two eventsan offer by one party to form a contract and an acceptance of the offer by the person to whom the offer is made Counteroffer An offeree s response to an offer in which the offeree rejects the original offer and at the same time makes a new offer Estop To bar impede or preclude Mailbox rule A rule providing that an acceptance of an offer becomes effective on dispatch on being placed in a mailbox if mail is expressly or impliedly an authorized means of communication of acceptance to the offeror Mirror image rule A common law rule that requires for a valid contractual agreement that the terms of the offeree s acceptance adhere exactly to the terms of the offeror s offer Mutual assent The element of agreement in the formation of a contract The manifestation of contract parties mutual assent to the same bargain is required to establish a contract Offer A promise or commitment to perform or refrain from performing some specified act in the future Option contract A contract under which the offeror cannot revoke his or her offer for a stipulated time period and the offeree can accept or reject the offer during this period without fear that the offer will be made 0 another person The offeree must give consideration for the option the irrevocable offer to be enforceable Promissory estoppel A doctrine that applies when a promisor makes a clear and definite promise on which the promisee justifiably relies such a promise is binding ifjustice will be better served by the enforcement of the promise Revocation ln contract law the withdrawal of an offer by an offeror Unless an offer is irrevocable it can be revoked at any time prior to acceptance without liability NOTES Requirements of the Offer three elements must be present for an offer to be effective 1 Offeror must have a serious intention to become bound by the offer 2 Terms of the offer must be reasonably certain or definite so that the parties and the court can ascertain the terms of the contract 3 Offer must be communicated by the offeror to the offeree resulting in the offeree s knowledge of the offer Intention courts generally adhere to Objective Theory of Contractsunder this theory a party s words and conduct are held to mean whatever a reasonable person in the offerr s position would thing they meant Offers made in anger jest or undue excitement are usually not offers Example you and three classmates ride to school each day in Davina s new automobile which has a market value of 20000 One cold morning the four of you get into the car but Davina cannot get the car started She yells in anger I ll sell this car to anyone for 500 You drop 500 in her lap Given facts reasonable person taking into consideration Davina39s frustration and the obvious difference in worth between the market value of the car and the proposed purchase price would declare that her offer was not made with serious intent and that you did not have an agreement iv vi Expressions of Opinion Example Hawkins took his son to doc and asked doc to operate on the son s hand Doc said that the boy would be in the hospital three of four days and that the hand would probably heal a few days later The sons hand did not heal for a month but the father did not win a suit for breach of contract Doc had not made an offer to heal the son s hand in a few day He had merely expressed an opinion as to when the hand would heal Statements of Future Intent Example If Arif says I plan to sell my stock in Novation Inc for 150 per share a contract is not created if John accepts and tenders the 150 per share for the stock Arif has merely expressed his intention to enter into a future contract for the sale of the stock No contract is formed because Arif was only thinking about selling his stock not promising to sell it Preliminary Negotiations request or invitation to negotiate is not an offer Will you sell Blythe Estate I wouldn t sell my car for less than 1 000 Agreements to Agree during preliminary negotiations the parties may form an agreement to agree to a material term of a contract at some future date Example Zhan consulting leases office space from Leon properties lnc Their lease agreement includes a clause permitting Zhan to extend the lease at an amount of rent to be agreed on at the time the lease is extended Court could hold that the parties intended the future rent to be a reasonable amount and could enforce the clause Advertisements Example Loesser advertises a used paving machine and ad is mailed to hundreds of firms and reads Used Loesser construction co paving machine Builds curbs and finishes cement work all in process price 42350 lf star paving calls Loesser and says we accept your offer no contract is formed Any reasonable person would conclude that Loesser was not promising to sell the paving machine but rather was soliciting offers to buy it If such an ad were held to constitute a legal offer and fifty people accepted the offer there would be no way for Loesser to perform all 50 of the resulting contracts He would have to breach 49 contracts Law seeks to avoid such unfairness Auctions Bidder may retract bid any time prior to acceptance before hammer falls Seller may withdraw goods even after hammer has fallen in auctions with reserve Seller may not withdraw goods that are without reserve 0 Definiteness of Terms Contract must include the following terms either expressed in the contract or capable of being reasonably inferred from it M4 Ar Identification of the parties Identification of the object or subject mater of the contract also the quantity when appropriate including the work to be performed with specific identification of such items as goods services and land Consideration to be paid Time of payment delivery or performance 0 Communication offeree s knowledge of the offer Examplesuppose that Estrich advertises a reward for the return of his lost dog Hoban not knowing of the reward finds the dog and returns it to Estrich Hoban cannot recover the reward because she did not know it had been offered Termination of the Offer Termination by Action of the Parties Revocation of the Offer by the Offeror offeror s act of withdrawing an offer 0 Offer can be withdrawn anytime before offeree accepts the offer Revocation may be accomplished by express repudiation statement of revocation of the offer or by performance of acts that are inconsistent with the existence of the offer and are made known to the offeree Effective when the offeree of offeree s agent receives it Notice of revocation must be RECEIVED by offeree prior to acceptance 0 Example Dept store offers a 10000 reward to anyone providing info leading to the apprehension of the persons who burglarized the stores downtown branch The offer is published in three local papers and four papers in neighboring communities To revoke the offer the store must publish the revocation in all ofthe seven papers in which it published the offer Irrevocable Offers cannot be revoked or cancelled Offerfor the sale of goods may also be considered irrevocable if the merchant offeror gives assurances in a signed writing the offer will remain open 0 Option contract Example Suppose you are in the business of writing movie scripts Your agent contacts the head of development at new line cinema and offers to sell new line your latest movie script New line likes your script and agrees to pay you 10000 for a 6 month option In this situation you are the offeror and new line is the offeree You cannot revoke your offer to sell new line your script for the next 6 months If after 6 months no contract has been formed however new line loses the 10000 and you are free to sell the script to another firm 0 Real Estate Option Contracts Example you might agree with a landowner to lease a home and include in the lease contract a clause stating that you will pay 9000 for an option to purchase the home within a specified time period If you decide not to purchase the home after the specified time period has lapsed you forfeit the 9000 and the landlord is free to sell the property to another buyer 0 Detrimental Reliance and Promissory Estoppel offeree relies on offer to his or her detriment thus offeror is barred from revoking the offer Example Angela has rented commercial property from Jake for the past 30 years under a series of fiveyear leases Angela tells Jake that she is going to look for a new place Jake promises to reduce he rent in their next lease if Angela stays ln reliance to the promise Angela continues to do business on Jake s property When they sit down to renew the lease Jake has changed his mind This is a case of detrimental reliance on a promise which cannot be revoked Promissory estoppel comes into play to estop means to bar impede or preclude someone from doing something Rejection of the Offer by the Offeree Rejection by the Offeree expressed or implied terminates the offer Effectively only when it is receive by the Offeror or Offeror s agent Merely inquiring about an offer does not mean rejection 0 Example A friend offers to buy your CDROM library for 300 and you respond is that your best offer Or will you pay me 375 for it A reasonable person would conclude that you had not rejected the offer but had merely made an inquiry for further consideration ofthe offer You can sill accept and bind your friend to the 300 purchase price Counteroffer by the Offeree Example Duffy offers to sell her Picasso lithograph to Wong for 4500 Wong responds your price is too high l ll offer to purchase your lithograph for 4000 Wong s response is a counteroffer because it terminates Duffy s offer to sell at 4500 and creates a new offer by Wong to purchase at 4000 0 Mirror Image Rule requires that offeree s acceptance must match the offeror s offer exactlyto mirror the offer Termination By Operation of Law power ofthe offeree to transform the offer into a binding legal obligation can be terminated by operation of law through the occurrence of the following Lapse of Time Offer terminates by law when the period oftime 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 0 Example Alejandro offers to sell his camper to Kelly if she accepts within 20 days Kelly must accept within the 20 day period or the offer will terminate Destruction of the Subject Matter An offer is automatically terminated if the specific subject matter of the offer is destroyed before the offer is accepted 0 Example Johnson offers to sell his prize greyhound to Rizzo but the dog dies before Rizzo can accept the offer is automatically terminated Johnson does not have to tell Rizzo that the animal has died for the offer to terminate Death or Incompetence of the Offeror or Offeree Death or incompetence of either the offeror or the offeree terminates an offer unless the offer is irrevocable Supervening quotlegality of the Proposed Contract When a statute or court decision makes an offer illegal the offer is automatically terminated o For example Lee offers to lend Kim 10000 at an annual interest rate of 12 Before Kim can accept the offer a law is enacted that prohibits interest rates higher than 10 Lee s offer is automatically terminated Acceptance o Unequivocal Acceptance offeree must accept unequivocally mirror image rule Example l accept the offer but I wish I could have gotten a better price is an effective acceptance So too is I accept but can you shave the price in contrast the statement I accept the offer but only if I can pay on 90 days credit is not an unequivocal acceptance and operates as a counter offer rejecting the original offer 0 Silence as Acceptance Acceptance of Offered Services by Silence Example Sayre watches while a stranger rakes his leaves even though the stranger has not been asked to rake the yard Sayre knows the stranger expects to be paid and does nothing to stop her Here his silence constitutes an acceptance and an implied in fact contract is created He is bound to pay a reasonable value for the strangers work Prior Dealings and Acceptance by Silence Example Merchant routinely receives shipments from a certain supplier and always notifies the supplier when defective goods are rejected Silence regarding a shipment will constitute acceptance 0 Communication of Acceptance In a bilateral contract communication of acceptance is necessary because acceptance is in the form of a promise not performance and the contract is formed when the promise is made rather than when the act is performed Offeree must communicate the acceptance to the offeror however if the offer can be accepted by silence no communication is necessary 0 Mode and Timeliness of Acceptance Authorized means of acceptance specified mode of acceptance 0 Exampleovernight delivery receives it the next day Contract is not formed unless the offeree uses that specified mode of acceptance When the preferred means of acceptance is not indicated 0 When two parties are at a distance for example mailing is impliedly authorized because it is a customary mode of dispatch When the authorized means of acceptance is not used 0 An acceptance sent by means not expressly or impliedly authorized is normally not effective until it is received by the offeror In the previous example if overnight delivery was not used and regular first class delivery was used but offeror received it the next day same time as offeror should have received it if it were sent overnight it will be accepted Ch 12 1 Accord and satisfaction An agreement for payment or other performance between two parties one of whom has a right of action against the other After the payment has been accepted or other performance has been made the accord and satisfaction is complete and the obligation is discharged 2 Consideration Generally the value given in return for a promise or a performance The consideration which must be present to make the contract legally binding must be something of legally sufficient value and bargained for 3 Covenant not to sue An agreement to substitute a contractual obligation for some other type of legal action based on a valid claim 4 Forbearance The act of refraining from an action that one has a legal right to undertake 5 Past consideration An act done before the contract is made which ordinarily by itself cannot be consideration for a later promise to pay for the act 6 Release A contract in which one party forfeits the right to pursue a legal claim against the other party 7 Rescission A remedy whereby a contract is canceled and the parties are returned to the positions they occupied before the contract was made may be effected through the mutual consent of he parties by their conduct or by court decree NOTES 0 Elements of Consideration 0 Legal Value In a contract for the sale of goods the seller promises to ship specific goods to the buyer and the buyer promises to pay for those goods when they are received Each of these promises constitutes consideration for the contract Also act of painting the garage or performing an action is the consideration that creates contractual obligation o Bargainedfor Exchange Arlene says to her son in consideration of the fact that you are not as wealthy as your brothers I will pay you 500 The fact that the word consideration is used does not by itself mean that consideration has been given The son need not give Arlene something of legal value in return for her promise and the promised 500 does not involve a bargainedfor exchange Rather Arlene has simply stated her motive for giving her son a gift 0 Adequacy of Consideration o Dylan has a house worth 100000 and sells it for 50000 A 50000 sale could indicate that the buyer unduly pressured Dylan into selling the house at that price or that Dylan was defrauded into selling the house at far below market value c Agreements that Lack Consideration o Preexisting duty For example a sheriff cannot collect reward for providing info leading to the capture of a criminal if the sheriff already has a legal duty to capture the criminal Suppose Bauman begins construction on a 7 story building and after 3 months demands an extra 75000 on its contract lfthe extra 75000 is not paid it will stop working The owner of the land having no one else to complete the construction agrees to pay the extra 75000 The agreement is unenforceable because it is not supported by legally sufficient consideration Bauman was under a preexisting contract to complete the building 0 Past Consideration Elsie real estate agent does her friend Judy a favor by selling Judy s house and not charging any commission Later Judy says to Elsie in return for your generous act I will pay you 3000 This promise is made in return for past consideration and is thus unenforceable in effect Judy is stating her intention to give Elsie a gift 0 Problems Areas Concerning Consideration o Uncertain Performance Examplepresident of Tuscan corp says to her employees all of you have worked hard and if profits continue to remain high a 10 percent bonus at the end of the year will be given if management thinks it is warranted Employees continue to work hard and profits remain high but no bonus is given OptiontoCancel Clauses Suppose that l contract to hire you for one year at 5000 per month reserving the right to cancel the contract at any time This is an illusory contract I am required to give you 30 days notice to exercise the option The 30 days notice entitles you to at least one months salary of 5000 which is consideration Thus until I give you notice you are entitled to 5000 per month until the contract is terminated at the end of the year 0 Promises Enforceable Without Consideration Promissory Estoppels Suppose that your uncle tells you I ll pay you 150 a week so you wont have to work anymore In reliance on your uncle s promise you quit yourjob but your uncle refuses to pay you Under the doctrine of promissory estoppels you may be able to enforce such a promise Ch 13 1 Adhesion contract A standardform contract such as that between a large retailer and a consumer in which the stronger party dictates the terms 2 Age of majority The age at which an individual is considered legally capable of conducting himself or herself responsibly A person of this age is entitled to the full rights of citizenship including the right to vote in elections In contract law one who is no longer an infant and can no longer disaffirm a contract 3 Blue laws State or local laws that prohibit the performance of certain types of commercial activities on 4 Contractual capacity The threshold mental capacity required by the law for a party who enters into a contract to be bound by that contract 5 Covenant not to compete A contractual promise to refrain from competing with another part for a certain period of time not excessive in duration and within a reasonable geographic area Although covenants not to compete restrain trade they are commonly found in partnership agreements business sale agreements and employment contracts lfthey are ancillary to such agreements covenants no to compete will normally be enforced by the courts unless the time period or geographic area is deemed unreasonable 6 Disaffirmance The legal avoidance or setting aside of a contractual obligation 7 Emancipation In regard to minors the act of being freed from parental control occurs when a child s parent or legal guardian relinquished the legal right to exercise control over the child Normally a minor who leaves home to support himself or herself is considered emancipated 8 Exculpatory clause A clause that releases a contractual party from liability in the event of monetary or physical injury no matter who is at fault 9 In pari delicto at equal fault 10 Necessaries Necessities required from life such as food shelter clothing and medical attention may include whatever is believed to be necessary to maintain a person s standard of living or financial and social 11 Ratification The act of accepting and giving legal force to an obligation that previously was not enforceable 12 Unconscionable contract or clause A contract or clause that is void on the basis of public policy because one party as a result of his or her disproportionate bargaining power is forced to accept terms that are unfairly burdensome and that unfairly benefit the dominating party 13 Usury Charging an illegal rate of interest NOTES Contractual Capacity person adjudged by a court to be mentally incompetent for example cannot form a legally binding contract with another party minors usually are not legally bound by contracts 0 Minors no longer minor for contractual purposes at age 18 can enter into any contract that an adult can contract entered into by a minor is voidable at the option of that minor A Minors Right to Disaffirm To disaffirm a minor must express hisher intent through words or conduct expressed or implied not to be bound to the contract Contract can be disaffirmed at any time during minority or for a reasonable period after the minor comes of age Minor must disaffirm the whole contract not just a portion of it 0 Example A minor cannot decide to keep part of the goods purchased under a contract and return the remaining goods must disaffirm the entire contract A Minors Obligations on Disaffirmance Majority Rule minor need only return the goods or other consideration subject to the contract provided the goods are in the minor s possession or control 0 Example Suppose that Jim 17 year old purchases a PC from RS While transporting the PC to his home Jim negligently drops it breaking the plastic casing The next day he returns the PC to RS and disaffirms the contract Under the majority view this return fulfills Jim s duty even though the PC is now damaged Jim is entitled to receive a refund of the purchase price or to be relived of any further obligations under an agreement to purchase the PC on credit Minority Rule minor must restore the adult to the position held before the contract was made 0 Example17 yr old Joseph bought a pickup truck for 4900 from a used car dealer Although the truck developed mechanical problems nine months later Joseph continued to drive it until the engine blew up and it stopped running Then Joseph disaffirmed the contract and attempted to return the truck to the dealer for a full refund of the purchase price The dealer refused to accept the truck or refund the money Court allows Joseph to disaffirm the contract but required the seller to be compensated for the depreciated valuenot purchase priceofthe truck Exceptions to a Minors Right to Disaffirm Some contracts cannot be avoided simply as a matter of law on the ground of public policy For example marriage contracts and contracts to enlist in the armed services Misrepresentation of Age minor can disaffirm the contract even though minor s age is misrepresented 0 Example Suppose that a minor tells a seller that she is 21 yrs old when she is really 17 The minor can disaffirm the contract even though she has misrepresented her age but the minor is liable for damages in tort Some states prohibit disaffirmance by a minor who has engaged in business as an adult Some courts refuse to allow minors to disaffirm executed fully performed contracts unless they can return the consideration received Some courts allow the defrauded party to sue the minor for misrepresentation or fraud Contracts for Necessaries 0 Minor may disaffirm the contract but remain liable for the reasonable value of the goods 0 For a contract to qualify as a contract for necessaries they must meet the three criteria Unless these three criteria are met the minor can disaffirm the contract without being liable for the reasonable value of the goods used 1 Item contracted for must be necessary to the minor s subsistence 2 Value of the necessary item must be up to a level required to maintain minor s standard of living 3 Minor must not be under the care of parent or guardian who is required to supply this item Example If a minor s parents provide himher with shelter then a contract to lease shelter such as an apartment will not be classified as a contract for necessaries Insurance and Loans 0 Insurance is not viewed as necessary so minor s can ordinarily disaffirm their insurance contracts and recover all premiums paid 0 Loans are seldom considered to be necessaries even if the minor spends the funds borrowed on necessaries If however a lender makes a loan to a minor for the express purpose of enabling the minor to purchase necessaries and the lender personally makes sure the funds are so spent the minor normally is obligated to repay the loan Ratification o For example suppose that Lin enters a contract to sell her laptop to Arturo a minor If on reaching the age of majority Arturo writes a letter to Lin stating the he still agrees to buy the laptop he has expressy takes place when individual reaches age of majority states orally or in writing that heshe intends to be bound by the contract ratified the contract If instead Arturo takes possession of the laptop as a minor and continues to use it well after reaching the age of majority he has impliedy takes place when the minor on reaching the age of majority evidences an intent to abide by the contract ratified the contract O Contract that is generally executed is presumed to be rati ed Contract that is still executoryis normally considered to be disaf rmed Parent s Liability statutes vary General rule is that parents are not liable for contracts made by minor children acting on their own minors are personally liable for their own torts Liability imposed on parents only for willful acts of their minor children Parents of a minor may also be held for their child s negligent acts that results from their parents negligence o Intoxication intoxicated persons lack contractual capacity at the time the contract is being made Contract can be either voidable or valid lf voidable person has the option to disaffirm or ratifythe contract expressly or impliedly Disaffirmance o For example suppose that Briller who is intoxicated contracts to purchase a set of encyclopedias from Stevens lfthe books are delivered Briller can disaffirm the executed contract and recover the payment made to Stevens only be returning the encyclopedias Ratification 0 An intoxicated person after becoming sober maybe ratify a contract expressly or impliedly lmplied ratification occurs when a person enters into a contract while intoxicated and fails to disaffirm the contract within a reasonable time after becoming sober 0 Mental Incompetence i When The Contract Will Be Void If a court has previously determined that a person is mentally incompetent and had appointed a guardian to represent the individual any decisions made by the mentally incompetent is void When The Contact Will Be Voidable If the person does not know heshe is entering into the contract or lacks the mental capacity to comprehend its nature purpose and consequences When The Contract Will Be Valid void For example a person maybe be able to understand the nature and effect of entering into a certain contract yet simultaneously lack capacity to engage in other activities Mentally incompetent person may have a lucid interval a temporary restoration of sufficient intelligence judgment and will to enter into contracts without disqualificationduring which heshe will be considered to have full legal capacity Legality for a contract to be valid and enforceable it must be formed for a legal purpose A contract to do something prohibited by federal or state statutory law is illegal and therefore Contracts Contrary to Statute Usury o Statute that sets the maximum rate of interest that can be charged for different types of transactions including ordinary loan Gambling 0 Statute that regulates gamblingscheme that involves distribution of property by chance among persons who have paid a valuable consideration for the opportunity chance to receive the property Sabbath Sunday Laws 0 Laws Blue Laws that prohibit the formation or performance of certain contracts on a Sunday Statutes in other states prohibit only the sale of certain types of merchandise particularly alcoholic beverages on a Sunday Blue Laws Licensing Statutes o All states require that members of certain professions or occupations obtain licenses allowing them to practice Contracts to Commit a Crime 0 Any contract to commit a crime is a contract in violation of a statute contract to sell an illegal drug is unenforceable 0 Contract can be discharged by law afterthe contract has been entered into if the object or performance of the contract is rendered to be illegal Contracts Contrary to Public Policy Contract in Restraint of Trade covenant not to compete i Covenants Not to Compete and the Sale of an Ongoing Business Covenant not to compete is created when a seller agrees not to open a new store in a certain geographic areas surrounding the existing store For example a wellknown merchant sells hisher store and opens a competing business a block away many of the customers will likely do business at the wellknown merchant s new store ii Covenants Not to Compete in Employment Contracts Agreement not to work for competitors or not to start competing businesses for a specified period of time after termination of employment Unconscionable Contracts or Clauses 0 Procedural Unconscionability Has to do with how a term becomes part of a contract and relates to factors that make it difficult for a party to know or understand the contract terms due to inconspicuous print unintelligible language or the lack of an opportunity to read the contract or to ask questions about its meaning involves adhesion contracts 0 Substantive Unconscionability Portions of contracts that are oppressive or overly harsh for example suppose that a person with little income and with only a fourthgrade education agrees to purchase a refrigerator for 2000 and signs a twoyear installment contract The same type of refrigerator usually sells for 600 on the market Exculpatory Clauses 0 Suppose for example that an employer requires its employees to sign contract provisions removing the employer s potential liability for any injuries to those employees In that situation a court would usually hold the exculpatory clause to be contrary to public policy Effect of egaity 0 Illegal contracts are void and both parties are considered to be in pari delicto Exceptions to the General Rule 0 Justifiable Ignorance of the Facts For example a trucking company contracts with Gillespie to carry goods to a specific destination for a normal fee of 500 The trucker delivers the goods and alter finds out that the contents ofthe shipped crates were illegal Although the law specifies that the shipment use and sale of the goods were illegal the trucker being an innocent party can still legally collect the 500 from Gillespie 0 Members of Protected Classes For example flight attendants and pilots are subject to a federal statute that prohibits them from flying more than a certain number of hours every month If an attendant or pilot exceeds the maximum number of hours the airline must nonetheless pay for those extra hours of service 0 Withdrawal from an Illegal Agreement For example Sam and Jim decide to wager illegally on the outcome of a boxing match Each deposits money with a stakeholder who agrees to paythe winner ofthe bet At this point each party has performed part ofthe agreement but the illegal element of the agreement will not occur until the funds are paid to the winner Before such payments occur either party is entitled to withdraw from the bargain by giving notice of repudiation to the stakeholder 0 Contract Illegal Through Fraud Duress or Undue Influence one party is more at fault When a party has been induced to enter into an illegal bargain by fraud duress or undue influence on the part of the other party to the agreement that party will be allowed to recover for the performance or its value Severable or Divisible Contracts 0 Severable or divisible consists of distinct parts that can be performed separately with separate consideration provided for each part 0 IndVisible contract in contrast exists when the parties intended that complete performance by each party would be essential even if the contract contains a number of seemingly separate provisions o If a contract is divisible into legal and illegal portions the court may enforce the legal portion but not the illegal one so long as the illegal portion does not affect the essence of the bargain Ch 14 1 Genuineness of assent Knowing and voluntary assent to the terms of a contract If a contract is formed as a result of a mistake misrepresentation undue influence or duress genuineness of assent is lacking and the contract will be voidable Innocent misrepresentation A false statement of fact or an act made in good faith that deceives and causes harm or injury to another Negligent misrepresentation Any manifestation through words or conduct that amounts to an untrue statement of fact made in circumstances in which a reasonable and prudent person would not have done or failed to do that which led to the misrepresentation A representation made with an honest belief in its truth may still be negligent due to 1 a lack of reasonable care in ascertaining the facts 2 the manner of expression or 3 the absence ofthe skill or competence required by a particular business of profession Scienter Knowledge by the misrepresenting party that material facts have been falsely represented or omitted with an intent to deceive NOTES Genuineness 0f Assent voluntary consent can be used as a defense to the contract s enforceability Genuineness of assent may be lacking because of a mistake misrepresentation undue influence or duress 0 Mistakes 0 Mistakes of Fact only mistake of fact may allow a contract to be avoided Bilateral Mutual Mistakes of Fact Mutual mistake occurs when both parties are mistaken as to some material factthat is a fact important to the subject matter ofthe contract Contract can be rescinded or canceled by either party 0 For example Keeley buys a landscape painting from Umberto s art gallery Both Umberto and Keeley believe that the painting is bythe artist Vincent van Gogh Later Keeley discovers that the painting is a very clever fake Because neither Umberto nor Keeley was aware of this material fact when they made their deal Keeley can rescind the contract and recover the purchase price of the painting Unilateral Mistakes of Fact Occurs when only one ofthe contracting parties make a mistake as to some material fact Does not afford the mistaken party any right to relief from the contract 0 For example DeVinck intends to sell his motor home for 17500 When he learns that Benson is interested in buying a used motor home DeVinck faxes Benson an offer to sell the vehicle to him When typing the fax however DeVinck mistakenly keys in the price of 15700 Benson immediately sends DeVinck a fax accepting DeVincks offer Even though DeVinck intended to sell his motor home for 17500 his unilateral mistake falls on him He is bound in contract to sell the motor home to Benson for 15700 Two exceptions to this general rule If Benson knew that DeVinck intended to sell his motor home for 17500 than DeVinck s unilateral mistake may render the resulting contract unenforceable Second exception arises when a unilateral mistake of fact was due to a mathematical mistake in addition subtraction division or multiplication was made inadvertently and without extreme negligence Two exceptions to this rule i lfthe other party to the contract knows or should have known that a mistake of face was made the contract may not be enforceable In the above example if Benson knew that DeVinck intended to sell his motor home for 17500 then DeVinck s unilateral mistake may render the resulting contract unenforceable ii The second exception arises when a unilateral mistake of fact was due to a mathematical mistake in addition subtraction division or multiplication and was made inadvertently and without gross negligence 0 Mistakes of Value If a mistake concerns the future market value or equality ofthe object of the contract the mistake is one of value and either party can normally enforce the contract Contract enforceable by either party Unilateral or bilateral mistake are not basis for avoiding a contract 0 For example suppose that Chi buys a violin from Bev for 250 Although the violin is very old neither party believes that it is extremely valuable An antiques dealer later informs the parties however that the violin is rare and worth thousands of dollars Although a mutual mistake has been made the mistake is not a mistake of fact that warrants contract rescission Similarly a unilateral mistake of value will not serve as the basis for avoiding a contract 0 Fraudulent Misrepresentation Contract Voidable by Innocent Party Consist of the following elements i Misrepresentation of a material fact must occur ii There must be an intent to deceive iii Innocent party must justifiably rely on the misrepresentation iv To collect damages a party must also have been injured 0 Misrepresentation Has Occurred Misrepresentation of future facts and statements of opinion are not fraud unless person professes to be an expert For example the statement This sculpture was created by Michelangelo is an express misrepresentation of fact if another artist sculptured the statue The misrepresentation as to the identity of the artist would certainly be a material fact in the formation of this contract Misrepresentation By Conduct Misrepresentation can also take place through the conduct of a party such as by the concealment of a fact that is material to the contract 0 Suppose for example that Rakas contracts to buy a new car from Bustamonte a dealer in new automobiles The car has been used as a demonstration model for prospective customers to testdrive but Bustamonte has turned back the odometer Rakas cannot tell from the odometer reading that the car has been driven nearly one thousand miles and Bustamonte does not tell Rakas the distance the car has actually been driven Bustamonte s concealment constitutes misrepresentation by conduct Misrepresentation Of Law Misrepresentation of law is not fraud unless person has greater knowledge ofthe law Misrepresentation of law ordinarily does not entitle a party to relief from a contract 0 For example Camara has a parcel of property she is trying to sell to Pye Camara knows that a local ordinance prohibits building anything higher than three stories on the property Nonetheless she tells Pye You can build a condominium fifty stories high if you want to Pye buys the land and later discovers that Camara s statement was false Normally Pye cannot avoid the contract because at common law people are assumed to know state and local ordinances Additionally a layperson should not rely on a statement made by a nonlawyer about a point of law Exception lf Camara had been a lawyer or real estate broker her misrepresentation of the area s zoning status would probably have constituted fraud Misrepresentation By Silence Silence is not fraud unless serious problem or defect known or asked and person lied o For example suppose you have an accident that requires extensive bodywork on one side of your car After the repair the car s appearance and operation are the same as they were before the accident One year later you decide to sell your car You do not need to volunteer this information to a potential buyer In this situation silence does not constitute O O O misrepresentation In contrast if the purchaser asks you ifthe car has had extensive bodywork and you lie you have committed a fraudulent misrepresentation Exceptions to the rule include o If seller knows of a serious defect or a serious potential problem that could not reasonably be suspected by the buyer the seller may have a duty to speak Also when parties are in a fiduciary relationship one of trust such as the relationship between business partners physicians and their patients there is a duty to disclose material facts failure to do so may constitute fraud 0 Intent to Deceive Scienteris an intent to deceive Scienter is clearly exists if a party knows a fact is not as stated Scienter also exist if a party makes a statement that heshe believes is not true or makes a statement recklessly without regard to whether it is true or false Party says or implies that statement is made on some basis such as personal knowledge or personal investigation For example assume that Meese a securities broker offers to sell BIM stock to Packer Meese assures Packer that BIM shares are bluechip securitiesthat is they are stable are limited in risk and yield a good return on investment over time In fact Meese knows nothing about the quality of BIM stock and does not believe what he is saying to be true Meese s statement is thus a misrepresentation lf Packer is induced by Meese s intentional misrepresentation of a material fact to enter into a contract to buy the stock normally he can avoid his obligations under the contract Reliance on the Misrepresentation Deceived party must have justifiable reliance or reason for relying on the 39 itatiun and the 39 itatiun must be an important factor in inducing that party to enter into the contract If a used care dealer tells you This old Cadillac will get fifty miles to the gallon you normally will not be justified in relying on the statement Or suppose that Kovich a bank director induces Mallory a codirector to sign a guaranty that the bank s assets will satisfy its liabilities stating We have plenty of asses to satisfy our creditors lf Mallory knows the true facts he will not be justified in relying on Kovich s statement If however Mallory does not know the true facts and had now way of discovering them he may be justified in relying on Kovich s statement Injury to the Innocent Party No proof of injury is required when the action is to cancel the contract but proof of injury is required to recover damages 0 Nonfraudulent Misrepresentation Innocent Misrepresentation 0 If person makes a statement that heshe believes is true but actually misrepresents material facts the person is guilty only of an innocent misrepresentation not of fraud lf innocent misrepresentation occurs party can rescind the contract but usually cannot seek damages For example Parris tells Roberta that a tract contains 250 acres Parris is mistakenthe tract of land contains only 215 acresbut Parris does not know that Roberta is induced by the statement to make a contract to buy the land Even though the misrepresentation is innocent Roberta can avoid the contract if the misrepresentation is material 0 Negligent Misrepresentation Equal to scienter ls treated as fraudulent misrepresentation even though the misrepresentation was not purposeful Misrepresentation is negligent if person does not use reasonable care in uncovering or disclosing the facts or does not use the skill and competence that herhis business or profession requires For example an operator of a weight scale certifies the weight of Sneed s commodity even though the scales accuracy has not been checked in more than a year In this situation the scales operator s lack of action could constitute negligent misrepresentation o Undue Influence Arises from relationships in which one party may dominate another party thus unfair influencing himher o How Undue Influence May Occur Minors and elderly people for example are often under the influence of guardians If a guardian induces a young or elderly ward to enter into a contract that benefits the guardian undue influence may have been exerted Undue Influence may arise from a number of confidential or fiduciary relationships attorneyclient physicianpatient husbandwife parentchild etc Party being taken advantage of does not in reality exercise free will in entering into a contract 0 The Presumption of Undue Influence When a contract enriches a party at the expense of another who is in a relationship of trust and confidence with or who is dominated by the enriched party court will often presume contract was made under undue influence For example if a person challenges a contract made by his or her guardian the presumption will normally be that the guardian has taken advantage of the ward o Duress Forcing a party to enter into a contract under fear or threat 0 The Threatened Act Must Be Wrongful or Illegal threatening to sue someone is not illegal For example suppose that Joan injures Olin in an auto accident The police are not called Joan has no automobile insurance but she has substantial assets Olin wants to settle the potential claim out of court for 3000 but Joan refuses After much arguing Olin loses his patience and says If you don t pay me 3000 right now I m going to sue you for 35000 Joan is frightened and gives Olin a check for 3000 Later in the day Joan stops payment on the check and Olin later sues her for the 3000 Although Joan argues that she was the victim ofthe duress the threat of a civil suit normally is not considered duress Therefore a court would not allow Joan to use duress as a defense to the enforcement of her settlement agreement with Olin 0 Economic Duress For example suppose that the IRS assesses a large tax and penalty against Weller Weller retains Eyman the accountant who had filed the tax returns on which the assessment was based to resist the assessment Two days before the deadline for filing a reply with the IRS Eyman declines to represent Weller unless he signs a very high contingencyfree agreement for the services This agreement would be unenforceable Although Eyman has threatened only to withdraw his services something that he was legally entitled to do he was responsible for delaying the withdrawal until the last days before the deadline o Adhesion Contracts and Unconscionability Adhesion contracts are written exclusively by one party dominant party usually the seller or the creditor and presented to the other party on a takeitorleave it basis Adhering party has no opportunity to negotiate the terms ofthe contract 0 StandardForm Contracts Fine print provision purports to shift a risk normally borne by one party to the other 0 Unconscionability and the Courts Onesided bargains in which one party has substantial superior bargaining power and can dictate the terms of the contract Allison Gibson February 3 2001 BLAW 3201 Danos I 5 Chapter 2 STUDY QUESTIONS lf a corporation is incorporated in Delaware has its main office in New York and does business in California but its president lives in Connecticut in which states can it be sued a This corporation can be sued in Delaware New York and California depending on the minimum contacts requirement Corporations are treated as persons so the same rules that apply to legal persons when determiningjurisdiction apply to corporations What is the difference between a court of general jurisdiction and a court of limited jurisdiction a Courts of general jurisdiction can determine cases of many different subjects like a state trial court of federal district court Courts ofjurisdiction can decide cases only pertaining to certain issues like probate courts or bankruptcy courts What is the role of a court with appellate jurisdiction a A court with appellate jurisdiction usually hears the case for the second time it is a reviewing court when a case is appealed from a state trail court or a federal district court When may a federal court hear a case a A federal court can hear a case in two situations The first is if a federal question arises that is if the claimant argues that their reason of action has something to do with the US Constitution a treating or a federal lay The federal court would apply federal law if a federal question arises The second situation is diversity of citizenship which requires that the plaintiff and defendant reside in different states and the controversy at hand must exceed 75000 In this case the federal court would apply the state law of the state that the court is in When may the United States Supreme Court hear a case a The US Supreme Court rarely hears cases of original jurisdiction it is mostly a court of appeals In order to bring a case to the US Supreme Court a party must request a writ of certiorari a command from the Supreme Court to lower court for a review of the case A writ requires four out of the nine justices for approval Although most writs are denied this only means that the ruling of the lower court states for the case in that jurisdiction 2 INSTRUCTOR S MANUAL TO ACCOMPANY WEST S BUSNESSLAW NINTH EDITION 6 When may a court exercise jurisdiction over a party whose only connection to the jurisdiction is d 9 via the Internet a Jurisdiction is appropriate when a significant amount of business is conducted via the Internet When there is some interaction via the Internet it depends on situation the minimumcontact requirement can be fulfilled even if there is just a single contact If the only connection on the Internet is through passive advertising jurisdiction is not appropriate In the international realm the minimumcontacts requirements seems to develop a worldwide principle corporations may have obey the laws of anywhere in the world it actively does business with customers How does the process of negotiation work a Negotiation is the simplest type of alternative dispute resolution it is when the parties attempt to resolve their differences without going to trial or without attorneys Some courts require that negotiation be attempted before going to trail and negotiation can even occur during trail or after a trail but before an appeal Negotiation is just between the parties in dispute What is the principal difference between negotiation and mediation a The main difference between negotiation and mediation is the addition of a mediator in mediation that works with both parties to come to a mutually reasonable resolution The mediator s solution or proposal is not the deciding factor in a dispute Mediation tends to reduce opposition of the two parties so that a trail can be averted and they can continue to work together with less hostility What is arbitration a Arbitration is the third method of ADR and the most formal This method involves an arbitrator a neutral third party who declares a resolution after hearing the dispute The arbitrator s decision may be legally binding as in most cases or nonbinding where the disputants may go to trail if they do not agree with the arbitrator s decision What kinds of disputes may be subject to arbitration a Most commercial matter are dealt with through arbitration Arbitration clauses are often included in contracts that require any dispute to be settled through arbitration The Uniform Arbitration Act of 1955 led many state to have statutes that enforce arbitration clauses The Federal Arbitration Act FAA of 1925 requires arbitration clauses to be enforced in maritime activities and interstate commerce Chapter 1 Introduction to Law and Legal Reasoning 0 Law consists of enforceable rules governing relationships among individuals and between individuals and their society 0 establish rights duties and privileges that are consistent with the values and beliefs of their society or its ruling group jurisprudence the study of law which involves learning about different schools of jurisprudential thought and discovering how the approaches to law characteristic of each school can affect judicial decision making 0 judgeinterpret and apply laws courts de ne what the law is Schools of Jurisprudential Thought The Natural Law School 0 Natural law denotes a system of moral and ethical principles that are inherent in human nature and that people can discover through the use of their natural intelligence or reason 0 Natural law dates back to Greek philosopher Aristotle who distinguished between natural law and the laws governing a particular nation He said natural law applies universally to all human kind The Positivist School 0 positive law national law which applies only to the citizens of that nation or society People who adhere to this school believe there can be no higher law than a nation s positive law 0 believe there is no such thing as natural rights instead human rights exist solely because of laws The Historical School 0 emphasizes the evolutionary process of law by concentrating on the origin and history of the legal system 0 it looks to the past to discover what the principles of contemporary law should be Legal Realism 0 Legal realism is based on the idea that law is just one of many institutions in society and that it is shaped by social forces and needs 0 judges should take social and economic realities into account when deciding cases 0 legal law can never be applied with total uniformity Business Activities and the Legal Environment Many Different Laws May Affect a Single Business Transaction Ethics and Business Decision Making 0 ethics must be taken into account Sources of Amelich Law 0 primary sources of law 0 the US Constitution 0 statutory lawlaws passed by Congress state legislatures or local governing bodies 0 regulations created by administrative agencies 0 case law and common law doctrines o secondary sources of law 0 books and articles that summarize the primary sources of law Constitutional Law 0 the law as expressed in these constitutions 0 according to Article 4 of the US Constitution the Constitution is the supreme law of the land 0 the 10111 amendment reserves to the states all powers not granted to the federal government Statutory Law laws enacted by legislative bodies at any level of government make up statutory law includes local ordinances which are statutes passed by municipal or county governing units to govern matters not covered by federal or state law federal statueapplies to all states state statuteapplies only to state 0 Uniform Lawsmodel laws made for states to consider adopting 0 Uniform Commercial Codefacilitates commerce among the states by providing a uniform set of rules governing commercial transactions 0 each state has the option of adopting or rejecting a uniform law Only if a state legislature adopts a uniform law does that law come in affect in that state Administrative Law 0 consists of rules orders and decisions of administrative agencies 0 administrative agency is a federal state or local government agency established to perform a speci c function Rules issued by administrative agencies affect every aspect of a business s operations like its capital structure and nancing its hiring and ring procedures its relations with employees and unions and the way it manufactures and markets 0 Federal Agencies numerous executive agencies exist within the cabinet departments of the executive branch 0 state and local agencies Case Law and Common Law Doctrines 0 case law the doctrines and principles announced in cases it governs all areas not covered by statutory law or administrative law and is part of our common law tradition Early English Courts Common law 0 common law originates under the English system the king s courts sought to establish a uniform set of customs for the country as a whole 0 a body of general rules that applied throughout the entire English realm Courts of law and remedies at law 0 remediesthe legal means to enforce a right or redress a wrong 0 Ifa person wronged another in some way the king s courts could award as compensation 0 land items of value or money these three remedies were called remedies at law 0 the courts that award compensation are the courts of law Courts of Equity and Remedies in Equity 0 Equity is a branch of law founded on what might be described as notions of justice and fair dealing that seeks to supply a remedy when no adequate remedy of law is available 0 the remedies granted by the equity courts became known as remedies in equity 0 remedies in equity equitable remedies 0 specific performance ordering a party to perform an agreement as promised o injunction ordering a party to cease engaging in a specific activity or to undo some wrong or injury 0 rescission the cancellation of a contractual obligation o today s courts will not grant equitable remedies unless the remdy at lawmonetary damagesis inadequate Equitable Maxims 0 defense an argument raised by the defendant the party being sued indicating why the plaintiff the suing party should not obtain the remedy sought 0 time periods for different types of cases are now usually fixed by statutes of limitations Legal and Equitable Remedies Today 0 the establishment of courts of equity in medieval England resulted in two distinct court systems courts of law and courts of equity 0 during the l9ths century most states in the US adopted rules of procedure that resulted in the combining of courts of law and equity The Doctrine of Stare Decisis 0 common is judge made law 0 the body of principles and doctrines that form the common law emerged over time as judges decided legal controversies Case Precedents and Case Reporters 0 each interpretation became part of the law on the subject ad served as a legal precedent which is a decision that furnished an example or authority for deciding subsequent cases involving similar legal principles or facts Stare Decisis and the Common Law Tradition o The practice of deciding new cases with reference to former decision or precedents became a cornerstone of the English and American judicial systems The practice formed a doctrine known as stare decisis o the term jurisdiction refers to an area in which a court has the power to apply the law 0 once a court has set forth a principle of law as being applicable to a certain set of facts that court and courts of lower rank must adhere to that principle and apply it to furture cases involving similar fact patters o Stare decisis has two aspects 0 decisions made by a higher court are binding on lower courts 0 a court should not overturn its own precedents unless there is a compelling reason to do so 0 the doctrine of stare decisis helps the courts to be more efficient o stare decisis also makes the law more stable and predictable 0 binding authority a case precedent statute or other source of law that a court must follow when deciding a case When there is No Precedent o In deciding cases of first impression courts often look at persuasive authorities precedents from other jurisdictions for guidance 0 a court may also look at legal principles existing statutes fairness social values customs and public policy Stare Decisis and Legal Reasoning 0 legal reasoning the reasoning process used by judges in deciding what law applies to a given dispute and then applying that law to the speci c facts or circumstances of the case Courts and Alternative Dispute Resolution 0 Federal courts are independent system of courts which derive its authority from Article 111 Section 2 of the US Constitution They are not superior to state courts 0 federal jurisdiction extends to US territories Guam Puerto Rico and Virgin Islands Chapter 2 The Judiciary s Role in American Government 0 The judiciary can decide whether laws of the other two branches are constitutional o the process for making such a determination is call judicial review the power of judicial review enables the judicial branch to act as a check on the other two branches the power of judicial review was established in the Supreme Court s decision in M arbury v Madison it is emphatically the province and the duty of the judiciary to saw what the law is Basic Judicial Requirements 0 Jurisdiction o the power to speak the law 0 before any court can here a case it must have jurisdiction over the person against whom the suit is brought or over the property involved in the suit as well as the subject matter of the dispute 0 Jurisdiction over persons or property I in personam jurisdiction a particular court can exercise personal jurisdiction personam over any person or business that resides in a certain geographic area a court can exercises jurisdiction over property that is located within its boundaries called in rem jurisdiction Long Arm Statutes under the authority of a state long arm statue a court can exercise personal jurisdiction over certain out of state defendants based on activities that took place within the state It however must be demonstrated that the defendant had sufficient minimum contacts with the state to justify the jurisdiction I copporate contacts corporations are considered legal persons so the same principles apply in exercising jurisdiction 1 I a corporation normally is subject to personal jurisdiction in the state in which it is incorporation has its principal office and is doing business minimum contact requirement is met if the corporation advertises or sells its product within the state 0 Jurisdiction over subject matter I subject matter jurisdiction refers to the limitations on the types of cases a 001111 can hear I General jurisdiction can decide cases involved a broad array of issues exp state trial court federal district court I limited jurisdiction probate courts bankruptcy courts I Original and Appellate Jurisdiction n I courts in which lawsuits begins trails take place and evidence is presented are referred to as courts of original jurisdiction appellate jurisdictions when courts act as reviewing courts or appellate courts Cases can be brought before appellate courts on appeal from an order or a judgment of atrial court or other lower court 0 Jurisdiction of the Federal Courts I Federal courts have subject matter jurisdiction in two situations 1 Federal Questions 0 whenever a plaintiff s cause of actions is based on the US Constitution a treaty or a federal law afederal question arises any lawsuit involving a federal question comes under the judicial authority of the federal courts and can originate in a federal court 2 Diversity of Citizenship 0 federal district courts can exercise original jurisdiction over cases involving diversity of citizenship diversity of citizenship applies whenever a federal court has jurisdiction over a case that does not involve a question of federal law The common types of DJ has two requirements o the plaintiff and defendant must be residents of different states 0 must exceed 75000 0 Exclusive versus Concurrent Jurisdiction I concurrent jurisdiction when both federal and state courts have the power to hear a case diversity of citizenship I when concurrent jurisdiction exists a party may choose too bring a suit in either a federal court or a state court I exclusive jurisdiction when cases can be tried on in federal courts or only in state courts I federal courts have exclusive jurisdiction in cases involving federal crimes bankruptcy and most patent and copyright claims in suits against the US and in some areas of admiralty law 0 venue concerned with the most appropriate location for a trial I the concept of venue re ects the policy that a court trying a suit should be in the geographic neighborhood where the incident leading to the lawsuit occurred or whe5re the parties involved in the lawsuit reside I venue in a civil case typically is where the defendant resides whereas venue in a criminal case is normally where the crime occurred The State and Federal Court Systems 0 State Court Systems 0 state courts may include 1 local trial courts of limited jurisdiction 2 state courts of general jurisdictions 3 state court of appeals 4 the state s highest court 0 any person who is a party to a lawsuit pleads the case before atrial court and if he or she loses they may move up at least one level of appellate court 0 if a case involves a federal statute or federal constitutional issue the decision of a state supreme court may be further appealed to the US Supreme Court 0 trial court I trial courts are courts in which trials are held and testimony is taken 0 appellate or reviewing courts I appellate courts focus on questions of law not questions of fact D question of fac deals with what really happened in regard to the dispute being tried whether the party actually committed the action or not I question of law concerns the application or interpretation of the law is the action violates a law or not D only a judge can rule on questions of law 0 highest state courts the decisions of each state s highest court on all questions of state law are nal only when issues of federal law are involved can the US Supreme Court overrule decision made by a state s highest court 0 The Federal Court System 0 the federal court system is athree tiered system US District Courts US Courts of Appeals and The US States Supreme Court US District Courts D at the federal level the equivalent of a state trial court of general jurisdiction is the district court US district courts have original jurisdiction in federal matters and federal cases typically originate in district courts US Courts of appeals D in the federal courts system there are 13 courts of appeals 12 of which hear appeals from the federal district courts with the Court of Appeals for the l3ths Circuit is called the Federal Circuit It has national appellate jurisdiction over special cases such as those involving a patent law US Supreme Court D according to Article 111 there is only one national Supreme Court all other courts in the federal system are considered inferior D supreme court consists of 9 justices most of its work consists of appeals although is can have original jurisdiction in some cases D appeals to the supreme court 0 to bring a case before a supreme court a party requests a writ of certiorari which is a order issued by the Supreme Court to a lower court requiring the latter to send it the record of the case for review The Court will not issue a write unless at least four of the nine justices approve This is called rule of four denial of an appeal means that the lower court s decision remains the law Alternative Dispute Resolution 0 litigation the process of resolving a dispute through the court system 0 alternative dispute resolution ADRl used instead of or before trying a case as a means of settling a case dispute 0 disadvantages I give up procedural protections of judicial process I participation not compulsory and resolution non binding I outcome may be less predictable than court I court independent of parties and publicly funded o advantages I speed privacy I more conducive to compromise I greater control over process I less expensive arbitrator may be an expert 0 Basic forms ofADR o negotiation a process in which the parties attempt to settle their dispute informally with or without attorneys to represent 0 mediation a neutral third part acts as a mediator and works with both sides in the dispute to facilitate a resolution I binding mediation the parties agree if they cannot resolve the dispute the mediator can make a legally binding decision I mediation arbitration the parties first attempt to settle their dispute through mediation if no settlement is reached the dispute will be arbitrated o arbitration formal method of ADR in which an arbitrator hears a dispute and imposes a resolution on the parties usually the parties in arbitration agree that the third party s decision will be legally binding although they can also agree to nonbinding arbitration the arbitration process D a submission to an arbitrator then comes a hearing where parties present evidence and arguments and then the arbitrator renders an award D award arbitrator s decision it is usually the nal word on the matter although parties may appeal I disadvantages D results may be unpredictable because arbitrators do not have to follow the precedent or rules of procedure or evidence D arbitrators do not have to issue written opinions D generally no discovery available Chapter 3 Court Procedures American and English courts follow the adversarial system of justice Procedural Rules 0 procedural rules provide a framework for every dispute and specify what must be done at each stage of the litigation process 0 all civil trials held in federal district courts are governed by the Federal Rules of Civil Procedure Stages of Litigation 0 the litigation process has tree phases pretrial trial and posttrial 0 First step consulting an attorney 0 attorney advises on what one can expect in a lawsuit probability of success and the procedures that will be involved 0 attorney discusses the advantages and disadvantages of filing in a particular court and how long it will take to resolve the dispute through litigation 0 attorney fees 0 fixed fees charged for the performance of a specific service drafting a will 0 hourly fees computed for matters that will involve a indeterminate period of time 0 contingency fees fixed as a percentage of a client s recovery in certain types of lawsuits such as a personal injury lawsuit 0 settlement considerations 0 the attorney is required to pursue a resolution of the matter on the client s behalf the amount of time and money the client puts forth determines this Pretrial Procedures the pretrial litigation process involves the filing of the pleadings the gathering of evidence The Pleadings The complaint and answer together are known as the pleadings the pleadings inform each part of the other s claims and specify the issues involved in the case The plaintiff s complaint 0 the complaint contains a statement alleging the facts showing that the court has jurisdiction the facts establishing the plaintiff s basis for relief and the remedy the plaintiff is seeking 0 service of process I before the court can exercise jurisdiction over the defendant the court must have proof that the defendant was notified of the lawsuit This is done by notifying the defendant through a service of process The plaintiff must deliver or serve a copy of the complaint and a summons to the defendant I the summons notifies the person that they must file an answer to the complaint within a specified time period if they do not answer they suffer a default judgment which means the plaintiff would be awarded the damages alleged in the complaint 0 The defendant s response 0 the defendant s response to the complain takes the form of an answer in an answer the defendant either admits or denies ach of the allegations in the plaintiff s complain 0 any allegations not denied by the defendant will be deemed by the court to have been admitted if they allegations are denied the matter proceeds further affirmative defenses O I one can admit to the complaint but raise facts that they should not be held liable called an af rmative defense counterclaims O I the defendant can deny the allegations and set forth a claim of his own against the plaintiff called a counterclaim o Dismissals and Judgments before Trial 0 parties may negotiate a settlement of the dispute at any stage of the litigation process or submit a motion 0 motion a procedural request submitted to the court by an attorney on behalf of her or his client I pretrial motions the motion to dismiss the motion for judgment on the pleadings and the motion for summary judgment Discovery 0 O O O motion to dismiss a request for the court to dismiss the case for reasons stated in the motion usually the defendant s request motion for judgment on the pleadings asks the court to decide the issue solely on the pleadings without proceeding to trial This is only granted when there is no dispute over the facts of the case and the sole issue to be resolved is a question oflaw motion for summary judgmen asks the court to grant a judgment in that party s favor whoever is ling the motion without a trial A court will grant a motion for summary judgment only if it determines that no facts are in dispute and the only question how the law applies to the facts to support this motion the part can submit admissible evidence obtained prior to trial the use of additional evidence is a feature that distinguishes the motion for summary judgment from the motion to dismiss and the motion for judgment on the pleadings the others can only use evidence from the pleadings before a trial begins the parties can use a number of procedural devices to obtain information and gather evidence about the case discovery the process of obtaining information from the opposing party or from witnesses prior to trial it includes gaining access to witnesses documents records and other types of evidence only information that is relevant to the case at hand is discoverable discovery prevents surprises at trial by giving both parties access to evidence that might otherwise be hidden Depositions and Interrogatories discovery can involve the use of depositions or interrogatories deposition sworn testimony by a party to the lawsuit or by any witness recorded by an authorized court official The person deposed gives testimony and answers questions by the attorneys from both sides The questions are recorded sworn to and signed interrogatories written questions for which written answers are prepared and then signed under oath Interrogatories are directed to a party to the lawsuit not to a witness and the party ca prepare answers with the aid of an attorney They are designed to obtain accurate information about specific topics such as h O O O I how many contracts were signed and when They are also required to disclose the information asked in the questions Requests for Admissions I a party can serve the other party with a written request for an admission of the truth of matters relating to the trial any facts admitted under this request are established as true for the trial A request for admission shortens the trial because the parties will not have to spend time proving facts on which they already agree requests for documents objects and entry upon land requests for examinations I when the physical or mental condition of one party is in question the opposing party can ask the court to order a physical or mental examination by an independent examiner electronic discovery I any relevant material including information stored electronically can be the object of a discovery request I eevidenceall computer generated or electronically recorded information such as email voice mail spreadsheets etc o Pretrial Conference 0 0 after discovery has taken place and before the trial begins the attorneys may meet with the trial judge in a pretrial conference the purpose of the hearing is to explore the possibility of a settlement without trial and if this is not possible to identify the matters that are in dispute and to plan the course of the trial 0 the right to a jury trial 0 O 7Lh amendment guarantees the right to a jury trial for cases at law in federal courts when the amount exceeds 20 in most states and federal courts one of the parties must request a jury or the judge presumes the parties waive this right 0 Jury selection 0 0 before a trial starts jurors must be selected voir dire jury selection process during this process the attorneys ask prospective jurors oral questions to determine whether a potential jury member is biased or has a connection to the party I during this process a party may challenge jurors peremptorily ask that a juror not be sworn in or challenge a juror for cause which is providing reason why the juror should not be sworn in The Trial 0 opening statements 0 attorneys make opening statements setting forth the facts they are presenting at the beginning of the trial 0 Rules of evidence 0 rules of evidence a series of rules that have been create by the courts to ensure that any evidence presented during a trial is fair and reliable o evidence mst be relevant to the issues 0 hearsay evidence is not admissible I hearsay is defined as any testimony given in court about a statement made by someone else who was not under oath at the time of the statement 0 Examination of Witnesses o plaintiff has to prove that allegations are true The plaintiff s attorney begins by calling the first witness to examine and question The questioning is called direct examination 0 after the plaintiff s attorney is finished the other attorney can cross examine the witness too 0 potential motion and judgment I at the conclusion of the plaintiff s case the defendant s attorney has the opportunity to ask the judge to direct a verdict on the ground that the plaintiff has presented no evidence to support their claim It is call a motion for a judgment as a matter of law and is only granted if there is insufficient evidence to raise an issue of fact 0 defendant s evidence I the defendant presents their evidencewitnesses and the plaintiff has the right to cross examine them after the defendant s attorney has finished the plaintiffs attorney can present a rebuttal which includes additional evidence and the defendant in turn can refute the evidence in a rejoinder 0 Closing arguments jury instructions and verdict 0 after the cases are rested each attorney present a closing argument that summarizes the facts and evidence


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