LA 245 Week 11 Notes
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This 6 page Class Notes was uploaded by Frankie Fucci on Sunday April 3, 2016. The Class Notes belongs to LA 245 at Boston University taught by David Randall in Spring 2016. Since its upload, it has received 40 views. For similar materials see Introduction to Law in Law at Boston University.
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Date Created: 04/03/16
Introduction to Contracts Contracts Elements of a Contract o Contract - legally enforceable agreement; to be enforceable, certain characteristics must be present: Offer - all contracts begin with a person/company proposing a deal; only proposals made in certain ways amount to a legally recognized offer Acceptance - once he receives the offer, he must respond in a certain way Consideration - must be bargaining that leads to an exchange between the parties; both sides must receives measurable benefits Legality - contract must be for a lawful purpose Capacity - parties must be adults of sound mind Consent - certain kinds of trickery and force can prevent the formation of a contract Writing - verbal agreement often amount to contracts, but some types of contracts must be in writing Other important issues o Performance and Discharge - if a party fully accomplishes what the contract requires, his duties are discharged (but what if his obligations are performed poorly or not at all?) o Remedies - a court will aware money/other relief to a party injured by a breach of contract Types of Contracts Bilateral v. Unilateral o Bilateral contract: a promise made in exchange for another promise, both parties make a promise o Unilateral contract: binding agreement in which one party has made an offer that the other party can accept only by action, one party makes a promise that the other party can accept only by actually doing something Executory v. Executed o Executory contract: an agreement in which one or more parties have not yet fulfilled their obligations o Executed contract: an agreement in which all parties have fulfilled their obligations Valid v. Unenforceable v. Voidable v. Void o Valid contract: an agreement that satisfies all of the law's requirements o Unenforceable agreement: when parties intent to form a valid bargain, but a court declares that some rule of law prevents enforcing it o Voidable contract: an agreement that may be terminated by one of the parties o Void agreement: a contract that neither party can enforce, because the bargain is illegal or one of the parties has no legal authority to make it o Mr. W Fireworks, Inc. v. Ozuna Mr. W sells fireworks In Texas, can only sell fireworks two weeks before 4th of July and two weeks before NYE Firework sellers tend to lease property Mr. W leased a portion of Ozuna's land, the contract contained two key terms: If sale of fireworks becomes unlawful during period of lease, the lease shall be void Lessors agree not to sell/lease any of part of the property (adjoining, adjacent or contiguous) to any person(s)/corporations for the purpose of selling fireworks in competition to the Lessee during the term of this lease, and for a period of ten years after the lease is terminated San Antonio annexed new land which caused Ozuna's property to fall within 5,000 feet of the new city limits, making it illegal to sell fireworks there Mr. W stopped selling fireworks and paying the rent Two years later, San Antonio disannexed some property and shrank , placing Ozuna's property just outside of 5,000 feet, making it legal to sell fireworks there again Ozuna leased a part of his property to a competitor or Mr. W Mr. W sued for breach of contract, arguing that Ozuna had no right to lease to a competitor for a period of 10 years, trial court granted Ozuna's motion for summary judgment and Mr. W appealed Issue: Did Ozuna breach contract by leasing his land to a competitor? When it became illegal to sell fireworks on the property, the lease was terminated, which means Mr. W and Ozuna no longer had an enforceable agreement A voidable contract doesn't mean someone is entitles to enforce portions that are favorable and at the same time disaffirm other provisions that one finds burdensome Affirm judgment of the trial court Express v. Implied o Express contract: an agreement with all the important terms explicitly states o Implied contract: the words and conduct of the parties indicate they intended an agreement o Demasse v. ITT Corporation DeMasse + 5 others were employees-at-will at ITT Corp, each paid an hourly wage ITT issues an employee handbook, which was revised four times over two decades First 4 editions helps that, within job classifications, layoffs would be made in reverse order of seniority Edition 5 had 2 major changes: Nothing contained herein shall be construed as a guarantee of continued employment, ITT doesn't guarantee continued employment to employees and retains the right to terminate or lay off employees ITT reversed the right to amend, modify or cancel this handbook, as well as any or all other various policies [or rules] outlined in it 4 years later, ITT notified its hourly employees hat layoff guidelines for hourly workers would be based not on seniority, but on ability and performance 10 days later, 6 employees were laid off, though less- senior employees kept their jobs, they sued Issue: Did ITT have the right to unilaterally change the layoff policy? Argument for workers: employees were originally employees-at-will, but once the company issued the handbook, it chose to make promises to its employees Once contract is formed, it is binding on both sides, if one side can simply change the terms on an agreement on its own, what value is there Implied contracts are binding and ITT should not have made promises it wouldn't keep Argument for ITT: once at-will employee, always one; ITT had the right to fire them at any time If plaintiff thought layoffs would happen in a particular order, with reference to the newest handbook, they made an error, not the company All workers are bound by terms of whichever handbook is in place at the time The plaintiff's position would mean that a company isn't allowed to change its general work policies and rules Promissory Estoppel v. Quasi-Contracts o Sometimes courts will enforce agreements even if they fail to meet the usual requirements o In each case, sympathetic plaintiff can demonstrate an injury but there is no contract; plaintiff cannot claim the defendant breached a contract because non ever existed, plaintiff must hope for more creative relief o The two remedies can be very similar, best way to distinguish them is: In promissory estoppel cases, the defendant mad e promise that the plaintiff relied on In quasi-contract cases, the defendant received a benefit from the plaintiff o Promissory Estoppel: a possible remedy for an injured plaintiff in a case with no valid contract, where the plaintiff can show a promise, reasonable reliance and injustice May use promissory estoppel to enforce defendant's promise if one can show that: Defendant made a promise knowing the plaintiff would likely rely on it; The plaintiff did rely on the promise; and The only way to avoid injustice is to enforce the promise Quasi-Contract: a possible remedy for an injured plaintiff in a case with no valid contract, where the plaintiff can show benefit to the defendant, reasonable expectation of payment, and unjust enrichment o Can use quasi-contract to compensate a plaintiff who can show that: The plaintiff gave some benefit to the defendant The plaintiff reasonably expected to be paid for the benefit and the defendant knew this; and The defendant would be unjustly enriched if he did not pay o Quantum meruit: the plaintiff "gets as much as he deserves"; if court compensates on account of quasi-contract, plaintiff will be awarded damages, usually the value of the goods/services plaintiff conferred Sources of Contract Law Common Law - express and implied contracts, promissory estoppel and quasi-contract were all crafted, over centuries, by courts deciding one contract lawsuit at a time o Many contract lawsuit continue to be decided using common-law principles developed by courts Uniform Commercial Code o As the world changed, common-law principles began to vary from one state to another o Business leaders became frustrated that, to do business across the country, their companies had to deal with many different sets of common law rules o Uniform Commercial Code (UCC) - created out of the desire to have a body of law for business transactions that provided uniformity through the US Created to facilitate the easy formation and enforcement of contracts in a fast-paced work Every state has adopted at least part of the UCC to govern commercial transactions within the state *Article 2 - governs the sale of goods "goods" means anything movable, except for money, securities and certain legal rights For many issues, common law and UCC are similar, but sometimes different UCC governs contracts for sale of goods Common law principles govern contracts for sales of services and everything else In a mixed contract, Article 2 governs only if the primary purpose was the sale of the goods Contract Law Contract adhesion - non negotiable, take it or leave it, like Facebook or phone contract If there are surprising/unrelated/unusual clauses in the contract, they're not enforceable Contract: legally enforceable promise Doesn't have to be in writing, though some types of contract DO have to be in writing Legally enforceable = as a party to the contract you can summon the power of the state to enforce your private agreement o Can collect damages for a breach of contract Elements of a contract Offer Acceptance Consideration Legality Capacity Consent Writing (sometimes) Freedom of contract and judicial restraint v. fairness of contract and judicial activism Freedom of contract - whatever terms parties agree to in a contract, since a contract represents the exercise of parties' free will, it's inappropriate for courts to comment on the fairness of the contract o Predictability - this makes contract law more predictable, one of the reasons why we enter into contracts in the first place o Judicial restraint - job of a court in considering contract law suit to determine whether there is a valid contract and whether the terms of the contract have been breached Fairness of contract - comfortable looking at the fundamental fairness of the contract o Flexibility - willingness of court to look at the fairness of the contract may make things more fair but also makes contracts less predictable Bilateral contract: a promise for a promise Covers most contracts Unilateral contact: a promise for an act Ex: reward for finding lost pet o Promise: pay a reward o Act: find the lost pet o Acceptance of unilateral contract by committing the act Person paying the reward doesn't want someone to PROMISE to find the dog at a later date, the person gives the money to the person who performs the act