LGSTFinalStudyGuideConstanSpring2014

SecondHalf

Contracts

Requirements:
1. Mutualassentusualmethodisofferacceptance
2. Considerationbothpartiesintentionallyexchangelegaldetriment
3. Legalityofobjectcontractmustbelegalandnotagainstpublicpolicy
4. Capacitypartiesmusthavecontractualcapacity
WrittenContracts
1. Promisestoanswerforthedutyofanother
2. Promisesofanexecutororadministratortoanswerpersonallyforadutyofthedecedent
whosefundsheisadministering
3. Agreementsuponconsiderationofmarriage
4. Agreementsforthetransferofaninterestinland
5. Agreementsnottobeperformedwithinoneyear
6. UCC(goodsover$500)

Contracts(InMoreDetail)
Offer
[Define]definitetermstotheofferee.
Whatisnotconsideredabindingcontract?
TheOffermusthavethekey(minimum)terms
Candependonindustrypractice
TheObjectiveTest
Itdoesntmatterwhattheofferorsintentionswereinternally.
Onlythingthatmattersisexternalexpression
Andhowareasonablepersonwouldinterpretthoseactionsand
words
Ifcontracttakesover1year,itmustbeinwriting!
Ifacontractisforgoodsofvalue>$500,itmustbeinwriting!
InvitationtoTreat(NOTanOffer)
Whenyoudisplaygoodsinashopwindow,publicauction,notifysomeone
ofthesellingprice
RevocationofOffer
Offerorcanrevoketheirofferbeforeithasbeenaccepted.
Therevocationmustbecommunicatedtotheoffereebysomebody(neednotbe
offeror)
[UnilateralContracts]Cantberevokedonceoffereehasstartedtherequired
performance

Acceptance
[Definition]Twosided
Offeror:Willingnesstobeboundbytermsoftheoffer
Offeree:Acknowledgmentthatbindsoffereetothetermsoftheoffer
TestofAcceptance(Didbothpartieshaveavalidacceptance?)
Bothpartiesengageinconductthatmanifeststheirassent
Onepartycanonlyactuponwhattheotherpartyrevealsovertlytobehisintent
Howwouldareasonablebystander(a.k.a.flyonthewall)perceivethe
acceptance,giventheconductofbothparties.
RulesofAcceptance
Communicationofacceptance
i.
Acceptancemustbecommunicated
ii.
Priortoacceptance,anoffermaybewithdrawn
iii.
Offercanonlybeacceptedbyofferee
iv.
Anoffereeisnotalwaysboundifanotherpersonacceptstheofferontheir
behalfwiththeirauthorization.
1. ExceptioniswithAgency:Agenthadapparentauthority,ratify
v.
Iftheofferspecifiesamethodofacceptance,acceptancemustbebya
methodthatisnolesseffectivefromtheofferorsPOVthanthespecified
method.
1. Onlylimitedtospecifiedmethodifoffererisveryexplicitaboutit
vi.
Acceptancemaybeinferredfromconduct
Counteroffers
Youmustacceptanofferexactly,withoutmodifications
Ifyouchangetheoffer,thisbecomesacounterofferthatnixestheoriginaloffer
Theoriginaloffercanthennolongerbeacceptedatafuturetime
ModifyingContracts
TheUCCappliestocontractsforthesaleofgoodstoorbyamerchant.Under
theUCC,additionalconsiderationisnotnecessarytomodifyawrittencontract,
aslongasthemodificationisenteredintoingoodfaith.

Ifthecontractisnotforthesaleofgoodstoorbyamerchant,thenadditional
considerationisnecessarytomodifythetermsofthecontract.Forexample,
MargehascontractedtosellhercartoPaul.Theybothwanttochangesomeof
thetermsofthecontract.BecausetheUCCdoesnotapplytothesaleofacar
betweenprivateparties,somenewconsiderationmustbeexchangedbeforethe
contractcanbemodified.

TypesofContracts
UnilateralContract
Offereeacceptsbyperforminganactwhichindicateshis/heragreementwiththe
bargain.

 Promiseismadeinreturnfordoingtheact
UnilateralContractsConditionalGifts
QuasiContract(ImpliedinLaw,equitableremedy)
Definition:
Whenonepartyknowinglyreceivessomethingfornothing,
quasicontractsmaybeimposed
FakeContractconstructedafterthefactincourt.
Itsthecontractthatshouldhavebeenformed,butwasnot.
Purpose(Remedytomakethingsfair)
Usedtopreventunjustenrichment
Managementofanothersaffairs
Paymentofathingnotdue
Requirements
Doesntrequireconsent(unlikeinimpliedinfactcontracts)
Remedy
Restitution
Damagesupuntilfair
Defendantsliability
=fairmarketvalueofthebenefitconferredbytheplaintiff(notthe
subjectivevaluethedefendantenjoys)
Usuallylessrecoverythanimpliedinfactcontracts
Usuallyonlycostoflaborandmaterials
NotprofitsDifficulttoforcepeoplewhodidntintendtoenterthe
contracttopayforprofits
[Example]Providingaserviceunsolicited:OffDutyPhysicianAfindsaninjuredB
onthesideoftheroad.AtreatsBandsavesBslife.EventhoughBdidntaskfor
thehelp,hegotavaluablebenefit.
Quasicontractrequirementsfulfilled
[Example]SearsmistakenlydeliversanewfridgetoAlicethatshedidntorder.
Shekeepsthefridgeanddoesnttrytoreturnit.Aquasicontractwouldforceher
topayforthefridgebecauseshechosetobenefitfromthefridgeatSears
expense.
Consideration
Hamerv.Sidway
UnclepromisedtopayNephewmoneyifNephewrefrainedfromacts(Smoking,
drinking)thathewaslegallypermittedtodountilage21.
ValidconsiderationbecauseNephewcouldhavelegallysmoked/drankat18.
ShipCases
Preexistingduties
Employersdontneedtopayemployeesmoreifemployeethreatensto
quitunlessgivenaraise.
HoldsevenifEmployeeofferstheextrapayment
Noconsiderationifyouareexpected/supposedtodothatanyways

LegalityofObject
LegalContractsonly!Cantbeagainstpublicpolicy.Donthirehitmenoverdeepnet.
Capacity

Note:Strictcontractinghasbeenweakenedby:
Estoppel
MisleadingConduct
Misrepresentation
Unjustenrichment

TerminationandthePowerofAcceptance

Remediesavailableatcommonlawandequity
Goal:Putthewrongedpartyinasgoodapositionastheywouldhavebeenifthecontracthad
beenperformed/notbreached.
Mostlymonetary,somenonmonetary

ExpectationDamages
benefitofthebargaindamages
moneybenefitsequaltobenefitshadthecontractbeenperformed
shouldalsotakeintoaccountanyamounttheinnocentpartycouldhavereasonably
savedhaditnotparticipatedinthecontract
putinnocentinpositionAFTERcontractiscompleted

RelianceDamages
ifexpectationdamageshavenotbeenorcannotbeprovenamountofmoneynecessary
tocompensatetheinnocentpartyforexpensesorlossincurredinreasonablereliance
uponthecontractbreachedputhiminthepositionBEFOREcontractwasformed

Restitution
makedefendantdisgorgemoneyvalueofbenefitreceivedforpartialcompletionofthe
contractmeasuredbybenefitconferreduponthedefendantdamagesnottechnically
accurateterm,butstillusedinthiscontextnottechnicallycontracttheorywhichallows
theapplicationofrestitutionactionisnotbeingbroughtonthecontract,whileitisbrought
becauseofthecontractactionisbeingbroughtontheplaintiffassertingthatthe
defendantwillbeunjustlyenrichedifnotrequiredtodisgorgeitsillgottengain
RelatestoQuasiContracts

Stipulateddamages
akaliquidateddamages
statedforcertainbreachesattimeofformationofcontracts
supersedesotherdamages
butneedtodecideifthesestipulationsarevalid

Asin,acourtusuallywonthonorpenaldamages

Interest
commonlawtypicallyallowsrecoveryofinterest,iftheamountis"sumcertain"
percentagerateofinterestistypicallyfixedbystatute

PunitiveDamages
exemplarydamages
notdesignedtocalculateddamagesorbenefits
butcalculatedtodeterfuturemisconduct
fraud,malice,oppression
mostcontractsbreachesinmostjurisdictionsdonotinvolvepunitive

Specificenforcement
orderbythecourttocompletethecontractperformance
onlyusedwhenlawisinadequate
mostofthetimes,otherremediessuffice
canonlybeexercisedbyacourtholdingthepowerofequity
onlyusedwhenmoneydamagesorothercompensationdeemedinadequate
mostcommongroundsfordeeminginadequacyofdamageremedy
contractsubjectisunique
saleofcustomdesignedpartsforacomplexmachine
forhistoricalreasons:allrealpropertyconsideredunique
moreandmorespecificationstowhenspecificenforcementcanbeapplied
expandinguponcircumstanceswherecontractsarespecificallyenforced

Otherremedialrights
sellerandbuyerrelationships
certaineventscoveredbytheU.C.C

DamagesunderUniformCommercialCode
LostVolumeSeller
[NonUCC]Buyer1breachesacontractwithaseller,anddoesntpurchasegoodsat
contractprice.Buyer1mustpaythedifferencebetweenthe[contractprice][pricesold
toBuyer2]fortheseller(andsometimesincidentaldamages)
[UCC]EvenifthesellercanfindBuyer2,ifBuyer1didntbreach,thesellerwouldhave
profitedfrom2BuyerSales.
Remedy:SellerallowedtorecoverthelostprofittheywouldvemadeifBuyer2
didntbreach.(andsometimesincidentaldamages)
ThreeCasestoKnow:
1. Covavs.HarleyDavidson
2. Hadleyvs.Baxendale
3. BankofFairbanksvs.Kaye

a. Mr.andMrs.Kayewereunabletomakethepaymentsontheirproperty
b. TheBoussardswereinterestedinbuyingtheproperty

3rdPartyBeneficiaries
2Types
1. IntendedBeneficiaries(whenthePromiseeintendedthe3rdpartytoacquirerights)
a. Creditor
Note:PersonAwhoowesCreditorBisstillliableifCreditorBdidntagree
toreleasePersonAfromtheobligation.
[Example]IfAgetsZtoassumethedebt,butZdoesntpayCreditorB
CreditorBcansueOriginalPromiseeA
CreditorBcansuedefaulterB
BUTCreditorBcannotcollecttwice!
b. Donee(3rdpartywaspromisedagiftbypromisee)
c. DefensesagainstIntendedBeneficiaries
Theycannotrequireoracquirerightsbeyondtheoriginalcontract
IfPromisorprovesthecontractwasvoid/voidablebecauseitwasinduced
byfraudormistake,orbecausethepromisorlackedcapacity,orifthe
contractwentagainstpublicpolicy,theycandefendagainstsuitfy
intendedbeneficiary
PromissoryEstoppel
2. IncidentalBeneficiaries
a. allother

Assignments
Assignmentdoesntalwaysneedtobeinwriting
Whenisanassignmentsuccessful?
Whenyounixprivity(acontractualrelationship)betweentheassignorandtheobligor
Createsprivitybetweenassigneeandobligor
Theassignormayremainliabletoobligorfortheproperperformanceofthecontract.
Assignmentusuallypermittedunlessspecificallyprohibitedinthecontract
Cantassignduties(thisisdelegation)
Mustoccurinthepresent
Assignormakesaclearstatementofintenttoassignidentifiedcontractualrightstothe
assignee
Towhatextenddoyouhavetonotifytheoriginalobligor?
Youdontneedtoconsulttheobligor
Whendoesanassignmenthavetobeinwriting?
Assignmentofwages
Assignmentofinterestinrealproperty
Assignmentworthover$5000
Assignmentascollateralforloanordebt.


Delegation&Assumption
DelegationvsAssignment
AssignmentisgivingthebenefitIwassupposedtoreceivetosomeoneelse
DelegationisgivingtheburdenIwassupposedtoperformtosomeoneelsetoperform
Limitations
Theperformancebythedelegatecantmateriallychangetheperformanceofwhichthe
obligeeisowed.
PersonalQualities(causeamaterialchangeintheperformanceowed)
Cantdelegatedutieswhentheperformer/obligorhaspersonalqualitiesbasicto
thecontract
Theobligeeenteredthecontractonreasonablereliancefortheskill,
judgment,ability,responsibility,personalqualitiesofthatperformer.
[Example]Cantassigndebt(duetocreditrating,personalqualities
attachedtowhoispayingthedebt)
Assumption
Personwhoistonowperformdutiesmustassumethem.
Thismeanstheyarelegallyboundtoperformthedelegatedduties
Bothtotheobligortheydealtwith(wereassigneddutiesby)
Andalsototheobligee(3rdPartyCreditorBeneficiary)theyhaventdealt
withyet.
Whenaredutiesassumed?
Determinetheintentionoftheparties.
Novation
Usuallya3partyagreement.
Bilateralagreement,noperformanceyet
Assignorofrightsconsiderationistransferofrightsunderthecontractto
delegate
Delegatesconsiderationisgivingassignorofrightsreleasefromcontract

OriginalObligormustbringaboutnovation(Iftheywantreleasefromthecontract)
Inducedelegatetoassumeduties
InduceObligorstoagreetoonlylooktodelegatefortheperformance.

[Example]JerryowesEmilyaduty.JerrytellsAndreatoperformthedutyforEmily.BothJerry
andAndreaareliabletoEmily.AndreaisstillliabletomakesureEmilyseesthedutyget
performed.Andreawontbeliableifthereisnovation,whichiswhenEmilyconsentstorelease
AndreafromthedutyandonlygettheperformanceofJerry.Andreareceivesthisconsentby
providingvalidconsiderationtoEmily,suchasagift.

Agency

Agent(A)

Principal(P)
3rdParty(3)

3Relationships(A,P,3)
[InternalRelationship]Principal+Agent
[ExternalRelationship]Agent+3rdParty
Principal+3rdParty

Authority(3Types)
1. Actual
2. Apparent
3. Ratified

ActualAuthority(2Types)
1. ExpressAuthority
a. Agentistoldhe/shemayactonbehalfofprincipal
2. ImpliedAuthority
a. Theauthoritythatisreasonablynecessarytocarryouttheexpressauthoritythe
Agentisgiven
ApparentAuthority
Theconduct,wordsofthePrincipalwouldleadareasonablepersoninthe3rdPartys
positiontobelievethattheagentwasauthorizedtoact(eveniftheprincipaland
supposedagenthadneverdiscussedsucharelationship)
[Example]AappointsBtoapositionthatcarriesagencylikepowers(Principalcreates
theimpressionthatanagentisauthorized,evenifthereisnoactualauthority)
[Thus]Thosewhoknowoftheappointmentareentitledtoassumethatthereis
apparentauthoritytodothethingsordinarilyentrustedtosomeoneoccupying
suchaposition.
[AgencybyEstoppel]3rdPartiesareprotectedsolongastheyhaveacted
reasonably"
Principalwillbeestoppedfromdenyingthegrantofauthorityif3rdparties
havechangedtheirpositionstotheirdetrimentinrelianceonthe
representationsmade.

NotesonAuthority:
Anagentwhoactswithinthescopeofauthorityconferredbyhis/herprincipalbindsthe
principalintheobligationshe/shecreatesagainst3rdparties
Iftheresasuitagainsttheagent/principalbythe3rdparty
Agentmaybeentitledtoindemnity/recoveriftheyactedwithinthescopeofactual
authority(express+implied)
Agentmay1)notbeentitledtoindemnity,andmay2)beinbreachofcontract,
and3)liabletothe3rdpartyiftheybreachedtheirimpliedwarrantyofauthority
[Tort]Agentmustactwithinscopeofemploymenttorecover


LiabilityofAgenttoThirdParty
Ifagenthasactual/apparentauthority
Agentwontbeliableforactsperformedwithinthescopeofactual/apparentauthority
Relationshipoftheagency+Identityoftheprincipalmustbedisclosed
Undisclosed/Partiallydisclosedagency
BothAgentandPrincipalareliable
IfagenthasNOactual/apparentauthority
Principalisnotliable
AgentliabletoThirdPartyforbreachingimpliedwarrantyofauthority

LiabilityofAgenttoPrincipal
IfAgentactedwithoutActualAuthority
PrincipalboundbecauseAgenthadapparentauthority
AgentliabletoPrincipalforanyresultingloss/damage

LiabilityofPrincipaltoAgent
IfagentactedwithinscopeofActualAuthority
PrincipalmustpayAgentforpaymentsmadeduringagencyrelationship
Forexpresslyauthorizedpayments
AndforexpensesnecessaryinpromotingthePrincipalsbusiness

QuestionsfromReviewSession
Q:Doesanemploymentcontractatwillneedtobeinwriting?
A:Yes,unlessthewordingsaystheemploymentcanbefinishedwithinayear.Theatwill
doesntaffectit.
Informalvs.formal:

Q:Inunilateralcontracts,istherenopartialperformance?
A:Yes,generally,nopartialperformance,therewasonlyoneexception.
Walkingacrossthebrooklynbridgeformoney
Markianovs.Check

Q:IfIgetinjuredwhilecompletingtheunilateralcontract,canIsuefordamages?
A:No,becauseyougotthosedamagesbeforeyoucompletedthecontract.

Q:Howdowedeterminethescopeofemployment
A:
Timingissue(withinworkinghours)
JobDescription
Location(weretheywithingeographicalregiondesignatedforthejob)
ActualAuthority,orwereyounottoldtodothat
IfPrincipalforbidsyoufromdoingsomething,youarentremovedfromscopeof
employment.

Wouldthishappenbutforiftheywereonthejob?

Q:Ifpeopleareduressingyoutobuysomethingthatisanecessity(water,home)vs.aluxury
(Maserati),onlyfornecessitycanyousue.
A:Yes,aslongasthejurydecidesitwassomethingyouneeded.
Ex.Case:TheRadarmakingfortheNavy

Q:Treefallsonyourhousewhileyoureonvacation.Neighborremovestreewithoutasking,
demandspayment.Youwerentawarethough.Isthisacontractoraquasicontract?
A:NoContract.Youwerentaware,didntacceptorauthorizeneighbortoremovetree.Howdare
yougoonsomeoneelsespropertyandremovetheirtree.
QuasiContract:Easiertomakeaquasicontractiftheirwasalotofdanger.E.g.atree
veryneartopowerlines.E.g.Neighborputsoutafireonyourhouse.
Normallywanttoencouragethereverse:Notifypeoplebeforeyoudoit.
Q:[Agency]SomeonehiredbyGoldman,fullyemployed,hedrivestoaclient,hehitsandkills
somebody.CanfamilyofthedeceasedsueGoldman?
A:Maybe,generally.

Q:[Slushfund]Whoisrequiredtohavetheslushfund(Contractors).Referstotheway
businessisdone,howitshapestheexpectationofpeople.
A:PromissoryEstoppel
1.Reasonablereliance
2.Materialchangeinposition
Ifeveryonewhoisasubcontractorknowsthegeneralcontractorcanturnaroundandsayyour
mentionedpriceisbinding,orifyoureallowedtoreworkyourquote.

Q:3typesofdamagesinascendingorderofpaymentamountanddifficultytoprove.
A:Whatyoucanprovewithreasonablecertainty.Ifyoucantproveyourdamagesyouchose,
youlllosethecaseandgetnothing.
RestitutionDamages
RelianceDamages
ExpectationDamages

Q:Fairbanksv.Kayecase.RuledinfavorofKayes.
A:Assigneddutiesanddelegatedduties.BecauseKayesaskedsomebody,thebankcansay
themanwhogavepermissionwasntsupposedtodothat.Bussardwasallowedtopaytherest
ofthepayments.BankunabletoforecloseonKayes.

Q:Novation
A:Withnovation,thefirstcontractisdead.2ndcontractisbilateral.
Withoutnovation,promiseecansuebothparties(originalcontractanddelegate)

[Scenario1]Agroupofstudentsatahousemakealease(eachhasone)withthe
landlord.Ifoneofthetenantswanttomoveout,theyfindsomeonewhowilltakeasublease.If
thisnewpersonisnotknownandapprovedtotakesublease,landlordcansuepersonwholeft
andthenewsubletterlivinginthehouse.Hecansueforrenteveniftherewasnocontract
formed.
[Scenario2]Iftheguywhoismovingoutnotifieslandlordofnewsubletter,novation
occursiflandlordsaysitsfinebyhim.

A:Youcanassignarightnotaduty.

A:Ifyoupromisetoanswerforthedebtofanother,itneedstobeinwriting.

A:Anythingarisingoutofasetofeventsneedstobesuedforinonesuit.

Q:Constanfiredforunreasonablereasons,offeredjobatDrexel.DifferentSalary.
A:Requiredtotakethejob.ItisConstansgoodfaithefforttominimizedamages.Suesfor
difference.
Goesbacktohowwedontwantpeopletobepenalizedforbreakingacontract,butthey
mustpaydamages.
IfConstanofferedalawprofessorshipthatwasdifficulttodistinguishfromtheonehed
lost,presumablehedhavetotakeit.

Q:Howlowdoyouhavetogotomitigatedamages?Goingbacktoactressand2movieoffers.
A:ItwasimportanttoherthatitwasamusicalandinCalifornia,notAustralia.Shouldshenot
havetomitigatebecausethetwomoviesarentartisticallycomparable?

Q:Buy2sandwichesforafriend.Endupalsobuyingawinninglotteryticket.Isfriendentitledto
moneyfromticket?
A:Theticketishis,hegaveyoumoneytobuythesandwiches.

Q:Ifyoucantreasonablecalculatethedamages
A:Youcantcalculatethem,youdjustgetnominaldamages.

Q:SeattleSeahawksdidntallowanyonewithaCAbilling/shippingaddressbuyatickettothe
game.
A:Doeshehaveacasefor$50Mdollars?Soundsridiculoustoajury.

Q:Somethingsenttoyouinthemail.Doyouhavetopayforit?
A:PostalReorganizationactdoesntallowthisanymore.Ifyougetsomethingunsolicitedinthe
mail,youcankeepitandnothavetopayforit.

Q:Teacherwrongfullyfiredonrumorshewasadrugdealer.Schoolapologizesandoffersjob
back.Sherejectsoffer,findsjobaswaitressinlocaldiner,andsuesschoolforpay.

A:Youdonthavetotakeanyjobinmitigationnotrequiredtobeemployed.Shedoesnthaveto
taketheteachingjobbacktomitigatedamages.DamagesareherteachingpayWaitresspay.

[CivilRights]Ifyouarewrongfullyterminatedbecauseyoureawoman,minority,etc.Youcan
sueand..

A:Ifyoufindajobthatpaysmorethanyourpreviousjob,youcantsueforanything.Notgoingto
beabletoproveactualdamages.

Q:Whenthebutlerboughttheliquor
A:Itwasapparentauthority

Q:DifferencebetweenQuasiContractandImpliedContracts
A:1.Impliedinfact(JustImpliedContracts)
2.Impliedinlaw
MoreusuallycalledQuasiorConstructivecontractsinsteadofimpliedinlawcontracts

Q:10Mdollarviolin
A:Costofbreachis2Mandoriginalownergetstokeeptheviolin.

Q:Covenantbydeed
A:Peoplebuyingthelandcantpretendtheydidntknowthattheydidntknowaboutit.
Noimpliedcovenants
Covenantsonlyexistbecausecourtwantstoenablecertainthings

Q:Differencebetweenacontractandagift

Q:Angelv.Murray,becausetherewereunanticipatedcircumstances,thepreexistingdutydoes
notapply

Q:LoredoHidescase.
A:SupplieroftheHidesdidntsupplythehidestomiddleman.Middlemanwasinanothercontract
withthemexicantannery.
Courtstrytoupholdvalidcontracts.Theywontrequiretobreachacontractifmiddlemancan
mitigatedamagesbybuyinghidesfromsomeoneelse.