Contracts Outline - Final exam PDF

Preview

Summary

Assignment 11: Statue of Frauds: - Purpose: prevent false contractual claims.  What can you do to get out of a legally binding agreement? o Statue of frauds, Mistake, Age, Mental capacitation, Duress and Illegality§ 131. General Requisites of a Memorandum. Unless additional requirements are prescri...

Description

Contracts Final Outline – Assignment 11- 27 Assignment 11: Statue of Frauds: - Purpose: prevent false contractual claims.  What can you do to get out of a legally binding agreement? o Statue of frauds, Mistake, Age, Mental capacitation, Duress and Illegality § 131. General Requisites of a Memorandum. Unless additional requirements are prescribed by the particular statute, a contract within the Statute of Frauds is enforceable if it is evidenced by any writing, signed by or on behalf of the party to be charged (a) reasonably identifies the subject matter of the contract, (b) is sufficient to indicate that a contract with respect thereto has been made between the parties or offered by the signer to the other party, and (c) states with reasonable certainty the essential terms of the unperformed promises in the contract You owe Jim Smith money, but you don’t know him. Protected because no writing, signed by you Are you protected in other ways? P has burden of proof, more evidence in your favor People who enter into legitimate oral agreements use statue of frauds to get out of them Why not require plaintiff signature? If you’re bringing a claim, you’re saying there is a K. (party emission) Courts have wiggled away from statue. Statue of frauds is about state not federal law. § 110. Classes of Contracts Covered. - Common law version of the statue of frauds (1) The following classes of contracts are subject to a statute, commonly called the Statute of Frauds, forbidding enforcement unless there is a written memorandum or an applicable exception: (a)a contract of an executor or administrator to answer for a duty of his decedent (the executor-administrator provision); (b)a contract to answer for the duty of another (the suretyship provision); (c) a contract made upon consideration of marriage (the marriage provision); (d)a contract for the sale of an interest in land (the land contract provision); in writing, within months (e)a contract that isn’t to be performed within one year from the making thereof (1-year provision). Most of action Enter K to bake and sell fruit cakes every December for three years. Sell $100 worth of fruit cakes. Does it fall under scope of statue of frauds? – Yes, because it’s a long-term contract. PBR v. AutoZone – PBR presented AutoZone with K for sponsorship Dec. 20, 2000 - Dec. 31, 2002. AutoZone could end early, written notice no later than August 15, 2001. AutoZone didn’t sign, PBR claims AutoZone’s actions accepted terms. Jan. 2002, AutoZone told PBR it wouldn’t sponsor in2002. AutoZone alleges that PBR continued to use name and logo. Don’t need writing because could've ended in first year, fell outside statue. If an agreement allows for termination within 1 year, K falls outside scope. At inception could be done in 1st year. PBR must prove there was an oral agreement Assume a contract does fall within the scope of the statue. Crabtree v. Arden - Arden offered Crabtree a 2-year K with salary: $20,000 first 6 months, $25,000 next 6 months, $30,000 2nd year. Memo, had salary, party names, position offered. No duration, “2 years to make good”. Memo wasn’t signed, Crabtree accepted by phone. Crabtree went to work, EVP of Arden, drafted, initialed a payroll change card with agreed-upon salary. After 6 months, salary increased. Next 6 months, no increase. Comptroller, drafted, signed another payroll card with salary. Arden refused increase; Crabtree quit. Multiple docs taken together may constitute a signed writing enough to fulfill statute of frauds if all docs refer to same subject matter or transaction and at least one is signed by the party to be charged with K obligations. All docs must have same subject matter. Phone order blank wouldn’t satisfy, not signed. Two signed payroll cards don’t satisfy, no essential terms. Statue of frauds falls within scope because it’s a long-term K. Four notable exceptions to UCC statue of frauds - controls over the common law 1. Between merchant - 2-104(1), only applies to transactions between merchants 2-104(3),when one of merchants (sender) sends a written confirmation with a reasonable time to another merchant (receiver) with transaction being agreed too. Written confirmation will bind receiver even though they didn’t sign it - under certain circumstances. Requirements: written confirmation must satisfy statue of frauds, signed by seller related to sender (in 2-201) 2. Specialty manufacture goods - logicized products 2-201 (3)(a) 3. Party omission - admit there is a contract in court - contract enforceable 4. Binds D in respect to any goods received or paid for even if there’s not a singed writing. § 2–201. Formal Requirements; Statute of Frauds. (1) Except as otherwise provided in this section a contract for the sale of goods for the price of $500 or more is not enforceable by way of action or defense unless there is some writing sufficient to indicate that a contract for sale has been made between the parties and signed by the party against whom enforcement is sought or by his authorized agent or

Contracts Final Outline – Assignment 11- 27 broker. A writing is not insufficient because it omits or incorrectly states a term agreed upon but the contract is not enforceable under this paragraph beyond the quantity of goods shown in such writing. (2) Between merchants if within a reasonable time a writing in confirmation of the contract and sufficient against the sender is received and the party receiving it has reason to know its contents, it satisfies the requirements of subsection (1) against such party unless written notice of objection to its contents is given within 10 days after it is received. (3) A contract which does not satisfy the requirements of subsection (1) but which is valid in other respects is enforceable (a) if the goods are to be specially manufactured for the buyer and are not suitable for sale to others in the ordinary course of the seller’s business and the seller, before notice of repudiation is received and under circumstances which reasonably indicate that the goods are for the buyer, has made either a substantial beginning of their manufacture or commitments for their procurement (b) if the party against whom enforcement is sought admits in his pleading, testimony or otherwise in court that a contract for sale was made, but the contract is not enforceable under this provision beyond the quantity of goods admitted; (c) respect to goods for which payment has been made/ accepted or which have been received/ accepted (2–606). Assignment 12: Incapacity due to Age: RSC -12 - Capacity to Contract. (1) No one can be bound by contract who has not legal capacity to incur at least voidable contractual duties. Capacity to contract may be partial and its existence in respect of a particular transaction may depend upon the nature of the transaction or upon other circumstances. (2) A natural person who manifests assent to a transaction has full legal capacity to incur contractual duties thereby unless he is: (b)an infant RSC 14 - Infants Unless a statute provides otherwise, a natural person has the capacity to incur only voidable contractual duties until the beginning of the day before the person’s eighteenth birthday. Bowling v. Sperry - Minor (16) purchased a car, agreement was solely signed by minor and salesman. Neither aunt nor grandmother signed papers. Contract with minor is voidable - Sperry can’t get out of contract. Minors can be unfairly influenced, falling prey to the pitfalls of the marketplace. Incapacity due to Mental Incapacity: Mental incompetency - doesn’t get as much protection - individual with mental illness can disaffirm K if she can restore the other party to their pre contract position, duty of restitution  Focuses on party claiming mental illness and what the other party should’ve known about party’s illness  Mental ill person got the exact same bargain as everyone else - wasn’t taken advantage of. § 12. Capacity to Contract. See above (1) and (2): (a) under guardianship, or (c) mentally ill or defective § 15. Mental Illness or Defect. (1)A person incurs only voidable contractual duties by entering into a transaction if by reason of mental illness or defect (a)he is unable to understand in a reasonable manner the nature and consequences of the transaction (b)he is unable to act in a reasonable manner in relation to the transaction and the other party has reason to know of his condition. (2)Where the contract is made on fair terms and the other party is without knowledge of the mental illness or defect, the power of avoidance under Subsection (1) terminates to the extent that the contract has been so performed in whole or in part or the circumstances have so changed that avoidance would be unjust. In such a case a court may grant relief as justice requires. Heights Realty, LTD v. E.A. Phillips - Heights Realty, entered a K with Mary Gholson, 84. Sept. 1984, Gholson listed home. Nov. 1984, offer made to buy Gholson’s home, didn’t accept. Mental incapacity at time of K formation may void existence of K. Test of mental capacity is whether a person is capable of understanding in a reasonable manner nature and effect of act in which the person is engaged. Must be mentally ill day entered K. Burden of proof is on person asserting the lack of capacity. Incapacity due to Intoxication: § 12. Capacity to Contract. See above (1) and (2) - (d) intoxicated. § 16. Intoxicated Persons. A person incurs only voidable contractual duties by entering into a transaction if the other party has reason to know that by reason of intoxication: (a)he is unable to understand in a reasonable manner the nature and consequences of the transaction,

Contracts Final Outline – Assignment 11- 27 (b)he is unable to act in a reasonable manner in relation to the transaction. Ervin v. Hosanna Ministry- Ervin entered a rehab program of Hosanna. Required Ervin to sign a waiver releasing Hosanna from liability for any claims. Ervin sued alleging Hosanna was negligent by failing to maintain premises in safe conditions, resulting in injury to Ervin. A party may not be bound by K obligations if, at time of formation, party lacked mental capacity to K due to intoxication. A lack of capacity to K may arise from intoxication due to drugs/alcohol if such intoxication is so extreme as to prevent any manifestation of assent to K’s terms by the intoxicated party. Assignment 13: Unilateral and Mutual Mistake; Contract Reformation: § 151. Mistake Defined. A mistake is a belief that is not in accord with the facts. § 152. When Mistake of Both Parties Makes a Contract Voidable. (1) Where a mistake of both parties at the time a contract was made as to a basic assumption on which the contract was made has a material effect on the agreed exchange of performances, the contract is voidable by the adversely affected party unless he bears the risk of the mistake under the rule stated in § 153. When Mistake of One Party Makes a Contract Voidable. – Harder to prove Where a mistake of one party at the time a contract was made as to a basic assumption on which he made the contract has a material effect on the agreed exchange of performances that is adverse to him, the contract is voidable by him if he does not bear the risk of the mistake under the rule stated in § 154, and (a)the effect of the mistake is such that enforcement of the contract would be unconscionable, or (b)the other party had reason to know of the mistake or his fault caused the mistake. § 154. When a Party Bears the Risk of a Mistake. Can get out of K if you didn’t bear mistake. A party bears the risk of a mistake when: (a)the risk is allocated to him by agreement of the parties, or (b)he is aware, at the time the contract is made, that he has only limited knowledge with respect to the facts to which the mistake relates but treats his limited knowledge as sufficient, or (c) the risk is allocated to him by the court on the ground that it is reasonable in the circumstances to do so. (lowest cost avoider) Boise Junior College v. Mattefs Construction- Mattefs submitted a bid to Boise. Boise expected to pay $150,000. Mattefs’ bid contained a customary bid bond promising to pay difference between its bid and next higher bid accepted by Boise if Mattefs refused to K. Unknown to Mattefs, bid had an error, made costs around $151,000 rather than $141,048. Boise awarded K to Mattefs, refused. Boise awarded K to next higher bidder, who bid $148, 915. Unilateral mistake Five part test the court uses (1) mistake was material (153) - court said it was material (2) enforcement of a K pursuant to the erroneous bid would be unconscionable (153) - court says (3) the mistake didn’t result from the violation of a positive legal duty (NO) - court says no because there's no gross negligence - mistake made was general negligence (4) the party to whom the bid is submitted will not be prejudiced except by the loss of his bargain (NO) - court says no prejudice (5) prompt notice of the error is given (153) - court says no at least one lower bid was given Beachcomber Coins v. Boskett - Beachcomber K to buy a rare coin from Boskett. Both believed coin minted Denver 1916. Beachcomber paid Boskett for coin and got offer to resell. Buyer conditioned purchase, on favorable inspection of coin and determination of rarity. Coin was counterfeit. Beachcomber may rescind the K with Boskett due to mutual mistake of fact. Where parties enter a K and are under a mistake regarding a fact that forms basis for the transaction, K is voidable by either party if enforcement of K would be materially more difficult than it would have been had the fact been as parties believed it to be. Even if a party is negligent in failing to know or to discover the facts as to which both parties are under a mistake, party may still seek to rescind K based on mutual mistake of fact. Rescission of the K due to mutual mistake isnt appropriate, however, when one or both parties assume the risk of a mistake. A party “assumes risk” of a mistake when party knows that there is doubt regarding a certain matter and Ks based on that assumption. Lenawee County Board of Health v. Messerly – Messerlys purchased land, old owner installed a septic tank without permit and in violation of health code. Messerlys sold land to Pickleses. K stated “Purchaser has examined this property and agrees to accept same in its present condition. There are no other or additional written or oral understandings.” Pickleses discovered raw sewage seeping from land and Lenawee County Board of Health condemned property for health

Contracts Final Outline – Assignment 11- 27 code violation. Mutual mistake of fact, nobody knew property wasn’t habitable. Mistake was belief that property was suitable for residential purposes, which it wasn’t, because sewage system rendered it inadequate. Assignment 14 Fraud and the Duty to Disclose: - Fraud is sometime referred to as misrepresentation. § 159. Misrepresentation Defined. A misrepresentation is an assertion that is not in accord with the facts. § 160. When Action Is Equivalent to an Assertion (Concealment). Action intended or known to be likely to prevent another from learning a fact is equivalent to an assertion that the fact does not exist. § 161. When Non-Disclosure Is Equivalent to an Assertion. A person’s non-disclosure of a fact known to him is equivalent to an assertion that the fact does not exist in the following cases only: (a)where he knows that disclosure of the fact is necessary to prevent some previous assertion from being a misrepresentation or from being fraudulent or material. (b)where he knows that disclosure of the fact would correct a mistake of the other party as to a basic assumption on which that party is making the contract and if non-disclosure of the fact amounts to a failure to act in good faith and in accordance with reasonable standards of fair dealing. (c)where he knows that disclosure of the fact would correct a mistake of the other party as to the contents or effect of a writing, evidencing or embodying an agreement in whole or in part. (d)where the other person is entitled to know the fact because of a relation of trust and confidence between them. § 162. When a Misrepresentation Is Fraudulent or Material. (1) A misrepresentation is fraudulent if the maker intends his assertion to induce a party to manifest his assent and the maker (a) knows or believes that the assertion is not in accord with the facts, or (b) does not have the confidence that he states or implies in the truth of the assertion, or (c)knows that he does not have the basis that he states or implies for the assertion. (2) A misrepresentation is material if it would be likely to induce a reasonable person to manifest his assent, or if the maker knows that it would be likely to induce the recipient to do so. § 163. When a Misrepresentation Prevents Formation of a Contract. If a misrepresentation as to the character or essential terms of a proposed contract induces conduct that appears to be a manifestation of assent by one who neither knows nor has reasonable opportunity to know of the character or essential terms of the proposed contract, his conduct is not effective as a manifestation of assent. § 164.When a Misrepresentation Makes a Contract Voidable. (1) If a party’s manifestation of assent is induced by either a fraudulent or a material misrepresentation by the other party upon which the recipient is justified in relying, the contract is voidable by the recipient. (2) If a party’s manifestation of assent is induced by either a fraudulent or a material misrepresentation by one who is not a party to the transaction upon which the recipient is justified in relying, the contract is voidable by the recipient, unless the other party to the transaction in good faith and without reason to know of the misrepresentation either gives value or relies materially on the transaction. § 168. Reliance on Assertions of Opinion. (1) An assertion is one of opinion if it expresses only a belief, without certainty, as to the existence of a fact or expresses only a judgment as to quality, value, authenticity, or similar matters. § 177. When Undue Influence Makes a Contract Voidable. (1) Undue influence is unfair persuasion of a party who is under the domination of the person exercising the persuasion or who by virtue of the relation between them is justified in assuming that that person will not act in a manner inconsistent with his welfare. § 1–304. Obligation of Good Faith. Every contract or duty within [UCC] imposes an obligation of good faith in its performance and enforcement. - No duty to act in good faith when you negotiate. Only when you have an agreement.

Contracts Final Outline – Assignment 11- 27 Vokes v. Arthur Murray- Vokes entered a K for 1 month of dance lessons ($14.50), with J.P. Davenport, owner of an Arthur Murray franchise. Over 16 months, Vokes was sold 14 additional courses for $31,090.45. Court says, although statements of mere opinion, expectations or predictions are not generally actionable as a misrepresentation, where a party has superior knowledge of the truth or falsity of the statement, a statement of opinion will be treated as a statement of fact. Duty to disclose the whole truth that she was a bad dancer and wasn’t improving. Hill v. Jones - Hills entered K to buy Jones house. Required sellers to pay for a termite inspection. Inspection said no visible evidence of termites. Buyers moved in, learned that sellers experienced termites. 2 nd inspection confirmed evidence of termites. Sellers didn’t share this with buyers, realtor, inspector. Seller of home knows about facts materially affecting value of property and it’s not readily observable and not known by perspective buyer, have duty to tell potential buyers about problem. Duress and Undue Influence: § 175.When Duress by Threat Makes a Contract Voidable. (1) If a party’s manifestation of assent is induced by an improper threat by the other party that leaves the victim no reasonable alternative, the contract is voidable by the victim. § 176. When a Threat Is Improper. (1) A threat is improper if: (a) what is threatened is a crime or a tort, or the threat itself would be a crime or a tort if it resulted in obtaining property, (b) what is threatened is a criminal prosecution, (c) what is threatened is the use of civil process and the threa...