Week 3 - Lecture Notes for the Business Law Course taught by Eileen Marutzky PDF

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Lecture Notes for the Business Law Course taught by Eileen Marutzky...

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Chapter 15: Contacts in Writing 1. Identify and explain the types of contracts covered by the general contract Statute of Frauds 2. Explain the parol evidence rule 3. Discuss the rules that aid in the interpretation of a contract Certain contracts under the statute of frauds should be in writing: Statute of Frauds Contracts Within the Statute of Frauds MY LEGS IS (contracts that must be in writing to be inforced) -

M marriage contracts (Provision applies to promises in consideration of marriage but not to mutual promises to marry)

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Y year One-Year Provision applies to contracts that cannot be performed within one year The Possibility Test the criterion is whether it is possible, not likely, for the agreement to be performed within one year Computation of Time the year runs from the time the agreement is made

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L land provision applies to promises to transfer any right, privilege, power, or immunity in real property

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E Executor/executrix-Administrator/administartrix Provision applies to promises to answer personally for a duty of the decedent if you die with a will you name an executor to carry out your estate. I f you don’t have a will, your estate may be distributed by an administer that the court will appoint

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G goods Sale of Goods a contract for the sale of goods for the price of $500 or more must be evidenced by a writing or record to be enforceable

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S Suretyship Provision applies to promises to pay the debt of another

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I insurance

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S securities

Parol evidence rule: Statement of Rule when parties express a contract in a writing that they intend to be the final expression of their rights and duties, evidence of their prior oral or written negotiations or agreements of their contemporaneous oral agreements that vary or change the written contract are not admissible. Situations to Which the Rule Does Not Apply •

a contract that is not an integrated document

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correction of a typographical error

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showing that a contract was void or voidable

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showing whether a condition has in fact occurred

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showing a subsequent mutual rescission or modification of the contract

Supplemental Evidence may be admitted 

Course of Dealing previous conduct between the parties

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Usage of Trade: practice engaged in by the trade or industry

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Course of Performance: conduct between the parties concerning performance of the particular contract

Interpretation of Contracts When the contract is in writing, it has to be: (general contract law/ not the UCC) •

signed

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Specify terms

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Specify parties

Rules of Interpretation include 

a writing is interpreted as a whole

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wherever possible, the intentions of the parties are interpreted as consistent with each other and with course of performance, course of dealing, or usage of trade

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technical terms are given their technical meaning, specific terms are given greater weight than general language

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separately negotiated terms are given greater weight than standardized terms or those not separately negotiated

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written provisions are given preference over typed or printed provisions and typed provisions are given preference over printed provisions

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if an amount is set forth in both words and figures and they differ, words control the figures

#2, 5, 7, 13 Chapter 16: 1. Distinguish between an assignment of rights and a delegation of duties

2. Identify: - The requirements of an assignment of contracts rights and - Those rights that are not assignable 3. Identify those situations in which a delegation of duties is not permitted 4. Distinguish between an intended beneficiary and an incidental beneficiary 5. Explain when the rights of an intended beneficiary vest A – B, would have privity, contractual obligation B-C have privity Sometime C would have obligation to perform a contact even though A and C don’t have privity A contract has rights and duties. However, a party can assign many of the rights and delegate many of the duties under a contract. 1. Assignment of rights: Def: voluntary transfer to a third party of the rights arising from a contract so that the assignor’s right to performance is extinguished -

Assignor party making an assignment

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Assignee party to whom contract rights are assigned

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Obligee party to whom a duty of performance is owed under a contract

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Requirements of an Assignment include intent but not consideration

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Partial Assignment transfer of a portion of contractual rights to one or more assignees

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Rights of Assignee: the assignee stands in the shoes of the assignor

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Defenses of Obligor may be asserted against the assignee

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Notice is not required but is advisable

Assignability most contract rights are assignable except -

Assignments that materially increase the duty, risk, or burden upon the obligor

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Assignments of personal rights

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Assignments expressly forbidden by the contract

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Assignments prohibited by law

2. Delegation of Duties: more closely scrutinized by courts

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Definition of Delegation: transfer to a third party of a contractual obligation • Delegator party delegating his duty to a third party • Delegatee third party to whom the delegator’s duty is delegated • Obligee party to whom a duty of performance is owed by the delegator and delegate

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Delegable Duties most contract duties may be delegated except • Duties that are personal • Duties that are expressly nondelegable • Duties whose delegation is prohibited by statute or public policy

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Duties of the Parties o

Delegation: delegator is still bound to perform original obligation

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Novation Contract: a substituted contract to which the promisee is a party, which substitutes a new promisor for an existing promisor, who is consequently no longer liable on the original contract and is not liable as a delegator

3. Third-Party Beneficiary Contracts -

Definition a third-party beneficiary contract is one in which one party promises to render a performance to a third person (the beneficiary)

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Intended Beneficiaries: third parties intended by the two contracting parties to receive a benefit from their contract 

Donee Beneficiary a third party intended to receive a benefit from the contract as a gift

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Creditor Beneficiary a third person intended to receive a benefit from the contract to satisfy a legal duty owed to him Rights of Intended Beneficiary: an intended donee beneficiary may enforce the contract against the promisor; an intended creditor beneficiary may enforce the contract against either or both the promisor and the promisee

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Vesting of Rights if the beneficiary’s rights vest, the promisor and promisee may not thereafter vary or discharge these vested rights

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Defenses Against Beneficiary: in an action by the intended beneficiary to enforce the promise, the promisor may assert any defense that would be available to her if the action had been brought by the promisee

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Incidental Beneficiary third party whom the two parties to the contract have no intention of benefiting by their contract and who acquires no rights under the contract

Problem 1, 17

Chapter 17: Performance, Breach, and Discharge 1. 2. 3. 4.

Identify and distinguish among the various types of conditions Distinguish between full performance and tender of performance Explain the difference between material breach and substantive performance Distinguish among a mutual rescission, substituted a contract, accord and satisfaction, and novation

Some types of contracts are going to be conditional (a condition is not a breach but it may excuse performance) Conditions 6 types Definition of a Condition an event whose happening or nonhappening affects a duty of performance 1. Express Condition contingency explicitly set forth in language 2. Implied-in-Law Condition contingency not contained in the language of the contract but imposed by law; also called a constructive condition 3. Implied-in-fact 4. Concurrent Conditions: conditions that are to take place at the same time 5. Condition Precedent: an event that must or must not occur before performance is due 6. Condition Subsequent an event that terminates a duty of performance (return of good) Discharge termination of a contractual duty Types of Distinguish: 1. Discharge by Performance (or tender of performance): Performance fulfillment of a contractual obligation resulting in a discharge 2. Discharge by Breach (material breach) Definition of Breach: a wrongful failure to perform the terms of a contract that gives rise to a right to damages by the injured party

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Material Breach nonperformance that significantly impairs the injured party’s rights under the contract and discharges the injured party from any further duty under the contract 

Prevention of Performance one party’s substantial interference with or prevention of performance by the other constitutes a material breach and discharges the other party to the contract

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Substantial Performance: performance that is incomplete but that does not defeat the purpose of the contract; does not discharge the injured party but entitles him to damages

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Anticipatory Repudiation/breach: an inability or refusal to perform, before performance is due, that is treated as a breach, allowing the nonrepudiating party to bring suit immediately

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Unauthorized Material Alteration of Written Contract a material and fraudulent alteration of a written contract by a party to the contract discharges the entire contract

3. Discharge by Agreement of the Parties (mutual rescission) -

Mutual Rescission an agreement between the parties to terminate their respective duties under the contract

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Substituted Contract a new contract accepted by both parties in satisfaction of the parties’ duties under the original contract

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Accord and Satisfaction substituted duty under a contract (accord) and the discharge of the prior contractual obligation by performance of the new duty (satisfaction)

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Novation a substituted contract involving a new third-party promisor or promisee

4. Discharge by Operation of Law (impossibility or illegality) -

Impossibility performance of contract cannot be done a. Subjective Impossibility the promisor, does not discharge the promisor b. Objective Impossibility no promisor is able to perform; generally, discharges the promisor c. Subsequent Illegality if performance becomes illegal or impractical as a result of a change in the law, the duty of performance is discharged d. Frustration of Purpose principal purpose of a contract cannot be fulfilled because of a subsequent event e. Commercial Impracticability where performance can be accomplished only under unforeseen and unjust hardship, the contract is discharged under the Code and the Restatement f.

Availability of Restitution a person is discharged for impossibility, subsequent illegality, frustration, or impracticability is entitled to restitution to prevent unjust enrichment of the other party

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Bankruptcy discharge available to a debtor who obtains an order of discharge by the bankruptcy court

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Statute of Limitations after the statute of limitations has run, the debt is not discharged, but the creditor cannot maintain an action against the debtor

Problem #2

Chapter 18: Contract Remedies 1. Monetary Damages -

Compensatory Damages contract damages placing the injured party in a position as good as the one he would have held had the other party performed; equals loss of value minus loss avoided by injured party plus incidental damages plus consequential damages

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Loss of Value: value of promised performance minus value of actual performance

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Cost Avoided: loss or costs the injured party avoids by not having to perform

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Incidental Damages: damages arising directly out of a breach of contract

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Consequential Damages: damages not arising directly out of a breach but arising as a foreseeable result of the breach

Reliance Damages contract damages placing the injured party in as good a position as she would have been in had the contract not been made -

Nominal Damages a small sum awarded when a contract has been breached but the loss is negligible or unproved

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Damages for Misrepresentation

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Out-of-Pocket Damages difference between the value given and the value received

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Benefit-of-the-Bargain Damages difference between the value of the fraudulent party’s performance as represented and the value the defrauded party received

Punitive Damages (penalty damages) are generally not recoverable for breach of contract, if combined with a tort, they punish the defendant (conduct must be malicious)

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Liquidated Damages: reasonable damages agreed to in advance by the parties to a contract

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Limitations on Damages 

Foreseeability of Damages potential loss that the party now in default had reason to know of when the contract was made

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Certainty of Damages: damages are not recoverable beyond an amount that can be established with reasonable certainty

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Mitigation of Damages injured party may not recover damages for loss he could have avoided by reasonable effort

2. Injunction: court order prohibiting a party from doing a specific act

3. Restitution: restoration of the injured party to the position she was in before the contract was made 4. Specific Performance (land)

Problem #2, 6...