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Contracts Final : - Coggle Diagram

- - - - If a contract is made under the threat of life, limb, or threat of imprisonment, the the contract is void as if it never existed How to remeber: vanilla ice and suge knight example
    - - the tugboat case
        
        Facts Totem entered a contract with Alyeska to ship items from Alaska to Texas. Totem was a new company, this was its first contract. Numerous problems impeded Totem's performance (like weather and Alyeska's miscalculation of material, which slowed the boat down and required another tug). Totem desprately needed money. It sent Aleyska an invoice for $300,000. Alyeska knew this, and asked Totem to settle for $97,500.
        
        Rule: what is needed for an economic distress claim 1. Involuntarily submitted to the terms of another 2. No reasonable alternatives 3. Coercive acts of the other party 4. An improper threat, as defined by Restatement 176.
        
        an alternative is unreasonable if it would cause immediate harm.
        
        Totem involuntarily accepted the terms of Alyeska (they needed to because they faced bankruptcy). 2. There were no reasonable alternatives (because immediate harm would be suffered) 3. Alyeska coerced Totem (forced them to settle, knowing they needed the money & Alyeska witheld payments knowing this). There was an improper threat. Breach of good faith. This resulted in bankrupcy.
        
        If the company was already in economic duress, the other party needed to have pushed it into financial straights.
      - way to remember the rule: I Now Realize Apples Cause Improper Threats
  - - - Facts: Kid bought a truck.There were mechanical issues and he chose to keep driving it until it broke down in his parents front yard. Then, it was in a hit and run accident. The kid wanted to return the truck & recieve full compensation.
        
        The traditional Rule said any contract a minor enters into is voidable before reaching the age of majority, or shortly afterwards. There was an exception for necessities like: clothing, food, shelter, etc. They could not rescind those contracts. However, this court took a different view.
        
        This court implemented the depreciation rule. Meaning, an infant cannot return an item and receive the full purchase price. Recovery is deducted from the minor's use of the product. As long as the contract was reasonable, no undue influence, and the minor used the product, once the item is returned, the negligent use/depeciation is factored in.
  - - - Facts: Family dispute over the family home. Sister 1 tried to enforce. Sister 2 said no enforcing because she was not able to assent to the agreement through temporary mental incapacity. She had not taken her Zoloft that day.
        
        Holding/Rule Firstly, the court held there must be evidence of mental incapacity. The P brought no medical evidence (no expert testimony), she and her husband just testified to their observations.
        
        Holding/Rule: The court discussed the two tests for mental incapacity, traditional (cognitive) and modern (volitional)
        
        Traditional Cognitive Test: They were incapable of understanding the nature of the transaction or its consequences.
        
        The Modern Volitional Test: The party was incapable of acting reasonably and the other party knew this. Looks at what a person of sound mind would do as well. (and, medical evidence necessary)
  - - - This is the homosexual teacher case
        
        facts:Guy gets arrested for being gay and is interrogated for days, with no sleep. He gets home to find his principal and the superintendent at his apartment wanting him to resign otherwise the event would go public. He does so. The charges against him were dropped
        
        Rule/Holding: Look for a subservient party and a dominant party. One party not in the right state of mind, and the other over persuading.
        
        characteristics of overpersuasion
        
        Discussion took place an inappropriate time 2. Or place 3. No time to consult a third party (friends, family, etc) 4. No time to consult an attorney. 5. Multiple persuaders against one 6. Insisting the transaction end quickly 7. Emphasizing the consequences of delay.
      - According to the migrant worker case, the overpersuasion must be pretty aggregious.
  - - - this is making a statement knowing it is false. There are two kinds fraud in the inducement and fraud in the execution
        
        fraud in the inducement
        
        evidenced in the dance lessons case
        
        facts: old lady is told she will be a professional dancer. She is targeted by the studio, who employs high pressure sales tactics. They have speakers in rooms to ensure sales tactics are followed. They have employee manuals detailing the harsh nature of thier tactics. This old lady was heavily taken advantage of and signed a release.
        
        fraud in the execution
        
        the personal guarantee case
        
        The P's were presented a document titled "lease agreement," but it was actually a personal guarantee. The P's were in a hurry to get to their daughters wedding, so they just signed. D just stayed silent.
        
        Rule/Holding:Misrepresentation as to the contents of the agreement. Elements of actual fraud:
        Material misrepresentation of fact which (2) Was false (3) Made with knowledge (4) Relied upon by the other party (5) Caused injury to the other party
        
        Way to remember: My Friends know Reliance ---> Injures
      - Note: puffery is allowed, "this is the best restaurant in Little Rock."
    - - the termite case
        
        This was the fraud by silence case Restatement 161.
        
        P went to buy house and saw rippling in the floor, and asked if it was termite damage. D said no, it was water damage. P later found out from neighbor the house had termites before, and the D had hidden the other damage with a plant and boxes.
        
        Rule/Holding: There is a duty to disclose something known to the seller, but not to the buyer, if that will materially affect the value of the property.
        
        Prevent a previous assertion from being a misrepresentation 2) Correct a mistake of the other party on a basic assumption 3) Correct a mistake as to the writing 4) Entitled to know because of trust
        Restatement 161
        
        This reminds me of the exam question about the guy's credit score and the bank. When he applied there were no issues, but before the contract was finalized, it changed dramatically.
        
        How to remember: 1. People 2. Can't 3. Wear 4. Trust
  - - - facts: Kids are orphaned and go to live with another family. They get picked to be on Home Makeover. Kids were later fucked over by the family and tried to sue the TV network as well. The TV network said “nah, you gotta go through arbitration. You signed…” The provision was hidden under the miscillaneous tab with nothing to draw attention to it. ONLY THE KIDS HAD TO SUBMIT TO ARBITRATION
        
        First make sure it's a contract of adhesion (boiler plate language document presented on a take it or leave it basis). Then, there must be procedural/substaitinve unconscionability.
        
        Procedural Unconscionability This is the circumstances surrounding the transaction. Think of oppression (only a few minutes to read the document despite being young and vulnerable) and surprise (hiding the provision in the misc. heading with no attention drawn to it, having to pay 1/2 arbitration costs, and cannot appeal.).
        
        Look at parties sophistication & were there reasonable alternatives? Was the party hurried to sign?
        
        THESE ARE ON A SLIDING SCALE. MORE OF ONE MITIGATES THE OTHER. **THEY BOTH MUST BE PRESENT
        
        Substantive Unconscionability: This is the one sided results(like one party having to submit to arbitration and not the other one). This looks at the contract itself.
        
        Was one party unfairly benefitted? Was it justified? Did the contract shock the conscience?
        
        There was a contract of adhesion because there was 1. vast disproportionate bargaining power and 2. it was written in legalese boiler plate language.
    - - the furniture store case This is an early case
        
        facts: Woman buys furniture from a rent-to-own company that had a dodgy af clause saying if you miss one payment on one item, everything that you have that is still outstanding will be taken.
        
        rule: Unconscionability is an absence of meaningful choice on the part of one of the parties and the other party enjoys the excessive benfits of the contract's terms. To determine whether a meaningful choice exists, the circumstances surrounding the transaction are considered (parties education, time to comprehend, pushy sales tactics, etc.): In many cases, the meaningfulness of choice is negated by the gross inequity of baragaining power. Presently, the contract was void as soon as it was made
  - - - Facts: doctor signs a partnership contract with a covenant not to compete. It was super unreasonable compared to the impacts (he was a specialized HIV doctor, and the covenant was not to practice any medicine for 3 years within a certain mileage).
        
        Reasonableness is a fact-intensive inquiry. A restriction is unreasonable if (1) the restraint is greater than necessary to protect the employer’s legitimate interest and (2) that interest is outweighed by the hardship to the employee and the likely injury to the public. Its duration and geographic area define the restraint’s scope.
        
        Covenants not to compete in the sale of businesses are considered reasonable. In employer-employee relationships they are disfavored. Especially with doctor's. lawyers cannot sign covenants not to compete.
    - - facts: The B couple and M couple met on Craigslist and agreed that B would carry a baby for M (gestational). THe relationship between the two couples became nasty and B refused to give the baby to Mrs. B and argued that the gestational surrogacy contract cannot be enforced because it goes against public policy.
        
        There are two types of Surrogacy: (1) traditional—genetic mother is the surrogate. (2) gestational—surrogate is not genetically related to the child.
        
        This court looked at statutes and legislative intent. There was a statute criminalizing the sale of babies, but there was an exemption for artificial insemination of the genetic mother with sperm. The legislature meant traditional surrogacy, which is much less accepted than gestational.
        
        The court said gestational surrogacy actually helps promote families by enabling infertile couples to have a family and bring life into this world. gestational surrogacy, here, was not against public policy.
  - - - the septic apartment buildings case
        
        Facts: Couple 1 sold land to couple 2. The land had rental properties on it. Unbeknownst to both couples, the original owner installed a dodgy septic system which ended up in violation of safety codes and everyone had to leave the property. Couple 2 tried to rescind the contract.
        
        Holding/Rule: rescinding a contract based on a mutual mistake is rare and examined on a case-by-case basis. A claim for relief based on the property's value being less than expected is insufficient, given that neither fraud nor misrepresentation of material facts has been established. The mistake needs to go to the whole substance of the agreement—its very nature, for rescission--it was not what the parties bargained for. Precedent arguably distinguishes mistakes affecting the essence of the consideration from those which go to its quality or value, affording relief on a per se basis for the former but not the latter.
        
        The way the property was divided and sold made it impossible to have a septic system that was up to code. So, the land lost all its value because no one could rent it.
        
        The mistake was collateral, meaning, it affected the nature of the contract and its value (remember, value itself is insufficient).
        
        Rescission is not available, however, to relieve a party who has assumed the risk of loss in connection with the mistake.
        
        2 more items...
    - - The BMW odometer case
        
        Facts:BMW didn’t flag an account that was going through litigation so the collection company went to collect payment on the car. Settlement agreement was made which was 10K less than asking which is normal for collection agencies, but much less than the award through litigation. BMW said that the agreement was signed as a mistake
        
        Rule: • A contract may be rescinded based on mistake of fact if (1) the party seeking rescission made a mistake regarding a basic assumption in the contract, (2) the mistake had a material adverse effect on the agreed-upon exchange, (3) the party did not bear the risk of mistake, and (4) enforcement of the contract would be unconscionable on account of the mistake.
        
        The first two elements were not at issue here. Did BMW bear the mistake? Yes. BMW caused the error, waited a month to rescind, and neither the collection agency nor the P knew default judgment had been entered when they settled.
        
        Would enforcement of the contract be unconscionable? No. BMW's loss was a little over $10,000. Settlements are favorable and result in some monetary loss, usually. It was better to place the burden on the party who made the mistake.
        
        How to remember: My / Mother Acts Entitled / Regarding / Unconscionability.
        
        A mistake is a belief not in accord with the facts.
- - - - ELEMENTS: 1. P CONFERRED A BENEFIT TO D. (NOT GRATUITIOUSLY) 2. D KNEW OF THE BENEFIT 3. AND ACCEPTED OR RETAINED IT 3. ENFORCEMENT WOULD AVOID INJUSTICE.
      - the owner/subcontractor rule: Sub cannot sue owner unless: 1. Owner has not paid a dime to anyone AND 2. Sub has exhausted all options trying to get paid.
      - What happened in the case: Sub sues the owner on a quantum meriut theory because Sub provided services and was never paid because the GC went bankrupt. The owner, however, had paid GC the amount owed.
    - - P conferred a benefit to D (homemaking and working in the successful business), D knew of the benefit, and accepted/retained it; enforcement would avoid injustice.
- - - - Facts:, decedent was cleaning the floor by dropping wood and noticed P standing below. Decedent saved P by falling with the wood and injured himself severely.
        
        The court enacted the material benefit rule
        
        past consideration may be consideration if:1. material benefit is provided. 2. RIGHT AFTERWARDS IS A PROMISE TO PAY. "thanks for saving my life, you'll have a job for life.
        
        UNLESS
        
        the value of the promise is disproportionate to the benefit received
        
        It was a gift. How do you know if it's a gift? Look at the circumstances. "thank you, I accept your payment." Decedent told P. he would pay him for life, and right afterwards, P. said "thank you." if the receiving party of the benefit does not offer to pay, then there is no issue.
- - - - EA hired someone with a two year contract. He was cut loose after one year and wanted his money. Arden said there was never a written contract and SOF applies. However, there was a memo and payroll documents.
        
        Holding: you can aggregate signed writings. The defendant (one whom the contract is being enforced against) must sign the document
        
        Elements: 1. One document is signed by the defendant (one against whom enforcement is sought) and 2. the unsigned document refers to the same transaction or subject matter. In this case, the unsigned memo and signed payroll cards referred to the same transaction as the parties, payment, terms, and job position matched.
      - The Democratic Party Case exception to the contract cannot be completed in a year
        
        Facts: Rice was asked to work for the Alaska Dem and moved from Maryland to do so. Upon arriving, the Exec team told her that they didn’t want to hire her. It should have been rejected through the statute of frauds because it was a verbal agreement of a contract that could not have been performed in 1 year - but because there was a promise that a party acted on, to their detriment, the promise was enforceable
        
        Holding/Rule: Promissory Estoppel can override the SOF. She detrimentally relied on promises (she moved).
      - How to Remember: 1. The Arden Aggregation Rule and 2. The Detrimental Democrat Rule
    - - Facts: Buyers cashed those in to afford the property. P was an employee of the D. P purchased a home and substantially improved it, spending $85,000. No formal document was executed because sellers realized there was a mortgage due on sale clause. The parties relationship later deteriorated and the D's no longer wanted to sell the property. The sellers leased the land and sought to evict the buyers.
        
        Holding: The contract was enforced because an outsider looking at the circumstances surrounding the transaction could tell a contract existed. (the unequivicollay referable test)
        
        two factors are key 1. possession of the property. 2. substantial improvements.
    - - Facts: Buffaloe rented tobacco barns from the Harts and wanted to buy them. The Harts accepted the offer. Buffaloe failed to obtain a mortgage so wanted to sell them. This is the case where the Harts ripped up the check Buffaloe sent. It was not signed by the defendants, so that could not enforce the contract.
        
        The partial performance exception under the UCC 2-201 states the seller must deliver the goods, and the buyer must accept. The seller can accept through performance (or part payment accepted by the seller). But, P did not satisfy this because D did not endorse the check. However, reasonable minds could conclude partial performance was accepted. P took posession of the barns, paid for improvements, reimbursed insurance payments, and advertised the land for sale.
        
        Look at whether payment has been received or a transfer of goods among parties. Then, the exception applies.
- - - - Holding/Rule:The court added an implied term discussing the reasonable effort of the parties to perform to the nature of the contract. Wood had an implied promise to ensure profits and revenue.
        
        UCC 2-306: A lawful agreement by either the seller or the buyer for exclusive dealing in the kind of goods concerned imposes, unless otherwise agreed, an obligation by the seller to use best efforts to supply the goods and by the buyer to use best efforts to promote their sale.
  - - - Holding/Rule:In every contract, there exists an implicit promise that neither party shall undertake any action that may harm or impede the other party's ability to enjoy the benefits of the contract. OR “‘[W]here a contract confers on one party a discretionary power affecting the rights of the other, a duty is imposed to exercise that discretion in good faith and in accordance with fair dealing.’”
        
        An implied warranty of good faith and fair dealing is in all contracts