BLAW 301 Exam 2 (Castle - KU)

What is the statute of frauds?

A law requiring contracts involving real property to be in writing and to contain essential elements

What contracts must have statute of frauds?

- sale of a certain interest in land

- guaranty of debt

- contracts that cannot be performed within one year

- contracts for the sale of goods over $500

Do email transactions satisfy the statute of frauds?

Yes.

How are contracts interpreted?

Words are given their common meaning

What happens if there are ambiguous terms in the contract?

Courts interpret these terms according to common trade usage and business practices.

What is the purpose of the judge in contract interpretation?

To try and determine what the parties meant and what they intended when they drafted the language

What controls the contract -- handwritten or typed terms?

Handwritten terms control typed terms meaning that if presented with a contract that had stuff crossed out and replaced with writing in the margins, the writing would be the terms of the contract not what was crossed out

How are ambiguous terms interpreted?

Ambiguous terms are interpreted against the drafter

What is the Parol Evidence Rule?

Parties may not introduce evidence of prior oral agreement that would change the written agreement

What is an example of the Parol Evidence Rule.

Buying a washer from Lowe's. The salesman says that they can deliver the washer on Monday or Tuesday. The contract that you sign says it won't be delivered until Thursday. After you contest, the court would find that that is ok, because that date wasn't in the contract but rather the conversation you had with the salesman.

What is performance?

The act of doing what is in the contract

Why do parties enter in to contracts?

To ensure the performance of a promise that is made

When is a party discharged from a contract?

When that party has fulfilled all obligations under the contract and is relieved of further performance

What is substantial performance?

When a party honestly attempts to perform but has fallen short

What is an example of substantial performance?

You want to build a custom house. You and the builder walk through every aspect of the house -- # of bedrooms, type of carpet, landscaping, etc. However, when the builder finishes the house, they didn't put in the sprinkler system for the landscaping, despite you wanting it. Everything else you wanted is there.

The court would find that the builder did substantial performance. They would get the benefits of the contract less any damages of the breach. So if your grass died because the sprinklers weren't there, they would have to pay for that.

What is a breach of contract?

A breach occurs when a party fails to perform an agreed-upon act.

What are compensatory damages?

Damages that put the person in the same place as if the contract had been performed

What are consequential damages?

Damages incurred as a consequence of the other side's breach

What is an example of a consequential breach?

You want to open up a restaurant and you order your appliances from Sears (RIP), like a dishwasher, stove, refridgerator, etc. However, on opening day, you still don't have a refridgerator so you cannot open. Sears is in breach of our agreement. I cannot open the store, so I've lost profits, had to pay my staff for no work, etc. The lost profits and what I had to pay the staff are considered consequential damages.

What are liquidated damages?

Damages that parties agree from the beginning of what a breach is going to cost

Why are liquidated damages used?

So people can make business decisions based on how much it would cost them to breach the contract

What is specific performance?

Plaintiff asks the court to force the defendant to specifically perform the promise they made

When is specific performance used?

When a contract involves something really unique (land!) or when money damages cannot compensate (land!).

Do courts like to use specific performance?

No, they don't like to tell people what they can and cannot do.

When a breach occurs, the non-breaching party (victim) must...

mitigate damages when possible

What is mitigation?

the non-breaching party has a legal duty to mitigate (lessen) the damages caused by the breaching party

What is an example of mitigation.

I sign a contract for a 12 month lease on an apartment. 3 months into the lease, I breach my contract and must out. There are still 9 months left on the lease.

The landlord must try and rent out my vacated apartment for 9 months. If after 3 months, they sign a new lease and have it rented out, the new tenent pays for those last 6 months. I am only on the hook for those 3 months with no tenent.

If the landlord sits on the property for 9 months and then tries to sue me, I will say the apartment complex had a duty to mitigate, which they didn't do.

Who is an offeror?

The person making an offer

Who is the offeree?

The person to whom the offer is made

What is the offeree's power?

They have the power to accept an offer

What happens once an offer is accepted?

Both parties are bound

What does definite terms mean?

parties are on the same terms

How definite should the terms be?

They should be explicit. If the parties agree to "a reasonable price", that price could be different for either party.

What is the gumball example for offers?

I go to a garage sale where you are selling this super cool antique gumball machine. You tell me that you will sell me this antique for $400. I have the power to accept or reject. I do accept, and agree to pay you $400 for the gumball machine.

After you accept, you cannot come back to me and tell me that you actually want $450 for it, since that was not a part of our original agreement.

What is revocation?

Offeror retracts offer before offeree accepts

What is the termination of an offer?

Before the offer has been accept, the original offer can walk away

What is revocation

The person making the offer (offeror) has the power to revoke or retract the offer at any time before the offer is accepted

What is rejection?

When an offeree says "No" then the original goes off the table and is terminated

What is a counter-offer?

The offeree offers different terms and makes a new offer the first offeror can accept.

What is expiration?

When the offer expires after a certain amount of time. Or, you don't have to go through with the contract after a certain amount of time.

Does the court have guidelines on timelines?

Yes, of course. The offeree must accept offer "within a reasonable time"

When is an offer terminated by operation of law?

- when the original subject matter (gumball machine) is destroyed through no fault of the party

- when the offeror dies or goes insane

- when the subject matter becomes illegal

What is acceptance?

The assent or agreement by the person to whom the offer was made that the offer is accepted.

What does acceptance create?

A binding and enforceable contract

What happens after the offer is accepted?

Must perform requested act.

What is a unilateral contract?

results from an offer that expressly requires performance as the only possible method of acceptance

What is the mirror image rule?

the terms of the acceptance must exactly mirror the terms of the offer and terms of acceptance cannot change the offer

Is silence acceptance?

No

"You didn't say no..." is not acceptance.

What is the mailbox rule?

The contract created at the moment the offeree sends acceptance. Offeror cannot revoke offer once offeree places acceptance in mailbox or sends electronically

What is consideration?

Something of value must be given by either party that induces them to enter into the contract.

When does consideration exist?

When parties promise to:

- do something that the party is not already obligated to do

- refrain from doing something that the party has a legal right to do

What is an example where consideration doesn't exist?

I tell my child that if they get straight A's, I will feed them. However, parents are obligated to feed children until they're 18, so asking them to do work in order to receive food is unbalanced. My child isn't receiving anything extra from the contract, but I am.

Does consideration exist when a party promises to make a gift?

No

What happens if you promise to give a gift?

- can change your mind

- court cannot enforce this contract

What is an option contract?

A promise to keep an offer open for a certain period of time

What is an option contract supported by?

Consideration --> the offeree must give value to the offeror to enforce the promise to keep the offer open

What is capacity?

The ability to enter into a contract

What are some categories of people that lack the capacity to enter into a contract?

- minors

- intoxicated

- mentally incompetent

What is duress?

using threat or threat of force to make someone enter into a contract

What is undue influence?

when a party is persuaded into entering a contract

Where is undue influence common?

Elderly, sick, or compromised and subject to high pressure sales techniques

Are oral contracts as enforceable as written contracts?

Yes!

What is the problem with oral contracts?

If contested, the problem is proving the agreement existed

What is the best way to agree to a contract?

Writing/signing

What is property?

The legal right to possess, use and transfer resources and to exclude others from our resources

Property rights are absolute...

but not infinite

What are the limitations of property rights?

- can't do whatever I want with my property

- cannot use my property to harm others

- can't do illegal stuff with my property

How are limited resources distributed?

- state control over and ownership of resources

- individual control and ownership of resources

Why does a private property system exist?

So people can benefit from what they produce, thereby increasing production effort and ultimately prosperity

What is real property?

ownership of or interests in land

What is tangible personal property?

any type of property that can generally be moved (i.e., it is not attached to real property or land), touched or felt. These generally include items such as furniture, clothing, jewelry, art, writings, or household goods

What is intangible personal property?

an item of individual value that cannot be touched or held. ... Examples of intangible personal property include patents, copyrights, life insurance contracts, securities investments, and partnership interests

What are the different types of land rights?

air, surface, subsurface

What are fixtures?

personal property that becomes part of land or part of the real property (like appliances in houses)

What are the different types of interests in real property?

1. fee simple

2. life estate

3. leasehold estate

4. easements

5. security interests

What is fee simple?

fullest legal rights, forever

- can make money off property, destroy property, whatever

- cannot have a mortgage on it

What is a life estate?

when the land reverts back to the original grantor at the death of life owner when the grantor can grant to another at the death of life owner

What is revisionary interest?

reverts back to grantor

What is remainder interest?

grantor has no interest --> who gets the land when the person dies (next in line)

What is a leasehold estate?

some (but not all) property rights granted to tenants by a landlord

- give property back to landlord

- can't destroy property

- can exclude people from property but cannot exclude landlord

What are easements?

a landowner grants a property right to another to access a portion of landowner's land

How are easements created?

They can be bought/sold and once purchased, an easement can be reserved in a deed of land

used a lot for utilities

What are security interests?

when a party obtains an interest in property in exchange for extending credit

What is an example of the use of a security interest?

When you're getting a loan and you put up your land as collateral. Now, the bank has an interest in the land. You cannot sell the property without the bank's approval and you cannot destroy it.

How do security interests work?

if the borrower defaults on a debt, the creditor can seize/sell the object of the security interest to satisfy the debt

What is a mortgage?

property owner grants security interest in land in exchange for loan to purchase the property

What is a deed of trust?

property owner grants security interest in land in exchange for a loan

What is foreclosure?

Bank can seize your property, sell it, and apply the proceeds to your debts

What is deficiency?

Proceeds from foreclosure sale not enough to get rid of all the debt

What is the right of redemption?

when a person gets behind on their mortgage, banks cannot swoop in and seize the property. States have a period of time where the bank cannot mess with the homeowner and gives the homeowner the chance to redeem themselves and try to get current on their payments or pay off their loan.

What is an artisan's lien?

property interest arising when someone contributes parts and/or services to personal property

if you don't pay the artisan, they can seize it, sell it, and apply it to what you owe them.

What is a mechanic's lien?

property interest arising when someone contributes materials and/or services to real estate

What is an example of a mechanic's lien?

Call a plumper to fix sink, plumber comes and fixes sink, hands you a bill and you don't pay it then the plumber now has a lien on your house --> can seize house and sell it and apply proceeds to bill

What are zoning ordinances?

laws that divide counties or municipalities into designated districts

What is exchanging resources?

the most common form of acquiring resources in a property system. ex. cash for cars

What is exchanging resources governed by?

rules of contract --> promise to exchange resources

What is possession (acquiring through possession)?

May become the owner of a resource by physically holding and controlling the land or item of person property

What is the rule of first possession?

first person to reduce previously un-owned things to possession becomes the owner.

ex. meteriote falls out of sky. Found by you. Not owned by anyone, so now you own it.

What is abandonment?

Voluntarily relinquish all rights to own and possess personal or real property with no intention of reclaiming the property

What happens after abandonment?

The first person to reduce abandoned property to possession owns the property