BLAW Exam 3 (Fry, LSU)

The object of an agreement has to be?

Legal or what the law will accept as good public policy.

What is an essential requirement of a binding promise or agreement?

legality of objective

When the formation or performance of an agreement is criminal, tortious, or otherwise contrary to public policy, the agreement is?

illegal and unenforceable

When the bargain involves criminal activity it is _________.

not enforceable

What is the general rule?

The courts will not enforce agreements declared illegal by statute.

What are licensing statutes?

require formal authorization to engage in certain trades, professions, or businesses.

Licensing statute that is intended to protect the public against unqualified persons; an unlicensed person may not recover for services she has performed.

regulatory license

Licensing statue that seeks to raise money; an unlicensed person may recover for services he has performed.

revenue license

What are gambling statues?

Prohibit wages, which are agreements that one party will win and the other will lose, depending on the outcome of an event in which their only interest is the gain or loss.

What statutes establish a maximum rate of interest?

usury statutes

What is the least punitive usury statute?

Maximum interest rate rule is that you lose your right to pursue and recover legally the excess interest over the maximum rate.

What is the second most punitive usury statute?

If you violate the maximum rate of interest that you are allowed to charge, you lose the right to pursue any of the interests.

What is the most punitive usury statute?

If you violate the usury statute, you lose the right to recover even the principal amount of the loan. You lose the right to enforce the loan altogether because you exceeded the maximum interest rate.

What are Sunday statutes (Blue Laws)?

Prohibition of certain types of commercial activity on Sunday.

Alcoa Concrete & Masonry v. Stalker: Why do general contractors often delay payments to workers?

They get behind financially and rely on future projects to catch up on past debts.

Alcoa Concrete & Masonry v. Stalker: What was the main reason Alcoa was hesitant to work with Stalker Brothers?

Alcoa was already owed money from past projects and was unsure about getting paid.

Alcoa Concrete & Masonry v. Stalker: How did Stalker Brothers convince Alcoa to take on the project?

They promised that there was enough profit in the project to cover both past and current debts.

Alcoa Concrete & Masonry v. Stalker: Why did Alcoa decide to sue Stalker Brothers?

Alcoa was still not paid after completing the project and was owed about $60,000.

Alcoa Concrete & Masonry v. Stalker: What issue arose regarding Alcoa's contractor's license during the lawsuit?

Alcoa had let its contractor's license lapse for some time, which Stalker Brothers argued should prevent them from enforcing the contract.

Alcoa Concrete & Masonry v. Stalker: Why is a contractor's license considered a regulatory license?

It is required by law to ensure professionals meet competency standards and to protect property owners.

Alcoa Concrete & Masonry v. Stalker: What is the difference between a regulatory license and a revenue-raising license?

A regulatory license ensures competence in a profession, while a revenue-raising license primarily generates government income.

Alcoa Concrete & Masonry v. Stalker: How does a regulatory license affect the ability of professionals to enforce contracts?

If a professional does not have an active license, opponents may argue that they cannot legally enforce contracts.

Alcoa Concrete & Masonry v. Stalker: What was the argument made by Stalker Brothers to avoid paying Alcoa?

They claimed that because Alcoa's license had lapsed, they could not enforce the contract in court.

Alcoa Concrete & Masonry v. Stalker: How did the court ultimately rule regarding Alcoa's payment despite its lapse license?

The court allowed Alcoa to be paid because the licensing requirement was meant to protect property owners, not other contractors.

Unreasonable restraints of trade are not enforceable in particular business in a reasonable geographic area for a reasonable period of time is enforceable.

common law restraint of trade

The promise by the seller business not to compete in that particular business in a reasonable geographic area for a reasonable period of time is enforceable.

sale of a business

What is at the core of every noncompete agreements?

We are restricting people from making a living.

The terms of a geographic scope rarely go beyond _____ years.

5

Prohibits an employee from competing with his employer for a reasonable period following termination is enforceable provided the restriction is necessary to protect the legitimate interests of the employer.

employment contracts

What are the elements for a noncompete to be enforceable?

1. Two year maximum period. If the period exceeds this, it is unenforceable.

2. Every employer who attempts to restrict the scope of work within an area and compete has to be specified in the agreement.

3. The third requirement ensures integrity in the application of the second requirement by preventing employers from unfairly restricting former employees from working anywhere in the state.

The courts generally disapprove of contractual provisions excusing a party from liability for her own tortious conduct.

exculpatory

Unfair or unduly harsh agreements are not enforceable.

unconscionable contracts

Unfair or irregular bargaining.

procedural unconscionability

Oppressive or grossly unfair contractual terms.

substantive unconscionability

An agreement that requires a person to commit a tort is unenforceable.

tortious conduct

Agreements that corrupt public officials are not enforceable.

corrupting public officials

Payroll Advance, Inc. v. Yates: What type of company did Barbara Yates work for?

A payday loan company that provided quick turnaround loans with high interest rates. The company had multiple small offices across Missouri, often located in strip malls.

Payroll Advance, Inc. v. Yates: What was the main restriction in Barbara's non-compete agreement?

The agreement stated that if Barbara left the company, she could not work for a competing business within a 50-mile radius of any office location. Given the number of offices across Missouri and nearby states, this restriction effectively barred her from working in most of Missouri, as well as parts of Tennessee and Arkansas.

Payroll Advance, Inc. v. Yates: Why was the non-compete agreement considered overly broad?

The agreement was overly broad because it covered an extensive geographical area, making it nearly impossible for Barbara to find employment in her field. Additionally, it applied not only to direct competitors but also to unrelated industries such as banks, credit unions, and real estate title companies.

Payroll Advance, Inc. v. Yates: What did the court rule regarding the non-compete agreement?

The court ruled that while the two-year duration of the non-compete was reasonable, the geographic restriction was too extensive and unenforceable. The agreement was broader than necessary to protect the employer's interests, effectively excluding Barbara from working in the entire state.

Payroll Advance, Inc. v. Yates: What is the general legal principle regarding non-compete agreements?

Non-compete agreements must be narrowly tailored to protect legitimate business interests without unduly restricting a person's ability to earn a living. Courts often scrutinize such agreements to ensure they are reasonable in both time and geographic scope. If an agreement is too broad, it may be deemed unenforceable.

Anderson v. McOskar Enterprises, Inc.: What is the exculpatory clause in this contract?

In this case, the health club's exculpatory clause required members to waive their right to sue the club for injuries sustained on the premises, even due to the negligence of its employees.

Anderson v. McOskar Enterprises, Inc.: What injury did the plaintiff suffer at the health club?

The plaintiff participated in a workout session with a personal trainer who continued the workout despite her complaints of pain. As a result, she suffered neck and shoulder injuries severe enough to require surgery.

Anderson v. McOskar Enterprises, Inc.: What was the basis of the plaintiff's lawsuit?

The plaintiff sued the health club for negligence, arguing that the trainer failed to act as a reasonable professional by ignoring her complaints of pain and pushing her through the workout, leading to her injury. Since an employer is generally liable for the negligence of its employees, the lawsuit was directed at the health club.

Anderson v. McOskar Enterprises, Inc.: How did the health club defend itself against the lawsuit?

The health club invoked the exculpatory clause in the contract, arguing that the plaintiff had agreed in advance to waive her right to sue for injuries caused by the negligence of its employees.

Anderson v. McOskar Enterprises, Inc.: What did the court decide about the enforceability of the exculpatory clause?

The court upheld the exculpatory clause, ruling that the plaintiff had voluntarily agreed to the terms when she signed the contract. Since joining a health club is not a public necessity, the plaintiff had the choice to either accept or decline the contract terms.

Anderson v. McOskar Enterprises, Inc.: Why did the court rule in favor of the health club?

The court ruled the exculpatory clause was enforceable because the plaintiff voluntarily signed the agreement and joining a gym is not an essential service. Therefore, the plaintiff had the option not to sign and was bound by the terms of the contract.

When are exculpatory clauses generally unenforceable?

Exculpatory clauses are usually unenforceable when they attempt to excuse intentional misconduct. Courts scrutinize these claims carefully, and while they may sometimes be valid for negligence, they are never upheld when they attempt to release a party from liability for international harm.

What is the concept of unconscionability in contract law?

Unconscionability refers to a legal doctrine that allows courts to refuse to enforce contracts that are so unfair or oppressive. This doctrine is often used when one party has significantly more bargaining power than the other, leading to grossly unfair terms.

How does unconscionability relate to exculpatory clauses?

Exculpatory clauses are contractual provisions that release a party from liability for negligence or wrongdoing. Courts may refuse to enforce such clauses if they are found to be unconscionable, meaning they are excessively one-sided, or if enforcing them would lead to unjust results.

What are the two components of unconscionability?

Procedural and substantive unconscionability.

Bagley v. Mt. Bachelor Inc.,: Why was the exculpatory clause in the Mt. Bachelor case ruled unenforceable?

The court found that Mt. Bachelor was partially responsible for the faulty design of the air chamber that caused the plaintiff's paralysis. Because the resort played a role in the hazardous condition and was in the best position to insure against such risks, the exculpatory clause was deemed unconscionable and unenforceable.

Bagley v. Mt. Bachelor Inc., What was the main legal issue?

The main legal issue was whether the exculpatory clause in Mt. Bachelor's season pass agreement, which released the resort from liability for negligence, was enforceable or unconscionable under Oregon law.

Bagley v. Mt. Bachelor Inc., What argument did Mt. Bachelor present in its defense?

Mt. Bachelor argued that the release agreement was clear, unambiguous, and not contrary to public policy. It claimed that skiing and snowboarding are voluntary recreational activities, not essential services and that the plaintiff knowingly accepted the terms of the release.

Bagley v. Mt. Bachelor Inc., Why did Bagley challenge the enforceability of the contract?

Bagley argued that the release was both procedurally and substantively unconscionable, meaning that it was unfairly imposed on customers without meaningful negotiation and that it allowed Mt. Bachelor to escape liability for its own negligence, leading to an unfair and oppressive result.

Bagley v. Mt. Bachelor Inc.,: Why did the court find the exculpatory clause unconscionable?

Mt. Bachelor had superior control over the risks associated, the release was broad, and public policy favors deterring negligence.

Bagley v. Mt. Bachelor Inc.,: What public policy considerations influenced the court's decision?

Public policy discouraged negligent conduct by businesses, businesses serving large numbers of patrons have a duty to maintain safe premises, and a complete release of liability for negligence could undermine the safety and harm the public interest.

Bagley v. Mt. Bachelor Inc.,: How did the court balance the interest of Mt. Bachelor and the public?

The court acknowledged that skiing and snowboarding are inherently risky activities, but it found that the resort's ability to prevent or mitigate risks created by its own negligence outweighed its interest in enforcing the release.

Bagley v. Mt. Bachelor Inc., What was the final ruling of the court?

The Oregon Supreme Court ruled that the exculpatory clause was unconscionable and unenforceable. It reversed the lower court decisions and remanded the case for further proceedings.

Bagley v. Mt. Bachelor Inc., What impact does this case have on the enforceability of liability waivers?

The ruling reinforces that liability waivers are not automatically enforceable. Courts will evaluate factors such as bargaining power, fairness, and public policy when determining whether an exculpatory clause should be upheld.

A minor's contracts are voidable at the minor's option.

liability on contracts

Avoidance of the contract may be done during the minority and for a reasonable time after reaching the majority, but not after ratifying the contract. Cannot disaffirm sale of land until after reaching the age of majority.

disaffirmance

What is the exception to disaffirmance?

In contracts involving real estate interests, a minor is forced to wait until the age of 18 to decipher that contract.

Who can exercise a minor's disaffirmance rights on their behalf?

a parent

Affirmation of the entire contract may be done upon reaching the majority.

ratification

How old must a person be to ratify?

18

A minor is liable for the reasonable value of necessary items (those that reasonably supply a person's needs).

liability for necessaries

Minors: Disaffirmance: Berg v. Traylor: What was the main contractual issue in the case involving Craig, his agent Sharon Berg, and his mother?

The main issue was whether a minor (Craig) could disaffirm a contract and whether his mother, who also signed the contract individually, could also avoid liability under the same contract.

Minors: Disaffirmance: Berg v. Traylor: Why was Craig, as a minor, allowed to disaffirm the contract?

Under contract law, minors generally have the right to disaffirm contracts they enter into before they turn 18 to protect them from being bound by agreements they may not fully understand. Craig, being only 10 years old when he entered the contract, exercised this right to void it.

Minors: Disaffirmance: Berg v. Traylor: Why was Craig's mother not allowed to disaffirm the contract?

Craig's mother had signed the contract not only on behalf of Craig but also in her personal capacity. Because she was an adult, she was legally bound to the terms of the contract and could not use Craig's minor status to avoid her own obligations.

Minors: Disaffirmance: Berg v. Traylor: What role did Sharon Berg play in the contract, and what was she entitled to?

Sharon was Craig's agent, securing a three-year contract under which she was entitled to a 15% commission on Craig's earnings. The contract also stipulated that if Craig continued working beyond the three years, she would still receive 15% of his earnings.

Minors: Disaffirmance: Berg v. Traylor: What is the legal principle behind allowing minors to void contracts?

The principle is based on protecting minors from unfair or burdensome obligations due to their lack of legal maturity. Minors can disaffirm contracts at any time before reaching the age of 18 and for a reasonable time afterward, except in cases involving necessities or certain real estate contracts.

Minors: Disaffirmance: Berg v. Traylor: What was the court's ruling in regard to Craig and his mother?

The court ruled that Craig, as a minor, could legally disaffirm the contract, meaning he was no longer bound by it. However, his mother, who signed individually, remained liable under the contract and could not disaffirm it on the basis of Craig's minor status.

Minors: Disaffirmance: Berg v. Traylor: What was Craig's mother trying to argue in court?

Craig's mother attempted to argue that she should also be released from the contract because Craig was a minor and had disaffirmed it. However, since she had signed as an individual party, the court rejected her argument.

Minors: Disaffirmance: Berg v. Traylor: What lesson does this case illustrate about contracts involving minors?

The case illustrates that while minors have the right to disaffirm contracts, adults who sign on their behalf or in their own capacity cannot avoid their obligations simply because the minor does. If an adult signs individually, they are still legally bound.

Why do contracts with minors often include a requirement for a parent or guardian to sign?

Since minors can disaffirm contracts, businesses often require a parent or guardian to sign to ensure there is at least one legally responsible party who cannot void the contract. This protects the business from financial loss.

Minors: Ratification: In Re the Score Board, Inc.: What was the nature of the contract Kobe Bryant signed when he was 17?

Kobe Bryant signed a contract with a sports merchandise company agreeing to autograph trading cards and sports merchandise in exchange for payment. The contract included a $10,000 signing bonus if he signed and returned it quickly.

Minors: Ratification: In Re the Score Board, Inc.: Why did Kobe Bryant argue that the contract was void?

He argued that the contract was void because he was 17 when he signed it, and contracts signed by minors are generally voidable under contract law.

Minors: Ratification: In Re the Score Board, Inc.: What happened after Kobe turned 18 in relation to the contract?

After turning 18, Kobe received a $10,000 check from the merchandise company. He cashed the check and continued signing autographs for 18 months, fulfilling the terms of the contract.

Minors: Ratification: In Re the Score Board, Inc.: How did the merchandise company use the contract when it filed for bankruptcy?

The merchandise company listed the contract as an asset in its bankruptcy proceedings because it allowed it to sell Kobe Bryant's autographed merchandise.

Minors: Ratification: In Re the Score Board, Inc.: What was the court's ruling regarding the validity of the contract?

The court ruled that the contract was voidable, not automatically void. Because Kobe did not disaffirm the contract upon turning 18 and instead continued to perform under it, he implicitly ratified the contract, making it enforceable.

What is the difference between a void and a voidable contract in the context of minors?

A void contract is one that is invalid from the start and has no legal effect. A voidable contract is valid but can be canceled by the minor upon reaching adulthood. If the minor does not disaffirm the contract after turning 18, it may become binding.

Minors: Ratification: In Re the Score Board, Inc.: What action (or inaction) did the court consider as implied ratification of the contract?

The court determined that Kobe cashing the $10,000 check in continuing to sign autographs for 18 months indicated his acceptance of the contract terms. His actions showed he intended to honor the agreement, which ratified the contract.

Minors: Ratification: In Re the Score Board, Inc.: What could Kobe have done differently to effectively disaffirm the contract after turning 18?

To properly disaffirm the contract, Kobe should not have cashed the check, not signed any further merchandise, and notified the company in writing that he was disaffirming the contract. By doing these, he could have voided the agreement and relieved himself of any obligations under it.

Minors: Ratification: In Re the Score Board, Inc.: How does this case highlight the importance of a minor's actions after turning 18 regarding contracts?

The case shows that while minors can void contracts, they must take action to disaffirm them upon reaching adulthood. If they continue to act as if the contract is valid - such as accepting payments or fulfilling obligations - it becomes ratified and legally binding.

Minors: Ratification: In Re the Score Board, Inc.: What legal principle did the court clarify regarding minor contracts?

The court clarified that a minor's contract is not void but voidable - meaning the minor must actively disaffirm it upon turning 18. If they fail to do so and continue to benefit from the contract, it is considered ratified and enforceable.

Minors: Liability for Necessaries: Zelnick v. Adams: What was the main legal issue in Zelnick v. Adams?

The main legal issue was whether a contract for legal services entered into a behalf of a minor was voidable upon a plea of infancy or enforceable under the doctrine of necessaries.

Minors: Liability for Necessaries: Zelnick v. Adams: What legal services did attorney Robert J. Zelnick provide for Jonathan Adams?

Zelnick represented Jonathan is a legal claim to have him recognized as a beneficiary of his grandfather's estate and trusts, which could have entitled him to future distributions.

Minors: Liability for Necessaries: Zelnick v. Adams: Why did Jonathan Adams' father file a complaint to declare the contract with Zelnick void?

He argued that the contract was void because Jonathan was a minor when it was signed, and minors can generally disaffirm contracts

Minors: Liability for Necessaries: Zelnick v. Adams: What was Jonathan Adam's argument when he disaffirmed the contract after reaching adulthood?

He argued that the legal services were not necessary because:

1. His paternity had already been established in a Florida decree.

2. The trust distributions were not due until 2014 and 2021, making the issue not "ripe" for litigation.

3. The contingency fee agreement was unreasonable.

Minors: Liability for Necessaries: Zelnick v. Adams: How did the trail court initially rule on the contract between Zelnick and Jonathan?

The trial court ruled that the contract was void because Jonathan was a minor when it was signed. The court also held that the doctrine of necessaries did not apply since the legal services could have been sought after Jonathan turned 18. However, Zelnick was awarded $60,000.

Minors: Liability for Necessaries: Zelnick v. Adams: What is the doctrine of necessaries, and how does it relate to contracts with minors?

The doctrine of necessaries states that a minor may be held responsible for contracts related to essential goods or services, such as food, clothing, shelter, education, or legal services necessary to protect their rights. If a contract falls within this doctrine, the minor cannot void it entirely but is only required to pay the reasonable value of the services provided.

Minors: Liability for Necessaries: Zelnick v. Adams: What did the Virginia Supreme Court decide on appeal?

The Virginia Supreme Court reversed and remanded the trial court's decision, ruling that legal services can qualify as necessary under certain circumstances. It held that the trial court erred in deciding that the doctrine of necessaries did not apply without considering all the evidence.

Minors: Liability for Necessaries: Zelnick v. Adams: What was the Supreme Court's reasoning for remanding the case?

The court determined that the issue of whether Zelnick's legal services were actually necessary should be decided based on the facts. The trial court needed to consider whether Jonathan needed legal representation to protect his financial interests and whether his status as a beneficiary was truly a risk without legal action. The case was sent back to trial to determine whether the legal services were necessary and, if so, what their reasonable value was.

Minors: Liability for Necessaries: Zelnick v. Adams: If the trial court determines that Zelnick's services were necessary, what will Jonathan be required to pay?

Jonathan will be required to pay the reasonable value of the legal services, not necessarily the full contingency fee originally agreed upon.

Minors: Liability for Necessaries: Zelnick v. Adams: How does this case impact the enforceability of contracts for legal services provided to minors?

It establishes that legal services can be considered necessary under certain circumstances. However, courts must examine whether the services were actually necessary to the minor's interests. If they were, the minor might be required to pay a reasonable fee despite disaffirming the contract.

Contracts made by a person placed under guardianship by court order are void

Person under guardianship

Mental illness or defect

A contract entered into by a mentally incompetent person (one who is unable to understand the nature and consequences of his acts) is voidable. Either party may be liable in restitution.

Intoxicated persons

A contract entered into by an intoxicated person (one who cannot understand the nature and consequence of their actions) is voidable. Slight intoxication does not cut it; it has to be to the point where there is a serious impairment to being able to understand or remember the events.

What is the majority rule?

The minor can disaffirm even if they lie about their age.