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The Holt Case (Promissory Estoppel)
Plaintiff works for Home Depot and the internal complaint procedure as outlined in the employee handbook
If used, Home Depot would not fire you
There was a reliance on the promise made in the handbook to not be fired for making a complaint
The jury ruled in favor of Holt
Most courts state that employee handbooks don't create a contract
The Meram Case (Objective Approach)
Insurance sales presentation that is open to the public by a company worth a billion dollars
The presentation was put on by McDonald who has a billion-dollar insurance company
Says "I will pay you a million dollars if you put your business card in the hat and you sit through the presentation and your card is chosen at the end"
Plaintiff Meram's business card was chosen and he is expecting a million dollars
Gives him 100 dollars and then a dollar a year
Meram sues for a breach of contract
Alliance Inc and McDonald move for a motion to dismiss
Meram wins the motion to dismiss because the court used objective intent to analyze the case
The reasonable person could actually think they were getting a million dollars because Alliance was such a large company (objective approach)
McDonald secretly intended not to actually play
The Armstrong Case (Specificity of an Offer)
2 guys working for a plant company are told if they leave the company will outsource 'as much work as they can handle' to them
Based on that statement they leave and start their own company
They end up getting little work and sue for breach of contract
The court sided with their former employers because the contract was very vague and therefore it cannot be interpreted as intent (specificity of an offer)
The Leonard Case (Ads are not Offers)
Pepsi had a commercial about points and if you got enough points you can win prizes
One of the prizes was a 23 million jet
Leonard sees the ad and wants to get the jet
You could buy points for 10 cents each rather than having to buy actual drinks
Pepsi did not actually give Leonard the jet and he sues them
Pepsi won the case because no reasonable person would expect to get the jet
The ad was not specific about how many jets there was and had no time limit
The jet was not even in the catalog of the possible prizes (ads are not offers)
The Okosa Case (Mailbox Rule)
Okasa(plaintiff) has an auto insurance policy and had quarterly premium payments
Was sent a letter by insurance that the policy is going to be canceled by March 16 unless payment is received
The day before that deadline, she mails a check by certified mail and gets a receipt
On March 16, she is in an accident with an uninsured driver
Uninsured driver, then you make a claim on your own policy
Insurance denied the claim on the basis that they didn't receive her payment by the 16th
Sues the insurance for breach of contract and the insurance company wins summary judgment
Appeals the case and wins the appeal
She won because, under the mailbox rule, she accepted their offer when she sent her acceptance(check) the day before the deadline
The McGurn Case (Silence as Acceptance)
McGurn is negotiating the terms of a job with a company, Bell, and he wants a 24-month termination clause
This means if he is fired within the first 24 months then he is owed severance pay
They make three separate employment offers and none of them are with the 24-month termination clause
The final one has a 12-month termination clause
He crosses out 12 months and writes 24 months, signs it, and sends it back to Bell
Bell never responds and McGurn starts working for 13 months and is fired
He demands severance and Bell refuses
The court decided that the silence is acceptance because they accepted the benefit of his 13-month employment
In this case, silence is acceptance and lets the jury decide
The Heye Case (Illusory Promise)
Plaintiff Heyes was hired by a golf company and was given an employee handbook and it stated that any conflict with the company must go to the arbitration clause
She was fired and filed lawsuits against the company under sex discrimination
At first, the court affirmed the arbitration
She made a motion for reconsideration for the court to reconsider and change their mind and she wins
The company takes the appeal and the court said that the arbitration agreement was an illusory promise
Under the handbook, the company said that they reserve the right to change any part of the handbook at any time for any reason
The Skebba Case (Promissory Estoppel)
M.W Cash Co. hired Skebba and became VP of sales
They were having financial difficulties and Skebba was considering taking another offer at a better job
Skebba wanted 3 conditions to be met in order to stay at the company
One of which was to pay Skebba $250,000
After 6 years the company was sold they did not pay Skebba the money and they did not keep the promise
The court stated that there was no contract but there was promissory estoppel
Skebba appealed and won and he was rewarded $250,000 in damages
The Jordan Case (Fraud)
Involving the basketball player, Michael Jordan
Had a clean public image and got many endorsement deals from his image
It was exposed that he was cheating on his wife with a singer and gets her pregnant
He promised to pay her $5 million when he retires if she kept quiet
He retires and he refuses to pay her (not his kid)
She demands he pay under a breach of contract and he sues her for defrauding him because he claims she knowing entered this contract when she knew the baby was not his
He ultimately wins because the contract was not enforceable because she did indeed defrauded him because she was sleeping with multiple other men at the same time when she got pregnant
Fairly likely that there was a good chance it was not Jordan's baby even without a paternity test
The Nelson Case (Mutual Mistake & Unconscionability)
Nelson dies leaving an estate which includes artwork
Administrators of the estate hires someone to do an appraisal of the artwork
When hired she says I can do the appraisal but I would not be able to recognize fine art (valuable art) but they hire her anyway
She says she does not see any fine art in the estate
There is an estate sale and a guy buys 2 paintings for 60 dollars and he sells them at auction for a million dollars
The paintings were done by a famous artist in the 1800s
The estate tries to get out of the sales contract under which they sold the two paintings for 60 under the theory of mistake
Estate loses the case because they knew they did not know the true state of affairs because the appraiser told them she wouldn't recognize fine art
The Straub Case (Mutual Mistake)
Male-female couple in a long-term relationship
She wants a kid but her partner does not want a kid because they are expensive
She convinces him to enter into a contract where he will impregnate her but he will not be held financially responsible
She gets pregnant and has the kid
She has a change of heart and wants him to pay for the kid
She sues him and the contract is unenforceable because it violated the public policy of Indiana law
State law states that biological parents must pay child support if they are financially able to
He loses and has to pay for the kid
The McCume Case (Exculpatory Clause)
The plaintiff went to play paintball and signed a waiver stating that the business isn't responsible for any negligence
The staff poorly put a mask on her (negligently) that resulted in her becoming permanently blind in the eye that was shot by a paintball
She sues the business.
Court: The court rules in the business's favor. The waiver is valid because this issue was indeed one of negligence.
Law of Contracts
deals with the enforcement of promises
only some are enforceable
Freedom of Contract
courts should not interfere with contracts because contracts are the product of free will of the people who enter into them
20th Century of Contracts
dramatic increase of regulation by the government and courts of private contracts
employment contracts
insurance contracts
General Rule of Contracts
contracts need to be oral or written to be enforceable
does not need to be written but is it easier to enforce if written
4 Basic Elements of a Contract
voluntary agreement - offer and acceptance of the offer
consideration - something of legal value that every party in the contract gives to the other parties in the contract
capacity - adult and without mental impairment
objective and performance of the contract must be legal - illegal contracts cannot be enforced
4 Ways to Classify Contracts
bilateral vs unilateral
valid, unenforceable, voidable, and void
expressed vs implied
executed vs executory
Bilateral Contracts
both parties make a promise
almost all contracts are bilateral
Unilateral Contracts
one party makes a promise to the other
frequent flyer program (airline promises you point rewards but you don't promise anything)
blackout period: limited period
Valid Contracts
meets all 4 of the basic elements to a contract which makes it enforceable
employee contract
Unenforceable Contracts
meets all 4 basic elements to a contract but is not enforceable for some other reason
Statute of Frauds
requires some contracts to be in writing to be enforceable
buying a house: if not in writing the contract is not enforceable
Statute of Limitations Expired
the period in which you can sue has [assed
for breach of contracts the statute is approx 3-6 years
Voidable Contracts
agreement in which one or more parties are entitled to get out the of the contract once they are in it
minors, mentally impaired, and victims of fraud
Void Contracts
illegal contracts
Expressed Contracts
terms of contracts are explicitly stated either orally or in writing
Implied Contracts
terms of contracts are not explicitly stated, but we can figure out the terms by looking at the circumstances of the transaction
Executed Contracts
when all of the parties have fully performed their contractual duties
Executory Contracts
when all parties have not fully performed their duties
2 Main Sources of Contract Laws
Common law
Uniform Commercial Code (UCC)
Common Law
laws that judges create
UCC Article 2
Applies to contracts for the sale of goods
goods are tangible, movable, and are personal property
Hybrid Contracts
deals with a combination of goods and services
source depends on the dollar value of good and dollar value of service
If good > service dollar value, → UCC
If good < service dollar value, → Common Law
Non-Contract Obligations
a situation where there is some kind of arrangement (not contract) that is still enforceable by the court
Unjust Enrichment
one benefiting unfairly at another's expense
A provides a benefit to B, who knowingly accepts the benefit, unjust to allow B to accept the benefit without paying for it, therefore the court will require B to pay A
Promissory Estoppel
An equitable doctrine that protects those who foreseeably and reasonably rely on the promises of others by enforcing such promises when enforcement is necessary to avoid injustice, even though one or more of the elements normally required for an enforceable agreement is absent
knowingly accept
promisor and promisee
Promissory Estoppel 3 Requirements
all three must be shown
promisor made a promise to the promisee and the promisor should have expected that the promisee would have relied on that promise
Promisee did rely on the promise (actual reliance)
unjust to allow the promisor to break the promise
Offerer
the person who makes the offer
Offeree
the person to whom the offer is made
3 Requirements of an Offer
objective indication of intent to enter a contract on the part of the offerer
specificity of the alleged offer
communication of the offer to the offeree
How to Discern Intent
joking does not equal intent
subjective - what did the offerer actually/secretly intend when they said what they said
objective - does not care about what someone thinks but asks what would a reasonable person who heard the offer think/do
Specificity of the Offer
2 reasons for for this requirement
the less specific the deal the less likely it shows intent
too much vagueness then the court is going to have a tough time figuring out of a breach of contract actually occurred
4 Terms Courts Can Fill In
price
quantity
delivery/conditions
time for payment
exception: if the reason for a missing term is due to parties not agreeing then. the courts will not fill in the terms = no intent
Communication of the Offer
indirect communication does not count (exception if the person is acting as a agent)
ads are not offers (the more specific the ads are, the more likely it is to be an offer)
ads for rewards are offers
Terms Included in an Offer
the terms accepted are the ones you had actual or reasonable notice of
small writing at the. end does not count
Termination of Offers
if an offeror terminates the offer, it can no longer be accepted
7 ways an offer terminates
Termination: By the Terms of the Offeror
offeror includes a term in the offer that limits its duration
Termination: By Lapse of Time
terminates after a reasonable amount of time has occurred which is determined by the judge/jury
subject matter can be subjected to rapid fluctuation of value - the offer has a short duration
Termination: Revocation
an offer can be revoked at any time before acceptance of time and that X amount has not passed even if the offeror says it'll remain open for X amount
Termination: Rejection
2 types of rejections
expressly - offeree states they refuse
impliedly - make counteroffers
Termination: Death or Mental Insanity
the offer is terminated if either party dies or goes instance after the offer is given
Termination: Destruction of Subject Matter
if, just before the offer is accepted, the subject matter is destroyed without either party knowing/being at fault, the offer is terminated
Termination: Intervening Illegality
an offer terminates if the performance in contracts becomes illegal before the offer is accepted
ex: drug becomes illegal before the offer is accepted
3 Requirements for an Acceptance
all three must be met
offeree has to intend to enter into a contract
offeree has to accept the terms proposed by the. offerer
offeree must communicate acceptance to the offer
Approach Used by Courts to Figure Out Intent
objective approach - what would a reasonable person who heard what the offerer said would think
The Mirror Image Rule
accept exactly the terms and no new terms
new terms or any. alternations are treated as an counteroffer
Communicate Acceptance Details
the offeror is entitled to specify how and when the acceptance can be made or occur
could accept in any reasonable manner unless specified
if the subject matter of the acceptance is time-constrained then there is a shorter reasonable time
The Mailbox Rule
acceptances are effective when sent even if never received by the offeror
offeror is entitled to modify the mailbox rule and say that the acceptance is only valid when received by the offeror
Silence as Acceptance
generally, silence by the offeree is not acceptance
3 Exceptions to Silence as Acceptance
there are prior dealings between the parties and there is a mutual understanding of silence as acceptance
an offer is made and the offeree says if you don't hear from me then take it as an acceptance
offeree is silent, offeror assumes acceptance and acts, offeree accepts benefits from acts then there is acceptance to the contract
Acceptance When a Writing is Expected
there is a deal even if the terms of the contract are not in writing
can sue for breach of contract
exception: evidence shows that there was an intention that that there is no deal until in writing
Who Can Accept the Offer
only the offeree can accept the offer unless there is an agent involved
Consideration
the legal value given by everybody who is a party to the contract to everybody else who is a party to the contract
Adequacy of Consideration
if one party makes a bad deal then it is their own problem
exception: if the deal is bad enough the court may refuse to enforce it if there is evidence that the reason the deal is bad is that one party defrauded the other party into entering the contract/lacked capacity
4 Forms of Consideration
you do something you had no prior obligation to do
your promise to do something you had no prior obligation to do
you refrain from doing what you are entitled to do
you promise to refrain from doing something you are entitled to do
Not Consideration: Illusory Promises
looks like consideration/promise but isn't actually consideration/promise
promise that does not bind or require the individual to do anything or refrain from doing anything therefore is not a contract
ex: Heye Case
Not Consideration: Preexisting Duties
if you already have a duty to do something and the consideration in the contract is that you are going to do that preexisting duty that does not constitute consideration
Preexisting Public Duty
deals with obeying the law - not consideration
Contract Modification under UCC
do not need consideration
oral modifications do not count
500 dollars+ must be in writing
UCC is only with the sale of goods
Contract Modification under Common Law
you do need new consideration
Agreement to Settle Debts
deals with credit card debt or gen debt
can negotiate a reduction in debt payment
Liquidated Debt
debt where there. is no dispute on how much is owed - unenforceable
I'll pay half of what I owe you - not consideration
I'll pay half of what I owe 2 weeks early - yes consideration
Unliquidated Debt
dispute about how much is owed
Some of the charges aren't yours and the bank removes those, they cannot come after you for those removed charges later - enforceable
Called Accord and Satisfaction
Composition Agreement
owes a debt to multiple creditors
each creditor agrees to accept a small percentage of the total owed - enforceable
Not Consideration: Past Consideration
does not count as a consideration
an act or benefit given in the past that was not given in exchange for the promise in question
Exceptions to the Consideration Requirement
promissory estoppel - subs consideration
promise to pay a debt where the statute of limitations expired
promise to pay a debt you discharged in bankruptcy
charitable gifts
Rescind
to terminate the contract as to future transactions or to annual the contract from the beginning
only the injured can rescind
Ratification
the adoption of affirmance by a person of a prior act that did not bind them and continue to receive benefits from the contract
Rescind vs. Ratification
if person ratifies then they can no longer rescind
Misrepresentation
making the statement but does not know it's false
should be allowed out of the contract because the other party made a misrepresentation during negotiations
Misrepresentation 4 Requirements
there was a false statement of fact
has to have relied on the fact
has to be material/significant
the reliance has to be justified
Fraud
making statements but knew it was false
Fraud 5 Requirements
false statement of fact
has to have relied on the fact
has to be material/significant
the reliance has to be justified
scienter
Scienter
person making the statement knew it was false. and the intent was to deceive the other person
Mistake
during the negotiations either party are mistaken about some important fact and you either into the contract on the basis of that mistake
2 Kinds of Mistake: Mutual
both parties are mistaken about the same basic fact
Prove 3 Things to Leave Mutual Mistake Contract
mistake relates to the basic assumption on which the contract was entered into
assumption: identify, existence, quality, and quantify
has to be material
the party adversely affected by the mistake does not bear the risk of the mistake
2 Kinds of Mistake: Unilateral
only one party is mistaken
more difficult for the court to agree to
Prove 4 Things to Leave Unilateral Mistake Contract
mistake relates to the basic assumption on which the contract was entered into
has to be material
the party adversely affected by the mistake does not bear the risk of the mistake
must prove either A or B A.) the non-mistaken party either caused the mistake or knew of the mistake but did not tell B.) it would be extremely unfair to enforce the contract
Duress
wrongful coercion that induces a person to enter into a modified contract
2 Kinds of Duress: Physical Compulsion
physically forcing someone to sign a contract
void contract
2 Kinds of Duress: Threat of Physical, Emotional, or Economic Harm
threat to kill dog
2 Requirements to Leave Contract Under Duress
victim must show there was an improper act or threat
victim must show they had no reasonable alternative but to. give in to the duress
Undue Influence
unfair persuasion
ex: rich elderly person who has a evil caretaker and persuades the elderly person to change their will to leave everything to them instead
Undue Influence Proof
show either a relationship of trust or confidence between the victim and evil person
or show how the evil person had dominance over the victim
Factors for Unfairness
is the victim kept isolated and unable to discuss with family
is the result of the change that the distribution of assets is suspicious
Capacity
the ability to give voluntary consent to enter into a contract
no capacity then there is not an enforceable contract
3 Categories of People Who May Not Have Capacity
minors
mental illness/impairment
intoxicated people
Disaffirmance
The legal avoidance, or setting aside, of a contractual obligation.
Note
Flashcard