Fluent Essays

3Q  600 words Kingdom of Saudi Arabia Ministry of Education Saudi Electronic University المملكة العربية السعودية وزارة التعليم الجامعة السعودية الإلكترونية College of Administrative and Financial Sciences Assignment 1 Low of Business (LOW 101) Course Name: Low of Business Student’s Name: Course Code: low 101 Student’s ID Number: Semester: First CRN: 15181 Academic Year:2021-22 For Instructor’s Use only Instructor’s Name: Students’ Grade: Marks Obtained/Out of 5 Level of Marks: High/Middle/Low Instructions – PLEASE READ THEM CAREFULLY · The Assignment must be submitted on Blackboard (WORD format only) via allocated folder. · Assignments submitted through email will not be accepted. · Students are advised to make their work clear and well presented, marks may be reduced for poor presentation. This includes filling your information on the cover page. · Students must mention question number clearly in their answer. · Late submission will NOT be accepted. · Avoid plagiarism, the work should be in your own words, copying from students or other resources without proper referencing will result in ZERO marks. No exceptions. · All answered must be typed using Times New Roman (size 12, double-spaced) font. No pictures containing text will be accepted and will be considered plagiarism). · Submissions without this cover page will NOT be accepted. Action Items 1. For Week 2, you will analyze the cases in the Questions and Problems based on the group to which your instructor assigns you. . Group 1: Chapter 2 (4, 5, and 7) in Dynamic Business Law . Group 2: Chapter 2 (8-10) in Dynamic Business Law · For each assigned case, analyze the issue based on the following criteria: . Identify the parties involved in the case dispute (who is the plaintiff and who is the defendant). . Identify the facts associated with the case and fact patterns. . Develop the appropriate legal issue(s) in question (i.e., the specific legal issue between the two parties).Provide a judgment on who should win the case - be clear. . Support your decision with an appropriate rule of law. · Be prepared to defend your decision and to objectively evaluate the other points of view. Group 1 4. Jarold Daniel Friedman worked as a temporary computer contractor for a pharmaceutical ware- house. The warehouse offered him a permanent position, but the warehouse required that he get a mumps vaccine, grown in chicken embryos, as a condition of his permanent employment. Friedman, a vegan, believed that the vaccination would violate his religious beliefs and declined to be vaccinated. As a result, the warehouse withdrew its offer of employment. Friedman claimed that the warehouse discriminated against him on the basis of religion. Do you agree with Friedman? Do employers have a duty to respect the beliefs of their employees? If so, what happens when that duty conflicts with employers' duty to provide a safe and healthy work environment? [Friedman v. Southern California Permanente Medical Group, 102 Cal. App. 4th 39 (2002).] 5. Jennifer Erickson sued her employer, Bartell Drug Company, contending that its decision not to cover prescription contraceptives under its employee pre- scription drug plan constituted sex discrimination. Bartell argued that its decision was not sex discrim- ination because contraceptives were preventive, were voluntary, and did not treat an illness. With whom do you agree? Why? What values did you use to reach your conclusion? [Erickson v. Bartell Drug Co., 141 F. Supp. 2d 1266 (2001).] 7. Ernest Price went to a doctor in 1997, seeking Oxycontin to treat pain related to sickle cell ane- mia. Between November 1999 and October 2000, Price sought Oxycontin prescriptions from at least ten different doctors at ten different clinics in two cities, filling the prescriptions at seven pharmacies in three cities. The doctors were notified of Price's medication-seeking behavior, and the doctors dis- continued Price's treatment. Price then filed suit, claiming his doctors, pharmacies, and the pharma- ceutical companies that manufactured Oxycontin had breached their duty by failing to adequately warn Price of the addictive nature of Oxycontin. think the court responded to Price's How do you claims? Think about all the stakeholders involved in such a cas… Good Luck Answers Chapter 02 Business Ethics McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved. * Chapter 2: Business Ethics Chapter 2 Case Hypothetical and Ethical Dilemma As hiring coordinator for Hennessey Networking Solutions, Inc. (Hennessey), Andrea Templeton knew that her position was of utmost importance to her company in terms of hiring candidates who were well-qualified, and who would best contribute to the company’s overall success. On her desk was the employment application and resume of Timothy Carraway. Andrea had just finished her interview of Timothy, who was the last in a long line of interviewees who had applied for an entry-level information technology (IT) position at Hennessey. Hennessey only had one (1) opening available. During Timothy’s interview, the candidate revealed that seven (7) years ago, he had been tried and convicted in federal court for selling a significant amount of cocaine. Timothy had also revealed the conviction on his employment application. Timothy went to great lengths to explain to Andrea that he sincerely regretted the indiscretions of his youth, and that he had spent the last seven (7) years of his life “paying penance,” and reforming his life. After serving three (3) years in federal penitentiary, Timothy had earned his bachelor’s degree in Information Technology, graduating with honors. Timothy’s interview had gone very well. In fact, Andrea felt that in terms of his personality and education, he was the best “fit” for the position. Andrea was obviously concerned about Timothy’s criminal background, but she was also concerned about the young man should he not find an employment opportunity after graduating from college. Without a legitimate employment option, would Timothy revert back to his “criminal ways? Does Andrea Templeton and Hennessey Networking Solutions, Inc. have an ethical obligation to hire Timothy Carraway? Should Andrea’s “hire” decision be based exclusively on Timothy’s qualifications for the job? Why or why not? 2-* Chapter 2 Case Hypothetical and Ethical Dilemma: As hiring coordinator for Hennessey Networking Solutions, Inc. (Hennessey), Andrea Templeton knew that her position was of utmost importance to her company in terms of hiring candidates who were well-qualified, and who would best contribute to the company’s overall success. On her desk was the employment application and resume of Timothy Carraway. Andrea had just finished her interview of Timothy, who was the last in a long line of interviewees who had applied for an entry-level information technology (IT) position at Hennessey. Hennessey only had one (1) opening available. During Timothy’s interview, the candidate revealed that seven (7) years ago, he had been tried and convicted in federal court for selling a significant amount of cocaine. Timothy had also revealed the conviction on his employment application. Timothy went to great lengths to explain to Andrea that he sincerely regretted the indiscretions of his youth, and that he had spent the last seven (7) years of his life “paying penance,” and reforming his life. After serving three (3) years in federal penitentiary, Timothy had earned his bachelor’s degree in Information Technology, graduating with honors. Timothy’s interview had gone very well. In fact, Andrea felt that in terms of his personality and education, he was the best “fit” for the position. Andrea was obviously concerned about Timothy’s criminal background, but she was also concerned about the young man should he not find an employment opportunity after graduating from college. Without a legitimate employment option, would Timothy revert back to his “criminal ways? Does Andrea Templeton and Hennessey Networking Solutions, Inc. have an ethical obligation to hire Timothy Carraway? Should Andrea’s “hire” decision be based exclusively on Timothy’s qualifications for the job? Why or why not? * Chapter 2 Ethical Dilemma What is the best source for ethical business practices: The individual employee, or the business organization itself? To what extent should individual employees be allowed to lend input in the creation of a code of ethics for a business organization? In the event that an individual employee’s ethical standards differ from his/her employer’s code of ethics, what can/should be done to resolve those differences? 2-* Chapter 2 Ethical Dilemma: What is the best source for ethical business practices: The individual employee, or the business organization itself? To what extent should individual employees be allowed to lend input in the creation of a code of ethics for a business organization? In the event that an individual employee’s ethical standards differ from his or her employer’s code of ethics, what can or should be done to resolve those differences? * Business Ethics and Social Responsibility Ethics: The study and practice of decisions about what is good or right Business Ethics: The application of ethics to the problems and opportunities experienced by businesspeople Ethical Dilemma: A problem about what a firm should do for which no clear, right decision is available Social Responsibility of Business: Expectations that the community imposes on firms doing business inside its borders 2-* * In addressing the topics of business ethics and social responsibility, several key topics are important to comprehend. First, “ethics” is the study and practice of decisions about what is good or right. Second, “business ethics” is the application of ethics to the problems and opportunities experienced by businesspeople. Third, an “ethical dilemma” is a problem regarding what a firm should do in situations where no clear, just decision is available. Finally the “social responsibility” of business represents expectations that the community imposes on firms doing business within its borders. The “WPH” Process of Ethical Decision Making: W—WHO (Stakeholders) Consumers Owners or Investors Management Employees Community Future Generations 2-* * The “WPH” process of ethical decision-making first involves a determination of “who” is affected by the decision-making process. These individuals are known as “stakeholders,” and include consumers, owners or investors, management, employees, the community-at-large, and future generations. The “WPH” Process of Ethical Decision Making: P—PURPOSE (Values) Freedom Security Justice Efficiency 2-* * The “WPH” process of ethical decision-making next involves a determination of the “purpose” or “values” involved in the decision-making process. These purposes or values include freedom, security, justice, and efficiency. Primary Values and Business Ethics: Freedom To act without restriction from rules imposed by others To possess the capacity or resources to act as one wishes To escape the cares and demands of this world entirely 2-* * The primary values of freedom include the right to act without restriction from rules imposed by others, the right to possess the capacity or resources to act as one wishes, and the right to escape the “cares and demands of this world” entirely. Primary Values and Business Ethics: Security To possess a large enough supply of goods and services to meet basic needs To be safe from those wishing to interfere with your property rights To achieve the psychological condition of self-confidence to such an extent that risks are welcome 2-* * The primary values of security include the right to possess a large enough supply of goods and services to meet basic needs, the right to be safe from those wishing to interfere with your property rights, and the right to achieve self-confidence to such an extent that risks are welcome. Primary Values and Business Ethics: Justice To receive the products of your labor To treat all humans identically, regardless of race, class, gender, age, and sexual preferences To provide resources in proportion to need To possess anything that someone else is willing to grant you 2-* * The primary values of justice include the right to receive the products of your labor, the right to treat all humans identically (regardless of race, class, gender, age, and sexual preferences,) the right to provide resources in proportion to need, and the right to possess anything that someone else is willing to grant you. Primary Values and Business Ethics: Efficiency To maximize the amount of wealth in society To get the most from a particular output To minimize costs 2-* * The primary values of efficiency include the right to maximize the amount of wealth in society, the right to get the most from a particular output, and the right to minimize costs. The “WPH” Process of Ethical Decision Making: H—HOW (Guidelines) Public Disclosure Universalization Golden Rule 2-* * The “WPH” process of ethical decision-making finally involves the determination of “how” to best conduct the decision-making process, in recognition of appropriate decision-making guidelines. This includes public disclosure, “universalization,” and adherence to “The Golden Rule.” Chapter 03 The U.S. Legal System McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved. * Chapter 3: The U.S. Legal System Chapter 3 Case Hypothetical #1 Officer Brian Perkins was having a difficult Monday morning. For the past three hours, he was responsible for “serving process” in three (3) civil cases (As Chapter 3 indicates, service of process is the procedure by which courts present litigation documents to defendants. Those documents typically consist of a complaint, which specifies the factual and legal basis for the lawsuit and the relief the plaintiff seeks, and a summons, a court order that notifies the defendant of the lawsuit and explains how and when to respond to the complaint). For the first civil case, Merriwether v. Alstott, Officer Perkins attempted to serve the defendant Harry Alstott at his home, but no one appeared to be there. For the second civil case, Setliff v. Sanders, the person answering the door claimed the defendant, Marshall Sanders, did not live there, and that he did not even know who Marshall Sanders was. Leaving the premises, Officer Perkins surmised that the residential address indicated on the summons was incorrect. Either that, or the person who answered the door was lying. For his third attempt at service of process that morning, in a lawsuit captioned Jackson v. Graves, Officer Perkins drove to the home of Laticia M. Graves at 721 Magnolia Street. Officer Perkins knocked on the door of the dilapidated house, and although no one answered the door, a second-story window opened almost immediately. A female in the house looked down from her second story vantage point and pointedly asked Officer Perkins, “What do you want?” Officer Perkins responded with a question, “Are you Laticia Graves,” to which the woman responded, “Yeah. What’s it to you?” Officer Perkins asked the not-so-polite occupant to open the door, to which she responded, “I ain’t comin’ down there, and if you ain’t got a warrant, you ain’t comin’ in.” Frustrated, Officer Perkins replied, “Well, I have civil papers to serve you, ma’am, and if you won’t come down to get them, I’m going to put them in your mailbox.” The response was, “I ain’t comin’ to the door.” Officer Perkins immediately proceeded to the mailbox, and put the complaint and summons in the matter of Jackson v. Graves in the box. The address on the mailbox indicated 721 Magnolia Street. In his notes, Officer Graves wrote that the defendant, Laticia Graves, had been served with process on Monday, September 13, 2010 at 11:47 a.m. As he entered his patrol car, Officer Perkins looked backed at the second-story window from which he had received his impolite greeting. The woman had since closed the window, and was watching his every move. Did Officer Perkins effectively serve process on the defendant, Laticia Graves? Why or why not? 3-* Chapter 3 Case Hypothetical: Officer Brian Perkins was having a difficult Monday morning. For the past three hours, he was responsible for “serving process” in three (3) civil cases (As Chapter 3 indicates, service of process is the procedure by which courts present litigation documents to defendants. Those documents typically consist of a complaint, which specifies the factual and legal basis for the lawsuit and the relief the plaintiff seeks, and a summons, a court order that notifies the defendant of the lawsuit and explains how and when to respond to the complaint). For the first civil case, Merriwether v. Alstott, Officer Perkins attempted to serve the defendant Harry Alstott at his home, but no one appeared to be there. For the second civil case, Setliff v. Sanders, the person answering the door claimed the defendant, Marshall Sanders, did not live there, and that he did not even know who Marshall Sanders was. Leaving the premises, Officer Perkins surmised that the residential address indicated on the summons was incorrect. Either that, or the person who answered the door was lying. For his third attempt at service of process that morning, in a lawsuit captioned Jackson v. Graves, Officer Perkins drove to the home of Laticia M. Graves at 721 Magnolia Street. Officer Perkins knocked on the door of the dilapidated house, and although no one answered the door, a second-story window opened almost immediately. A female in the house looked down from her second story vantage point and pointedly asked Officer Perkins, “What do you want?” Officer Perkins responded with a question, “Are you Laticia Graves,” to which the woman responded, “Yeah. What’s it to you?” Officer Perkins asked the not-so-polite occupant to open the door, to which she responded, “I ain’t comin’ down there, and if you ain’t got a warrant, you ain’t comin’ in.” Frustrated, Officer Perkins replied, “Well, I have civil papers to serve you, ma’am, and if you won’t come down to get them, I’m going to put them in your mailbox.” The response was, “I ain’t comin’ to the door.” Officer Perkins immediately proceeded to the mailbox, and put the complaint and summons in the matter of Jackson v. Graves in the box. The address on the mailbox indicated 721 Magnolia Street. In his notes, Officer Graves wrote that the defendant, Laticia Graves, had been served with process on Monday, September 13, 2010 at 11:47 a.m. As he entered his patrol car, Officer Perkins looked backed at the second-story window from which he had received his impolite greeting. The woman had since closed the window, and was watching his every move. Did Officer Perkins effectively serve process on the defendant, Laticia Graves? Why or why not? * Chapter 3 Case Hypothetical #2 Defendant Woodson is an African-American male accused of murdering a white female in an apartment burglary. During the jury selection process, Prosecutor Forbes exercises only two peremptory challenges, excusing from service the only two African-Americans in the jury. An all-white jury is eventually empanelled, and Defendant Woodson is convicted of first-degree murder, with life imprisonment imposed as punishment. After the jury verdict is announced, Prosecutor Forbes is questioned by the local media concerning his exercise of the peremptory challenges. Prosecutor Forbes explains that race was not a factor in his decision, but that the two potential jurors were excused “because they have facial hair, and as a matter of practice, I do not want individuals with facial hair serving on my jury.” Further, Prosecutor Forbes states “I categorically deny that race played any factor whatsoever in the jury selection process.” On appeal, should the appellate court: 1) deem Prosecutor Forbes’ actions reversible error, and remand the case to the trial court level to be retried; 2) vacate (nullify) the jury verdict, and dismiss the charges against Defendant Woodson; or 3) allow the conviction to stand? Should prosecutors be allowed to consider race as a factor in the jury selection process? Gender? Age? 3-* * Chapter 3 Case Hypothetical: Defendant Woodson is an African-American male accused of murdering a white female in an apartment burglary. During the jury selection process, Prosecutor Forbes exercises only two peremptory challenges, excusing from service the only two African-Americans in the jury. An all-white jury is eventually empanelled, and Defendant Woodson is convicted of first-degree murder, with life imprisonment imposed as punishment. After the jury verdict is announced, Prosecutor Forbes is questioned by the local media concerning his exercise of the peremptory challenges. Prosecutor Forbes explains that race was not a factor in his decision, but that the two potential jurors were excused “because they have facial hair, and as a matter of practice, I do not want individuals with facial hair serving on my jury.” Further, Prosecutor Forbes states “I categorically deny that race played any factor whatsoever in the jury selection process.” On appeal, should the appellate court: 1) deem Prosecutor Forbes’ actions reversible error, and remand the case to the trial court level to be retried; 2) nullify the jury verdict, and dismiss the charges against Defendant Woodson; or 3) allow the conviction to stand? Should prosecutors be allowed to consider race, gender, and age as factors in the jury selection process? Types of Jurisdiction Original Jurisdiction: The power to hear and decide cases when they first enter the legal system Appellate Jurisdiction: The power to review previous judicial decisions to determine whether trial courts erred in their decisions 3-* * “Jurisdiction” refers to the power of a court to hear a particular case. Types of jurisdiction include “original” jurisdiction, which refers to the power to hear and decide a case when it first enters the legal system, and “appellate jurisdiction, which refers to the power to review a lower court decision to determine whether the lower court erred in rendering its verdict. Types of Jurisdiction In personam jurisdiction: The power to render a decision affecting the rights of the specific persons before the court Subject-matter jurisdiction: The power to hear certain kinds of cases 3-* * Other types of jurisdiction include “in personam” jurisdiction, which refers to the power to render a decision affecting the rights of specific persons before the court, and “subject-matter” jurisdiction, which refers to the power to hear certain kinds of cases. Subject-Matter Jurisdiction: Exclusive Federal Jurisdiction Admiralty cases Bankruptcy cases Federal criminal prosecutions Cases in which one state sues another state Claims against the United States Federal patent, trademark, and copyright claims Other claims involving federal statutes that specify exclusive federal jurisdiction 3-* * Federal courts have exclusive subject-matter jurisdiction over the following types of litigation: admiralty cases; bankruptcy cases; federal criminal prosecutions; cases in which one state sues another state; claims against the United States; federal patent, trademark, and copyright claims; and other claims involving federal statutes that specify exclusive federal jurisdiction. Subject-Matter Jurisdiction: Concurrent Federal and State Jurisdiction Federal question cases Diversity of citizenship cases 3-* * Federal and state courts have “concurrent,” or shared, subject-matter jurisdiction over “federal question” and “diversity of citizenship” cases. Subject-Matter Jurisdiction: State Jurisdiction All cases not falling under Exclusive Federal Jurisdiction 3-* * State courts have subject-matter jurisdiction over all cases not falling under exclusive federal jurisdiction. The Federal Court System The United States Supreme Court Intermediate Courts of Appeal Federal Trial Courts (U.S. District Courts) 3-* * The federal court system is a “tri-partite” system consisting of three levels. The U.S. District Courts are the federal trial courts, the intermediate courts of appeal have appellate jurisdiction over all federal trial courts, and the United States Supreme Court has ultimate appellate jurisdiction, with the power to review all lower court decisions. State Court Systems State Supreme Courts Intermediate Courts of Appeal State Trial Courts 3-* * State court systems are also “tri-partite” systems consisting of three levels. The state trial courts have original jurisdiction over all state-related cases, the intermediate courts of appeal have appellate jurisdiction over all state trial courts, and the state supreme court has the power to review all lower court decisions. Threshold Requirements for Litigation Standing (to sue) Case or Controversy (Justiciable Controversy) Ripeness 3-* * In order to initiate litigation, the plaintiff must have “standing” to sue, there must be a “justiciable” controversy, and the case must be “ripe” for trial. Steps in Civil Litigation: The Pretrial Stage Informal Negotiations Pleadings Service of Process Defendant’s Response Pretrial Motions Discovery Pretrial Conference 3-* * The “pre-trial” steps in civil litigation include informal negotiations, pleadings, service of process, the defendant’s response, pretrial motions, discovery, and the pre-trial conference. Steps in Civil Litigation: The Trial Jury Selection Opening Statements Examination of Witnesses and Presentation of Evidence Closing Arguments Jury Instructions 3-* * The stages of a trial include jury selection, opening statements, the examination of witnesses and presentation of evidence, closing arguments, and jury instructions. Steps in Civil Litigation: Post-Trial Motions Motion For Judgment In Accordance With Verdict Motion For Judgment Notwithstanding Verdict Motion For New Trial 3-* * Post-trial motions include the motion for judgment in accordance with the verdict, the motion for judgment notwithstanding (or in spite of) the verdict, and the motion for a new trial. Steps in Civil Litigation: Appellate Procedure 3-* * Beyond the trial stage, constitutional due process guarantees the right to appeal the lower court decision. The appellant must follow appropriate procedural rules in order to “perfect” (or establish) the appeal. Appellate Court Decision-Making Powers Affirmation Modification Reversal Remand 3-* * Upon review of a lower court decision, the appellate court has the right to affirm the decision, modify it, reverse it, or remand the case to the trial court level to be re-heard either wholly or partially. Chapter 13 Introduction to Contracts McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved. * Chapter 13: Introduction to Contracts Chapter 13 Case Hypothetical Zsa Zsa Hilton, a wealthy socialite living in Beverly Hills, was frantic. Her best friend in the world was her pet poodle Caboodles, and Caboodles had been missing for three (3) days. Having searched her estate exhaustively, Zsa Zsa decided that her next best option was to post a reward for her beloved Caboodles. Zsa Zsa carefully prepared a poster advertising a reward for the return of her pet. The heading of the poster exclaimed “Please find Caboodles—Reward--$25,000!!!” Below the heading was a color “glamour shot” of the animal and Zsa Zsa’s contact information, including her address and cell phone number. After soliciting the assistance of her butler, her maid, and her best friend Eva Ritchie, Zsa Zsa displayed and distributed one thousand of the posters throughout the greater Beverly Hills metropolitan area. Later in the week, Dane “Bulldog” Sheppard showed up at Zsa Zsa’s front door. When she answered the door chime, Dane said “I am pleased to meet you, Ms. Hilton. I saw your ad for the return of your lost poodle, and I am your man. I will find him, Ms. Hilton, and let me say in advance that I really appreciate the $25,000 bounty, um, reward money!” Is there a contract between Dane “Bulldog” Sheppard and Zsa Zsa Hilton? 13-* Chapter 13 Case Hypothetical: Zsa Zsa Hilton, a wealthy socialite living in Beverly Hills, was frantic. Her best friend in the world was her pet poodle Caboodles, and Caboodles had been missing for three (3) days. Having searched her estate exhaustively, Zsa Zsa decided that her next best option was to post a reward for her beloved Caboodles. Zsa Zsa carefully prepared a poster advertising a reward for the return of her pet. The heading of the poster exclaimed “Please find Caboodles—Reward--$25,000!!!” Below the heading was a color “glamour shot” of the animal and Zsa Zsa’s contact information, including her address and cell phone number. After soliciting the assistance of her butler, her maid, and her best friend Eva Ritchie, Zsa Zsa displayed and distributed one thousand of the posters throughout the greater Beverly Hills metropolitan area. Later in the week, Dane “Bulldog” Sheppard showed up at Zsa Zsa’s front door. When she answered the door chime, Dane said “I am pleased to meet you, Ms. Hilton. I saw your ad for the return of your lost poodle, and I am your man. I will find him, Ms. Hilton, and let me say in advance that I really appreciate the $25,000 bounty, um, reward money!” Is there a contract between Dane “Bulldog” Sheppard and Zsa Zsa Hilton? * Chapter 13 Case Hypothetical Carter Morley and Erena Erickson live side by side in town homes joined together by a shared wall. Both residences are in need of new exterior paint. On Monday, Morley calls a painter, Tom Sizemore, having selected his name from the classified section of the phone directory. Morley describes his address, the physical dimensions and structure of his home, and he agrees with Sizemore that the work will be performed that Friday. Sizemore estimates that with his crew of five, and given the relatively small size of the home, the work will only take one day to complete. Morley advises that although he will have to work a fourteen-hour day on Friday, he would like to have the work completed in his absence. In passing conversation with his neighbor Erickson, Morley advises her of his “home improvement” plans. Early Friday morning, Sizemore and his team arrive at the address, but by mistake, they begin work on Erickson’s side of building. Although Erena is home, she does not object to the work, nor does she inform Sizemore and his crew of the mistake. Midway through the day, she offers them fresh-squeezed lemonade and ham sandwiches, and they heartily accept. Upon completion of the work at 7:00 p.m. Friday evening, Sizemore knocks on Erena’s door and asks if “the man of the home” is present, that he would like Morley to review the work and pay the agreed-upon price for the work. Erena chuckles, and “breaks the news” that the painting crew has made a mistake, one to her benefit. Erickson proclaims “I do not owe you one dime, because you do not have a contract with me; I will give you ten minutes to remove yourself and your materials from my property, or I will call the police.” Do Erickson and Sizemore have a contract? If so, why? If not, are there any other theories of recovery available to Sizemore? 13-* Chapter 13 Case Hypothetical: Carter Morley and Erena Erickson live side by side in town homes joined together by a shared wall. Both residences are in need of new exterior paint. On Monday, Morley calls a painter, Tom Sizemore, having selected his name from the classified section of the phone directory. Morley describes his address, the physical dimensions and structure of his home, and he agrees with Sizemore that the work will be performed that Friday. Sizemore estimates that with his crew of five, and given the relatively small size of the home, the work will only take one day to complete. Morley advises that although he will have to work a fourteen-hour day on Friday, he would like to have the work completed in his absence. In passing conversation with his neighbor Erickson, Morley advises her of his “home improvement” plans. Early Friday morning, Sizemore and his team arrive at the address, but by mistake, they begin work on Erickson’s side of building. Although Erena is home, she does not object to the work, nor does she inform Sizemore and his crew of the mistake. Midway through the day, she offers them fresh-squeezed lemonade and ham sandwiches, and they heartily accept. Upon completion of the work at 7:00 p.m. Friday evening, Sizemore knocks on Erena’s door and asks if “the man of the home” is present, that he would like Morley to review the work and pay the agreed-upon price for the work. Erena chuckles, and “breaks the news” that the painting crew has made a mistake, one to her benefit. Erickson proclaims “I do not owe you one dime, because you do not have a contract with me; I will give you ten minutes to remove yourself and your materials from my property, or I will call the police.” Do Erickson and Sizemore have a contract? If so, why? If not, are there any other theories of recovery available to Sizemore? * Contract (Definition): A legally enforceable agreement 13-* * A contract is defined as a legally enforceable agreement. Elements Required For Contract Formation Agreement (Offer and Acceptance) Mutual Consideration (Value Given By Both Parties) Legal Purpose and Subject Matter (Object) Legal Capacity (Ability to Understand Terms and Nature of Contract; legal ability to enter into binding contract) 13-* * Elements required for contract formation include an agreement (represented by a valid offer and a valid acceptance,) mutual consideration (meaning that both parties must give value in order to support the enforceability of the agreement,) lawful purpose and subject matter, and legal capacity (which is the ability to understand the terms and nature of the contract; as well as the legal ability to enter into a binding contract.) Defenses to Enforcement of Contract Lack of genuine assent (fraud, duress, undue influence, misrepresentation) Lack of proper form requirements (statute of frauds writing requirement) 13-* * Defenses to the enforceability of a contract include the lack of genuine assent as a result of fraud, duress, undue influence, or misrepresentation, and lack of proper form requirements, usually indicating non-compliance with the statute of frauds, a rule of law requiring that certain types of contracts be in writing in order to be enforceable. The Objective Theory of Contracts Existence and interpretation of contract based on outward manifestations of intent by parties (objective, “reasonable person” standard of contract formation and interpretation) Subjective (individual) intent generally irrelevant 13-* * Courts generally use the objective theory of contract interpretation, meaning that the existence and interpretation of a contract will be based on outward manifestations of intent by the parties. This is an objective, “reasonable person” standard of contract formation and interpretation; subjective, or individual, intent is generally irrelevant. Sources of Contract Law State common law The Uniform Commercial Code (Article 2) Governs contracts for the sale of goods 13-* * Sources of contract law include state common law, as well as Article 2 of the Uniform Commercial Code, which governs contracts for the sale of goods. Classification of Contracts: Bilateral or Unilateral “Bilateral” Contract: Exchange of promises “Unilateral” Contract: Promise in return for performance of act 13-* * Contracts can be classified as either “bilateral” or “unilateral.” A bilateral contract involves an exchange of promises between contracting parties, while a unilateral contract involves the exchange of a promise in return for the performance of an act. Classification of Contracts: Express or Implied “Express” Contract: Based on written or spoken words “Implied” Contract: Based on conduct or actions “Quasi-Contract” (“Implied-in-law” contract): Imposed in certain cases to avoid unjust enrichment, even if all elements of contract formation not satisfied 13-* * Contracts can be classified as “express” or “implied.” An express contract is based on written or spoken words, while an implied contract is based on the conduct or actions of the parties. A “quasi-contract,” also referred to as an “implied-in-law” contract, is imposed in certain cases to avoid unjust enrichment, even if all elements of contract formation are not satisfied. Classification of Contracts: Valid, Void, or Voidable “Valid” Contract: All elements of contract formation satisfied “Void” Contract: Illegal purpose/subject matter; unenforceable “Voidable” Contract: One or both parties can withdraw from contract 13-* * Contracts can be classified as “valid,” “void,” or “voidable.” In a valid contract, all elements of contract formation have been satisfied. A void contract involves an illegal purpose and/or subject matter, and is therefore unenforceable. A voidable contract allows one or both parties to withdraw legally from the contract. Classification of Contracts: Executed or Executory “Executed” Contract: All terms of contract fully performed “Executory” Contract: Some duties under contract not performed by one/both parties 13-* * Contracts can be classified as “executed” or “executory.” An executed contract means that all terms of the contract have been fully performed. With an executory contract, some duties under the contract have not been performed by one or both parties. Classification of Contracts: Formal or Informal “Formal” Contract: Must meet special form requirements Examples: Contracts under seal, “recognizances,” letters of credit, and negotiable instruments “Informal” Contract: No formalities required in making; a “simple” contract 13-* * Contracts can be classified as “formal” or “informal.” A formal contract must meet special form requirements. Examples of formal contracts include contracts under seal, “recognizances,” letters of credit, and negotiable instruments. An informal contract requires no formalities; it is a “simple” contract. Interpretation of Contracts Contract interpreted to give effect to parties’ intentions at time they entered into contract If multiple interpretations possible, adopt interpretation that would make contract lawful, operative, definite, reasonable, and capable of being effected If contract contains ambiguity, judge should interpret it against interests of drafter Handwritten provisions prevail over preprinted terms Numbers written in words prevail over numerals Specific terms prevail over general terms Technical words are generally interpreted in accordance with industry standard 13-* * Various rules of contract interpretation are available to a court in determining the rights and liabilities of contracting parties. For example, a contract is usually interpreted to give effect to the parties’ intentions at the time they entered into the contract. If multiple interpretations are possible, the court will interpret the contract in terms of making it lawful, operative, definite, reasonable, and capable of being effected. In the event of contractual ambiguity, the judge should interpret it against the interests of the drafter. Handwritten provisions generally prevail over preprinted terms, and numbers written in words generally prevail over numerals. Specific terms prevail over general terms, and technical words are generally interpreted in accordance with industry standards. Chapter 14 Agreement McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved. * Chapter 14: Agreement Chapter 14 Case Hypothetical Tom Garrity, Bill Simmons, and Edward Yang were close friends. Their friendship had developed over their mutual love for vintage stereo equipment, and the three often spent hours with each other, admiring their electronic collections, monitoring online auctions for vintage receivers and speakers, and playing music. On several occasions, Edward expressed his interest in a particular stereo receiver Tom owned, the classic Marantz Model 4400. Edward often told Tom that if he ever wanted to sell the receiver, he would like to be first considered as the buyer. Last Saturday morning, Tom and Bill were at Tom’s house. During their conversation, Tom stated “Bill, I know how much Edward loves my Marantz 4400 receiver, and I have too much stereo equipment in the house. In fact, Sarah (Tom’s wife) has given me an ultimatum: Either a good portion of the receivers and speakers go, or I go! I have decided that I will sell my Marantz 4400 to Edward for $200. It’s worth at least $600, and it’s the only Marantz receiver that I own, but I’ve decided that I would like to continue to live in this house, and my wife hasn’t given me any other options except to sell some of this stuff!” Later that day, Edward appeared at Tom’s house. Edward enthusiastically proclaimed “Tom, Bill told me about your offer, and I will take the Marantz 4400 for $200. This is the classic receiver as far as I am concerned, and I am forever grateful to you! I promise I will take care of it, and you can have lifetime visitation rights! Oh, and please tell Sarah I said ‘thanks’!” Tom was perplexed. After his conversation with Bill on Saturday morning, he had decided to keep the Marantz 4400, and sell all of his other receivers. He knew that his next statement would test Edward’s friendship: “Edward, I’m sorry, but I have decided not to sell the Marantz 4400. We can discuss selling any of my other receivers, but the Marantz is ‘off-limits’.” Edward’s reply? “We have an agreement, Tom. You made me an offer, and I accepted your offer. Here is the $200. Where is the receiver?” Is there a contract between Tom Garrity and Edward Yang? 14-* Chapter 14 Case Hypothetical: Tom Garrity, Bill Simmons, and Edward Yang were close friends. Their friendship had developed over their mutual love for vintage stereo equipment, and the three often spent hours with each other, admiring their electronic collections, monitoring online auctions for vintage receivers and speakers, and playing music. On several occasions, Edward expressed his interest in a particular stereo receiver Tom owned, the classic Marantz Model 4400. Edward often told Tom that if he ever wanted to sell the receiver, he would like to be first considered as the buyer. Last Saturday morning, Tom and Bill were at Tom’s house. During their conversation, Tom stated “Bill, I know how much Edward loves my Marantz 4400 receiver, and I have too much stereo equipment in the house. In fact, Sarah (Tom’s wife) has given me an ultimatum: Either a good portion of the receivers and speakers go, or I go! I have decided that I will sell my Marantz 4400 to Edward for $200. It’s worth at least $600, and it’s the only Marantz receiver that I own, but I’ve decided that I would like to continue to live in this house, and my wife hasn’t given me any other options except to sell some of this stuff!” Later that day, Edward appeared at Tom’s house. Edward enthusiastically proclaimed “Tom, Bill told me about your offer, and I will take the Marantz 4400 for $200. This is the classic receiver as far as I am concerned, and I am forever grateful to you! I promise I will take care of it, and you can have lifetime visitation rights! Oh, and please tell Sarah I said ‘thanks’!” Tom was perplexed. After his conversation with Bill on Saturday morning, he had decided to keep the Marantz 4400, and sell all of his other receivers. He knew that his next statement would test Edward’s friendship: “Edward, I’m sorry, but I have decided not to sell the Marantz 4400. We can discuss selling any of my other receivers, but the Marantz is ‘off-limits’.” Edward’s reply? “We have an agreement, Tom. You made me an offer, and I accepted your offer. Here is the $200. Where is the receiver?” Is there a contract between Tom Garrity and Edward Yang? * Chapter 14 Case Hypothetical Keith Avondale is in the market for a new “big screen” flat-panel television. While reviewing the Sunday newspaper, he notices a full-page advertisement from “Transistor Town.” The advertisement includes a 45-inch flat-panel television for $299. Surprised by the remarkably low price, and eager to purchase his new luxury item, Avondale makes plans to “open the store” on Monday morning. Avondale is the first customer to arrive at the store on Monday, waiting outside when the front doors open. He rushes into the store and announces to the first sales representative he sees, “I will take a 45-inch flat-panel television for $299!” The sales representative immediately refers Avondale to the store manager, who directs Avondale to his office. The store manager explains to Avondale that the advertisement was an unfortunate mistake, resulting from miscommunication between Transistor Town and the newspaper publisher. The manager goes on to say that the intended advertise price was $2,999, but that he would be willing to sell the described television to Avondale for $2,449, Transistor Town’s cost for the television. Avondale objects, demands that Transistor Town sell the television for $299, and informs the store manager that his brother is a trial lawyer. Who wins? 14-* Chapter 14 Case Hypothetical: Keith Avondale is in the market for a new “big screen” flat-panel television. While reviewing the Sunday newspaper, he notices a full-page advertisement from “Transistor Town.” The advertisement includes a 45-inch flat-panel television for $299. Surprised by the remarkably low price, and eager to purchase his new luxury item, Avondale makes plans to “open the store” on Monday morning. Avondale is the first customer to arrive at the store on Monday, waiting outside when the front doors open. He rushes into the store and announces to the first sales representative he sees, “I will take a 45-inch flat-panel television for $299!” The sales representative immediately refers Avondale to the store manager, who directs Avondale to his office. The store manager explains to Avondale that the advertisement was an unfortunate mistake, resulting from miscommunication between Transistor Town and the newspaper publisher. The manager goes on to say that the intended advertise price was $2,999, but that he would be willing to sell the described television to Avondale for $2,449, Transistor Town’s cost for the television. Avondale objects, demands that Transistor Town sell the television for $299, and informs the store manager that his brother is a trial lawyer. Who wins? * Elements of a Valid Offer Manifestation of offeror’s intent to be bound Intent determined by objective, “reasonable person” standard Preliminary negotiations and advertisements do not constitute offers Definite and certain terms (including subject matter, price, quantity, quality, and parties) Communication of offer to offeree (or offeree’s agent) 14-* * In order for an offer to be valid, there must first be a manifestation of the offeror’s intent to be bound by contract. Intent is determined by an objective, “reasonable person” standard. Preliminary negotiations and advertisements do not constitute offers. A valid offer also requires definite and certain terms, including subject matter, price, quantity, quality, and the names of the contracting parties. Finally, a valid offer requires communication of the offer from the offeror (or the offeror’s agent) to the offeree (or the offeree’s agent.) Auctions Auction With Reserve Seller merely expresses intent to receive offers Auctioneer (as representative of seller) may withdraw item from auction at any time before “hammer falls” Before hammer falls (signaling acceptance of offer), bidder/offeror may revoke bid Auction Without Reserve Seller must accept highest bid 14-* * Auctions can be classified as either “with reserve” or “without” reserve. In an auction with reserve, the seller merely expresses the intent to receive offers. The auctioneer, as a representative of the seller, may withdraw the item from the auction at any time before the “gavel falls.” Before the gavel falls (signaling acceptance of offer,) the bidder-offeror may revoke his or her bid. In an auction without reserve, the seller must accept the highest bid. Termination of Offer Revocation Rejection Counteroffer Death/Incapacity of offeror Destruction of subject matter of offer Subsequent illegality of subject matter of offer Lapse of time Failure of condition(s) specified in offer 14-* * Events that terminate an offer include revocation of the offer by the offeror, rejection of the offer by the offeree, a counteroffer, death or incapacity of the offeror, destruction of the subject matter of the offer, subsequent illegality of the subject matter of the offer, lapse of time specified in the offer (or if no time is specified, expiration of a reasonable period of time,) and the failure of a condition specified in the offer. Acceptance Definition: Representation of offeree’s intent to be bound by terms of offer Silence generally does not constitute acceptance Terms of acceptance must be identical to terms of offer (“Mirror-Image” Rule) Effective when communicated by offeree to offeror If no method of communicating acceptance specified in offer, any reasonable means of acceptance effective (Examples: telephone, mail, fax, e-mail) 14-* * Acceptance is defined as a representation of the offeree’s intent to be bound by the terms of the offer. Silence generally does not constitute acceptance. According to the “mirror-image” rule, the terms of the acceptance must be identical to the terms of the offer. Acceptance is effective when it is communicated by the offeree to the offeror. If no method of communicating acceptance is specified in the offer, any reasonable means of acceptance is effective, such as by telephone, mail, fax, or e-mail. The Mailbox Rule Acceptance by mail effective when placed in mailbox; however, revocation of offer effective only when received by offeree 14-* * The mailbox rule holds that acceptance by mail is effective when it is placed in the mailbox; however, revocation of the offer is effective only when it is received by the offeree. Chapter 16 Capacity and Legality McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved. * Chapter 16: Capacity and Legality Chapter 16 Case Hypothetical and Ethical Dilemma Before her recent accident, eighty-two-year-old Lily Ledbetter was her own chauffeur. She used to drive an automobile to fulfill her once-active senior lifestyle, including outings for bridge tournaments, water aerobics, grocery shopping, bill-paying, and family get-togethers. One day, Lily decided to purchase a new automobile. Although her fifty-year-old son Ron suggested that he accompany her to the car dealership, she refused, reminding him that she was fully capable of taking care of her own responsibilities. With the “wind of independence at her back,” Lily entered the dealership, Bjorn Fjord Motors, alone. After negotiating her best deal and signing a contract for the purchase of a new Fjord Mastodon sedan, Lily drove away in her rapidly-depreciating asset. Five miles down the road, the steering wheel detached from the steering column (the steering wheel literally came off in her hands) and Lily crashed into a culvert. She sustained severe personal injuries, including (but not limited to) a broken left leg, a broken pelvis, a collapsed lung, and numerous lacerations to her face. Her attending physicians agree that Lily will never be able to drive an automobile again. Lily has since sued Fjord Motors, Inc. (the manufacturer of the sedan) and Bjorn Fjord Motors, Inc. (the dealership) for personal injury. Both companies have filed answers denying liability on the basis of an exculpatory clause included in Lily’s purchase contract. The exculpatory clause states that neither Fjord Motor, Inc. nor Bjorn Fjord Motors, Inc. is responsible to a customer or any other third party for a defect in the Fjord Mastodon that results in personal injury and/or economic harm. Both companies have also filed motions for judgment on the pleadings, requesting that the court summarily dismiss both causes of action against Fjord Motors, Inc. and Bjorn Fjord Motors, Inc. on the basis of the contract’s exculpatory clause. Should the court grant the defendants’ requests for judgment on the pleadings? Is the exculpatory clause enforceable against Lily Ledbetter? 16-* Chapter 16 Case Hypothetical and Ethical Dilemma: Before her recent accident, eighty-two-year-old Lily Ledbetter was her own chauffeur. She used to drive an automobile to fulfill her once-active senior lifestyle, including outings for bridge tournaments, water aerobics, grocery shopping, bill-paying, and family get-togethers. One day, Lily decided to purchase a new automobile. Although her fifty-year-old son Ron suggested that he accompany her to the car dealership, she refused, reminding him that she was fully capable of taking care of her own responsibilities. With the “wind of independence at her back,” Lily entered the dealership, Bjorn Fjord Motors, alone. After negotiating her best deal and signing a contract for the purchase of a new Fjord Mastodon sedan, Lily drove away in her rapidly-depreciating asset. Five miles down the road, the steering wheel detached from the steering column (the steering wheel literally came off in her hands) and Lily crashed into a culvert. She sustained severe personal injuries, including (but not limited to) a broken left leg, a broken pelvis, a collapsed lung, and numerous lacerations to her face. Her attending physicians agree that Lily will never be able to drive an automobile again. Lily has since sued Fjord Motors, Inc. (the manufacturer of the sedan) and Bjorn Fjord Motors, Inc. (the dealership) for personal injury. Both companies have filed answers denying liability on the basis of an exculpatory clause included in Lily’s purchase contract. The exculpatory clause states that neither Fjord Motor, Inc. nor Bjorn Fjord Motors, Inc. is responsible to a customer or any other third party for a defect in the Fjord Mastodon that results in personal injury and/or economic harm. Both companies have also filed motions for judgment on the pleadings, requesting that the court summarily dismiss both causes of action against Fjord Motors, Inc. and Bjorn Fjord Motors, Inc. on the basis of the contract’s exculpatory clause. Should the court grant the defendants’ requests for judgment on the pleadings? Is the exculpatory clause enforceable against Lily Ledbetter? * Chapter 16 Case Hypothetical and Ethical Dilemma Tommy McCartney is a sixteen-year-old high school student. He has worked forty hours per week at the local convenience store over the last year, and has diligently saved $6,000 for the purchase of his first car. While visiting a local car dealership, Tommy finds the “car of his dreams,” a used yellow Camaro. Tommy walks into the dealership, announces to the dealership owner that he is “ready to buy,” negotiates $6,000 as the purchase price, and leaves the dealership a proud car owner. Over the course of the next six months, Tommy drives the Camaro eight thousand miles, wears the tires thin, dents the left front fender, and regrets his purchase. He realizes that in two short years college will beckon, and he knows that his parents cannot afford to pay for his higher education. In short, he wants his money back. On a Saturday morning, Tommy returns to the car dealership, walks into the sales office, and hands the keys to the seller, asking for the return of his $6,000. The dealer chuckles, and then his look turns stern, saying “Son, I don’t owe you anything. You’ve just learned a lesson in the ‘School of Hard Knocks.’ The car is still yours, and the money is still mine!” Who will prevail? Is it legal and/or ethical to allow Tommy to escape his contractual obligations? 16-* Chapter 16 Case Hypothetical and Ethical Dilemma: Tommy McCartney is a sixteen-year-old high school student. He has worked forty hours per week at the local convenience store over the last year, and has diligently saved $6,000 for the purchase of his first car. While visiting a local car dealership, Tommy finds the “car of his dreams,” a used yellow Camaro. Tommy walks into the dealership, announces to the dealership owner that he is “ready to buy,” negotiates $6,000 as the purchase price, and leaves the dealership a proud car owner. Over the course of the next six months, Tommy drives the Camaro eight thousand miles, wears the tires thin, dents the left front fender, and regrets his purchase. He realizes that in two short years college will beckon, and he knows that his parents cannot afford to pay for his higher education. In short, he wants his money back. On a Saturday morning, Tommy returns to the car dealership, walks into the sales office, and hands the keys to the seller, asking for the return of his $6,000. The dealer chuckles, and then his look turns stern, saying “Son, I don’t owe you anything. You’ve just learned a lesson in the ‘School of Hard Knocks.’ The car is still yours, and the money is still mine!” Who will prevail? Is it legal and/or ethical to allow Tommy to escape his contractual obligations? * Contractual Capacity (Definition): Mental ability to understand rights and obligations established by contract, with the presumptive ability to understand how to comply with terms of agreement 16-* * Contractual capacity is defined as the mental ability to understand rights and obligations established by contract, with the presumptive ability to understand how to comply with the terms of the agreement. Contractual Capacity General Rule of Law: Natural persons over the age of majority (18 in most states) are presumed to have the full legal capacity to enter into binding legal contracts 16-* * As a general rule of law, natural persons over the age of majority (eighteen in most states) are presumed to have the full legal capacity to enter into binding legal contracts. Individuals Who Have Only Limited Capacity to Contract Minors Those suffering from mental deficiency that renders them incapable of understanding the nature and obligations of contracts Those who are intoxicated 16-* * Individuals who have only limited capacity to contract include minors, those suffering from a mental deficiency that renders them incapable of understanding the nature and obligations of contracts, and those who are intoxicated. Rules Regarding Minor’s “Contractual Power of Avoidance” Disaffirmance (“Power of Avoidance”): Minors’ right, until reasonable time after reaching age of majority, to disaffirm/avoid their contracts To exercise right, minor need only demonstrate, through words and/or actions, intent to rescind contract Minor must return any consideration received (if still in minor’s possession/control), regardless of condition Even if consideration damaged/destroyed, other party has no recourse against minor Rules designed to discourage competent parties from entering into contracts with minors 16-* * “Disaffirmance,” also known as the “power of avoidance,” refers to the minor’s right, until a reasonable time after reaching age of majority, to avoid his or her contractual obligations. To exercise the right of disaffirmance, the minor need only demonstrate, through words or actions, intent to rescind the contract. Upon contractual avoidance, the minor must return any consideration received (if still in the minor’s possession or control,) regardless of its condition. Even if the consideration is damaged or destroyed, the other party has no legal recourse against the minor. Rules protecting minors from contractual obligations are designed to discourage competent parties from entering into contracts with minors. Exceptions to Minor’s Right to Disaffirm Contract Contract for Necessaries (Definition): Contracts that supply minor with basic necessities of life Examples: food, clothing, shelter, basic medical services Ratification (Definition): Acceptance of terms of contract (entered into as a minor) after reaching age of majority Express Ratification: Occurs when, after reaching age of majority, individual states (either orally or in writing) that he/she intends to be bound by contract entered into while a minor Implied Ratification: Occurs when former minor takes action after reaching age of majority consistent with intent to ratify contract 16-* * Exceptions to a minor’s right to disaffirm a contract includes a “contract for necessaries,” defined as a contract that supplies the minor with the basic necessities of life. Examples of basic necessities include food, clothing, shelter, and essential medical services. Ratification is another exception to a minor’s right to disaffirm contractual obligations. Through ratification, the former minor accepts the terms of a contract entered into as a minor after reaching the age of majority. With express ratification, a former minor states, either orally or in writing, that he or she intends to be bound by the contract entered into while a minor. With implied ratification, the former minor takes action, after reaching the age of majority, consistent with an intent to ratify the contract. Parental Liability for Minors’ Contracts, Necessaries, and Torts General Rule: Parents not liable for contracts entered into by their minor children Exception: Contracts for necessaries General Rule: Parents not liable for torts committed by their minor children Exception: Failure to properly supervise child, subjecting others to unreasonable risk of harm from the child 16-* * As a general rule, parents are not liable for contracts entered into by their minor children. An exception is a contract for necessaries. Also, parents are not generally liable for torts committed by their minor children. An exception is the failure to properly supervise a child, subjecting others to unreasonable risk of harm from the child. Individuals Having No Capacity to Contract Those adjudicated insane Those adjudicated habitually intoxicated Those with appointed legal guardians 16-* * Individuals having no capacity to contract include those adjudicated insane, those adjudicated habitually intoxicated, and those with appointed legal guardians. Rules Regarding Intoxication General Rule: Contracts made by intoxicated persons are voidable If intoxication merely causes person to exercise poor judgment, contract not voidable unless other party unfairly capitalized on the impaired judgment When intoxicated person becomes sober, contract can be ratified or disaffirmed; however, courts will liberally interpret behavior that seems likes ratification once intoxicated person becomes sober 16-* * Generally, contracts made by intoxicated persons are voidable; however, if the intoxication just causes a person to exercise poor judgment, the contract is not voidable unless the other party unfairly capitalized on the impaired judgment. When an intoxicated person becomes sober, the contract can be ratified or disaffirmed; however, courts will fairly liberally interpret behavior that seems likes ratification once the intoxicated person becomes sober. Illegal Contracts Contracts with no legal purpose and/or subject matter Example: Agreement to commit crime/tort Contracts violating statute(s) and/or “public policy” Example: Usurious loan agreement (loan contract exceeding state-imposed maximum interest rate) Example: Unconscionable contract (Agreement so unfair that it is “void of conscience”) 16-* * Illegal contracts include contracts with no legal purpose or subject matter. An example is an agreement to commit a crime or tort. Another example of an illegal contract is a contract violating a statute or “public policy.” Examples include a usurious loan agreement (a usurious loan exceeds a state-imposed maximum interest rate) and an “unconscionable” contract (an unconscionable agreement is so unfair that it is “void of conscience.”) Chapter 17 Legal Assent McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved. * Chapter 17: Legal Assent Chapter 17 Case Hypothetical and Ethical Dilemma John Hammonds recently purchased a used Fjord Mastodon sedan from Square Deal Pre-Owned Auto Sales, Inc. During contract negotiations, John did not ask any questions related to the fuel efficiency of the car, and Square Deal’s sales representative, Wink Eubanks, did not volunteer any information about the Mastodon’s gas mileage. John had saved for a car for five (5) years, and he paid ten thousand dollars cash for the vehicle. After his purchase, John kept meticulous records regarding the fuel consumption of the Mastodon, and he calculated that the Mastodon was getting approximately twelve (12) miles per gallon. He immediately returned to Square Deal (John thought the dealership should be renamed “Raw Deal”), found Wink Eubanks in front of one of the store’s vending machines, and stated “You should have told me that Mastodon only gets twelve miles per gallon. I am the victim of fraud, and I want my money back. Here are the keys to your Mastodon with the mammoth appetite!” Do you agree with John Hammonds? Is John the victim of fraud? Is he entitled to a rescission of the contract based on Square Deal’s nondisclosure of the Mastodon’s gas mileage? 17-* Chapter 17 Case Hypothetical and Ethical Dilemma: John Hammonds recently purchased a used Fjord Mastodon sedan from Square Deal Pre-Owned Auto Sales, Inc. During contract negotiations, John did not ask any questions related to the fuel efficiency of the car, and Square Deal’s sales representative, Wink Eubanks, did not volunteer any information about the Mastodon’s gas mileage. John had saved for a car for five (5) years, and he paid ten thousand dollars cash for the vehicle. After his purchase, John kept meticulous records regarding the fuel consumption of the Mastodon, and he calculated that the Mastodon was getting approximately twelve (12) miles per gallon. He immediately returned to Square Deal (John thought the dealership should be renamed “Raw Deal”), found Wink Eubanks in front of one of the store’s vending machines, and stated “You should have told me that Mastodon only gets twelve miles per gallon. I am the victim of fraud, and I want my money back. Here are the keys to your Mastodon with the mammoth appetite!” Do you agree with John Hammonds? Is John the victim of fraud? Is he entitled to a rescission of the contract based on Square Deal’s nondisclosure of the Mastodon’s gas mileage? * Chapter 17 Case Hypothetical and Ethical Dilemma For Greta Harrington and her husband Robert, it was love at first sight. The two were married for 52 years until cancer took her husband at the age of 84. Greta is currently 83 years old, and her marriage produced three offspring: Samuel, 50 years old; Katherine, 45 years old; and Benjamin, 40 years old. In his will, Robert left all of his financial interests, a considerable sum valued at $5 million, entirely to his wife; in his will, he also expressed love and affection for his three children, as well as the desire that Greta devise the remainder of the couple’s estate to their children, in equal portions, upon her death. Greta has recently been “keeping company” with Gary Watson, a twice-divorced, 65-year-old bachelor with a reputation for “womanizing.” While visiting her mother one weekend, Katherine is shocked to see a fully-executed will on the desk in the living room, devising all of her mother’s estate to Gary Watson. She immediately calls Samuel and Benjamin, schedules an emergency “sibling meeting” for Sunday, and wonders what to do about her mother’s ill-advised decision. She has noticed in recent months that her mother is often forgetful, frequently calls her “Sharon” (her aunt’s name,) and often confuses the days of the week. Do the children have any legal rights in terms of successfully invalidating Greta Harrington’s will? From a legal and/or ethical standpoint, should a mother (even of adult children) be allowed to “disinherit” her offspring? 17-* Chapter 17 Case Hypothetical and Ethical Dilemma: For Greta Harrington and her husband Robert, it was love at first sight. The two were married for 52 years until cancer took her husband at the age of 84. Greta is currently 83 years old, and her marriage produced three offspring: Samuel, 50 years old; Katherine, 45 years old; and Benjamin, 40 years old. In his will, Robert left all of his financial interests, a considerable sum valued at $5 million, entirely to his wife; in his will, he also expressed love and affection for his three children, as well as the desire that Greta devise the remainder of the couple’s estate to their children, in equal portions, upon her death. Greta has recently been “keeping company” with Gary Watson, a twice-divorced, 65-year-old bachelor with a reputation for “womanizing.” While visiting her mother one weekend, Katherine is shocked to see a fully-executed will on the desk in the living room, devising all of her mother’s estate to Gary Watson. She immediately calls Samuel and Benjamin, schedules an emergency “sibling meeting” for Sunday, and wonders what to do about her mother’s ill-advised decision. She has noticed in recent months that her mother is often forgetful, frequently calls her “Sharon” (her aunt’s name,) and often confuses the days of the week. Do the children have any legal rights in terms of successfully invalidating Greta Harrington’s will? From a legal and/or ethical standpoint, should a mother (even of adult children) be allowed to “disinherit” her offspring? * Legal Assent Definition: Promise to buy or sell courts will require parties to obey Without assent, contract may be avoided/rescinded Cancellation of contract due to lack of assent means party with power of avoidance can require return of consideration given to other party; similarly, party with rescission right must return consideration received from other party Major “obstacles” to legal assent: Mistake, misrepresentation, undue influence, duress, and unconscionability 17-* * Legal assent is defined as a promise to buy or sell a court will require the parties to obey. Without assent, a contract may be avoided or rescinded. Cancellation of contract due to a lack of assent means the party with the power of avoidance can require the return of consideration given to the other party; similarly, party with a rescission right must return the consideration received from the other party. Major “obstacles” to legal assent include mistake, misrepresentation, undue influence, duress, and unconscionability. Mistake Definition: Erroneous beliefs regarding material facts of contract at time agreement made Unilateral Mistake: Mistake made by one contracting party; generally, contract still binding Mutual (Bilateral) Mistake: Mistake made by both parties; if mutual mistake of material (significant) fact, either party can rescind contract 17-* * Mistakes are erroneous beliefs regarding the material facts of a contract existing at the time the agreement was made. A unilateral mistake is a mistake made by one contracting party; generally, a contract is still binding even if a unilateral mistake has been made. With a mutual (or bilateral) mistake, a mistake is made by both parties; if the mistake is mutual, and if it pertains to a material (or significant) fact, either party can rescind the contract. Fraudulent or Negligent Misrepresentation Fraudulent Misrepresentation (Definition): Intentional, untruthful assertion of material fact by contracting party; aggrieved party can rescind contract, and sue for damages Negligent Misrepresentation (Definition): Negligent, untruthful assertion of material fact by contracting party; aggrieved party can rescind contract, and sue for damages Contrast with “innocent misrepresentation”, when party making false assertion believes it to be true, and is not negligent in making false assertion; although innocent misrepresentation permits misled party to rescind contract, he/she cannot sue for damages Courts permit contract rescission for fraudulent or negligent misrepresentation, assuming: False assertion Intent to deceive, or negligence Justifiable reliance on false assertion by innocent party 17-* * Fraudulent misrepresentation is defined as the intentional, untruthful assertion of a material fact by a contracting party. If a fraudulent misrepresentation has occurred, the aggrieved party can rescind the contract, and sue for damages. Negligent misrepresentation is defined as the negligent, untruthful assertion of material fact by a contracting party. If a negligent misrepresentation has occurred, the aggrieved party can rescind the contract, and sue for damages. An innocent misrepresentation occurs when the party making the false assertion believes it to be true, and is not negligent in making the false assertion. Although an innocent misrepresentation permits the misled party to rescind the contract, he or she cannot sue for damages. Courts permit contract rescission for fraudulent or negligent misrepresentation, assuming proof of a false assertion, the intent to deceive or negligence resulting in deception, and justifiable reliance on the false assertion by the innocent party. Undue Influence Definition: Persuasive efforts of dominant party, who uses special relationship to interfere with other’s free choice of terms Any relationship involving one party’s unusual degree of trust in another can give rise to undue influence 17-* * Undue influence consists of persuasive efforts of a dominant party, who uses a special relationship to interfere with the other party’s free choice of contract terms. Any relationship involving one party’s unusual degree of trust in another can result in undue influence. Questions Affecting Determination of Undue Influence Did dominant party “rush” the other party to consent? Did dominant party gain unjust enrichment from the contract? Was non-dominant party isolated from other advisers at time of contract? Is contract unreasonable, in that it overwhelmingly benefits dominant party? 17-* * Questions affecting a determination of undue influence include the following: Did the dominant party “rush” the other party to consent?; Did the dominant party gain unjust enrichment from the contract?; Was the non-dominant party isolated from other advisers at the time of contract?; and is the contract unreasonable, in that it overwhelmingly benefits the dominant party? Duress Definition: Occurs when one party threatens other with wrongful act unless assent given Duress is not legal assent, since coercion interferes with contracting party’s free will For courts to rescind agreement, injured party must prove duress left no reasonable alternatives to contractual agreement 17-* * Duress occurs when one party threatens another with a wrongful act unless assent is given. Duress is not legal assent, since coercion interferes with the contracting party’s free will. For courts to rescind an agreement, the injured party must prove the duress left no reasonable alternative to contractual agreement. Situations Involving Duress One party threatens physical harm or extortion to gain consent to contract One party threatens to file criminal lawsuit unless consent given to terms of contract One party threatens to file frivolous civil lawsuit unless consent given to terms of contract One party threatens the other’s economic interests (although in many jurisdictions, recovery based on economic duress/pressure rarely granted) 17-* * Duress occurs when one party threatens physical harm or extortion to gain consent to contract, when one party threatens to file a criminal lawsuit unless consent is given to the terms of the contract, when one party threatens to file a frivolous civil lawsuit unless consent is given to the terms of the contract, and when one party threatens the other’s economic interests (although in many jurisdictions, recovery based on economic duress or pressure is rarely granted.) Unconscionability Definition: Occurs when one party has so much relative bargaining power that he/she effectively dictates terms of contract, resulting in situation where dominated party, in essence, lacks free will Unconscionable contract is an “adhesion contract”, and cannot be basis for avoiding contract 17-* * Unconscionability occurs when one party has so much relative bargaining power that he or she effectively dictates the terms of contract, resulting in a situation where the dominated party, in essence, lacks free will. An unconscionable contract is an “adhesion contract,” and cannot be the basis for avoiding the contract.