La3100 lp4 lecture
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  • Fraud: A person who purchased an automobile from another person, who intentionally misrepesented the vehicle's mileage by turning back the odometer, may wish to keep the car and sue the seller for the difference in actual value of the car and the value with the lower mileage that was represented. The car buyer may also be able to recover punitive damages from the seller (additional money to punish the seller). Duress: A landlord's threat to a tenant that "I'll have you deported, unless you sign a new lease," would be a wrongful threat. Under such a threat, a tenant may sign the lease under duress. Undue Influence: Grandchild to grandparent to cosign for car loan.
  • Creditor Beneficiary: Sally Student borrows money from Last Chance National Bank to purchase a house and signs a promissory note (unilateral contract), promising to pay the bank $750 per month and Sally later enters into a contract to sell the house to George Graduate, who agrees to make the monthly payments, then the bank is a creditor beneficiary of the contract between Sally and George. Assuming the bank did not release Sally from the original promissory note, the bank can sue either Sally or George, or both, if the monthly payments are not made. Donee beneficiary: A beneficiary is named on a life insurance policy. The contract is made between the insurance company and the policy holder. If the insurance company does not pay the agreed death benefit upon the death of the policy holder, the beneficiary may sue the insurance company, even though the beneficiary was not a party to the contract between the insurance company and policy holder. Incidental Beneficiary: For example, Howard Homeowner enters into a contract with Green Thumb Mowing Service to mow Howard's lawn. Nancy Neighbor receives a benefit from Howard's mowed lawn, which improves the appearance of the neighborhood. However, such benefit is not a material purpose of the contract. As a result, Nancy may not sue Green Thumb, if it fails to mow Howard's lawn and allows the grass to grow.
  • Condition Precedent : For example, Sam Speculator promises to buy land from Roy Rancher, if geologic tests indicate the potential for oil production on the property. The geologic tests are later conducted and returned, showing no chance of oil on the property. As a result, Sam's duty to buy the land did not arise. Conditions concurrent: For example, one party must deliver a deed to land at the time that the other parties tenders the agreed purchase price for the land. Condition subsequent: For example, Cathy Carpenter promises to build an addition to Howard Homeowner's house during the month of August, unless she is required to work on a new hotel during that month. Cathy is later informed that she is, indeed, required to work on the new hotel during the month of August. As a result, Cathy is relieved from the duty to build the addition to Howard's house. Implied Condition: It may be implied that one party must deliver a deed to land at the time that the other parties tenders the agreed purchase price, even though this concurrent condition is not expressly stated in the contract.
  • Specific Performance: The seller of land may be ordered to convey the land to the buyer, because no two pieces of property are exactly the same. By contrast, specific performance is not available where a nonbreaching party may be adequately compensated by money.
  • For example, if an apartment tenant breaches a one year lease after only two months, the landlord may not leave the apartment empty for the remaining ten months, but must attempt to rent it to another person. The amount of damages owed by the breaching tenant is reduced by the amount paid by the new tenant. (Of course, if the landlord cannot find a new tenant after reasonable efforts, the breaching tenant is liable for the full amount.)

La3100 lp4 lecture La3100 lp4 lecture Presentation Transcript

  • [CONTRACT ENFORCEMENT] LA3100 Lear ning Plan 4
  • [REVIEW] Review: Contract Classification  Express Contract  Implied Contract  Bilateral Contract  Unilateral Contract  Executory Contract  Executed Contract  Valid Contract LA3100L P 3
  • [REVIEW] Review: Contract Classification Unenforceable Contract An unenforceable contract is a contract that is otherwise valid, but cannot be enforced, because fails to meet a certain requirement. Void Contract A void contract is a contract that is void and without legal effect from its attempted creation. Voidable Contract A voidable contract can be avoided by one or both of the parties. LA3100L P 3
  • Lear ning Plan 3LA3100 VOID AND VOIDABLE CONTRACTS [CONTRACT ENFORCEMENT]
  • [VOIDABLE & VOID CONTRACTS] Even if an agreement has the required elements to form a contract, these factors can make the agreement unenforceable: 1. Party lacked capacity. 2. Involuntary agreement of a party. 3. Statute of Frauds violation. 4. Illegality. LA3100L P 3
  • [VOIDABLE FOR INCAPACITY] Anyone can form a contract. But in many states, laws protect certain people from enforcement of contracts, by creating voidable contracts, such as: 1. Persons under the age of 18 years (minors) 2. Persons who are mentally incompetent 3. Persons under the influence of alcohol or drugs During the development of contract law, it was recognized that these groups of people might not understand the consequences of entering into a contract-that they lacked capacity. Remedy: Excuse from performing. LA3100L P 3
  • [VOIDABLE FOR INVOLUNTARY PARTY] A contract must be a voluntary agreement to be enforceable. Situations in which consent may not have been voluntarily given: 1. Mistake 2. Fraud 3. Duress 4. Undue Influence These situations create a voidable contract. LA3100L P 3
  • [VOIDABLE BY MISTAKE] Mutual Mistake. 1. Both parties are mistaken about a material fact. 2. Either party may rescind (cancel) the contract. Remedy: Consideration returned by both parties. Unilateral Mistake. 1. One party mistaken about a material fact, 2. Misrepresentation: knowledge of the mistake, term ambiguity. Remedy: Recission allowed if there is misrepresentation. LA3100L P 3
  • [VOIDABLE BY FRAUD, DURESS, INFLUENCE] Fraud: Intentional misrepresentation of a fact. Duress: Contract created under wrongful threat. Undue Influence: Contract created by manipulation of a party’s confidence-”Trust me!” Remedy: The harmed party can recind or sue the fraudulent party for resulting damages. LA3100L P 3
  • [VOID BY ILLEGALITY] Generally, a court will not enforce an illegal contract. As a result, the court system is not available to the parties in the event of a contract dispute. 1. A contract to commit a crime 2. A contract to commit a tort Remedy: None. LA3100L P 3
  • [VOID PER STATUTE OF FRAUDS] Statute of frauds requirement of express contracts in certain situations: 1. Sale of land. 2. Duration of more than one year. 3. Over a specified dollar amount ($500). Remedy: A person may be able to recover the reasonable value of the performance/consideration as a quasi-contract. LA3100L P 3
  • [ASSIGNMENTS OF CONTRACTS] Certainly, a contract may be enforced by the original parties to a contract. However, in many cases a contract may also be enforced by other parties, including: 1. Assignees 2. Third Party Beneficiaries The person making the assignment is called the assignor and the person receiving the assignment is called the assignee. LA3100L P 3
  • [CONTRACTS NOT ASSIGNABLE] Courts generally favor parties’ rights to contract, including the right to assign contracts. However, some assignments are prohibited: 1. Statutory prohibition. 2. Assignment prohibition clause. 3. Unique, personal service contracts. 4. Burden-increasing assignments. LA3100L P 3
  • [BENEFICIARIES OF CONTRACTS] A contract need not be assigned to be enforced by a person who is not a party to the original contract. A contact may also be enforced by a beneficiary of the contract. Examples: 1. Creditor beneficiary 2. Donee beneficiary 3. Incidental beneficiary LA3100L P 3
  • Lear ning Plan 3LA3100 BREACH [CONTRACT ENFORCEMENT]
  • [ENFORCING A BREACH] BREACH OF CONTRACT  When parties enter into a contract, they generally do not intend to breach (break) the contract.  Breaches are anticipated, however. Often, the remedy is included as a clause in the contract.  If there is no clause predetermining damages, it is often difficult to determine the appropriate remedy for a breach. LA3100L P 3
  • [CONTRACT CONDITIONS]  In determining whether a contract has been breached, it is necessary to review the conditions of the contract.  A condition is an event that creates, limits, or terminates a party's duty to perform under the contract. (aka a “term” of the contract). LA3100L P 3
  • [CONTRACT CONDITIONS]  Condition Precedent: One party is obligated to perform a duty before the other party is obligated to perform.  Condition Concurrent: Both parties to the contract must perform their duties at the same time.  Condition Subsequent: A condition that terminates an existing duty to perform.  Express Condition: Term written into the contract.  Implied Condition Assumed term based on circumstances. LA3100L P 3
  • [CONTRACT ENFORCEMENT Lear ning Plan 3LA3100 DAMAGES
  • [DAMAGES] LA3100L P 3 Compensatory damages: Puts the nonbreaching party in the monetary position that the party would have been had no breach occurred and the contract had been fully performed. Consequential damages: Additional award, if at the time the contract was made, a reasonable person could have expected that such damages would have resulted. Liquidated damages. A set dollar amount awarded only if: 1. Actual damages difficult to predict at formation. 2. Reasonable amount; does not constitute a penalty. Equitable remedies: When monetary damages insufficiently remedy, specific performance can order the breaching party to fulfill his obligations.
  • [DUTY TO MITIGATE DAMAGES] LA3100L P 3 A nonbreaching party has a duty to mitigate damages (personally attempt to recover loss).
  • [CONTRACT ENFORCEMENT] LA3100 Lear ning Plan 4