Exam 2/3 Busi Law 2700 Flashcards

Question

Social Host Liability

Answer 1

Can be liable for injuries caused by intoxicated person who became intoxicated at house

Answer 2

Without regard to Fault, Foreseeability, Standard of Care or Causation Abnormally dangerous activities

Answer 3

Physical harm/property damage caused by goods to a customer, user, bystander

Answer 4

Govt regulations preempt claims for product liability

Answer 5

Plaintiff knew and appreciated risk created by product defect and voluntarily assumed the risk

Answer 6

Only when particular use was not foreseeable

Answer 7

protection (or “rights”) to those who create writings and things.

Answer 8

A distinctive mark, motto, symbol, device, or implement affixed to goods the business produces

Answer 9

No - ex. bicycle, computer

Answer 10

trade name is also the name of the company’s trade-marked product (ex: Coca-Cola)

Answer 11

that are explicitly stated in agreement

Answer 12

Basically anything that pertains to how you conduct your business. (Can;'t be patented/copyrighted/trademarked) * Ex. Ingredients for coca-cola * Ex. How you develop client

Answer 13

Grant from the government that gives an inventor exclusive right to make, use or sell his invention * “First to file” rule – first person to file an application for a patent on a product or process will receive patent protection

Answer 14

Laws of nature * Natural phenomena * Abstract ideas * Things that are obvious, not new, not novel. E.g. Wheels, water. * Protection is for 14 years for designs of products, and 20 years for products.

Answer 15

Making/using/selling another’s patented design, product, or process without the patent owner’s permission

Answer 16

Only the expression of an idea, not the idea itself

Answer 17

You may briefly copy from any copyrighted work for the purposes of criticism, comment, news, teaching, research.

Answer 18

Anything that is not an original expression (facts widely known to the public, page numbers, mathematical equations Ideas (but the way the idea is expressed can be)

Answer 19

does not have to be the same as the original, nor does it have to reproduce the original in its entirety Example: “Ice Ice Baby” / “Under Pressure” under pressure / ice ice baby

Answer 20

Aimed at limiting online pornography and commercial SPAM * Generally permits sending of unsolicited commercial email but prohibits certain types of spamming activities

Answer 21

Allows FTC to cooperate and share info with foreign agencies to investigate and prosecute violators * Attempts to limit SPAM * Helps and protects Internet Service Providers (ISP)

Answer 22

Registering a domain name that is same as or confusingly similar to trademark of another and then tries to sell name back to trademark owner

Answer 23

Registering a name that is a misspelling of a popular brand * If misspelling is significant, trademark owner may have difficulty proving name is identical or confusingly similar

Answer 24

Makes cybersquatting illegal when both of the following are true: * Domain name is identical or confusingly similar to trademark of another * The one registering, trafficking in, or using domain name has “bad faith intent” to profit from that trademark

Answer 25

May use copyrighted/trademarked words in search engines

Answer 26

Prohibits private individuals and entities from intentionally intercepting any wire, oral or electronic communication and disclosure/use of the info obtained * Exception – communications through devices an employer provides for employee to use in ordinary course of business * Prohibits retrieval and use of stored (saved) electronic communications

Answer 27

Serious crimes, punishable by Death or prison for more than one (1) year and/or by fines

Answer 28

Non-serious (petty) crimes punishable by jail for less than one (1) year and/or by fines

Answer 29

Violation of city, county minor traffic/good order ordinances

Answer 30

Commit a guilty act (actus reus) *Have the guilty mind or mental state (mens rea) during commission of the guilty act *And must meet the other elements of the crime

Answer 31

Required intent (or mental state) is indicated in the applicable statute or law:

Answer 32

A corporation itself cannot be imprisoned but can be convicted of crime through acts of its officers

Answer 33

cause others to suffer harm or death * Murder, sexual assault, rape, robbery

Answer 34

goal of offender is some form of economic gain/damaging of property; most common type of criminal activity * Burglary * Larceny/Robbery * Theft * Receiving Stolen Goods * Arson * Forgery

Answer 35

considered contrary to public values/morals * Public drunkenness, prostitution, gambling, illegal drug use

Answer 36

Crimes occurring in the business context using non-violent means to obtain personal or business advantage * Embezzlement * Mail and Wire Fraud (federal) * Bribery * Bankruptcy Fraud (federal) * Insider Trading (federal) * Theft of Trade Secrets and other Intellectual Property

Answer 37

A person commits the crime of making a terrorist threat when he or she credibly, based on an objective evaluation, threatens to commit a crime of violence against a person or to damage any property by use of a bomb, explosive, weapon of mass destruction, firearm, deadly weapon, or other mechanism CLASS C FLEONY

Answer 38

Requirement that no warrant for a search or an arrest be issued without probable cause. (“Plain View” Exception) * The Exclusionary Rule. * Evidence obtained in violation of the 4th, 5th, or 6th amendments is excluded from trial. (“Fruit of the Poisonous Tree”) * The Miranda Rule: based on the 1966 Miranda v. Arizona case – arrested individuals must be informed of certain constitutional rights

Answer 39

Something given in exchange for a service rendered; a recompense. 6. Law. Something promised, given or done that has the effect of making an agreement a legally enforceable contract

Answer 40

* Performance or * Forbearance (i.e., self control, restraint) CASE 13.1 HAMER V. SIDWAY ( COURT OF APPEALS OF NY 1891) *Promise

Answer 41

tem of value must be given or promised in return for promise, performance, or promise of performance Why? * Distinguishes contracts from gifts

Answer 42

General Rule: * A court will not question the adequacy of consideration based solely on the comparative value of things exchanged * Something need not be of direct economic or financial value to be considered legally sufficient consideration * Freedom of contract – courts leave it up to the parties to decide what something is worth and parties are usually free to bargain as they wish

Answer 43

Preexisting Duty – a promise to do what one already has a legal obligation to do does not constitute legally sufficient consideration * “I promise to drive the speed limit” Past Consideration – promises made for actions or events that have already taken place are unenforceable * Tom promises Cindy to pay $25.00 after Cindy has already found his wallet. * Illusory Promises – terms of the contract express such uncertainty of performance that promisor has not definitely promised to do anything, it lacks consideration and is unenforceable * “I promise to paint the house...if I have time

Answer 44

Debtor offers to pay and a creditor accepts a lesser amount than the creditor originally claimed was owed * Accord – agreement * Satisfaction – performance (usually payment) that takes place after accord is executed

Answer 45

Contract in which one party forfeits the right to pursue a legal claim against the other party – bars any further recovery beyond terms stated in the release * Generally binding if: * The agreement is made in good faith * The release contract is in a signed writing * The contract is accompanied by consideration * Done frequently to settle claim

Answer 46

Does not always bar further recovery – parties simply substitute a contractual obligation for some other type of legal action based on a valid claim

Answer 47

- Promises that induce detrimental reliance under doctrine of Promissory Estoppel- - Promises to pay debts that are barred by statute of limitations - Promises to make charitable contributions

Answer 48

a.k.a. “detrimental reliance” – will keep promisor from asserting lack of consideration as defense and allow promisee to obtain some measure of recovery * In order to be applied: * Must be clear and definite promise * Promisor should have expected that the promisee would rely on the promise * Promisee reasonably relied on the promise by acting or refraining from some act * Promisee’s reliance was definite and resulted in substantial detriment * Enforcement of the promise is necessary to avoid injustice * EX: family promising land to children, allowing children to build on property, then refusing to transfer property via a deed

Answer 49

Statutes of Limitation (SOL) require a creditor to sue within a specified period to recover a debt * A debtor who promises to pay a previous debt even though recovery is barred by SOL makes an enforceable promise – the promise needs no consideration * In effect, promise extends the limitations period and creditor can sue to recover entire debt or at least the amount promised * Promise can be implied if debtor acknowledges the barred debt by making partial payment

Answer 50

Charitable subscription – promise to make a donation to a religious, educational, or charitable institution * Traditional view: unenforceable, because they are not supported by legally sufficient consideration (a gift) * Modern view: make exceptions to the rule by applying the doctrine of promissory estoppel * EX: church solicits and receives pledges (commitments to contribute funds) from church members to erect a new building. On basis of these pledges, church purchases land, hires architects, etc – because of the church’s detrimental reliance, court may enforce pledges under promissory estoppel

Answer 51

Legal ability to enter into a contractual relationship. * Contractual Capacity is either not present or subject to special rules

Answer 52

Minors: the Age of Majority is either 18 or 19 depending on the state. (Common Law was 18 for females and 21 for males.) * Alabama is 19 * Minor status can be terminated by marriage or emancipation * General rule: minor can enter into any contract that an adult can except contracts prohibited by law * BUT: a contract entered into by a minor is generally voidable at the option of the minor (can be disaffirmed) * To disaffirm: express intent through words or conduct not to be bound to the contract – must be entire contract, not just a portion of it * Note: an adult cannot avoid his/her contractual duties on the ground that the minor can do so – adult will be bound unless minor disaffirm

Answer 53

If person was sufficiently intoxicated to lack mental capacity, agreement may be voidable, even if intoxication was purely voluntary * BUT – if person understood legal consequences of the agreement despite intoxication, contract will be enforceable * Courts look at objective indications of the person’s condition to determine if he/she possessed or lacked required capacity * Difficult to prove that a person was so severely impaired that he/she could not comprehend legal consequences * Courts RARELY permit contracts to be avoided due to intoxicatio

Answer 54

Either VOID, VOIDABLE, or VALID * VOID: if court has previously determined a person is mentally incompetent – any contract made by that person is VOID * VOIDABLE: if a court has not previously judged a person to be mentally incompetent but the person is later determined to be incompetent at the time contract was formed, VOIDABLE * Voidable if person did not know he/she was entering into contract or lacked mental capacity to comprehend its nature, purpose, and consequences * Voidable at option of incompetent person, not other party * VALID: if person had capacity at time contract was formed * Note: some people who are incompetent have lucid intervals – during such intervals, they will be considered to have legal capacity to enter into contracts

Answer 55

Performed for a specific purpose

Answer 56

Contracts to do something prohibited by federal or state statutory law is illegal and therefore void (never existed). * Contracts to Commit a Crime. * Contracts for Usury. * Gambling. * Licensing Statutes: only remember that where a license is required, a contract without a license is unenforceable.`

Answer 57

Health, Safety, Welfare, Morals * Contracts in Restraint of Trade are generally void. * Exception(s): Sale of an ongoing business, covenants not to compete*

Answer 58

Covenant Not to Compete in a Sale of a Business enforceable as long as type of business restriction, time and geographic terms are reasonable (same business/2 years/75 miles) *Covenant Not to Compete in Employment is enforceable as long as time and geographic terms are reasonable.

Answer 59

So oppressive that courts will relieve innocent parties of all or some of their duties * Procedural – often involves inconspicuous print, unintelligent language (“legalese”), or one party’s lack of opportunity to read or ask questions about contract’s meaning * Substantive – contracts or portions of contracts are oppressively harsh * Deprive one party of benefits of the agreement or leave that party without a remedy for non-performance * Ex: business gets unrestrained access to courts but other party has to arbitrate * also when there is such disparity in bargaining power between the two parties – called an adhesion contract- written exclusively by one party and presented on a take-it-or-leave-it basis - no opportunity to negotiate terms * Only those adhesion contracts that unreasonably favor the drafter

Answer 60

Release a party from liability in event of monetary or physical injury no matter who is at fault *Can be upheld if they are reasonable, do not violate public policy, and do not protect parties from liability for intentional misconduct

Answer 61

Party promises to discriminate on the basis of race, color, national origin, religion, gender, age, or disability are contrary to both statute and public policy, and unenforceable.

Answer 62

Generally, illegal contracts are void. *If contract is executory (not yet fulfilled), cannot be enforced. *If it has been executed, neither party can recover damages. *Unjust enrichment is not an issue – Courts just leave the parties where they find them

Answer 63

*Only a mistake of fact makes a contract voidable! *Mistake must involve a material fact – a fact that a reasonable person would consider important when determining his/her course of action Mistakes of Value * Generally, contract is enforceable by either party because value is variable – depending on the time, place, and other circumstances, same item may be worth considerably different amounts – each party is considered to have assumed the risk that the value will change in the future or prove different to be from what he/she thought

Answer 64

Unilateral – made only by 1 of the parties * In general, does not give the mistaken party any right to relief from the contract – normally contract is enforceable UNLESS: * If other party to the contract knows or should have known that a mistake of fact was made, OR * If mistake was due to an inadvertent mathematical mistake and without gross negligence. Bilateral (Mutual) Mistake – mutual misunderstanding concerning a basic assumption on which the contract was made *can be rescinded by either party.

Answer 65

Contract is Voidable by Innocent Party because they did not voluntarily consent to its terms *Consists of the following Elements: * Misrepresentation of Material Fact - by words or actions * Intent to Deceive * Reliance on Misrepresentation * Injury to the Innocent Party

Answer 66

occurs when a party takes specific action to conceal a fact that is material to the contract. * Ex: selling a horse and acting as though horse is fit to ride in competitions when in reality horse unfit due to a medical condition *Statement of Fact vs. Statement of Opinion * Statement of Opinions are not actionable.

Answer 67

ordinarily does not entitle a party to relief * Exception can occur when misrepresenting party is in a profession that is known to require greater knowledge of the law than the average citizen

Answer 68

Ordinarily neither party has duty to disclose facts * Ex: disclosing that car has been in an accident and been repaired – don’t have to disclose, but can’t lie about it if asked * However, seller will be liable if she knows of material defect that cannot be reasonably discovered by buyer. * Fiduciary Relationship (doctor/patient, lawyer/client) – duty to disclose material facts

Answer 69

An innocent misrepresentation occurs when a person makes a statement he believes to be true but actually misrepresents facts. *Innocent party can rescind contract, but usually cannot seek damages

Answer 70

When party does not exercise reasonable care in uncovering or disclosing facts, or use the skill and competence required by his/her business or profession * In almost all states, negligent misrepresentation = knowingly making a misrepresentation and treated as fraudulent even if not purposeful.

Answer 71

Deceived party must have a justifiable reason for relying on the misrepresentation AND * Misrepresentation must be an important factor (but not necessarily sole factor) in inducing the deceived party to enter into the contract * Reliance is NOT justified if innocent party knows the true facts or relies on obviously extravagant statements

Answer 72

Arises from relationships where one party can greatly influence another party, thus overcoming that party’s free will. * Contract lacks voluntary consent and is voidable * Based on Confidential or Fiduciary Relationship, or Relationship of Dependence. * Minors, elderly people – under influence of guardians * physician/patient, parent/child, husband/wife, etc. * Undue Influence or Persuasion is presumed if weak party talked into doing something not beneficial to him or herself.

Answer 73

Party who enters into a contract under fear or threat makes the contract voidable. * Threatened act must be wrongful or illegal and render person incapable of exercising free will. * Threat of civil suit is not unlawful. * Economic Duress: generally not sufficient to constitute duress. * However – if party exacting the price creates the need, economic duress may be found

Answer 74

The primary purpose of the SOF is to prevent harm to innocent parties by requiring written evidence of agreements.

Answer 75

Marriage contracts Contracts which can’t be performed within a year Contracts which involve interests in land Executor’s contracts Contracts for the sale of goods worth over $500.00 under UCC Surety (Guarantor) contracts “MYLEGS”

Answer 76

Collateral Promises are promises by a third party to answer for the debt of another if that party does not perform.  Covers both Executor’s contracts and Surety contracts.  EXCEPTION: “Main Purpose” Rule – an oral promise to answer for the debt of another is covered by SoF unless guarantor’s main purpose in incurring a secondary obligation is to secure a personal benefit – then it doesn’t have to be in writing.  Court can infer from circumstances whether the leading objective was to secure a personal benefit – i.e., the guarantor is, in effect, answering for his or her own debt

Answer 77

- Partial Performance Contract has been partially performed and parties cannot be returned to their positions prior to contract formation – court can grant specific performance – equitable remedy that requires performance of contract according to its precise terms Indicates that at least one party believes there is a contract (since there was partial performance – why else would the party have performed?) - Admissions If a party against whom enforcement of an oral contract is sought “admits” under oath that a contract for sale was made, contract will be enforceable Admission can occur at any stage of the court proceedings If a party admits a contract subject to the UCC, contract is enforceable, but ONLY to the extent of the quantity admitted - Promissory Estoppel  If a person justifiably relies on another’s promise to his/her detriment, court may prevent (estop) the promisor from denying a contract exists  As such, an oral promise can be enforceable notwithstanding SoF IF:  Promisee justifiably relied on it to his/her detriment AND  Reliance must have been foreseeable to person making the promise  ALSO: there must be no way to avoid injustice except to enforce the promise *SIMILAR TO PARTIAL PERFORMANCE - Specially Manufactured Goods Once manufacturer begins production of specially made goods, may be enforceable without written contract Why? Same theory as partial performance and promissory estoppel – detrimental to company to use resources, time, etc.

Answer 78

Statute of Frauds requires a ‘Written Memorandum’ (written or electronic) signed by the party against whom enforcement is sought. What Constitutes a Writing? Order confirmation, invoice, sales slip, check, fax, email – doesn’t have to be a single document, one document can incorporate another by express reference What Must Be Contained in the Writing? The essential terms: quantity, signed by party to be charged, names of parties, subject matter, consideration. Sales of land must state the price and description of property with sufficient clarity.

Answer 79

Oral representations or promises made prior to the contract’s formation or at the time the contract was created, may not be admitted in court. Under Parol Evidence Rule, if a court finds that a written contract represents complete and final statement of parties’ agreement, it will not allow either party to present parol evidence  Parol evidence – testimony/other evidence of communications between parties that is not contained in contract itself  Normally cannot present evidence of any of the following if evidence contradicts/varies the terms of the written contract:  Negotiations prior to contract formation  Agreements prior to contract formation  Oral agreements contemporaneous with contract formation  EX: landlord tells a person who agrees to rent an apartment that cats are allowed but lease specifically says no pets allowed.

Answer 80

Contracts subsequently modified * Oral modifications may not be enforceable under SoF (i.e., modification that increases price of goods sold to over $500) or if original contract provides modification must be in writing * Voidable or Void contracts * Oral evidence can show deception led one of the parties to agree to terms * Contracts containing ambiguous terms * Evidence admissible to show meaning of terms * Incomplete Contracts * Lacks one or more of the essential terms – can “fill the gaps” Prior dealing, course of performance, usage of trade * When buyers/sellers deal with each other over period of time, customary practices develop – parties may overlook these practices in writing so courts use evidence to do show how parties have acted in the past * Contracts subject to orally agreed-on conditions precedent * If parties have orally agreed on a condition precedent that does not conflict with terms of their written agreement, parol evidence may be allowed – existence of the entire written contract is subject to an orally-agreed on condition * Contracts with an obvious or gross clerical error * Admissible to correct the error

Answer 81

*Only original parties to a contract have rights and liabilities under the contract. *Exceptions: *Assignment or Delegation *Third Party Beneficiary Contract

Answer 82

*Transfer of contractual rights is an assignment. *Transfer of contractual duties is a delegation.

Answer 83

*Effect of an Assignment: *When rights of assignor are unconditionally assigned, her rights are extinguished. *The third party (assignee) has right to demand performance from original party to contract. Rights That Cannot be Assigned: * When a statute expressly prohibits assignment * Ex: Alabama Code §8-5-21 – prohibits assignment of future wages * When a contract is personal in nature * Ex: tutor for children, housekeeper * If assignment materially changes risks or duties of obligor * Ex: insurance on a hotel – assigned by hotel owner to another hotel (Ins. Co. may not have info on the other hotel) * When the contract expressly prohibits assignment * Ex: operating agreement of a business

Answer 84

Duties That Cannot Be Delegated: *When Duties are Personal in Nature (special trust, special skill/talents) *When Performance by a Third Party Will Vary Materially From that Expected by the Obligee *When the Contract Prohibits Delegation Effect of a Delegation. * Delegator remains liable * If it is enforceable, obligee must accept performance from delagatee * Obligee can legally refuse performance only if the duty is one that cannot be delegated *Assignments of “All Rights.” * When an “assignment of all rights” is made this is can create both an assignment and a delegation

Answer 85

* Second Exception to Privity of Contract: * Types of Intended Beneficiaries * Distinguish only between intended and incidental beneficiaries * Intended = intentional – can sue to enforce * Ex: beneficiary under life insurance * Incidental = unintentional – cannot sue to enforce * Ex: spectators at Mike Tyson boxing match where he bit opponent’s ear sued for a refund – claimed they were 3rd party beneficiaries. Court said they could not sue – spectators got what they paid for - “the right to view whatever transpired”

Answer 86

* Courts look at intent – as expressed in contract language and implied by surrounding circumstances * “reasonable person” test – Would a reasonable person in the position of the beneficiary believe that the promise intended to confer on the beneficiary the right to enforce the contract? PLUS other surrounding circumstances: * Performance is rendered directly to 3rd party * 3rd party has the right to control details of the performance * 3rd party is expressly designated as a beneficiary in the contract

Answer 87

A possible future event, the occurrence or nonoccurrence of which will trigger the performance of a legal obligation or terminate an existing obligation under a contract.

Answer 88

Precedent – must be fulfilled before performance is required * Subsequent – operates to terminate a party’s absolute promise to perform (follows or is subsequent to the time at which duty to perform arose)

Answer 89

Types of performance: * Complete – party performs exactly as agreed * Substantial – party who in good faith performs substantially all the terms of the contract can enforce * Must not vary greatly from performance promised (or be easily remedied by compensation) * Performance must create substantially same benefits as those promised Performance to the Satisfaction of Another. * Reasonable Person Standard: for most contracts, unless contract explicitly states third party approval. * *Unless subject matter is personal, obligation is conditional – ex: contracts for portraits/works of art (exception if court find party expressing dissatisfaction simply to avoid payment/not acting in good faith) * Material Breach of Contract. * Occurs when performance is not at least substantial. * Non-breaching party is excused from performance and entitled to damages. * Anticipatory Repudiation – before either party has duty to perform, one party refuses to carry out his or her obligations – treated as a material breach even if time to perform hasn’t occurred yet * Non-Material (Minor) Breach of Contract. * Duty to perform is not excused and the non-breaching party must resume performance of the contractual obligations undertaken. Time for Performance. *If no time is stated in contract, reasonable time is implied. *Unless time is expressly stated to be vital, a delay in performance will not destroy performing party’s right to payment (“time is of the essence”)

Answer 90

*Discharge by Mutual Rescission. *If executory (not yet performed by either party), parties must make a new contract, oral or written (UCC requires in writing) *If one party has performed, agreement to rescind must have additional consideration. * By Accord and Satisfaction. * Agreement to accept performance different from what was originally promised * Accord is a contract to perform some act to satisfy an existing contractual duty that is not yet discharged. * Satisfaction: performance of accord. * Example: Bart has judgment against J.D. for $8,000.00. The parties later agree judgment can be satisfied if J.D. transfers his car to Bart. Agreement to accept car is accord, satisfaction is when J.D. actually transfers.

Answer 91

Material Alteration: allows innocent party to be discharged after material alteration by other party without consent. * Ex: changing quantity of items in contract without telling the other party *Statutes of Limitations *Bankruptcy: generally bars enforcement of non- exempt transactions. *Impossibility of Performance (not inconvenience). * Objective Impossibility of Performance: supervening event was not foreseeable. * When Performance is Impossible. * Death or Incapacitation in personal contract prior to performance, * Destruction of the Subject Matter; or * Change in Law makes Contract Illegal. * Commercial Impracticability * Performance becomes extremely difficult or costly, and not foreseeable by parties when contract made * Frustration of Purpose * Supervening event makes it impossible to attain purpose both parties had in mind. * Event must not have been foreseeable, and decreases value of what a party receives under contract.

Answer 92

Damages are the most common Breach of Contract remedy. * The goal of damages is either to “make the party whole” or give them the “benefit of their bargain.” * Types of Damages: * Compensatory – covers direct losses and costs * Consequential – to cover indirect and foreseeable losses * Nominal – to recognize wrongdoing when no monetary loss is shown * Punitive – to punish and deter wrongdoing

Answer 93

Compensate injured party only for damages actually sustained and proved to have arisen from the loss of bargain caused by breach – replace what was lost and “make the person whole” * Ex: employee under separation agreement not to work in same industry for 18 months received $750K severance package and agreed not to disclose confidential info. Employee works at new company and discloses confidential info. Old employer only entitled to the severance payment – anything more would leave old employer better off than if employee had not breached contract. * Two-step process: * Was there a contract between parties and a breach of that contract? * Prove that the breach caused damages.

Answer 94

difference between value of breaching party’s promised performance under contract and value of his/her actual performance. The amount is reduced by any loss that the injured party has avoided. * Incidental Damages – expenses that are caused directly by a breach of contract (i.e., incurred to obtain performance from another source)

Answer 95

* Sale of Goods – amount = difference between contract price and market price * Sale of Land – because land is unique, remedy is specific performance for buyer (get the property for which buyer bargained), if buyer breaches, seller’s measure = difference between contract price and market price * Construction – * Breach by owner – depends on when breach occurred * Breach by contractor – cost of completion (including reasonable compensation for delay in performance), if late, can get loss of use * Breach by both – courts try to strike a fair balance

Answer 96

Foreseeable damages that result from a party’s breach of contract * “Special Damages” * Caused by special circumstances beyond the contract itself * For non-breaching party to recover, breaching party must have known (or had reason to know) that special circumstances would cause the non-breaching party to suffer additional loss * Ex: Marty contracts to buy a certain quantity of Gatorade from Nathan. Nathan knows Marty has contracted with Ruthie to resell and ship the Gatorade within hours of its receipt. The beverage will then be sold to fans attending the Super Bowl. Nathan fails to deliver the Gatorade on time. Marty can recover consequential damages (the loss of profits from the planned resale to Ruthie)

Answer 97

When no actual damage or financial loss results from a breach and only a technical injury is involved * Often small ($1.00) – establish Defendant acted wrongfully * Brought as a matter of principle

Answer 98

Very seldom awarded in lawsuits for breach of contract * Could see in a situation when a person’s actions cause both a breach of contract and a tort (such as fraud)

Answer 99

When breach of contract occurs, the innocent injured party is held to a duty to reduce the damages that he or she suffered. * Depends on nature of contract * Ex: rental agreement – landlord has to try to find a new tenant if tenant breaks lease, former tenant liable for difference between original lease and rent from new tenant if not same * Ex: employment contract – employee has to try to find a similar job if wrongfully terminated if such a job is available.

Answer 100

Sometimes damages are an inadequate remedy. * If there is no legal remedy, courts can create equitable remedies * Rescission: Remedy whereby a contract is cancelled and the parties are restored to the original positions that they occupied prior to the transaction. * Can be unilaterally cancelled if fraud, mistake, duress, undue influence, misrepresentation, or lack of capacity is present or other party fails to perform * Appropriate where breach is found to be material and willful * Party seeking rescission must be able to show contracting parties can be restored to their position before contract was formed

Answer 101

Restitution: Both parties must return goods, property, or money previously conveyed. * If the property or goods have been consumed, restitution must be made in equivalent dollar amount * Not limited to rescission cases! Can seek restitution in breach of contract, tort actions, and other types of actions

Answer 102

*Specific Performance *Equitable remedy calling for the performance of the act promised in the contract – only if legal remedy (damages) inadequate *Provides remedy in cases involving: * Sale of Land. * Contracts for Personal Services.

Answer 103

Equitable remedy allowing a contract to be reformed, or rewritten, to reflect the parties’ true intentions. * Available if Fraud or Mutual Mistake is Present. * Written contract incorrectly states the parties’ oral agreement (ex: clerical error)

Exam 2/3 Busi Law 2700 Flashcards

(127 cards)