Law Quiz 3

Question 1

void

Answer 1

synonyms: cancel, not do, invalid, scratched, revoked, null

ex. a contract that was made about selling crack is immediately void, a contract signed by a three year old is void

Question 2

voidable

Answer 2

something that is capable of being voided

ex. drunk people and incompetent people

Question 3

rule for contract with drunk people

Answer 3

a contract entered into by an intoxicated party is voidable by them if the other party knew or had reason to know of the intoxication

Question 4

definition of incompetent person

Answer 4

someone who does not have mental faculties or ability to understand what they’re doing

Question 5

rule for contract with incompetent people

Answer 5

contracts entered into by incompetent persons are voidable at their options
(but must be voided within a promptly reasonable time, usually 30 days or less)

Question 6

every contract has ____ and _____

Answer 6

every contract has rights (fruits/benefits of the contract) and duties (obligations/burdens of the contract)

Question 7

example of rights and duties in contract to work at PC

Answer 7

Rights of teacher: to payment, to space on campus, to materials like computers, to tell the chair when you can teach
Rights of PC: to come in and make sure good teaching, to within reason tell what needs to be taught and what can’t be taught
Duties of teacher: to teach, to advise, to hold office hours, to grade within reasonable time, to follow handbook
Duties of PC: to paying, to giving health insurance, to maintain facilities

Question 8

3 ways a contract can impact 3rd parties

Answer 8

1. a party assigns or gives rights to a 3rd party, giving rights to next few years of a contract payment to someone for some reason
2. a party delegates their duties under the contract to a 3rd party, PC has contract with snowplow company, they hire someone else
3. the purpose of the contract is to benefit a third party, child support, student loans held by parents,

Question 9

are partial assignments of contract right permissible

Answer 9

yes

Question 10

3 situations contract rights wouldn’t be assignable

Answer 10

1. where the terms of the contract expressly prohibit assignment
2. where the contract involves highly personal contract rights (musician. artist, athlete. highly personal doesn’t mean confidential, it means unique/one of a kind)
3. where the assignment would materially increase the risk/burden on the other party

Question 11

5 ways contracts can end

Answer 11

1. full performance by all parties (most common way that it would end, when people do everything it said)
2. material breach of a party
3. by operation of a law (ex. death of a party, the purpose of the contract becomes illegal (ex. you have a contract to sell a certain chemical, the chemical becomes outlaws))
4. expired by its terms (ex. sports contract. could be both 1 and 4 full performance and it just ran out)
5. agreement of the parties (to end it)

Question 12

conditions

Answer 12

sometimes contracts have conditions that must be met before a party needs to preform
if X, then Y

Question 13

2 types of conditions

Answer 13

1. satisfaction of a party
2. satisfaction of a third party

Question 14

satisfaction of a party subjective rule

Answer 14

if the contract involves something subjective (ex. the fit and feel of a suit, taste, opinion, etc.) then all that matters is whether the party is satisfied or not

Question 15

satisfaction of a party objective rule

Answer 15

if the contract involves something objective (measurable, quantifiable) then the party’s satisfaction must be reasonable. if 100 people would look at it and say its reasonable, can’t rejcet it

Question 16

material (in terms of material breach)

Answer 16

substantial/significant enough to matter

Contract for 1,000,000 chopsticks, only 999,996 delivered -> missing 34. Did the chopstick supplier breach the contract? Yes. Did the chopstick supplier materially breach the contract? No

Question 17

rule for determining if a breach was material

Answer 17

we look at the number and kind of things at issue in the breach

Ex. Contract requires a pharmaceutical company to deliver a vaccine that is 100% effective. Due to supply chain issues, the company delivers a vaccine that is 99.9966% effective. Is this a material breach? Depends how many people it’s going to and what it’s treating

Question 18

force majeure

Answer 18

superior force
sometimes a party can be excused from performing under a contract if a serious external event occurs which prevents the parties performance (an Act of God)

Ex. natural disaster, huge accidents outside of the parties control, disability prevents performance, hurricane, war, riot, pandemic

Question 19

3 primary remedies for a breach of contract

Answer 19

1. compensatory damages ($)
2. equitable remedies (fairness)
3. resitution

Question 20

what is restitution

Answer 20

giving something to the non-breaching party which they gave or provided to the breaching party
ie. restoring it to the nonbreaching party

Ex. gold bars used to make custom bracelets by jeweler, if jeweler stopped performing you would want the gold bars back

Question 21

golden rule of contract law

Answer 21

to put the non-breaching party in the same position they would’ve been in had the contract been performed

Question 22

most common type of damages people seek

Answer 22

compensatory (money)

Question 23

for compensatory damages to be recoverable, they must be:

Answer 23

1. foreseeable (logical connections between the breach and the damages)
2. reasonably calculable (can’t just guess what the numbers are, need to be able to back up the claim by breaking the number down)
3. unavoidable (the nonbreaching party must mitigate or minimize its damages after the other party breaches the contract, can’t just let the pipe leak so you could claim more damages/a full new carpet)

Question 24

formula for calculating compensatory damages

Answer 24

Loss of value + Incidental damages + consequential damages - loss/cost avoided

Question 25

example using compensatory damage formula

Answer 25

You have a contract to demolish a bridge, you need a jackhammer, you sign a contract with the jackhammer store to buy one for $10,000. The contract promises that jackhammer will run for 10,000 hours. The jackhammer explodes after 7,500 hours.

Loss of value: $2,500
Loss of value = (value of promised performance - value of actual performance)

Incidental (indirect) damages: $250
Ex. you have to pay $250 to FedEx a replacement jackhammer to the project site

Consequential damages: 2*($100)=$200
Ex. your demolition contract imposes a $100/day penalty for each day you are late finishing the jackhammering. It took 2 days to get the new jackhammer. As consequence of jackhammer stores breach you suffered $200 more as a result of breach

Loss/cost avoided: $100 (made up for this example)
You have to pay the operator $30 on weekends but only $20 on weekdays, the item breaking made it so that you couldn’t start again until Monday. Saved money by not having to pay worker weekend rate

TOTAL: $2850

Question 26

rule of reliance damages

Answer 26

sometimes it is impossible to calculate compensatory damages (usually because they would be too speculative). In those cases, the non-breaching party can still recover what are called “reliance damages’’

Question 27

reliance damages definition

Answer 27

the damage they incurred in reliance on the other party’s promises under the contract what was breached

Question 28

agency

Answer 28

a consensual relationship in which one person (the principal) authorizes another person (the agent) to act on the principals behalf with the power to affect the legal rights and duties of the principal

Question 29

most common form of agency in business

Answer 29

employee

principals authoritizing agents to do what they’re contracted to do, eg. PC hiring teachers to give education which is what they receive payment for

Question 30

2 reasons the difference between employees and independent contractors matters

Answer 30

1. tax reasons
2. who can sue who (if someone is injured, can they sue the principal? depends if the agent was an employee or independent contractor)

Question 31

factors we consider to determine whether an agent is an employee or an independent contractor

Answer 31

• The amount of control that the principal exercises over the work
  If a lot of control, then the agent is more likely an employee
  Ladder can tell Samantha what to wear when to come etc., can’t tell the painting company much
• Whether the principle and the agent are in separate types of business
  If they are in different businesses, then they are more likely an independent contractor
  Samantha’s boss is working in the same business as Samantha, but not the independent contractor
• Whether the principal supervises the agents work
  If yes, the agent is more likely an employee
• Whether the agent has a skill that the principal does not have
  If yes, more likely to be an independent contractor
  Boss could do Samantha’s job, boss couldn’t pain the restaurant
• Who supplies the tools to do the work
  If agent supplies the tools, then most likely an independent contractor
• The anticipated length of the engagement
  If long, most likely employee. If short, most likely independent contractor
• Whether the agent is paid by the job or time worked
  If by the job, more likely independent contractor. If by the time, more likely employee
• What type of relationship do the principal and agent believe they are creating
  Whether the principal is “in business” (are they a business or not) or not
  If no, more likely independent contractor
  A business would hire an employee, but also they would have both really. So you could only tell from someone that wasn’t in business

Question 32

power of attorney

Answer 32

a written document in which the principle authorizes the agent to act on their behalf with respect to a particular issue

Question 33

duties that agents owe to their principals

Answer 33

• Obedience: the agent has to do what the principal asked
• Good conduct: while working for the principal, the agent has to engage in good conduct
• Keep the principal informed with all relevant information: Jack should have called Lamoreaux and tell him about the price and ask what to do
• Account for the principal’s money or property he had to come back with $1000 worth of corn and a receipt or change
• Fiduciary duty, the agent must act in the principal’s best interest at all times
• Avoid conflicts of interest and self-dealing
• Avoid competing with the principal
• Avoid misappropriation misusing the principal’s money or property
• Keep the principal’s confidential information confidential

Question 34

fiduciary duty

Answer 34

one of the duties that agents owe to their principals

the agent must act in the principal’s best interest at all times

Question 35

duties that principals owe to their agents

Answer 35

• Compensation have to pay them
• Deal with the agent fairly and honestly
• Reimbursement
• Indemnification

Question 36

Indemnification

Answer 36

one of the duties that principal’s owe to their agents

if the agent while working for the principal gets injured or suffers property damage, the principal must make the agent “whole” (Humpty Dumpty, had a great fall and fell off the wall while working the king, so the king instructed all of his horses and all of his men to try to put him together again)

Question 37

ways an agency can end

Answer 37

• principal fires agent
• agent quits
• completion of all tasks/jobs required by the agency
• operation of the law (something legally occurs that results in its ending, like death of a party of purpose of the agency becomes illegal)
• mutual agreement of the parties
• lapse of time