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Business Law
Jonathan Cutler
October 23, 2011
Chapter 10: Nature and Terminology
10-1. Implied in fact contract
10–2. According to the question, Janine was apparently unconscious or otherwise unable to
agree to a contract for the nursing services she received while she was in the hospital. As you
read in the chapter, however, sometimes the law will create a fictional contract in order to
prevent one party from unjustly receiving a benefit at the expense of another. This is known as a
quasi contract and provides a basis for Nursing Services to recover the value of the services it
provided while Janine was in the hospital. As for the at-home services that were provided to
Janine, because Janine was aware that those services were being provided for her, Nursing
Services can recover for those services under an implied-in-fact contract. Under this type of
contract, the conduct of the parties creates and defines the terms. Janine’s acceptance of the
services constitutes her agreement to form a contract, and she will probably be required to pay
Nursing Services in full.
10-3. Unilateral contract, Yes, because Davison accepted the offer by his “performance” upon
seeing the advertisement.
10-4. The court held that the employment agreement was a unilateral contract that could be
formed only by Hawley's performance in Missouri, and thus that the accident causing Hawley's
death was not compensable under Florida law. Arguing that its agreement with Hawley was a
bilateral contract executed in Florida, D.L. appealed to a state intermediate appellate court,
which reversed the judgment of the lower court and held that the agreement was a bilateral
contract. The appellate court stated, "To form a bilateral contract, there must be mutuality of
obligation. Here, Hawley and Appellant clearly made mutual promises. Thus, the agreement is a
bilateral contract. . . . A contract is created where the last act necessary to make a binding
agreement takes place. Where one contracting party signs the contract, and the other party
accepts and signs the contract, a binding contract results. It is undisputed that Hawley signed
the agreement then sent it to [D.L.] in . . . Florida, where it was signed and executed by [D.L.'s]
President. Because the last act necessary to complete the agreement, . . . was performed in
Florida, the contract was made in Florida." The consequence of this decision is that if a contract
is formed in Florida, the accident is compensable under Florida workers' compensation law.
10-5. The Appellate Division reversed, finding that the lower court improperly re-wrote the
contract. A court cannot make a different or better contract than the parties make for
themselves. In this case, two parties well equipped and savvy enough to deal with the allocation
of cost overruns and additional unexpected costs. Since they failed to do so, it was not the
court’s job to re-write the contract for them. While courts of equity “have the power not to enforce
a contract that inequitably imposes a greater hardship or a manifest injustice,” the cases cited by
the developer dealt with a court’s refusal to award specific performance of a contract and where
the Court awarded monetary damages instead. The Court found that, in this case for money
damages, there was no manifest injustice or great hardship. Therefore, the developer was
required to pay its share of all costs, even those it had not anticipated.
10-6. 10–6. Case Problem with Sample Answer
In December 2000, Nextel South Corp., a communications firm, contacted R.A. Clark
Consulting, Ltd., an executive search company, about finding an employment manager for
Nextel’s call center in Atlanta, Georgia. Over the next six months, Clark screened, evaluated,
and interviewed over three hundred candidates. Clark provided Nextel over fifteen candidate
summaries, including one for Dan Sax. Nextel hired Sax for the position at an annual salary of
$75,000. Sax started work on June 25, 2001, took two weeks’ vacation, and quit on July 31 in
the middle of a project. Clark spent the next six weeks looking for a replacement, until Nextel
asked Clark to stop. Clark billed Nextel for its services, but Nextel refused to pay, asserting in
part that the parties had not signed an agreement. Nextel’s typical agreement specified payment
to an employment agency of 20 percent of an employee’s annual salary. Clark filed a suit in a
Georgia state court against Nextel to recover in quantum meruit. What is quantum meruit? What
should Clark have to show to recover on this basis? Should the court rule in Clark’s favor?
Explain. [Nextel South Corp. v. R.A. Clark Consulting, Ltd., 266 Ga.App. 85, 596 S.E.2d 416
(2004)]
Answer:
As you learned from the text, the Latin phrase quantum meruit means “as much as he deserves”
and is tied to the doctrine of quasi contract. According to the chapter, a quasi contract is a
fictional contract created by a court and imposed on parties solely in the interest of fairness. A
quasi contract is formed when a court seeks to avoid the unjust enrichment of one party at the
expense of another. Quantum meruit prescribes the amount of compensation that will be owed
under the implied contract.
To decide in this case whether a claim for quantum meruit will be successful, it must be
shown first that there was no actual contract and then that there is a basis for the court to
impose a quasi contract. Here, the facts specify that the parties had not signed a contract. (Note
that there is an argument that the parties’ conduct had resulted in an implied-in fact contract,
which is an actual contract. They apparently did not pursue that theory of the case.) Without an
actual contract, in order for Clark to prevail, the court had to determine that there was enough
evidence to find an implied-in-law contract, or quasi-contract. The essential element that Clark
needed to prove was that Nextel had been unjustly enriched by Clark’s performance of services.
If you reached the conclusion that Clark was able to prove its case, you agree with the
state appellate court. The court found an implied contract because Clark spent months
evaluating candidates at Nextel’s request, and Nextel hired a candidate specifically placed by
Clark. Clark then worked for six weeks to find a replacement, stopping only when Nextel
terminated their relationship. Under the theory of quantum meruit, the court entered a judgment
in favor of Clark for the amount that Nextel would have paid under its typical agreement.
10-7. The judgment is affirmed. The matter is remanded to the trial court for its determination of
an award of attorney fees and costs on appeal to Black Hills.
McDonald, J., and Irion, J., concurred.
All further statutory provisions are to the Government Code unless otherwise specified.
Chapter 10 Summary
Jonathan Cutler
Business Law
October 2011
Chapter 10 discusses nature, terminology, and contracts. A contract is basically an
agreement that legally binds two or more parties who agree to perform or to refrain from
performing an act now or in the future. A bilateral contract is simply a promise for a promise.
A unilateral contract is a promise for an act. Contracts can be classified according to the
degree to which they have been performed.
A contract that has been fully performed is an executed contract. One that has not
been performed by one of the parties is an executor contract. A contract can be voidable at
the option of one or both of the parties. A contract can be unenforceable if there are certain
legal defenses against it. A void contract is not a contract at all.
A void contract produces no legal obligations on any of the parties. A court will
generally interpret the language to give effect to the parties’ intent as expressed in their
contract. There is a primary purpose of the rules of interpretation which is to determine the
parties’ intent from the language used in their agreement and to give effect to that intent. A
court will not normally make or remake a contract or interpret the language according to
what the parties claim their intent was when they made it. Express contracts and implied in
fact contracts are contracts that are formed by the words or actions of the parties. Quasi
contracts are fictional contracts created by the courts and imposed on parties in the interest
of fairness and justice.
Section 66499.32(a) provides: "Any deed of conveyance, sale or
contract to sell real property which has been divided, or which has
resulted from a division, in violation of the provisions of this division,
or of the provisions of local ordinances enacted pursuant to this
division, is voidable at the sole option of the grantee, buyer or person
contracting to purchase, his heirs, personal representative, or trustee
in insolvency or bankruptcy within one year after the date of
discovery of the violation of the provisions of this division or of local
ordinances enacted pursuant to the provisions of this division, but the
deed of conveyance, sale or contract to sell is binding upon any
successor in interest of the grantee, buyer or person contracting to
purchase, other than those above enumerated, and upon the grantor,
vendor, or person contracting to sell, or his assignee, heir or
devisee." (Italics added.)
Section 66499.32 is a curative statute in that it provides a remedy to a buyer who has entered
into a contract to purchase a parcel of real property that has been subdivided, but is not a legal
parcel. Section 66499.30, on the other hand, is a preventative statute in that it seeks to prevent
the creation of illegal parcels by prohibiting the sale of any parcel for which a final or parcel map
is required under the SMA or a local ordinance until the map has been recorded in compliance
with the SMA or ordinance (? 66499.30, subds. (a) & (b)), unless the contract for the sale of the
parcel expressly conditions the sale upon the approval and filing of the map as required under
the SMA (? 66499.30, subd. (e)).