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Statute of Frauds-Recap http://www.youtube.com/watch?v=tNwAFgdpLJM&feature=youtube_gdata_player 2 Exceptions to statute of frauds • • Partial performance Admissions Partial performance • If buyer has paid any portion of purchase price AND Started to improve land or taken possession Then this partial performance is proof of the K ADMISSIONS • • If admit in court or under oath that there is an oral K cant claim SOF PAROL EVIDENCE RULE ONE CAN NOT VARY OR ALTER THE TERMS OF A WRITTEN K WITH EVIDENCE OF TERMS AGREED TO BEFORE OR CONTEMPORANEOUSLY WITH THE WRITING Reason for parol evidence rule • TO PREVENT EVIDENCE THAT CONTRADICTS THE K MERGER CLAUSE (in contract) • Clause that says THIS is the final agreement of the parties 1 • • • • • Also usually says no modifications of K unless in writing Exceptions (to P.E. Rule) Lack of consent (fraud, duress, undue influence, mistake) Ambiguous K Incomplete (can fill in gaps, but cant change or contradict terms) Orally agreed on conditions (if existence of entire K depends on condition, but cant alter the terms of the K) To determine if parol evidence allowed, ask: • Is it an integrated K? (a complete and final agreement) • If integrated, no parol evidence (unless one of the exceptions applies) IF a K is only partially integrated (then it isn’t done yet) and parol evidence may be allowed to show additional, consistent terms to supplement (but not to contradict) CAN USE PAROL EVIDENCE To interpret an ambiguous contract Plain meaning rule • • • • When K is clear and unequivocal, courts will enforce K according to its terms Interpretation of Ambiguous terms Interpret to give effect to intent of parties as expressed in whole K 4 corners rule (Interpret as a whole) Ambiguities resolved against drafter 2 • Words given common, ordinary meaning CAN USE PAROL EVIDENCE To interpret an ambiguous contract BUT CANT CHANGE OR MODIFY REMEMBER! Parol evidence can NEVER be used to contradict the terms of the K Two situations when a 3d party given rights to a K when he is not a party • • 3d party beneficiary Assignment Third Party Beneficiary K’s When the performance is intended to benefit someone other than the person who made the K Third Party Beneficiary Contracts Types: • • • Donee Beneficiary Creditor Beneficiary Incidental beneficiary INTENTIONAL BENEFICIARIES ARE DONEE AND CREDITOR BENEFICIARIES THEY CAN ENFORCE THE CONTRACT INTENDED BENEFICIARY K 3rd party beneficiary can sue the PROMISOR for enforcement BUT NOT the PROMISEE Who is the PRMISOR in a 3rd party beneficiary K? 3 • The party that made the promise that benefits the 3rd party Example Life Insurance Co makes K w/ Grandpa for life insurance and Fred is the beneficiary __________________________________ Life Ins. Co= promisor Fred= 3rd party benefic. Grandpa= promisee Fred can sue Life ins co to enforce K but not Grandpa DONEE BENEFICIARY • Primary purpose of contracting was to make a gift of performance to the beneficiary DONEE BENEFICIARY CAN ENFORCE THE CONTRACT AGAINST THE ORIGINAL PROMISOR BUT NOT THE PROMISEE Donee Beneficiary (Examples) • • • If PURCHASE OF HOUSE BY PARENT FOR CHILD; ROOF FALLS IN. MAN BUYS ENGAGEMENT RING FOR FIANCEE AND IT TURNS OUT THAT THE STONE IS GREEN GLASS NOT EMERALD Life Insurance contracts (designated beneficiary is a donee beneficiary) Creditor Beneficiary performance will satisfy a legal duty that owed a third party (can be any legal duty; not just payment of $) INCIDENTAL BENEFICIARIES CAN NOT ENFORCE THE CONTRACT 4 Incidental Beneficiary K is not intended to benefit --------------------Has NO RIGHTS under the K (is NOT an intended beneficiary) Examples Incidental beneficiary • • Someone next door makes a K to have their ugly house painted Business in strip center makes contract with guy to dress up like gorilla and stand on corner to bring traffic to center A contract consists of rights and duties A transfer of rights is called an assignment A transfer of duties is called a delegation Can’t assign • • • • • Rights that are personal Rights that increase obligors risk or duties When prohibited by law or contract ONCE ASSIGNED Assignor has no rights left under the K Delegation (Duties) Cant delegate personal duties requiring specific talent or expertise Delegation 5 • • • • • If delegatee doesn’t perform, person delegating the duty (delegator) is still liable under the K Discharge of a K—How does a party terminate his obligations? Performance --complete ---substantial Material breach Mutual agreement Performance Excused (By operation of law prevention by other party or impossibility) Material Breach If performance is not at least substantial (failure to perform) When material breach • • The other party no longer has to perform And can sue for breach of K Anticipatory breach Also called anticipatory repudiation Occurs before a contract has been fully performed ------------------------------------------If other party indicates intent not to perform other party can treat the K as breached (and sue) EXCUSES FOR NONPERFORMANCE • • Prevention (other side prevents) By operation of law a. Bankruptcy 6 • Impossibility a. death or illness b. intervening illegality c. destruction of the subject matter Remedies for breach • • • Damages (remedies at law) OR Equitable remedy Damages Compensatory (actual) Consequential (special) Nominal Consequential Damages-Special circumstances FLOW from the breach Consequential Damages • • Includes incidental damages- Inspection, storage, transportation, buying replacement goods Consequential Damages Have to be foreseeable from the breach Parties can draft Clause in contract to WAIVE Consequential damages Nominal Damages= to show wrong even though no compensable harm NO PUNATIVE DAMAGES ! For breach of contract 7 Unlike Tort actions, where attorney’s fees are not recoverable The prevailing party in a breach of contract suit can usually recover his reasonable attorney’s fees (plus interest and costs of court) Liquidated Damages • Provide in advance that a specific sum recovered if breach When Liquidated Damages provided for in the K, it is the exclusive remedy (cant get more) Duty to Mitigate Parties injured by a breach of contract have a duty to minimize damages (Cant recover for injuries that could have been avoided) MITIGATE= • To make less EXAMPLE Rosco alleging wrongful termination from employer. Rosco can’t just sit around for 4 years waiting for case to go to trial. Has to MITIGATE his damages by looking for other work. Distinguish between LEGAL REMEDIES AND EQUITABLE REMEDIES LEGAL REMEDIES = DAMAGES $$$$$$$$$$$ Equitable Remedies=Court Ordered Action Equitable Remedies • • • Specific performance (if unique subject matter) … i.e. real estate K’s Restitution- (return property given) Rescission—undo K and return parties to status quo 8 CLEAN HANDS REQUIRED FOR EQUITY NOTE: DAMAGES ARE DIFFERENT THAN EQUITABLE REMEDIES Is a winning bid at an auction A contract? Ways to Enforce a Promise when there is no contract • • • • • • • • quasi-contract Promissory estoppel Quasi-Contract a/k/a/ quantum meruit No contract Contract is implied to prevent unjust enrichment Quantum Meruit “as much as he deserves” Quantum Meruit An equitable remedy that prevents others from receiving unjust enrichment Quantum Meruit Allows recovery for reasonable value of services provided Quantum Meruit (quasi-Contract) Elements Someone furnishes goods or services and expects compensation Other person accepts goods or services and obtains a direct benefit NOTE: Quantum Meruit 9 • • • • • Based on the parties conduct EXAMPLE: Quasi-Contract UPS delivers TV to you by mistake and you keep it REMEMBER!!!!!!!!!!!!!!! Quantum Meruit (quasi-contract) is for when there is NO CONTRACT PROMISSORY ESTOPPEL Person made promise, knew you would rely on it and You justifiably relied on it to your detriment REMEMBER!!!!!!!! PROMISSORY ESTOPPEL is for when there is NO CONTRACT FINIS! 10