Section 1
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Adhesion Contracts
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Section 1
(50 cards)
Adhesion Contracts
A type of unconscionable contract that is drafted by the party who has the greater bargaining advantage, providing the weaker party with only the opportunity to adhere (accept) to the contract or reject it (in other words, take it or leave).
Sullivan v O'Connor
Facts: Sullivan (P) entered into a contract with O'Connor (D), wherein D promised to perform two surgeries on P's nose to enhance P's appearance. After three surgeries performed by D actually worsened P's appearance and further surgery would not improve P's condition. Holding: Reliance damages (the amount the plaintiff had to pay because of the mess up) was just right. Expectancy damage (the defendant being forced to pay the difference between the value of a good or perfect nose, as promised, and the value of the nose after the bad operation) costs were too high. Restitution damages (defendant paying back the money) were not sufficient.
White v. Corlies and Tiff
Facts: Plaintiff was a builder, and the defendants were merchants wishing to have an office but. The defendants first requested an estimate and plaintiff left an estimate not indicating the time within which he would finish. The defendant then wrote a letter stating "Upon an agreement to finish the fitting up of the offices in two weeks from date, you can begin at once." The plaintiff never replied to this note, but purchased lumber and began the work. Defendant then withdrew the offer. Holding: Plaintiff had to communicate his assent in some reasonable fashion to defendant before making defendant bound to the offer.
Reasoning behind Contract Damages
The point of damages in a contract case is to compensate those who are disappointed, not to punish the breaker.
Lucy v. Zhemer
Facts: D owned a farm (purchased for $11K) that P had made several offers to purchase, all of which D rejected. D met P in D's restaurant. One evening after drinking, they had a substantial discussion of the sale of the farm. P made an offer of $50K D wrote out and signed an agreement to sell the farm to P on the back of a check. P took the written agreement and offered $5 to bind the agreement, which D refused to accept. D claims he was too drunk to enter into any real contract and that the memo was written as a joke. Trial court dismissed the case. Holding:A contract must have a good faith offer and a good faith acceptance with terms of consideration known by each party. The court does not look to Defendant's intent when making the agreement. The only focus is on the Plaintiff and if he had a reasonable belief. A person cannot say they were joking when their words and conduct would result in a reasonable person believing it was a valid agreement.
Expectancy
Put the plaintiff in position they would have been if the contract had been performed correctly. Expectancy is usually what the courts prefer.
What is a contract?
A set of promises which are enforceable under law. Generally, there is an exchange of things of value, or promises of value.
Mailbox Rule
An offer made by post/letter is not effective until received by the offeree. Acceptance is effective as soon as it is sent. For revocation to be effective, it must be received by the offeree before they post their letter of acceptance. The court has not clearly decided whether an acceptance by email becomes valid when sent or received. Instantaneous forms of communication such as faxes and telex communications do not fall under the mailbox rule, so acceptance by these methods are only valid when received.
Expectancy Example
Sunshine offers to sell Squeeze Me one thousand bushels of oranges for $5 per bushel to be delivered on April 1st. Squeeze Me agrees. On March 31st, the price of oranges reaches $9 per bushel and, the next day, Sunshine refuses to deliver the oranges to Squeeze Me. In this case, expectation damages will be measured by taking the market price of the oranges, $9 per bushel, and subtracting from it the contract price, $5 per bushel. Therefore, given the market price of oranges, Squeeze Me would have had $9,000 worth of oranges had Sunshine not breached. Taking the $9,000 value of the oranges and subtracting the $5,000 that Squeeze Me would have paid for the oranges, expectation damages will come to $4,000.
Restitution Example
Michelangelo promises to pay Picasso $5,000 if Picasso paints Michelangelo's house. Picasso begins the job and when he is a quarter of the way through the work, the house burns down. This contract is now unenforceable because the subject the matter of the contract has been destroyed. In this case, the Court will award Picasso restitution for the reasonable value of the work he did on the house before it was destroyed.
Leonard v. Pepsico Inc.
In justifying its conclusion that the commercial was "evidently done in jest" and that "The notion of traveling to school in a Harrier Jet is an exaggerated adolescent fantasy," the court made several observations regarding the nature and content of the commercial. These included (among others) that: "The callow youth featured in the commercial is a highly improbable pilot one who could barely be trusted with the keys to his parents' car, much less the prize aircraft of the United States Marine Corps." "The teenager's comment that flying a Harrier Jet to school 'sure beats the bus' evinces an improbable insouciant attitude toward the relative difficulty and danger of piloting a fighter plane in a residential area." "No school would provide landing space for a student's fighter jet, or condone the disruption the jet's use would cause." In light of the Harrier Jet's well documented function in attacking and destroying surface and air targets, armed reconnaissance and air interdiction, and offensive and defensive anti-aircraft warfare, depiction of such a jet as a way to get to school in the morning is clearly not serious even if, as plaintiff contends, the jet is capable of being acquired 'in a form that eliminates fits] potential for military use."
Specht v. Netscape Communications
Netscape was the offeror (of the software), the user was the offeree (of the terms). BUt the terms were included on a seperate page that was below the "download" button for the website. Holding: Court held that because software was free, users might not realize there was no warning to the offeree to look for terms, and no requirement of consent in order to download.
Counter Offer
Mirror Image Rule: Any deviation from terms of offer is not an acceptance, rather it is a counter offer.
Beneficiary
Person, other than a promise, who will benefit from the promise.
Revoking an Offer
After a party has made an offer, conferring on another by the power of acceptance, that power can be terminated by: 1)Lapse of an offer (time limit) (if no time limit then "reasonable time") 2)Revocation of an offer (by offeror). 3)Rejection of an offer (by offeree) 4)Death or incapacity (by offeror),
Promisee
Person to whom the promise is addressed.
Hamer v. Sidway
Facts: William Story agreed with his uncle to refrain from drinking, smoking, swearing, and gambling until he became 21, in exchange for $5,000. However, right before it became time to collect, his uncle died. Argument: The defendant contended that the contract was without consideration, and therefore invalid. He asserted that the promisee withholding from these behaviors wasn't harmed but rather benefitted, so he did what was best for him independently of his uncle's promise. They argued this suggests no consideration. Holding: Courts will not ask whether the thing which forms the consideration benefits the promisee or third part, or if it is of substantial value to anyone. It is enough that something is promised, done, forborne or suffered to whom the promise is made as consideration for the promise made to him.
Lefkowitz v. Great Minneaoplis Surplus Store
Facts: Defendant advertised the sale of three fur coats and three fur stoles for $1.00 a piece. The advertisement said "first come, first serve." Plaintiff arrived at Defendant's store wishing to buy the garments. Defendant refused, saying the sale was only for Women. Holding: While offers can be modified, one cannot, after acceptance, impose new, arbıtrary condıtions. This ad was an offer because it specified who could accept. The test of whether a binding obligation may originate in advertisements addressed to the general public is whether the facts show that some performance was promised in positive terms in return for something requested.
What do you agree to when you don't read the terms of a contract?
You expect standard terms in a boilerplate contract. Things that a reasonable person would not expect are less likely to be enforced. Things that are unfair are even less likely. The terms must be set out in a clear, conspicuous, and intelligible form. Courts can refuse to hold a party to a term that an offeree does not have actual knowledge of if the term is not apparent to a reasonable person. Can't be buried in fine-print or terms a normal person wouldn't understand.
When will courts not enforce "clickwrap" contracts?
Unconscionable in terms of: how consent is acquired (procedural unconscionability) or the terms are unduly harsh, or one-sided (substantive unconscionability). Or if the terms of the contract are dictated by the party with dominant market power, and the contract is for good or service that is not considered a luxury (contract of adhesion).
Browsewrap terms
No button to press.
What happens when you buy something in a big store?
You get a receipt with terms (return, warranties, etc)..
Consideration
A benefit received by the promisor or a detriment incurred by the promisee that induces the contract. Essentially, anything that was (or could be) bargained for constitutes consideration. We don't care, in general if consideration seems "fair."
Three types of contracts
Express contacts, implied contracts, and executed/executory contracts.
Promise
An assurance or understanding, however expressed, that something will or will not be done in the future. Promises enforceable under law are "contracts."
Consideration
Benefit received by the promisor or a detriment incurred by the promise.
Shrinkwrap terms
Terms on a piece of paper inside of a box. Generally, a party cannot change the terms of contract after it is agreed to.
Can a recovery be both reliance and restitution.
No
Acceptance
A voluntary act of the offeree whereby they exercise the power conferred upon them by the offer, and thereby creates a set of legal relations called a contract. If the offeree's words or actions should reasonably make the offeror think it was accepted; it was.
"Boilerplate"
Language that is common in many contracts. Generally, rules of offer and acceptance and the objective test apply.
Unconscionable contracts
A contract that is unjust or unduly one-sided in favor of the party who has the superior bargaining power. The adjective unconscionable implies an affront to fairness and decency. An unconscionable contract is one that no mentally competent person would accept and that no fair and honest person would enter into.
Feldman v. Google
Facts: Google was sued br Lawrence Feldman, a lawyer who purchased advertising for his legal practice using Google's AdWords service. Feldman would be charged for each click on one his ads that turned up when users searched for various terms. The online agreement was preceded by the statement "Carefully read the following terms and conditions. If you agree with these terms, indicate your assent below." Feldman claimed that he was a victim of "click fraud", and that 20-30% of all clicks he was charged for were fraudulent. He claimed that Google charged him over $100,000 and that the clickwrap agreement was not enforceable, His three reasons were 1) it was not a valid, express contract as there was no assent; 2) that there was not sufficient definiteness; and 3) that it was unconscionable. Google then filed a motion to dismiss the claims. Holding: When an online user has been given reasonable notice of the agreement's term and it is clear that once the user clicks on the acceptance button," the user agrees to be bound by those terms notwithstanding that the agreement does not include a specific price term, but describes with adequate definiteness, a practicable process by which price is determined, then the online clickwrap, agreement becomes binding on the online user.
Restitution
Take away any benefit conferred upon the defendant by plaintiff in performance of the contract. Typically used when a contract has been partially completed, but not paid for, or if the contract should have been unenforceable, but one party received their benefit.
Bargain Theory
This theory of consideration believes that a typical contract must consist of a bargained-for-exchange whereby the consideration of one part induces the making of a promise by another party.
Reliance Example
Tony promises to give Cornelius $10,000 to buy a car. In reliance on the promise, Cornelius spends $9,000 buying a car. Tony then reneges on the promise. In this case, because it was foreseeable that Cornelius would rely on the promise, the courts will award him reliance damages in the amount of $9,000, thereby putting him in the same position he would have been in had the promıse never been made.
Cotnam v. Wisdom
Facts: Plaintiffs were doctors and the defendant was a man. injured in an accident. He was thrown from a street car, and received serious injuries. Some spectator notified the doctors of the injury, and they performed a difficult operation in an effort to save his life. He ended up dying. They wanted to charge his estate for the surgery. Holding: This is a valid quasi-contract." No requirement of actual contract, or meeting of the minds (bargaining) - there was consideration and no other remedy is possible. Courts rule this way because emergency services rendered are gratuitous unless they are performed by someone who is rendering them in a business or professional capacity.
Walgreen Co v. Sara Creek Property Co
Facts: Walgreen was a tenant in the shopping center owned by Sara Creek. The thirty-year contract had an exclusivity clause which stipulated that no other pharmacy would be in the shopping center while Walgreen's was there. When ten years remained on the lease, Sara Creek was going through difficult times, and needed a new anchor tenant. Sara Creek signed Pharmor, a "deep-discount" pharmacy. Holding: An injunction (ordering Sara Creek to perform the terms of the contract). This is the best remedy because the damages are too speculative.
Executed and Executory Contracts
An executed contract is one in which nothing remains to be done by either party. An executory contract is one in which some future act or obligation remains to be performed according to its terms.
Express contacts
In an express contract, the parties state the terms, either orally or in writing, at the time of its formation.
Implied Contracts
An implied ("quasi contract") is not an actual contract, but is a legal substitute formed to impose equities between two parties. The concept of it is that an express contract should have been formed, but it was not. Courts use it to create an obligation that holds parties to measures that avoid injustice and ensure fairness.
Three elements required to have a contract.
Offer from one party to another. Acceptance of an officer. Exchange of consideration (something of value must be exchanged for something else of value).
What are the requirements of a valid offer?
-Expression of present intent to enter into a contract by offeror. Reasonable person standard (would a reasonable person believe there was an intent of the offeror). -Must have an identified offeree. -Offeree must have actual knowledge of the offer. This creates power of acceptance on the part of the offeree. -Definite subject matter. (What/how much is being bought/sold specifically?) -Duration the offer stays open. If no reason is specified, the time defaults to a "reasonable" amount of time. (Usually three months).
Claiming that you didn't read terms of contract.
In general, if you accept terms, you cannot later claim that you did not read them.
Reliance
Any expenditure made by the plaintiff and any other detriment following proximately and foreseeably from the defendant's failure to carry out the promise. Put the plaintiff back in the position he was in before there was a contract. Usually used when expectancy damages are hard to prove.
Clickwrap terms
Puts the item in the cart, inputs all information, and then before you can finish the purchase takes you to the store's policy. You click on a button acknowledging acceptance.
Types of broken contracts
Unconscionable contracts, adhesion contracts, and void/voidable contracts.
Promisor
Person who makes promise
Craft v. Elder and Johnson
The Elder and Johnson Company (defendant) advertised in a newspaper an offer to sell an electric sewing machine for $26 as a "Thursday Only Special." That Thursday, Craft (plaintiff) tendered $26 for a sewing machine but E&J refused to sell her one. Craft filed suit for breach of contract against E&J claiming the newspaper advertisement was an offer. The trial court dismissed Craft's complaint noting that the advertisement was not an offer which could be accepted by Craft to form a contract, but rather was an invitation to negotiate. Craft appealed.Holding: The advertisement in the newspaper is not an offeror an offer to receive offers.
Void and Voidable Contracts
These types of contracts can be either void or voidable. A void contract imposes no legal rights upon the parties and is not enforceable by a court. There is no contract at all. In a voidable contract, the person that the contract should not be enforced against, can usually choose whether or not to enforce.
Uniform Commercial Code
All states besides Louisiana have adopted at least parts of the "U.C.C." to apply provisions from it to their contract law system.
Section 2
(15 cards)