check sound check mike time today’s lecture: contracts 1. formation, defense & excuse 2....
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Check Sound
Check Mike
Time
Today’s Lecture:
Contracts
1. Formation, Defense & Excuse
2. Parole Evidence and Modification
Lecture Organization:
• Class Announcements
• Review
• Defenses
Time
• Excuses
• Contracts by Operation of Law
• The Primacy of the Writing
• Remedies
Class Announcements
1. Midterm grading
-- going well; hope to finish this weekend in New York City
2. No class on Tuesday (I’ll be in New York on my second job talk)
3. Your paper
-- find the phone number to the magistrate court here in state college and the trial court in Bellefonte.
-- watch them before Thanksgiving break; write the paper during Thanksgiving break
Questions?
Time
Review
1. Introduction to Contracts
-- specifically, how to form them
.. Take a look
• Prerequisites
• “Assent”
• No defense
• No excuse
Capacity
Subject Matter
Statute of Frauds
Offer
Acceptance
Consideration
Time
Defenses
1. Things that, if true, will negate or nullify the contractual formation
2. These things will be listed in a linear progression, so that each one gets progressively worse (one exception)
3. Let’s take a look …
Mutual Mistake
Mutual Mistake
(1) both parties are mistaken
(2) about a material assumption in the K
Example:
“Fugazi” (Louie selling “diamels”)
Mutual Mistake
Unilateral Mistake
(1) one party is mistaken about a fact in the K
(2) which the other party knows about and keeps quiet
Example:
Used car was a wrecked police car
(must be a fact not an assumption!)
Mutual Mistake
Unilateral Mistake
(1) reasonable reliance
(2) upon a material fact
(3) which has been innocently misrepresented
Example:
Same facts as before, only the secretary explicitly says it has never been wrecked
Misrepresentation
Mutual Mistake
Unilateral Mistake
(1) any reliance
(2) upon a fact
(3) that is fraudulently misrepresentedExample:
Running the odometer backward.
Misrepresentation
Fraud in the Inducement
Mutual Mistake
Unilateral Mistake
-- “switched document” fraud
Example:
Tricking someone into signing a document so they don’t realize what it really isMisrepresentatio
n
Fraud in the Inducement
Fraud in factum
Mutual Mistake
Unilateral Mistake
… e.g., gun to the head
Example:
Sign or I’ll break your knuckles
Misrepresentation
Fraud in the Inducement
Fraud in factum
Personal Duress
Note:
difference between a K defense and other causes (torts, crimes)
Note:
Each defense becomes progressively worse.
Note:
There is one defense left which does not fit into this orderly progression …
Mutual Mistake
Unilateral Mistake
Misrepresentation
Fraud in the Inducement
Fraud in factum
Personal Duress
Economic Duress
-- extremely rare
1. a party takes advantage of an economic situation
2. which he/she caused to exist!
Example:
A landlord who employs you
Time
Excuses
1. These are different from defenses
-- Defenses negate assent (nullify assent)
-- Excuses do not do this; they merely excuse performance even though valid assent still exists!
2. They also have an orderly structure to them
-- let’s take a look …
Modification
Modification
The parties agree to excuse the K performance
(another K takes away the previous responsibility!)
Modification
Impossibility -- performance cannot literally occur
Example:
-- prohibition
-- painting the inside walls of the twin towers on 9/12
Modification
Impossibility
(1) an event that is unassumed, severe and unforeseen
(2) makes it unreasonable for the parties to perform
Example:
-- Painting the curb yellow or installing a new traffic light at the intersection of the World Trade Centers after 9/11.
Impracticability
Modification
Impossibility
(1) an unforeseen event destroys or eliminates the purpose of the K
(2) both parties knew of the purpose at the time of K
Example:
-- Planting trees to beautify the Trade Center entrances after 9/11.
Impracticability
Frustration
• Prerequisites
• “Assent”
• No defense
• No excuse
Capacity
Subject Matter
Statute of Frauds
Offer
Acceptance
Consideration
Mutual mistake
Unilateral mistake
Misrepresentation
Fraud (I) & (II)
Duress (I) & (II)Modification
Impossibility
Impracticability
Frustration
Putting it all together
Time
Contracts by Operation of Law
1. These are not real Ks; they are a fictitious contractual arrangement imposed by courts to avoid unfairness
2. whenever a contract fails for some technical reason –- excuses, defenses, prerequisites, etc., -- and you are “injured” by the failure, you can ask the Court to impose a fictitious contractual relationship to repair the injury
3. generally imposed in two situations
-- Reasonably foreseeable reliance
-- upon an utterance to your detriment
Tricky Utterance
Example: a landlord’s oral promise to hold a lease for you. You terminate your other lease and put money down on your U Haul. The next day she changes her mind.
Contracts by Operation of Law
-- You lose money under the auspices of a K relationship, but find out that no enforceable K exists
-- The Court will impose a fictitious K in order to award you restitution ONLY
-- Also, there is something called “quantum meruit”
-- The reasonable value of the services rendered when a contract is cancelled
Lost Money
Example: prohibition.
Example: firing an attorney the day before settlement or trial
The Primacy of the Writing
-- Important question
-- There are two very important devices in K-law that make lawyer services quite valuable
-- These devices allow lawyers to defeat many of the contract defenses and loopholes that we’ve been looking at.
-- a clause inserted into the document
-- that makes prior/contemporaneous understandings about the K irrelevant
-- the writing controls anything that was said prior to or even DURING its signing
Question:
Why am I showing you this?
Answer:
A theoretical understanding what law does (how it is
used) and what lawyering consists of
Parole Evidence Clause “Batman”
The Primacy of the Writing
--this clause makes oral understandings SUBSEQUENT to the writing irrelevant
-- modifications are only allowed to be in writing
-- let’s take a look at how batman and robin work together in a contract
No Oral Modification Clause “Robin”
timelineT-1
Expectation
formed
• I get my security deposit back
• the walls are insulated well
• no one lives above me (cool!)
• The internet service makes the computer really fast
• They won’t raise the rent next year
timelineT-1
Expectation
formed
T-2
Expectation
formed
The date of the “execution”
(The signing of the K)
timelineT-1
Expectation
formed
T-2
Expectation
formed
Expectations formed here are irrelevant; only the writing controls the terms, not your expectations. Your understanding at T-1 and T-2 cannot vary the written terms that you affix your signature to
Note how powerful that makes lawyer draftsmanship
services!
Caveat!
Some difficult maneuvers that can be attempted:
Alleging fraud and so forth. But these are difficult.
The point is that these doctrines make writings very powerful
It takes away many of the defenses we talked about earlier
timelineT-1
Expectation
formed
T-2
Expectation
formed
“Batman”
T-3
Expectation
formed
Let’s look at “Robin” …
This expectation arises out of communications with the person AFTER the signing:
Example: Landlord and paying rent late
1. Modification?
2. Reasonable reliance?
timelineT-1
Expectation
formed
T-2
Expectation
formed
“Batman”
T-3
Expectation
formed
“Robin”
No oral modifications allowed!
Any modification must be in writing
Once again, this makes lawyer draftsmanship a valuable service
The Primacy of the Writing
-- Note: if you are caught within the terms of an aggressive or unfair writing, and there is no fraud involved, there are really only two things you can do:
-- very tough: have to be oppressive and unfair at the time of the bargain
-- But there is something else, at least for SOME kinds of contracts:
-- a contract where the idea of bargaining over terms is a fiction, even in theory
-- example: an insurance contract
Unconscionable?
Adhesion Contract?
Time
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