Ch. 2, 3, 4, 5 Notes PDF

Ch.2 Contract: agreement between 2 or more parties that intend to be legally enforceable. Essential elements 1. Legal Capacity of the Parties 2. Consideration (exchange) Emerson -defines consideration as any lawful alteration of responsibilities that is given...

Ch.2 Contract: agreement between 2 or more parties that intend to be legally enforceable. Essential elements 1. Legal Capacity of the Parties 2. Consideration (exchange) Emerson -defines consideration as any lawful alteration of responsibilities that is given in exchange for the other person’s consideration. -consideration is based on the idea of quid pro quo (something for something) action, forbearance, promise -usually a court will not evaluate the adequacy of consideration or promise -Exceptions: where there is no consideration/ where lesser amount exchanged for larger Issue of the existence of consideration -Illusory promises -Doing what are already is bound to do -Moral obligations(love 10% more) -Past consideration (study good grade pay example) -Statute of limitations(chins shoe ship example) Even where a promise is made without consideration, and no legally enforceable contract accordingly exists, a promissory estoppel can arise. Big chance it won’t come in the exam Promissory estoppel: stops a person from going back on a promise even if a legal contract does not exist. It states that an aggrieved party can recover damages from a promisor if the damages incurred were the result of a promise made by the promisor, which the receiver of the promise relied on to his subsequent detriment. 3. Mutual Agreement (assent) reflecting a “meeting of the minds” offer & acceptance 4. Legal purpose Offer and acceptance and meeting of the minds -imp because its essential to know whether the parties actually agreed anything. If no agreement was reached, no contract exists. -test whether the parties to a contract reached agreement, or had the same intentions, when entering into the contract. Offer 1. must indicate a clear intent to form a contract 2. must be sufficiently definite that a court (judge) can understand or determine or see the actual intent of the parties 3. must be communicated to the other party How Long does an offer remain “open” or valid and subject to acceptance? 1. as stated in the offer 2. for a reasonable period of time When does an offer become invalid after it is made? 1. Rejection by opposite party 2. Counter-offer 3. Death or incompetency or other loss of legal capacity 4. Until withdrawn (can be withdrawn at any time prior to acceptance) Acceptance 1. must be clear and unqualified (without conditions) 2. must be made in any manner required by the offer Meeting of the Minds When a valid offer has been validly accepted a meeting of the minds has occurred, intentions of each of the contracting parties match Counter-offer: anything other than a clear meeting of the minds, or a clear acceptance in the manner required by the offer Negotiation: process of offer & counter-offer before a meeting of the minds Questions -Is a newspaper advertisement an offer which can be accepted, thereby forming a contract? no because it lacks a specific person -Is an offer to sell a black 1999 Jaguar model XK8, 55,000 km, no damage or wear to the exterior or interior of the car, for SR50,000 an offer which can be accepted, thereby forming a contract? -Is an offer to sell some land near the main road through the town of Hagl on the Gulf of Aqaba for a good price an offer which can be accepted, thereby forming a contract? no, because no specific land, no specific road, no specific price -I offer to do the hokey pokey for SR100. Is this an offer which can be accepted, thereby forming a contract? Legal Purpose 1. agreement (or purported contract) which violates public policy s void ab initio 2. agreement restraining trade is unenforceable 3. contracts for payments of bribes are unenforceable Meeting of the minds… Did the minds actually meet? Why an apparent meeting of the minds might not be a meeting of the minds? Material mistake (imp mistake) Material Mistake (fact) Mutual -no binding contract if the mistake is mutual -there is a binding contract if the mistake is unilateral, except where the other party knows, or should have known, of the mistake -THE LAW, GENERALLY DOESN’T PROTECT A FOOL. DUTY OF CARE Fraud Might come in the exam Requirements for a finding of fraud 1. Misrepresentation of a material fact 2. Knowingly made 3. Made with intent to defraud 4. Justifiably relied upon 5. Causing injury to the other party The victim of fraud can disavow the contract (rescission) or affirm the contract, and sue (in tort) for damages arising from the deception. Undue influence Superior position in a close or confidential relationship (ex: when someone talks you into doing something you don’t want) Duress “Lock him up until he signs” Unconscionability Gross unfairness, or gross inequality in bargaining positions. (ex: elderly) These are errors in formation. If any of these things has occurred as a contract was being formed, that contract is void ab initio (does not exist) Contract is discharged (or ended or released by) 1. Performance: each party has done all that it agreed to do, and the other party tacitly agrees. No claims are made. 2. Agreement -mutual rescission -accord and satisfaction -release -waiver (similar to release) 3. Operation of Law -subsequent illegality -impossibility “force majeure” concept -Bankruptcy (because you loss capacity) -Statute of limitations If a contract is not fully discharged by performance, by agreement, or by operation of law, then we have a problem. Unless one of the three forms of satisfactory discharge occurs, we know there is going to be a disagreement between the contracting parties. To make a claim in contract a claimant always must prove three things: 1. existence of a contract 2. contract was breached 3. as a direct (or sometimes indirect) result of the breach, the plaintiff was damaged What is the theory or basic rule of damages? Revenge: law as revenge “an eye for an eye” Compensation: make whole; compensate for loss. “give me a new eye!” Compensation: (in contract law) is the basic rule of damages is A party proving loss is “made whole” for the loss she or he suffered, nothing more, nothing less; nothing else. This concept of making exactly whole is the concept of indemnity. (indemnification; indemnify) Consider how a loss can occur: Terminal 1, Heathrow Airport, Burger King. A true story. Limits on compensation: -reasonable certainty -reasonably foreseeable -duty to mitigate (stop bleeding!) Over many, many years most legal systems have developed rules which limit compensation in order to be predictable, to be fair, and to allow reasonable commercial risks to be taken. BASIC RULE OF DAMAGES IS COMPENSATION/MAKE WHOLE/INDEMNITY Other approaches to damages… Liquidated damages -agreed compensation in advance of loss -common in construction contracts Punitive (“punish”) damages Specific performance No damages at all: judge orders party to perform his/her contract -land, unique situations Lawsuit: claim against somebody Case: claim against somebody Breach: breaking contract Plaintiff: making or starting a complaint Defendant: against plaintiff Court (judge): government employees, public process Arbitration: alternative to court, private process, not government employees, almost always once and you are done Mediation: when a person ends a dispute between 2 people Legislation: court fight Liability: responsibility one has against the other Damage:  Ch.3 Agency/relationships: legal relationship whereby one person acts for another -may include employer/employee “apparent authority” -include powers of attorney -generally does not include independent contractors (tasked with a specific job) Creation of Agency (common law concepts) -by contract -by conduct (must be obvious to others; not private conduct) -by ratification of an unauthorized act -by estoppel (applies to principal. (employee example/driver to bank; I am estopped from denying authority.) -by necessity or law (parent/child) Powers of Attorney Subject to specific local laws that have same purposes & goals - prevent fraud + abuse - certainty Elements -maker/capacity, duration, purposes, 3rd party attest Duties of Agent to Principal Might come in the exam Fiduciary relationship: complete and strict separation of interests. Agent cannot put his interest ahead of the principal - Agent must obey instructions strictly - Agent must discharge duties with skill and care - Agent must avoid conflicts of interest - Agent must protect confidential information - Agent has duty to notify (not passive) - Agent has duty to account Duties of Principal to Agent -Duty to compensate/expenses if agreed or reasonable value or nothing if gratuity agreed - Duty to inform of known risks Might come in exam: list the obligation of an agent to principal What is most important obligation an agent has to a principal? Fiduciary obligations Liability of Principals Liability to third parties/contracts -Actual authority -Apparent authority (Western concept) Inviting 3rd parties to rely Liability in tort -Direct liability of principal if any failure on his part in Selecting agent, Instructing agent, Supervising agent -Indirect (employment) An employer is liable for acts of employee acting within scope of his employment. Liability of Agents -Disclosed principal/no agent liability -Partially disclosed principal/liability -Undisclosed principal/liability -Focus on undisclosed principal (KSA business practice) Termination of Agency -loss of legal capacity (death, bankruptcy, e.g.) -frustration of the purpose of the agency -subsequent illegality of agency -impossibility of performance -material breach of agency contract  Ch.4 Intellectual property: intangible property arising from the creative endeavors of the human mind, such as literary works and computer software; the major forms of intellectual property are patents, copyrights, and trademarks. Namely patents 1.temporary protection of applied knowledge, inventions, designs, manufacturing processes, chemical formulations (medicine) 2. Defined by Time (In USA 20 years) 3. Exclusions: not natural processes, philosophical ideas, abstract knowledge 4. Areas of Dispute -whether something is patentable -priority Copyrights 1.Exclusive right to print, reproduce written material music, art, photographs, and derivative works Requires -original authorship or creation/ expressed in tangible medium/at least minimally creative 2. Defined by Time (in USA life of creator + 70 years) 3. Exclusions: Fair use” doctrine -purpose of use (ex: Educational) -proportionality to the whole work -nature of work -effect of use on value Limited copying by libraries and archives Trademarks Protected symbols, words, numbers, pictures used to distinguish brand from another. 1.Must not lapse from disuse 2. defined by time but extendable 3. Exclusions: immoral, confusing, or “merely descriptive” marks Trade secrets -info which 1. -not generally known, owner makes reasonable efforts to keep private -owner derives economic value because the info is not known to others 2. Protected by common law or by contract or both -non-disclosure agreements -covenants not to compete  Ch.5 Negotiable Instruments (2 -3 questions might come in the exam about it) -most common negotiable instrument is paper money Imagine your business buys raw materials from a seller in Spain or anywhere a long distance from Riyadh. Seller’s worry: when can she ship the goods she is selling, and still be certain to receive payment? Buyer’s worry: how can she be certain the goods being sent to her are what she ordered, and are in the proper condition to be useful to her business before she makes payment in full? Commercial paper: documents used to facilitate the transfer of money or credit. Negotiable instruments: a particular and particularly useful form of commercial paper used to make delayed or international payments in a manner satisfactory to buyer and seller. Might come in exam What are the 6 requirements of negotiable instuments? Negotiable instrument must be: -written/ signed/ unconditional promise to pay/ fixed amount/ definite time/ to order (named person or company) or to bearer (to whoever has it) Basic Forms of Negotiable Instruments Bank notes or lawful paper currency. Checks: a form of draft in which the drawee is always a bank. I order my bank to pay you. Drafts: like checks, but not necessarily involving a bank. Drawer orders drawee to pay 3rd party payee. (For example where a drawee owes money to a drawer.) This is rare. Promissory note: two parties only, a maker and a payee. Certificate of deposit: a confirmation by a bank that a specific amount is on deposit. Can be endorsed by Owner to a third party Promissory Note How are negotiable instruments “negotiated”? Two examples: A. Bank note B. Promissory note Endorsement Types of endorsements Blank: name of payee only Special: payee pays to the order of another named person payee (Neal) writes “pay to the order of _____” Restrictive: for deposit only/Neal Qualified (limiting): payee endorses to another without recourse Liability/Discharge: If holder cannot recover from the maker, from whom can he recover? Primary liability = maker/drawer Secondary liability = endorsers Key concept in negotiable instruments law: holder in due course General rule: the law will not protect a fool, a stupid person. People in life must exercise reasonable caution; they must try to protect their own interests. This is the root of the “holder in due course” idea. Big chance it won’t come in exam Holder in due course holds a negotiable instrument which in some sense is defective, but which nevertheless is legally enforceable. That is: it protects the innocent guy who did everything possible to protect himself. “Holder in Due Course” 1. The instrument must appear authentic upon careful inspection. 2. holder must take/accept the instrument -for value -in good faith -without notice that it is overdue -without notice that it has been dishonored -without notice that it has been altered -without notice that it has an unauthorized signature -without notice of any other claims or defenses against it