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CONTRACTS SPRING 2010 OUTLINE I.
1. Types of Defenses a. Duress b. The Statute of Frauds c. Unconscionability d. Illusory Promises, and e. The existence of a preexisting contractual duty
1. Duress Traditional Duress (void) Duress used where other side threatened to kill, severely injure, or imprison the D so they entered into the contract. (U.S. for the Use of Trane Co. Bond, Bond physically abused wife to induce her to sign so trad. duress & contract voidable but yes contract)(Rest. SS174) Economic Duress (voidable) Agreement made only because one party was under extreme pressure economically. (majority of cases) Restatement SS175. When Duress by Threat Makes a Contract Voidable (1) If a parties manifestation of assent is induced by an improper threat by the other party that leaves the victim no reasonable alternative, the contract is voidable by the victim. (2) If a parties manifestation of assent is induced by a 3rd party to the transaction, the contract is voidable by the victim unless the other party to the transaction in good faith & w/o reason to know of the duress either gives value or relies materially on the transaction. Restatement SS176. When a Threat is Improper (1) A Threat is Improper if (a) what is threatened is a crime or a tort, or the threat itself would be a crime or a tort if it resulted in obtaining property, (b) what is threatened is criminal prosecution (a, b & c traditional duress) (c) threat is the use of civil process and the threat is made in bad faith (d) what is threatened is a breach of the duty of good faith & fair dealing under a contract w/the recipient (2) A threat is improper if the resulting exchange is not on fair terms, and (a) the threatened act would harm the recipient but would not significantly benefit the party making the threat, (b) the effectiveness of the threat in inducing the manifestation of assent is significantly increased by prior unfair dealing by the party making the threat, or (c) what is threatened is otherwise a use of power for illegitimate ends.
Elements of Economic Duress: a. Party's b. Manifestation i. Outward expression (signing document, saying yes) c. of assent i. agreement d. is induced by i. brought on by (threat must happen before agree to deal) e. an improper threat that is i. not on fair terms (charging more than you charge others, fair if price is fair market value or significantly below the original price, price increase for already delivered items unfair ) ii. AND either (1) is a use of power for illegitimate ends (exercising monopoly power, use of higher bargaining power, economic duress, withholding much needed goods) OR (2) threatened act would harm the victim AND not significantly benefit the aggressor f. by the other party g. that leaves the victim no reasonable alternative ( if you cannot obtain the goods elsewhere within a reasonable amount of time (Austin), just because there is legal relief (calling the cops) available, doesn't mean that there are reasonable alternatives if that legal relief won't afford effective relief in the victim's circumstances) Threats that are okay: Chouinard - Hard bargaining is okay
SS176 Illust. 16 - if using market price it is fair term, Machinery - a threat to stop doing business is not improper threat if it involves contracts that haven't been made yet cause have legal right not to do business. Example CasesAustin Instrument, Inc. v Loral Corp (DURESS) Loral was awarded a $6 million contract by the Navy and Loral hired Austin as the subcontractor to supply parts. Loral was hired a second time to supply the Navy; Austin bid on all 40 gear parts and refused to accept anything but all 40 parts - and would not deliver parts unless
Loral paid an increased price both retroactively and prospectively for all parts. Austin actually stopped all delivery; Loral could not find any other company able to provide the parts timely and acceded to Austin's demands. Letter stated: "we are left with no choice or alternative but to meet your conditions." Loral sued on economic duress and won. Chouinard v. Chouinard (NO DURESS) Declaratory judgment sought by Fred against his brother and father. Family business, brother and father stockholders and plaintiff Fred runs the business. Fred needed a loan to help the business stay afloat, and signed two promissory notes to his father and brother. Fred claimed economic duress but bro and dad just exercising right to legal claims and also Fred brought the economic hardship upon self so can't say induced or was improper threat. Machinery Hauling v. Steel of West Virginia (NO DURESS) ii. Plaintiff contracted to transport 17 loads of steel. When delivery near completion, def informed plaintiff that the product was not of merchantable quality and the delivery site rejected it. The site orally directed the plaintiff to return the last three loads and an employee instructed the plaintiff to pay them $31,000, the price of the undelivered loads, "or else [Steel] would cease to do business with the plaintiff." Loss of business would have been over $1 million per year. iii. Plaintiff filed suit for "extortionate demands." iv. Threats against business interests may in some circumstances be actionable, but the treats by the defendants were not cause had legal right not to continued business cause no future contractual agreement, and also p didn't accept demand and pay the money so didn't induce anything. UCC 1-103(b) If the U.C.C. doesn't explicitly give a rule then the Common Law Rule applies (ex. duress) Price Gouging StatutesPrice Gouging: where retailers take advantage of a natural disaster or other emergency to increase their prices for greatly needed items, from electrical generators to gas to plywood.
2. The Statute of Frauds a. Introduction The purpose of the SOF is to protect the D from fraudulent allegations by plaintiff that a contract existed. It makes a written document required for some contracts. 3 Questions to Ask: (1) Is the contract type within the scope of the SOF?
(2) Is there a writing and does it satisfy the statutes writing &
(3) If it doesn't satisfy, does the transaction fall w/in an exception to the SOF?
b. Statutory Interpretation c. Statute for Land and Services (Also Rest. 178 and 207) OKLA. STAT. ANN., tit. 15, SS136
1. The following contracts are invalid, unless the same, or some note or memorandum thereof, be in writing and subscribed by the party to be charged, or by his agent:
1. An agreement for services that, by its terms, is not to be performed within a year from its making thereof.
2. A special promise to answer for the debt [or]
default or miscarriage of another ...
3. An agreement made upon consideration of marriage, other than a mutual promise to marry.
5. An agreement for the leasing for a long period than one year, or for the same of real property, or of an interest therein. (1) Scope All contracts for the sale of real estate/land or leases that are for longer than a year must be in writing & signed by party to be charged. For service contracts: Klewin v. Flagship (Not within Scope) Construction project done in phases by Klewin and after done w/in one year the first phase, Flagship hired new contracter, Klewin sue, Flagship claim SOF but lose cause not need be in writing since no express duration terms and could possibly be completed in a year.
1. when a contract (even oral) could possibly be performed in less than a year AND the contract doesn't expressly state, in its terms, that performance will take longer than one year, it is a "contract of indefinite duration" and therefore, it is enforceable because it is not within the scope of the SOF's (just cause not plausible, it is possible to be completed in a year). a. Class - This means that K won't be in scope if K would PROBABLY take over a year to perform
2. Court interprets "agreement for services, that by its terms" as: cannot possibly be performed in less than a year; because this will cover as few contracts as possible
3. An oral contract that does not say in express terms that performance is to have a specific duration beyond one year is, as a matter of law, the functional equivalent of a contract of indefinite duration for the purposes of the SOF's and is enforceable because it is outside the scope of the SOF's
4. An oral contract for services that cannot be performed within a year must be in writing UNLESS the p can present "clear and convincing" evidence of the contracts existence
5. But if have a specified duration of more than a year for services, then it is within the scope and needs to satisfy the writing requirements. For lifetime contracts (i.e., lifetime contract to coach football team is not within the scope because could have died within a year and still fully performed so not more than a year expressly, so don't have to have in writing.) (But even if the contract said for 2 years which would be in the scope, the American courts will let that person's estate off the hook cause of impossible to perform. ) (2) Writing Requirement For Land Sale/Leases (Clark v. Larkin) Notes of Memorandum (can be a check)
-Sufficient if have Signature of party to be charged
-Identification of Purchaser & Seller (name, or description that will identify him, name of or agent representing him)
-Purchase Price & Interest
-Street Address or identifying land description (or subject matter)
-Possible have actually visited the property
-Terms & Conditions of (all or essential) the contract (promises) For Service Contracts (Eliz Arden)
-Signature of party to be charged on at least one doc
-Transaction or subject matter
-Need have Duration (employment length)
-Party to contract names
-Salary Crabtree v. Elizabeth Arden Sale Corp Was set of documents relating to Crabtree employment contract and salary increases. Only one was signed by the agent of Arden so she argued when sued for refusing increase that did not suffice SOF. RULE FOR MULTIPLE DOCS ONLY 1 SIGNEDSOF doesn't require the memorandum to be in one document, it (and terms) can be pieced together out of separate writings, connected with one another expressly or by the internal evidence of the subjectmatter and occasion. A sufficient connection between the papers is established simply by a reference in them to the same subject matter or transaction. The statute is not pressed to the extreme. But is must clearly be connected to the same subject matter or transaction.
At least one of the documents in question must bear the signature of the party to be charged and the unsigned document must on its face refer to the same transaction as the one that is signed. Some jurisdictions can use oral testimony (parol evidence) to show the connection between the docs and to show acquiescence of the party to be charged (if can't show the connection and the signed doc not sufficient on its own, then statute not satisfied. (but the parol evidence can't be used to supply terms not found in the various documents) Some Jurisdictionsapply strictly and if not all signed docs then can't use. d. Statute for the Sale of Goods a. UCC SS2-201(1) - SOF's (see spreadsheet) i. SCOPE - except as otherwise provided in this section, SOF's applies to sales of goods, of $500 or more ii. WRITING REQUIREMENT
1. Key test - a writing sufficient to indicate an agreement has been made
2. The only term required is quantity, every other term can be inferred from price lists, catalogs, or market price, BUT only enforceable to quantity amount shown in writing a. Doesn't need to state which party is buyer and which is seller b. Oral evidence can be used iii. SIGNATURE REQUIREMENT - must be signed by the party to be charged (or agent) iv. SS2-201(2) - for deals between merchants Merchant=UCC SS2-104 Parties who deal in goods of the kind or otherwise by occupation holds themselves out as having knowledge or skill particular to practices or goods involved in the transaction
1. Writing of confirmation, sufficient against the sender, sent within a reasonable time, and party receiving it knows or has reason to know of its contents, unless written notice of objection is given within 10 days after it is received v. SS2-201(3) - Exceptions: contracts which do not satisfy the requirements of subsection (1) is enforceable if
1. (a) specially manufactured goods are not suitable for sale to others in ordinary course of business and circumstances show the goods were made for the buyer, AND has made EITHER a substantial beginning of their manufacture or commitments for the procurement, OR a. The buyer admits in his pleading, testimony, or otherwise, that the contract was made, OR b. For goods for which payment has been made OR goods have been received and accepted
e. Exceptions to the Statute a. Exceptions for LAND, Service K's, etc. (Gen. Law of K) (1) Restitution i. DOCTRINE OF RESTITUTION Elements:
1. (1) P must have transferred something of value to [?], AND
2. (2) Is unjust for [?] to keep that something
- [?] is liable even if they have done nothing wrong, had no K with the party, or did not even know that party existed (have to give back whatever given)
-Nothing in the SOF's says anything about restitution, because it is not a K cause of action, whether there was a contract or not is irrelevant (buyer is only seeking restitution, not specific performance) (2) Estoppel & Rest. SS178 Comment f (a) Though there has been no satisfaction of the SOF (though there is no writing, or an insufficient writing) (b) this statute allows someone to enforce a promise in circumstances of fraud by the other party, BUT, this is still just a promise (nothing in writing) and will be pure "he said, she said"
1. Promissory Estoppel This statute allows for a p to use promissory estoppel (SS90) to overcome [?]'s use of SOF's, even when there is no written evidence of the contract.
2. Misrepresentation Also, if the [?] fraudulently told the p that the SOF's requirements were met, and the p relied on that false representation, the contract can overcome the SOF's defense
3. Promise to Make Memorandum Finally, if [?] promised p they would make a memorandum that would satisfy the SOF's and intended on not doing so to commit fraud, the contract can overcome the SOF's if it would prevent that fraud from taking place. (3) Reliance & Rest. SS139 Possession, make improvements, money paid this all indicates assent by D
i. Stearns v. Emery-Waterhouse [p left Sears to work for [?] for 5-yr oral contract]
1. Can p overcome SOF's based solely on his detrimental reliance of an oral K?
2. Rest. 2d. SS139 - promissory estoppel elements: a. A promise which the promisor should reasonably expect to induce action or forbearance b. Which actually does induce such action or forbearance
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