California and Multi-State Bar Exam
Summer 2009☼
☼
Hot Topics that are likely to appear on the Bar Exam are noted throughout this outline with a ☼.
1. Criminal Law ............................................................................................................................ 3
2. Criminal Procedure ................................................................................................................... 9
3. Real Property .......................................................................................................................... 16
4. Constitutional Law (United States Constitution).................................................................... 31
5. Contracts/Sales/Equity (UCC Article 2 and 2A) .................................................................... 46
6. Corporations............................................................................................................................ 60
7. Evidence (Federal Rules of Evidence with CEC Distinctions) .............................................. 74
8. Torts ........................................................................................................................................ 96
9. Agency .................................................................................................................................. 107
10. Partnership ............................................................................................................................ 110
11.
Criminal Law
Jurisdiction
1. Crimes of action: a state acquires jurisdiction where the conduct occurred (any act constituting an element of
the offense) or where the result happened. E.g. Gun from to NY from CT – both states have jurisdiction.
2. Crimes of omission: jurisdiction lies where the act should have been performed. The crime involved the
neglect of duty imposed by the law of the state.
3. Attempt or conspiracy: attempt or conspiracy outside the state with an act inside the state or an attempt or
conspiracy inside the state to commit an offense outside the state.
Merger of Crimes
1. Generally: no merger of crimes. ***Conspiracy does not merge with the substantive offense. Can be guilty of
conspiracy to commit a crime and the crime itself.
2. Exception: Solicitation and Attempt merge into the substantive offense.
a. Example: Cannot be convicted of attempting to do a crime and of the crime itself. A complete defense
to an attempted crime is doing the crime itself.
Elements of Crime
A crime almost always requires proof of a physical act (actus reus) and a mental state (mens rea), and concurrence
of the act and mental state. It may also require proof of a result and causation (i.e. that the act caused the harm).
1) ACT: a voluntary physical act or failure to act (where a legal duty is imposed)—a bodily movement.
i. **No liability for Involuntary Actions: Conduct that is not the product of your own volition; reflexive
or convulsive acts (seizure); conduct occurring while unconscious or asleep (not sleepy or not when one
falls asleep knowing that they can put others in danger – sleepwalking, not fall asleep at the wheel).
ii. Liability for Omissions to Act: Generally there is no legal duty to rescue, but there may be one to act,
and this legal duty can arise only if:
a) There is a specific duty to act imposed by law (filing tax returns);
1. A legal duty can arise from statute, contract (lifeguard, nurse), relationship
(parent, spouse), ***voluntary assumption of care by the defendant for the victim,
or the creation of peril by the defendant (pushes someone into swimming pool).
b) The defendant has knowledge of facts giving rise to the duty to act; and
c) It is reasonably possible to perform the duty.
1. Exam Tip: For an omission, there must be a duty. There is no duty to rescue, no
matter how easy it would be to help. If you start to help, you must finish.
2) (10Qs) MENTAL STATE:☼ There are four Common Law mental states for crimes: Specific Intent, Malice,
General Intent, and Strict Liability (no intent).
i. Specific Intent: Act must be done with the specific intent or objective to do the act (cannot be inferred).
a) Specific Intent Crimes:☼ Solicitation, Conspiracy, Attempt (even when the crime
attempted is not a specific intent crime), First Degree Premeditated Murder,1 Assault,
Larceny, Embezzlement, False Pretenses, Robbery, Burglary, Forgery.
b) Specific Intent Defenses:☼ Qualifies for general defenses (listed below) and additional
defenses of any (reasonable or unreasonable) Mistake of Fact and Voluntary
Intoxication.
ii. Malice: not as restrictive as specific intent—requires only reckless disregard of an obvious risk of harm.
a) ONLY Malice Crimes on Exam: Murder and Arson.
b) Malice Defenses: Qualifies for general defenses (listed below). Voluntary intoxication is
not a defense. Only reasonable mistakes of fact are permitted.
iii.
General Intent: awareness of all factors constituting the crime (intent may be inferred from the
act).
a) General Intent Crimes: a catch-all provision (almost all crimes in not enumerated in
specific intent or malice crimes, and not qualifying for the formula for strict liability).
1
If in a question on the bar, you see “murder” by itself, the examiners always mean COMMON LAW murder (today known as Murder
in the 2nd degree). “Murder” is not a specific intent crime, it is a malice crime. But, if it is FIRST DEGREE MURDER, it is a specific intent
crime— thus, you can use one of the additional defenses to reduce the crime back to the “malice” crime of Murder (i.e. 2nd degree murder).
3
Examples: Battery, Rape, Kidnapping, and False Imprisonment.
b) General Intent Defenses: Qualifies for general defenses (listed below).
Elements of Crime
(Mental State continued)
iv.
Strict Liability: public welfare offense, does not require awareness of all of the factors
constituting the crime. Can be guilty without intent. State of mind is irrelevant.
a) Strict Liability Crimes: Formula—If the crime is in the Administrative, Regulatory, or
Morality area (no adverbs like knowingly, willfully, intentionally), then they are strict
liability crimes. Examples: Statutory Rape, Selling Liquor to Minors, Bigamy.
b) Strict Liability Defenses: Any defense that negates intention is not a defense to strict
liability. Involuntary intoxication (but not voluntary intoxication), insanity, infancy, duress
are defenses. Mistake of Fact is never a defense.
1. The “best defense” is the one that does not include intent (i.e., the statute is
unconstitutionally vague).
Note: For Intent Crimes, Intent can be Transferred:☼ Where a defendant intends the harm that is actually
caused, but to a different victim or object. Usually guilty of two crimes—1) completed and 2) attempted.
• Example: If D intends to shoot and kills X, but instead shoots and kills V, D can be guilty of murder of V, and
the attempted murder of X. Intent follows the bullet!
Statutory Interpretation: Check for the mental state required. For knowingly, the defendant will not be guilty if
he did not have knowledge. Willfully is equivalent to knowingly.
Accomplice Liability☼
1. Parties: The one who actually engages in the act / omission is the principal; the other parties are accomplices.
2.
Liability: Accomplice is liable for the crime itself and all other foreseeable crimes. Only for those actively in
on the crime. Presence alone is not enough, even if they are consenting or not calling the police.☼
a. Most jurisdictions require that the person give aid, counsel, or encouragement to the principal with the
intent to encourage the crime. Mere knowledge is not enough. Must have a “stake in the venture.”
3. [Exclusion from Liability]: Members of the class protected by statute; party necessary to the crime but is not
provided for in the statute; withdrawal (must occur before the crime becomes unstoppable).
a. Withdrawal: (1) Repudiation is sufficient for mere encouragement; (2) Attempt to neutralize is
required if participation went beyond mere encouragement; (3) notifying the police or taking other
action to prevent the crime.
b. Cannot generally withdraw from solicitation, conspiracy, or attempt.
Inchoate Offenses☼ (Incomplete offenses)
1. Solicitation: Asking another to commit a felony.
a. Mental State: Specific intent that person solicited commit the crime.
b. Overt Act: No Act other than solicitation
c. Merger: Yes. If the person agrees, solicitation merges into conspiracy.
d. Withdrawal: Generally no. NOT a defense if person solicited is not convicted or offense solicited
could not have been successful.
2. Attempt: Performance of an act that would be a crime if successful. (Specific Intent + Substantial Step)
a. Mental State: Specific intent to commit the particular crime attempted.
b. Overt Act: Act dangerously close to success. Mere preparation (i.e., showing up) does not count.
c. Merger: Yes. If the substantive crime is committed, attempt merges. Cannot be guilty of both.
d. Withdrawal: Generally no.
e. Defenses: Factual impossibility is NOT a defense (robbery victim has no $); legal impossibility IS a
defense (the crime D intended is not unlawful).
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Inchoate Offenses☼ (continued)
3. **Conspiracy:☼ Agreement between two or more people to commit a crime (pursuing an unlawful objective).
a. Mental State: Specific intent to (1) enter into an Agreement and (2) an attempt to pursue an
unlawful objective (TRICKY!). The agreement does not have to be expressed. (People can be in
conspiracy even though they don’t know each other and even though there is no express agreement).
b. Overt Act: Act in furtherance of the conspiracy.
i. Majority Rule Agreement plus an overt act (ANY little act ex. Showing up).
ii. Minority Rule (Common Law) The Agreement itself is sufficient for liability.2
c. Merger: No. Conspiracy does not merge with the substantive offense.
d. Withdrawal: No, except for subsequent crimes of co-conspirators. Withdrawal, even if it is
adequate, can never withdraw you from liability for the conspiracy itself.
i. If no withdrawal: Liability for Conspiracy—Each is liable for the crimes of co-conspirators
if the crimes were committed in furtherance of the conspiracy and were foreseeable.
e. Defenses: Impossibility is not a defense to conspiracy. Acquittal by all other parties shows that there
was no one with whom the defendant could conspire. However, non-prosecution of co-conspirators
does not negate the conspiracy for the defendant.
f. Guilty Minds: It takes two to conspire at common law. Two people must intent to agree and intend
to commit a crime. Thus, at common law, cannot conspire with an undercover police officer. No
conspiracy when a person pretends to agree with the conspiracy but really intends to inform the police.
Defenses: Responsibility and Capacity
1. Insanity: Defense to all crimes, including strict liability crimes. Several formulations of the test:
a. M’Naghten Rule: defendant had a mental disease or defect that caused him to either: (i) not know
that his act would be wrong; or (ii) not understand the nature and quality of his actions.
i. [Does not know right from wrong]
b. Irresistible Impulse Test: defendant unable to control his actions or conform his conduct to law.
i. [Impulse defendant cannot resist]
c. Durham (or New Hampshire) Test: a defendant is entitled to acquittal if the crime was the product
of his mental illness. Broader than M’Naghten and irresistible impulse tests.
i. [But for the mental illness, there would be no act]
d. Model Penal Code Test: a defendant is entitled to acquittal if he had a mental disease or defect, and,
as a result, he lacked the substantial capacity to either (1) appreciate the criminality of his conduct or
(2) conform his conduct to the requirements of law.
i. [Does not know right from wrong and has an irresistible impulse]
2. Intoxication:☼ caused by substances (drugs, alcohol, medicine). May be raised to negate intent.
a. Voluntary Intoxication (self induced): Defense only to specific intent crimes. May be offered only
if the crime requires purpose (intent) or knowledge AND the intoxication prevented the defendant
from formulating the purpose or obtaining the knowledge. Not available if the defendant becomes
intoxicated to establish the defense. Not for malice, GI, SL crimes. Burglary ok, battery/speeding no.
b. Involuntary Intoxication (just like insanity): Defense to all crimes, including strict liability. Taken
without knowledge, under direct duress, or pursuant to medical advice.
3. Infancy:☼ Under 7, no liability for an act committed by a child under age seven. Defense to all crimes. Ages 7
to 14, rebuttable presumption that the child was unable to understand the wrongfulness of his acts.
2
If the Multi-state bar wants you to apply the minority rule, it will say it. If it says nothing, apply the majority rule.
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Defenses: Justification and other Principles of Exculpation
a) Justification: although the defendant committed the act, he should not be punished. Justification defenses
depend on immediacy of the threat: threat of future harm is not sufficient. The level of force is also crucial.
a. Self Defense:☼ divided into two categories—
i. Non-deadly force: a person may use such force as reasonably appears necessary to protect
himself from the imminent use of unlawful force upon his body. No duty to retreat.
ii. Deadly force: a person may use deadly force in self-defense if (1) he is without fault; (2) he
is confronted with unlawful force; and (3) he is threatened with imminent death or great
bodily harm.
1. Majority rule: must have reasonable belief that deadly force is about to be used.
2. Minority rule: before using deadly force, must retreat to the wall if it is safe to do
so. If you are in a retreat jurisdiction--three exceptions:
a. Do not have to retreat from your attacker in home: If the attacker is
outside your door, must slam your door in retreat.
b. Do not have to retreat if you are a victim of rape or robbery.
c. Police officers do not have to retreat.
b. Right of Aggressor to Use Self-Defense: The aggressor may use force in defense of himself only if
(1) she effectively withdraws from the altercation and communicates to the other the intention to do
so, OR (2) the victim of the initial aggression suddenly escalates the minor fight to deadly altercation
and the initial aggressor has no chance to withdraw.
c. Defense of Others: can defend others if there is the reasonable appearance of the right to use force
(by the person being attacked in his own defense). No special relationship is needed.
d. Defense of a dwelling: Deadly force may never be used solely to defend your property. (Spring gun in
the door to protect the house from invasion is impermissible). Non-deadly force may be used to
prevent or terminate what is reasonably regarded as an unlawful entry into or attack on the defender’s
dwelling. Deadly force may be used only to prevent a violent entry made with the intent to commit a
personal attack on an inhabitant, or prevent an entry to commit a felony in the dwelling.
i. Note: Justification for killing invaders is based on protecting inhabitants and not the dwelling.
b) Duress: defense to all crimes, except homicide, if the defendant believed that another person would imminently
inflict death or great bodily harm upon him or a member of his family if he did not commit the crime.
c)
Mistake of Fact:☼ Relevant only if it negates intent; shows D lacked the state of mind required for the crime.
Mental State of the Crime Charged
Application of the Defense
1) Specific Intent
Any mistake, reasonable or unreasonable.
2) Malice & General Intent
Reasonable mistakes only.
3) Strict liability
Never.
d) Mistake of Law: Applicable to crimes with a mental state element and statutory crimes. The mistake must
negate awareness of some aspect of law that the crime requires or must be due to: 1) statute not being
reasonably available; 2) reasonable reliance on statute or judicial interpretation; or 3) reliance on official.
a. Not reliance on private counsel.
e)
Consent: usually not a defense. If a defense, must establish that: 1) consent was freely given, 2) party was
legally capable of giving the consent, 3) no fraud.
f)
Entrapment: 1) the criminal design originated with law officers and 2) the defendant was not predisposed to
commit the crime prior to contact by the government. Predisposition by defendant negates entrapment.
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It is not a
defense to a
crime that a D
was unaware
that is acts
were prohibited
by the criminal
law, or that he
mistakenly
believed his
acts were not
prohibited,
even if such
ignorance or
mistake is
reasonable
The Common Law Crimes: Offenses Against the Person (up to 10Q)
1. Battery: a completed assault. An unlawful application of force to the person of another resulting in either
bodily injury or an offensive touching. Need not be intentional, need not be applied directly. A general
intent crime, never strict liability.
2. Assault: two categories— one SI, one GI
a. An attempt to commit a battery (specific intent, like all other attempt crimes) or
b. Intentional creation of a reasonable apprehension of an imminent bodily harm (general intent).
i. If there is an actual touching, there is only battery, not assault.
ii. Best defense is that there was no intent. There may be instances where there is a creation of
reasonable apprehension of harm, but not attempt to commit battery. Must distinguish.
3. ***Homicide:☼ The victim must be human. “Murder” on the bar exam means common law murder, known as
2nd Degree Murder today (a malice crime).3 Note: First degree murder is deliberate and premeditated.
a. Common Law Criminal Homicide: Three categories—
i. Murder: unlawful killing of a human being with malice aforethought. Need either (1) intent
to kill; (2) intent to do serious bodily harm; (3); reckless indifference to an unjustifiably high
risk to human life; (4) intent to commit a felony (felony murder).☼ Note: No mercy killings.
1. FM Rule: Any death caused in the commission of, or in an attempt to commit, a
felony is murder.
2. Common law: Enmuerated felonies include: burglary, arson, rape, etc. (must be
inherently dangerous).
3. Defenses to Felony Murder:☼ (1) defense to the underlying felony; (2) felony must
be other than the killing; (3) death must be foreseeable; (4) no felony murder if death
occurs after the felon reaches point of temporary safety; (5) Redline View: defendant
is not liable for death of co-felon as a result of resistance by victim or police; but
defendant is liable for death of third party cause by resistance by victim/police.
ii. Voluntary Manslaughter: a killing that would be murder but for the existence of adequate
provocation (NEED PASSION). Provocation is adequate only if: (1) it arose sudden and
intense passion in the mind of an ordinary person causing him to lose control (threat of
deadly force, spouse is bed with another); (2) the defendant was provoked; (3) no time to cool
off; and (4) the defendant did not cool off between the provocation and the killing.
1. Heat of passion is not a defense, it may however reduce the killing.
iii.
Involuntary Manslaughter: a killing committed with (1) criminal negligence or (2)
during the commission of an unlawful act (misdemeanor or felony not included in felony
murder).
Common Law Crimes: Offenses Against the Person (continued)
4. Sex Offenses:
a. Rape: unlawful carnal knowledge of a woman by a man, not her husband, without her effective
consent. The slightest penetration is sufficient.
b. Lack of effective consent: (1) Intercourse is accomplished by actual force; (2) intercourse is
accomplished by threats of great and immediate bodily harm; (3) the V is incapable of consenting due
to unconsciousness, intoxication, or mental condition.
c. Statutory rape: carnal knowledge of a female under age of consent; not necessary to show lack of
consent. Strict liability. Consent is no defense. Mistake of fact no defense.
Crimes against nature: adultery and fornication, incest, seduction, bigamy, bestiality.
3
Only FIRST DEGREE MURDER is a specific intent crime. Requires deliberation and premeditation. Specific intent has
additional defenses of voluntary intoxication and any mistake of fact. “Murder” is not s specific intent crime, so the additional defenses are not
available. But, for First Degree Murder, voluntary intoxication, for example, may negate the required intent; dropping the crime down to 2nd
degree murder.
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Common Law Crimes: Offenses Against Personal Property
Three Property Crimes:☼
d. Larceny: (1) A taking (wrongful taking) by trespass or trick and (2) a carrying away (can be slight in
distance) (3) the personal property of another without his consent (consent gained by fear or fraud is
invalid), (4) with the intent to deprive the person permanently of the property (at time of the taking).
i. Defenses: Taking property “with the belief it is yours” is not larceny.
ii. Possession: Larcenist gets possession only, not title. If the person had possession of the
property at the time of the taking, it is not larceny but may be embezzlement.
e. Embezzlement: the fraudulent conversion by someone with lawful possession. Example: trustee.
Do not need a taking away nor do you need to personally benefit.
i. Defense: Intent to restore—if the defendant intends to restore the exact property taken, it is
not embezzlement. Claim of right is a defense.
ii. Possession: Embezzler gets possession only, not title.
f. False pretenses: obtaining title to personal property of another by an intentional false statement of
past or existing fact, with intent to defraud the other. Future false promises do not create liability.
i. Title: Under false pretenses, the defendant gets title, not merely possession.
5. Robbery:☼ Larceny + Assault. A taking of personal property of another from the other’s person or
presence, by force or threats of immediate death or physical injury, with the intent to permanently deprive.
a. Possession: title does not pass.
b. Amount of force necessary: pick-pocket is not enough, but yanking a necklace is robbery.
c. Fear: threat of imminent harm, not future harm. “Your money or your life” (“Your money, or I
will…” that is extortion). CANNOT BE PROSECUTED FOR BOTH ROBBERY AND LARCENY.
6. Extortion: blackmail—consists of obtaining property by means of threats to do future harm or to expose
information. Crime occurs when threat is made with the intent to obtain property.
Common Law Crimes: Offenses Against the Habitation
7. Burglary:☼ Common Law -- a breaking and entry of a dwelling of another at nighttime with the intent to
commit a felony in the structure. Intent to commit a felony must be at the time of the entry. If intent forms
AFTER entering, it is not burglary.
a. Breaking: A wide open window or front door is not a breaking, but can break an interior door.
i. Constructive Breaking: Can have a constructive breaking: i.e. a key that is given to
housekeeper is used during off hours. OR Gaining entry by means of fraud (tricking the
person in the dwelling into letting you in).
b. Dwelling: Any place a person is living, including a Hotel Room.
8. Arson: Common law arson is the malicious burning of a dwelling of another. Must prove every part.
a. THERE MUST BE A MATERIAL WASTING OF THE FIBER OF THE BUILDING due to FIRE,
carpet catching fire doesn’t count. Cannot be a commercial structure.
b. Must be of another. Your own house doesn’t count.
c. Common law arson is not smoke, water, explosion, or other like damage.
d. Charring is sufficient. Does not have to be the entire structure.
i. Setting fire as a distraction, even if you know if will go out, creates the sufficient mental state
for malice reckless disregard for a substantial risk.
Importance of subjects:
-- Mental States
-- Different crimes – Voluntary Intoxication and Any Mistake of Fact as additional defenses for SI crimes
-- Transferred Intent
-- Accomplice Liability
-- 4 Hot Defenses: Self-Defense, Intoxication, Infancy (usually wrong), Mistake of Fact – consent almost never
works
-- Defenses to Felony Murder / NY Homicide Statutes and Special FM Affirmative Defenses
-- Distinguish Larceny, False Pretenses and Embezzlement-- Robbery, Burglary, and Arson
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Criminal Procedure
The Exclusionary Rule☼
Prohibits the introduction of evidence obtained in violation of a defendant’s Fourth, Fifth, and Sixth Amendment
rights. Under this rule, illegally obtained evidence is inadmissible at trial, and all “fruit of the poisonous tree”
(evidence obtained from exploitation of the illegally obtained evidence) must also be excluded (exceptions below).
1. Limitations on Exclusion:
a. Does not apply to Grand Juries (grand jury witness may be asked to testify on illegally seized
evidence), Civil Proceedings, and Parole Revocation Proceedings: Witness may be compelled to
testify on basis of illegal search.
b. The search must violate the Federal Constitution or Federal Statute.
2. Good Faith Defense to Exclusion: Will not exclude evidence otherwise illegally obtained if
a. the police rely in good faith on a judicial opinion later changed by another opinion.
b. the police rely in good faith on a statute or ordinance later declared unconstitutional.
c. where police have good faith reliance on a defective search warrant. 4 EXCEPTIONS:
i. Affidavit underlying warrant is so lacking in probable cause that no reasonable PO would
have relied on it.
ii. The warrant is defective on its face (e.g. it failed to state with particularity the place to be
searched or the things to be seized).
iii.
PO lied to or misled the magistrate
iv.
The magistrate has wholly abandoned his judicial role.
3. Use of Excluded Evidence for Impeachment Purposes: All illegally seized evidence may be used to
impeach the credibility of the defendant’s trial testimony. ONLY THE DEFENDANT’S TRIAL
TESTIMONY. (Not other defense witnesses).
4. Exclusion is not a remedy for the Knock and Not Announce rule.
The Fruit of the Poisonous Tree doctrine☼
Generally, all evidence obtained from the original police illegality will be excluded. There are three ways that the
government can break the chain between an original unlawful action and some supposedly derived evidence.
1. Independent source: evidence from a source independent of the original illegality.
2. Inevitable discovery: police would have discovered the evidence anyway without the illegal search.
3. Intervening acts: free will by the defendant between the illegal police action and the derived information.
a. E.g. Illegal arrest on Friday, out on bail and consults attorney and confession on Tues. Confession
admissible b/c intervening actions on the part of defendant break the chain.
4. Miranda Violations: the fruits derived from statements obtained in violation of Miranda may be
admissible despite the exclusionary rule. Fruits analysis does not apply.
5. Harmless Error test: If illegal evidence is admitted, a resulting conviction should be overruled on appeal
unless the govt can show beyond a reasonable doubt that the error was harmless.
Fourth Amendment Rights
Provides that people should be free from unreasonable searches and seizure.
Law of Arrests: when police take a person into custody against her will for purposes of prosecution/interrogation.
1. Probable Cause: Arrest must be based on probable cause—facts or knowledge to believe crime is committed.
2. Warrant: Arrest warrants are generally not required prior to arresting a person in a public place. However,
police generally must have a warrant to effect a non-emergency arrest of a person in his home.
3. Station House Detention: Police need probable cause for arrest to compel to you to come to the police
station either for interrogation (questioning) or finger printing.
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Fourth Amendment Rights (continued) (most important part – as many as 8 of 13 on MBE) –flowchart p. 6
Evidentiary Search and Seizure:☼ like arrests, they must be valid under the 4th Amendment. Reasonableness
requires a warrant, except in six circumstances (set out below). Search and seizure model:
1) Does the defendant have a fourth amendment right?
a. Seizure by the Government (not private individual): (1) public police; (2) private individual acting
for the police; (3) deputized private police with the power to arrest (not simply private police like
security guards).
b. Concerning a place or thing in which the defendant had a reasonable expectation of privacy:
i. Need standing to object to the legality of the search. No standing = no privacy expectation.
1. Automatic standing categories: (1) own the premises; (2) live on the premises,
whether own or not; (3) ***overnight guest of the owner of the place searched.
2. Sometimes standing categories: (1) person is legitimately present in place searched
or (2) own the property seized.
3. No standing: (1) ***Passengers in cars that don’t own the car and don’t claim to
own property taken out in the car. (2) ***Drug dealer briefly on the premises of
someone else solely for the business purpose of cutting up drugs for sale.
ii. No privacy rights: No privacy right in things held out to the public – (1) sound of voice,
(2) style of hand writing, (3) paint on your car, (4) Account records held by a bank, (5)
monitoring the location of your car on a public street or on your driveway, (6) anything that
can be seen across the open fields, (7) anything that can be seen by flying over in the public
airspace (w/naked eye), (8) odors emanating from luggage, (9) garbage left out for collection.
2) Did the government have a valid search warrant?
a. If a valid search warrant: (1) issued by a neutral and detached magistrate (Who is neutral? Court
clerks. NOT the AG); (2) show probable cause (can use police observation, hearsay, informers,
even anonymous ones) and (3) precise on its face as to the place to be searched and items to be
seized. (mostly tested on MBE portion); (4) properly executed (i) without unreasonable delay, (ii)
after announcement (unless officers or evidence would be endangered) and (iii) person or place
searched or seized is within the scope of the warrant.
b. If NOT a valid search warrant, or NO search warrant: Then what? On MBE: first see if can
save in good faith defenses. The Warrantless Search Exceptions:
i. Search incident to a lawful arrest: (1) the arrest must be lawful (probable cause), (2) the
Roadblocks
search must be contemporaneous in time and place with the arrest, (3) geographic scope
Generally, police need
limitation—can search the person and the areas in which you can reach (wing span).
reasonable suspicion
to stop a car.
1. Supreme Court: When a person is in a car, the wing span includes the entire interior
Exception: Can set up
of the car and everything in it, but not the trunk of the car.
road block without
ii. The automobile exception: The police need (but almost never have) probable cause – the
reasonable suspicion,
same probable cause they would have needed to get a warrant. The probable cause can arise
if it is based on some
neutral, articulate
after the car has stopped, but before anything or anybody is searched. Just cuz there is a car
standard (every car),
involved doesn’t mean it falls under the auto exception – still need prob. cause!!
designed to serve
1. Ross case: If there is probable cause, the police may search the entire car, the trunk,
purpose related to
and any packages in the car if they can reasonably contain the item for which they
problem related to
autos (drunk driving,
had probable cause to look (cant look through wallets for stolen TV sets). When
seat belts). Not general
they find the drugs, then they arrest the driver.
search for drugs.
iii.
Plain view: Key to plain view is to be sure that the police officer is legitimately present
where he or she does the viewing. Need probable cause to believe the item is
evidence/contraband.
iv.
Consent: Consent must be voluntary and intelligent. When police say they have a
warrant negates consent. But, the police do not have to warn you that you have a right not to
consent.
1. Authority to consent: where two or more people have an equal right to the property
The scope of the frisk is
or premises, any one can consent to its warrantless search.
limited to a pat-down of
v. Stop and frisk: Standard for a stopping: reasonable suspicion (less than probable cause). If
the outer clothing for
instruments of assault.
the police reasonably think there is a weapon, you can frisk. Weapons are always admissible
so long as the stopping was reasonable.
Police can seize any
1. Ex. Stop, pat, and find evidence of crime, not a weapon. Admissibility of this
item that the officer
evidence? How much like a weapon or contraband could it seem from the outside?
reasonably believes,
based on plain feel, is a
weapon or contraband.
10
vi.
Hot pursuit and evanescent evidence: Evanescent evidence: might go away if we took
the time to get a warrant. Ex. Scrape under the fingernails of a suspect. Hot pursuit: of a
fleeing felon. How hot? Very. If the police are not 15 minutes behind the felon, it is not hot
pursuit. This one is broad, no wing span requirement, can search everything. Can even enter
ANYBODYS home, not just that of the felon (pot smokers home entered by felon).
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Fourth Amendment Rights (continued)
Wiretap and eaves dropping: All wire taps require a warrant.
• Exception: Unreliable ear – a speaker assumes the risk that the person to whom he is talking is an informer
wired for sound or taping the conversation. A speaker has no Fourth Amendment claim if he makes no attempt
to keep a conversation private.
o All police cars are wired: never say anything in a police car you don’t want them to know.
Miranda Warnings – at least 2 MBE ☼
For an admission or confession to be admissible under the Fifth Amendment privilege against self incrimination, a
person in custody must, prior to interrogation, be informed, that: “You have the right to remain silent, anything you
say can be used against you, you have the right to an attorney, you have the right to terminate the interrogation.”
To trigger the Miranda warnings: The person must be in (1) custody and (2) there must an interrogation
1. Custody: If at the time of the interrogation, he was not free to leave.
a. Rule: Probation interviews and routine traffic stops are not custodial. – police can ask you
questions and admit your answers w/o giving you a Miranda warning.
2. Interrogation: more than the asking of questions. Any conduct where the police knew or should have
known they might get a damaging statement. (If breaks in questioning, no need to repeat the warnings).
Note: the failure to give these warnings violates the defendant’s Fifth Amendment right, not his Sixth Amendment
right to counsel. No Miranda warnings needed for spontaneous statements BLURTING OUT. If there is
custody and interrogation, police must get a waiver: must be knowing, intelligent, and voluntary. (Once read,
defendant can be questioned about all crimes) *Read the warning and defendant says nothing (silence or shoulder
shrugging) = no waiver.
Right to Counsel: Fifth and Sixth Amendments
a. Fifth Amendment: Once the defendant asserts his right to terminate the interrogation and requests an attorney,
re-initiation of interrogation by the police without his attorney present violates his Fifth Amendment right to
counsel. This is a DUE PROCESS right and is invoked prior to judicial proceedings.
a. Arises in only one circumstance – when someone hears the Miranda warnings says “I want a lawyer.”
b. Saying “I need help with the process of custodial police interrogation.” Police cannot reinitiate on
ANY topic—not offense specific.
i. If the defendant only chooses silence, the police may be able to reinitiate on a different topic.
b. Sixth Amendment: Guarantees the right to the assistance of counsel in all criminal proceedings, after judicial
proceedings have begun (formal charges filed). The Sixth Amendment right to counsel is offense specific.
Attorney needs to be present if the defendant is interrogated about that attorney’s case, not unrelated matters.
c. Exception: SC has allowed interrogation w/o Miranda warning where it was reasonably prompted by a concern
for the public safety.
Pretrial Identification – quick check that witness/victim is IDing the right suspect☼
If the defendant has been identified, there are two basis for attack:
1) Sixth Amendment Right to Counsel -- a suspect has the right to counsel at any post-charge lineup or showup.
There is no right to counsel at photo identification or when police take physical evidence: e.g., fingerprints.
2) Denial of right to DP – D can attack if the identification is unnecessarily suggestive and there is a substantial
likelihood of misidentification. Note: No 5th right to refuse a line up because there is no compelled testimony.
a. Remedy: Exclude the identification. Victim or witness cannot identify the person. (Rarely granted).
b. Defeating exclusion: Government can defeat exclusion if there is an adequate independent source:
Ample opportunity to look at the guy at the time of the crime. The victim can show that they saw the
defendant at the crime, even if there is a counsel or due process violation.
Pretrial Procedures
Bail: refusal to grant bail or the setting of excessive bail may be appealed immediately; however, the Supreme
Court has upheld portions of the federal Bail Reform Act that allow arrestees to be held without bail if they pose a
danger or would fail to appear at trial. Thus, preventative detention is constitutional.
12
Grand Juries – not important for MBE, but may show up on essay
1. Use of Grand Jury: States do not have to use a grand jury. Some state constitutions require it.
2. Proceedings: Conducted in secret. Defendant has no right to notice, to be present, to confront, or introduce
evidence. Witnesses do not have the right to counsel or Miranda warnings. Witness has no right to have
counsel present. Witness may become a “potential defendant” when called before grand jury (gets no warning).
Government can present evidence that will be inadmissible at trial. Witness can invoke Fifth Amendment
right against self incrimination if his answer to a specific question will incriminate him.
a.
Prosecutorial Duty to Disclose – but may be tested on essays
1. Prosecutor: disclose material, exculpatory evidence to defendant. Failure to do so is a due process violation.
Conviction reversed if evidence was favorable and prejudice resulted (result would have been different).
2. Defendant: disclose alibi and intent to present insanity defense.
Trial: Right to an Unbiased Judge. Bias = financial Interest in the outcome or actual malice against the
defendant
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Trial (continued): The Right to a Jury☼
There is no constitutional right to jury trial for petty offenses, but only for serious offenses. An offense is serious if
imprisonment for more than six months is authorized. Less than six months, or up to six months no jury right.
a. Contempt: (1) Civil Contempt: no jury trial right. (2) Criminal Contempt: cumulative penalties
totaling more than six months cannot be imposed without a jury trial.
b. Number and Unanimity of Jurors: Must be at least six jurors. Convictions have been upheld where
less than unanimous verdicts came in (e.g. 10-2, 9-3). Unanimity is required for six person jury, but no
constitutional right to a 12 person unanimous verdict.
c. Cross Sectional Requirement: Right to have a cross section of the community represented in the jury
pool, not necessarily on any particular jury.
i. Use of Peremptory Challenges: Equal Protection clause forbids use of peremptory challenge
to exclude jurors based on Race or Gender. (Prosecutor can rebut an accusation that the
challenge was race based by coming up with a race-neutral explanation for the strike).
Right to Counsel – If tested, it will be in Essay – unless person not guilty, deny relief
The defendant has a right to counsel (in all felony cases, guilty pleas, and in misdemeanor cases if imprisonment is
actually imposed). Violation of this right at trial requires reversal. For non-trial denials, harmless error test applies.
a. Defendant claims Ineffective assistance of Counsel.☼ Must show:
i. counsel’s conduct was unreasonable (deficient performance) and
ii. BUT FOR such deificiency, the result of the proceeding would have been different (hard to
prove). Unless there was some direct impact on the guilty determination of the trial, the conduct
does not matter.
1. Ineffective assistance of Counsel is likely to fail, unless the defendant is really not guilty.
Guilty Pleas and Plea Bargaining
1) Taking the Plea: a guilty plea is a waiver of the Sixth Amendment right to a jury trial. The Judge must advise
the defendant personally: (1) of the nature of the charge; (2) of the maximum possible penalty and any
mandatory minimum (good one for exam); (3) that defendant has a right not to plead guilty; and (4) by
pleading guilty defendant waives his right to a trial. (Judge does not have to accept the plea).
a. Record: a record must be made of the plea; must indicate that the plea was voluntary and intelligent.
b. Remedy: failure to meet the standards for taking a plea plea withdrawal and pleading anew.
2) Collateral Attack on Guilty Pleas after Sentencing: (1) the Supreme Court generally will not disturb guilty
plea after sentence. (2) the Supreme Court has the contract theory of plea bargaining: the terms should be
revealed and both sides should be held.
a. Four bases for withdrawing guilty plea after sentence:
i. The plea was involuntary: there was an error in the plea process.
ii. Lack of jurisdiction.
iii.
Ineffective assistance of counsel.
iv.
*** Breach of an agreement by the prosecutor.
Sentencing and Punishment
a) Procedural Rights in Sentencing: Right to counsel. No right to confront or cross examine.
b) Appeals: Re-sentencing after successful appeal—defendant may not be given a harsher sentence on retrial after
a successful appeal (unless trial is de novo or judge sets out in the record reasons to show it was not vindication
for the appeal).
c) Death Penalty: There are four principles that sum up the death penalty:
i. Any death penalty statute that does NOT give the defendant a chance to present mitigating facts and
circumstances is unconstitutional.
ii. There can be no automatic category for imposition of the death penalty.
iii.
The state may not by statute limit the mitigating factors; all relevant mitigating evidence must be
admissible or the statute is unconstitutional.
iv.
Only a jury and not a judge may determine the aggravating factors justifying imposition of
death.
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Double Jeopardy☼
Under the Fifth Amendment, a person may not be retried for the same offense once jeopardy has attached.
a) When Jeopardy Attaches:
a. At a jury trial: jeopardy attaches when the jury is sworn.
b. At a judge trial: jeopardy attaches when the first witness is sworn.
c. Jeopardy does not generally attach when the proceedings are civil (other than juvenile).
i. Can have criminal prosecution followed by civil for damages.
b) Four Exceptions permitting retrial
a. Jury is unable to agree on a verdict (hung jury).
b. Mistrial for manifest necessity (termination by defendant not constituting acquittal on the merits).
c. Retrial after successful appeal.
d. ***Breach of an agreed upon plea bargain by the DEFENDANT. When the defendant breaches a
plea bargain agreement, the plea and sentence can be withdrawn, and original charges can reinstated.
c) The “same offense”: two crimes do not constitute the same offense if each crime requires proof of an
additional element that the other does not. Ex. Can have two trials for hit & run and manslaughter from one hit.
d) Lesser included offenses
a. If you are in Jeopardy for the greater offense, bars retrial for the lesser included.
i. Example: Robbery (which is Larceny + Assault) bars retrial for Larceny or Assault.
b. If you are in jeopardy for the lesser offense, bars retrial for any greater offense.
i. Exception: Jeopardy for Battery. Then the victim dies, can be tried for Murder.
e) Separate Sovereign: Violation of Federal law and State law—not double jeopardy because they are not same
sovereign. If two states are implicated, both can bring trials. Note: State and locality are the same sovereigns.
Privilege Against Compelled Self-Incrimination☼
a) Who Can Assert: Any person. May be asserted by a defendant, witness, or party only if the answer to the
question might tend to incriminate him. Anyone under oath in any kind of case (administrative, civil, criminal,
etc.) may assert the privilege.
b) When Privilege May be Asserted: When a response might furnish a link in the chain of evidence needed to
prosecute him. Basically, don’t answer any incriminating question. NOTE: The privilege must be claimed in
civil proceedings to prevent the privilege from being waived for a later criminal prosecution.
c) Scope of Protection: the Fifth Amendment privilege protects only testimonial or communicative evidence and
not real or physical evidence (bodies: hair sample, blood sample, urine, etc.) The government cannot make you
take a lie detect test, or undergo custodial police interrogation. Only protects from compelled testimony.
d) Violation: When a person’s compelled statements are used against him in a criminal case.
Prohibition Against Burdens on Assertion of Privilege
It is unconstitutional for a prosecutor to make a negative comment on the defendant’s failure to testify or for
remaining silent on hearing the Miranda warnings.
Elimination of Privilege
The Fifth Amendment privilege can be eliminated generally in three ways:
i. Grant of Immunity: a witness may be compelled to answer questions if granted adequate immunity
from prosecution.
(1) “Use and Derivative Use” Immunity Sufficient: guarantees that the witness’s testimony and
evidence located by means of the testimony will not be used against the witness. The witness may
still be prosecuted based on evidence obtained before the immunity (source independent).
ii. No possibility of Incrimination: a person has no privilege against compelled self-incrimination if there
is no possibility of incrimination (e.g., statute of limitations has run).
iii.
Waiver of Privilege: a criminal defendant, by taking the witness stand, waives the privilege to the
extent necessary to subject him to any cross-examination. A witness waives the privilege only if he
discloses incriminating information.
15
Real Property
Freehold Estates
a. Four Categories: (1) Fee simple absolute; (2) fee tail; (3) defeasible fees (fee simple determinable, fee simple
subject to condition subsequent, and fee simple subject to executory limitation); (4) life estate.
b. Three Characteristics of Each Estate:
i. What language creates the estate?
ii. Is the estate devisable (pass by will); descendible (pass by intestacy); alienable (transferable
during the holder’s lifetime)?
iii.
Which future interests, if any, is the estate capable of?
Estate
Language To Create
Duration
1. Fee Simple
Absolute
"To A and his heirs."
"To A."
Devisable,
descendible,
alienable.
None.
2. Fee Tail
"To A and the heirs of
his body."
3. Defeasible Fees:
A. Fee simple
Determinable
determinable
"To A so long as..."
"To A until..."
"To A while..."
(Language providing
that upon the
happening of a
stated event, the land
is to revert to the
grantor.)
"To A, but if X event
happens, grantor
reserves the right
to reenter and retake."
Grantor must carve
out right of reentry.
Absolute
ownership, of
potentially infinite
duration.
Lasts only as long
as there are lineal
blood descendants
of grantee.
Potentially infinite,
so long as event
does not occur.
Passes
automatically to
grantee's lineal
descendants.
Alienable,
devisable,
descendible,
subject to
condition.
Reversion (if held by
grantor);
Remainder (if held
by third party).
Possibility of
Reverter (held by
grantor).
Potentially infinite,
so long as the
condition is not
breached and,
thereafter, until the
holder of the right
of entry timely
exercises the power
of termination.
Potentially infinite,
so long as stated
contingency does
not occur.
Measured by life of
transferee or by
some other life
(pur autre vie).
Same.
Right of Entry
(Right of
Reacquisition)/Powe
r of Termination
(held by grantor).
Same.
Shifting Executory
Interest (held by
third party).
Alienable,
devisable and
descendible if pur
autre vie and
measuring life is
still alive.
Reversion (if held by
grantor);
Remainder (if held
by third party).
B.
Fee Simple
subject to
condition
subsequent
C. Fee Simple
subject to an
executory
limitation
4. Life Estate
"To A, but if X event
occurs, then to B."
"To A for life."
"To A for the life of
B."
Transferability
Future Interest
Fee Simple Absolute
a. Language: “To A” or “To A and his heirs.” (Today: the common law words “to his heirs” are not necessary).
b. Transferable: Absolute ownership of indefinite duration. Freely devisable, descendible, and alienable.
c. Future Interest: No. Note: A living person has no heirs. Thus, when A is alive, heirs have no future interest.
• Ex. O A and his heirs. A is alive. A has son B. What does B have? Nothing (B is not an heir
while A is alive) A retains absolute ownership.
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Fee Tail
a. Language: “To A and the heirs of his body.
• Note: Virtually abolished in US.
b. Transferable: Historically: Passes directly to the grantee’s lineal blood descendants, no matter what.
• Today: the attempted creation of a Fee Tail creates a Fee Simple Absolute.
c. Future Interest: Historically: O (grantor) had reversion; 3rd party (other than O) had remainder.
Defeasible Fees***
1. Fee Simple Determinable
a. Language: “To A for so long as…”; “To A during…”; “To A until…”
i. Grantor must use clear durational language.
ii. If the condition is violated, forfeiture is automatic.
b. Transferable: Devisable, descendible, and alienable, but always subject to the condition.
c. Future Interest: Grantor gets possibility of reverter.
i. Remember F S D P O R (Frank Sinatra Didn’t Prefer Orville Redenbacher): Fee Simple
Determinable Possibility Of Reverter. FSD comes hand in hand with POR.
2. Fee Simple Subject to Condition Subsequent – less harsh than FSD
a. Language: “To A, but if X event occurs, grantor reserves the right to reenter and retake.”
i. Grantor must use clear duration language AND carve out the right to reenter.
b. Transferable: Grantor has the option to terminate if the stated condition occurs (not automatic).
c. Future Interest: Grantor has right of entry.
3. Fee Simple Subject to Executory Limitation
a. Language: “To A, but if X event occurs, then to B.”
b. Transferable: If the condition is broken, the estate automatically transfers to someone other than
grantor (to a 3rd party).
c. Future Interest: Named party (here B) has a shifting executory interest.
NOTE: Rules of Construction for Defeasible Fees
Words of desire, hope, or intention are insufficient to create a defeasible fee. Courts disfavor restrictions
on the free use of land. Therefore, court will not find a defeasible fee unless clear duration language is used.
Examples of unclear language: “To A for the purpose of...”; “To A with the hope that…”; “To A with
the expectation that…” Becomes a Fee Simple Absolute.
Absolute restraints on Alienation (to sell or transfer) are VOID. Cannot put an absolute ban on the power
to sell or transfer that is not linked to any reasonable time limited purpose.
Examples of restraint on Alienation: “To A so long as she never sells.” Becomes a Fee Simple Absolute.
But, “To A so long as she does not sell until 2008 when title will be clear” is ok because of the purpose.
Life Estate
a. Language: “To A for life.” A has a life estate and A is known as the life tenant.
i. Must be measured in explicit lifetime terms and NEVER in a term of years.
b. Transferable: Life tenant can sell the life interest, but can only give tenancy for his life.
c. Future Interest: Grantor gets reversion (reverts back to O or O’s heirs) after A dies. 3rd party gets remainder.
Life Estate Pur Autre Vie – life estate measured by the life other than the grantee’s
a. Language: “To A for the life of B.” A has a life estate (pur autre vie) for the life of B.
b. Transferable: Life tenant can sell the life interest, but can only give tenancy for B’s life.
c. Future Interest: Grantor gets reversion (reverts back to O or O’s heirs) after B dies. 3rd party gets remainder.
NOTE: Doctrine of Waste☼ as it applies to all forms of Life Estate
1) The life tenant is entitled to all ordinary uses and profits from the land.
2) The life tenant must not commit waste (cannot do anything to hurt the future interest holders):
a. Voluntary or affirmative waste: actual, overt conduct causing decrease in value.
i. Waste of Natural Resources: Generally must not consume or exploit natural resources,
unless 1 of 4 exceptions applies: PURGE—(1) Prior Use before grant may continue (for
mines: cannot open new ones); (2) Reasonable repairs or maintenance; (3) Grant (express);
(4) Exploitation (land is only suitable for exploitation, e.g. quarry).
b. Permissible waste or neglect: Must maintain premises. Pay taxes on income (or fair rental value).
17
Failure to pay
tax tax sale
cutting off
rights of
remaindermen.
c.
Ameliorative waste: cannot enhance the value without consent from all future interest holders.
Future Interests
1. Future Interests in the Grantor:
a. Possibility of Reverter: Accompanies only the Fee Simple Determinable.
b. Right of Entry (Termination): Accompanies only the Fee Simple Subject to Condition Subsequent.
c. Reversion: future interest that arises in a grantor who transfers an estate of lesser magnitude than he
started with (other than fee simple determinable and fee simple subject to condition subsequent).
i. Ex: “To A for life”; “To A for 99 years”; “To A for life, then to B for 99 years.”
2. Future Interests in Transferees: Remainders accompany preceding estates of known fixed duration (usually
life estate or term of years BUT never a defeasible fee). Executory interests cut short existing interests.
a. Vested remainder: both created in an ascertained person and not subject to a condition precedent.
i. Indefeasibly vested: Certain to acquire with no further conditions attached (no strings).
1. Ex. To A for life, then to B. (If B dies before A, B’s heirs or devisees take).
What follows what?
Vested Executory
2. To A for life, then, if [some prerequisite] to B. (Condition satisfied during A’s life).
Contingent Contingent
ii. Vested subject to complete defeasance (total divestment): Right can be cut short due to
Life estate Vested
condition subsequent.
Life estate Contingent
1. Ex. “To A for life, remainder to B, provided however, that if B dies under the age of
Executory Executory
25, to C.” A is alive, B is 20 years old. A has life estate, B has vested remainder
subject to complete defeasance, C has shifting executory interest. (O reversion).
a. Note the comma: When conditional language in a transfer follows
language that, alone and set off by commas, would create a vested
remainder, the condition is a subsequent one.
iii.
Subject to open: remainder vested in a group, at least one of whom is qualified to take
possession. Each class member’s share is subject to partial diminution from additional takers.
1. Ex. “To A for life, then to B’s children. A is alive, B has two children. Each child
has a vested remainder subject to open (including the child in the womb).
a. Note: a class closes whenever any member can demand possession. E.g.
B’s death b/c no more children or A’s death b/c members can demand.
b. Contingent remainder: created in an unascertained person OR subject to a condition precedent.
i. Ex. To A for life, then to… “B’s first child” (when B has no child); “B’s heirs”; “survivors”.
ii. Ex. To A for life, then, if [some prerequisite] to B. (If Condition unsatisfied – O’s reversion,
If condition satisfied – B takes).
iii.
Limiting Doctrines
1. Destructibility of Contingent Remainders (rule of construction)
a. Common Law—contingent remainder was destroyed if still contingent at
the time the preceding estate ended. (O (heirs) would take F.S. Absolute).
b. Today—destructibility of contingent remainders abolished.
2. Rule in Shelly’s Case (rule of law) – intent is not binding.
a. Common Law—“To A for life, then, on A’s death, to A’s heirs” (A is
alive). The present and future interest merges giving A F.S. Absolute.
b. Today—Rule virtually abolished. Most states: To A for life, then to A’s
heirs” creates life estate in A and a contingent remainder in the heirs.
3. Doctrine of Worthier Title: Rule against remainder (not reversion) in O’s heirs.
a. Common Law & Today—O, who is alive, conveys “To A for life, then to
O’s heirs.” Contingent remainder in O’s heirs is void. A has life estate, and
O has reversion. Note: Grantor’s intent controls—clear intention binding.
c. Executory interest: 3rd party interest that cuts short some other interest.
i. Shifting: Cuts short interest in another person. Follows defeasible fee.
1. “To A, but if X occurs, to B” B has a “shifting executory interest.” Shifts from A.
ii. Springing: Cuts short interest in Grantor or his heirs. Follows defeasible fee.
1. “To A if…” OR “To A for life, then, if [some prerequisite] to B.” (Condition
satisfied after A’s life). In both, the interest goes back to/stays in O or O’s heirs, and
would spring out to B upon satisfaction of the condition. Does not violate RAP
because will know by the end of A’s life if condition is met or not.
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Rule Against Perpetuities (“RAP”)
A future interest may be void if it may vest more than 21 years after the death of the measuring life (a life in being at
the time of the conveyance that affects the interest).
Assessing a RAP problem:
1) What interest is created? RAP only applies to (1) contingent remainders, (2) executory interests, (3)
certain vested remainders subject to open. (Does NOT apply to interest created in O or other vested interests)
2) What is the condition precedent to the vesting? What must has to happen for future interest holder to
take?
3) Find a measuring life: Person alive at the date of the conveyance who is relevant to the condition’s occurrence.
4) Ask: Will we know, with certainty, within 21 years of the death of our measuring life, if our future interest
holder(s) can or cannot take? If so, the conveyance is good. If not, void.
a. Ex. “To A for life, then to the first of her children to reach the age of 30.” A is 70.☺ Her only child, B,
is 29 years old. Steps: (1) interest: Contingent reminder in B’s first child to reach 30 (unknown now);
(2) condition: A must die and a child must reach 30; (3) measure: A (not B b/c grant is not B
specific); (4) Ask: No certainty. B could die. A could have another child C. C would not be 30 w/in
21 years. Thus, A has a life estate and O has a reversion.
i. ☺Fertile Octogenarian Rule—presumes that a person can have a child at any age.
Bright Line Rules of Common Law RAP:☼
1) A gift to an open class that is conditioned on the members surviving to an age beyond 21 violates the
common law RAP. “Bad as to one, bad as to all.” To be valid, every member must be able to take.
a. Ex. “To A for life, then to such of A’s children as live to attain the age of 30.” A has two children, B
and C. B is 35 and C is 40. A is alive. (Gift to an open class). B and C’s vested remainder subject to
open are voided by the common law RAP and its “bad as to one bad as to all rule” (A could have
another child and die; that child will not reach 30 within 21 years of A’s death). The entire gift is void.
A has a life estate and O has reversion.
2) Many shifting executory interests violate the RAP if there is no limit on the vesting period.
a. Ex. “To A and his heirs so long as the land is used for farm purposes, and if the land ceases to be so
used, to B and his heirs.” B has a shifting executory interest; the land must cease to be used; A is the
measuring life because A has the power to trigger; and the condition may not be violated until after 21
years of A’s death (could come before, but could come after)… so RAP is violated FSD with POR.
i. Strike the offensive language: left with “To A and his heirs so long as the land is used for
farm purposes.” A has fee simple determinable; O has possibility of reverter.
ii. Caveat: “To A and his heirs, but if the land ceases to be used for farm purposes, to B and his
heirs.” This violates RAP, but when offensive language is stricken, left with “To A and his
heirs.” Condition is out. A has Fee Simple Absolute. O has nothing!
3) Charity to Charity: A gift from one charity to another does not violate RAP.
a. Ex. “To the American Red Cross, so long as the premises are used for Red Cross purposes, and if they
cease to be so used, then to the YMCA.” Normally violates… but for Charity, it does not violate.
Reform of the RAP
1) “Wait and See” or Second Look: (Minority rule) Validity of any suspect future interest is determined on the
basis of the facts as they now exist at the conclusion of the measuring life.
2) Uniform Statutory Rule Against Perpetuities (USRAP): Provides for a 90 year vesting period.
3) Both Wait and See AND USRAP embrace
a. Cy pres doctrine: “as near as possible” – if a grant violates RAP, court will reform the violation in a
way that most closely matches the grantor’s intent while still complying with the RAP.
i. Reduction of any offensive age to 21 years.
ii.
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A gift to an
individual
then to a
charity is
subject to
RAP.
Concurrent Estates
1) Joint Tenancy: two or more own with the right of survivorship.
a. Right of Survivorship: When one joint tenant dies, his share passes automatically to the surviving.
b. Alienable: Can sell or transfer joint tenancy (even in secret, without permission), but is not devisable
(in Will) or descendible (to heirs) because of the right of survivorship.
c. Creation: 4 Unities “T-TIP” (1) Time, (2) Title (instrument), (3) Interest (equal), and (4) Possession.
Additionally, grantor must clearly express the right of survivorship (if not express tenant common).
d. Straw(man): If one person holds interest, but wants another to join—two steps: (1) convey to
straw(man); (2) straw(man) conveys to both at same time, same title, equal interest, w/both in
possession; specifying the right of survivorship.
e. Severing a Joint Tenancy: “SPaM”
i. By Sale: Tenant sells; unity disrupted Buyer takes “Tenancy in Common” (Note: if there
Creditor’s Rights:
Right of
are two or more Joint Tenants, Joint Tenancy remains intact as between them).
survivorship takes
1. Equitable conversion: Contract to sell interest severance of tenancy occurs on
precedent over
the date of contract.
creditors of
ii. By Partition: (1) Voluntary—peaceful end of relationship; (2) In Kind—judicial action for
deceased. If
creditor wants
physical division; (3) Forced sale—judicial action where land sold and proceeds divided.
judgment from a
iii.
By Mortgage:☼ The effect of a mortgage on joint tenancy property depends on
joint tenant,
jurisdiction—
creditor must sever
1. Title Theory (Minority): Mortgage severs the encumbered share from the joint
the tenancy by levy
prior to the debtortenancy (after mortgage is released, get back Tenancy in Common).
joint tenant’s
2. Lien Theory (Majority): Mortgage does not sever the encumbered share from the
death.
joint tenancy (after released, joint tenancy intact).
2) Tenancy by the Entirety: protected marital interest between Husband and Wife with the right of survivorship.
a. Right of Survivorship: Only created in Husband and Wife who share right of survivorship.
b. Creation: If made “to Husband and Wife,” presumption of by the entirety, unless otherwise stated.
c. Creditors: Creditors of one spouse can’t touch this tenancy (“can’t touch this”).
d. Unilateral Conveyance: neither tenant acting alone can defeat the right of survivorship by a unilateral
conveyance to a third party (Note: this is unlike joint tenancy were unilateral conveyance is ok).
3) Tenancy in Common: Two or more own with no right of survivorship. Three features: (1) Each co-tenant
owns an individual part and each has a right to possess the whole. (2) Each interest is descendible, devisable,
and alienable. There are no survivorship rights. (3) The presumption favors the tenancy in common.
Concurrent Estates: Rights and Duties of Co-Tenants
Applies to all co-tenancies: Joint Tenants, Tenants in Common, Tenancy by the Entireties:
1) Possession: Each co-tenant is entitled to possess and enjoy the whole. Wrongful exclusion = wrongful ouster.
2) Rent from co-tenant in exclusive possession: absent ouster, co-tenant is not liable for rent to other tenants.
3) Rent from third parties: Co-tenants are entitled to their fair share of the rental income based on % ownership.
4) Adverse possession: One tenant cannot acquire title to the exclusion of others. Hostility is absent (no ouster).
5) Carrying costs: Each is responsible for fair share of carrying costs (taxes, mortgage) based on % ownership.
6) Repairs: Each must contribute to repairs their fair share of the repair based on % ownership.
7) Improvements: During the life of the co-tenancy, there is no right to contribution for “improvements” –
However, at partition, the improving co-tenant is entitled to credit if the property is increased in value OR
bears full liability if there is decrease in value due to the “improvements”.
8) Waste: A co-tenant must not commit waste. (Waste: voluntary, permissive and ameliorative.)
a. Note: A co-tenant can bring an action for waste during the life of the co-tenancy.
9) Partition: A joint tenant or tenant in common has a right to bring an action for partition.
a. Review: (1) Voluntary—peaceful end of relationship; (2) In Kind—judicial action for physical
division; (3) Forced sale—judicial action where land sold and proceeds divided.
20
Landlord/Tenant Law: Leasehold Tenancies (non-freehold estates)☼
1. Tenancy for Years: Lease for a fixed determined period of time. You know the termination date, therefore no
notice is required for termination. Term greater than 1 year must be in writing (Statute of Frauds).
2. Periodic Tenancy: continues for successive intervals, until L or T give proper notice of termination.
a. Express: “To T from month to month (year to year) (week to week).”
b.
Implied: Arises by implication in any one of three ways:☼
i. Lease has no mention of duration, provision made for payment of rent at set intervals.
ii. Oral term of years greater than 1 year (in violation of the Statute of Frauds) implied
periodic tenancy measured by the way rent is tendered.
iii.
Holdover in a residential lease, if L elects to holdover a T who has wrongfully stayed
past the conclusion of the original lease implied periodic measured by way rent
tendered.
c. Termination: Notice is usually required, at least equal to the length of the period itself.
i. Monthly = 1 Month; Weekly = 1 Week; Yearly = 6 months.
1.
Period must end at the conclusion of a natural lease period.☼
2.
Parties may lengthen or shorten by private agreement.☼
3. Tenancy at Will: tenancy for no fixed period of duration. Must expressly agree to tenancy at Will.
a. Rent: Unless express agreement, payment of regular rent Court treats as implied periodic tenancy.
b. Termination: By either party at any time; however, reasonable demand to vacate typically required.
4. Tenancy at Sufferance: when T wrongfully holds over, T becomes a Tenant at Sufferance, permitting L to
recover rent. L has two options: (1) evict T; or (2) elect to hold T to a new term. (Short lived tenancy).
Landlord/Tenant Law: Tenant’s Duties
1. T’s liability to third parties (tort law): T is responsible for keeping the premises in reasonably good repair.
a. Injury: T is liable for injuries sustained by 3rd parties T invited, even where L has expressly promised
to make all repairs (Note: T may seek indemnification from L if L agreed to make repairs).
2. T’s duty to repair: Depends on what is in the lease-a. When lease is silent: (1) T must maintain the premises and make ordinary repairs. (2) T must not
commit waste (Voluntary: overt harmful acts; Permissive: neglect; Ameliorative: alterations increasing
value). (3) T cannot remove fixtures (even if he put them there) because removal = waste.
i. Law of Fixtures: A fixture is a once movable chattel that by virtue of its attachment to
realty, objectively shows the intent to permanently improve the reality. Fixtures pass
with ownership of the land. (Ex. Heating, custom made windows, certain lighting).
ii. What Qualifies as a “fixture”?
1. Express agreement: agreement between L and T controls and is binding.
2. No agreement: T may remove a chattel he installed so long as removal does
not cause substantial harm to the premises. If damage cause from removal =
objective intent to install a permanent fixture (and it must stay).
b. When lease has express covenant: At common law, T was responsible for any loss to the
property, including loss attributable to force of nature.
i. Today (Majority): T may terminate the lease if the premises are destroyed without T’s
fault. In New York, absent T’s express undertaking to restore the premises in the event
of destruction, if the premises are destroyed through no fault of tenant, tenant may quit
the premises and surrender possession without any further duty to pay rent.
3. T’s duty to pay rent: T must pay rent. L’s actions if T fails to do so depends on T’s state of possession—
a. T breaches, but is in possession: options to (1) evict (still entitled to rent) or (2) continue
relationship & sue for rent due. NO SELF-HELP: eg. change lock, forcibly move tenant/possessions.
b. T breaches, but is out of possession: options (“SIR”) (1) Surrender (by words or actions T wishes to
give up the leasehold). If unexpired term is greater than 1 year, surrender in writing. (2) Ignore and
hold T to the rent (only in minority of states). (3) Re-let on T’s behalf, hold T liable for deficiencies.
i. Re-let rule: Majority-must try to re-let/mitigate.
21
In a
commercial
lease, if the
original
lease was
for a year
or more, a
year-toyear
periodic
tenancy
results from
holdover.
If prior to
termination
the landlord
indicates
that rent is
increasing,
holdover is
held to the
new terms.
Landlord/Tenant Law: Landlord’s Duties
1. Duty to Deliver Possession
a. Majority (English Rule): L must put T in actual possession. If L breaches, T gets damages.
b.
Minority (American Rule): L not required to put T in actual possession, only legal possession.☼
2. Implied Covenant of Quiet Enjoyment:☼ Applies to both residential and commercial leases. T has a right to
quiet use and enjoyment of the premises without interference from L.
a. Breach by actual wrongful eviction: L wrongfully evicts T or excludes T from the premises.
b. Breach by constructive eviction:☼ (“SING”) (1) Substantial Interference attributable to L’s action
or failure to act (a chronic problem); (2) Notice given by T to L of the problem (L fails to respond); (3)
Get out (T must vacate).
c. Acts by other Tenants: L is generally not liable for acts of other tenants, except (1) nuisance on the
premises and (2) actions in common areas (L must control common areas).
3. Implied Warranty of Habitability: only applies to residential leases (not commercial). Non-waivable.
a. Standard: Premises must be fit for basic human habitation (bare living requirements); standard
supplied by (1) local housing code or (2) independent judicial conclusion.
b. Examples: Failure to provide heat in winter; lack of plumbing; lack of running water, etc.
c. Entitlements upon Breach: Four options (“MR3”): (1) Move out and terminate lease; Repair and
deduct from future rent; Reduce rent or withhold rent and place in escrow; Remain, pay rent, seek
damages (this is a key distinction between constructive eviction and implied warranty of habitability).
4. Retaliatory Eviction: If T lawfully reports L for housing code violations, L is barred from penalizing T, by, for
example, raising rent; ending the lease; harassing T; or taking any other retaliatory measures.
Landlord/Tenant Law: Assignment vs. Sublease☼
1. Assignment: Transfer of whole interest (Note: L can prohibit T from assigning without L’s prior written
approval. Once consent is granted, L waives right to object to future transfers, unless expressly reserved).
a. Effect of Assignment: Ex. L leases to T; T assigns to T2; T2 assigns to T3.
If the assignee
reassigns the
i. Privity of Contract: Secondarily liable for breaches of the lease. Ex. L&T; T&T2; T2&T3.
leasehold, her
1. L and T2/T3 only in privity of contract if expressly assume original lease promises.
privity of estate
ii.
Privity
of Estate: Liable to each other for all of the covenants in the original lease that “run
ends, and she is
with the land.” (i.e. rent, paint premises, repair, etc.) Between the landlord and Tenant in
not liable for
the subsequent
Possession. Ex. L and T3.
assignees
iii.
No Privity: Ex. L and T2—no privity of contract (unless expressly assumed) nor of
failure to pay.
estate.
2. Sublease: Transfer of part interest.
a. Effect of Sublease: L and Sublessee are neither in privity of contract nor in privity of estate. They
share no nexus. Privity of contact/estate exists between T and T2 (who are liable to each other). L can
still go after T (privity of contract) for T2’s breaches, but cannot go after T2 directly.
Landlord/Tenant Law: Landlord Tort Liability
1. Common Law: caveat lessee—“let the tenant beware”. In Tort, L has no duty to make premises safe.
2. Exceptions to the Common Law: When L has a duty to make the premises safe—
a. Common areas: Ex. Hallways, Stairwells.
b. Latent defects: duty to warn of hidden defects of which L has knowledge or reason to know.
i. NOTE: No duty to repair.
c. Assumption of repairs: once undertaken, L must complete repairs with reasonable care.
i. L will be liable for negligent repairs.
d. Public use: L who leases public space (e.g. convention hall or museum) and who should know,
because of the nature of the defect and the length of the lease that T will not repair, is liable for any
defects on the premises.
e. Short term: A short term lease of furnished dwelling, L is responsible for any defective condition
which proximately injured T. (T has neither the time nor the inclination to make repairs himself).
22
Servitudes☼ (Summary Chart)
Form of Servitude
Affirmative Easements.
Method of Creation
Parties Bound
P-I-N-G
P - Prescription (use that is continuous,
open and notorious, actual under a claim of
right that is hostile for request statutory
period).
Easement appurtenant is
transferred automatically with
dominant tenement.
I - Implication (implied from prior use; at
time land is severed, a use of one part
existed from which it can be inferred that
an easement permitting its continuation
was intended).
Remedy
Injunction or
Damages
Easement in gross for
commercial purposes is
assignable.
N - Necessity (division of a tract deprives
one lot of means of access out).
Negative Easements
(L-A-S-S: Light, Air,
Support, and
Streamwater).
Real Covenants.
G - Grant (writing signed by grantor).
Created only by writing signed by grantor
Writing signed by grantor.
Injunction or
Damages
Burden of promise will run to
successor of burdened lot
if WITHN requirements are
satisfied: Writing, Intent,
Touch & concern, Horizontal
and vertical privity and
Notice.
Equitable Servitudes.
Writing signed by grantor (unless implied
by General Scheme Doctrine).
Reciprocal Negative
Servitudes (General
Scheme
Doctrine).
According to majority, in a subdivision,
residential restriction contained in prior
deeds conveyed by common grantor will
bind subsequent grantees whose deeds
contain no such restriction if: At start of
subdividing, grantor had (i) common
scheme and (ii) unrestricted
lot holders had notice. (Note: Minority rule
will not bind subsequent grantees unless
their lots are expressly restricted in
writing.)
23
Benefit of promise will run to
successor of benefited lot if
WITV: Writing, Intent,
Touch and concern and
Vertical privity.
Successors bound if WITNes:
Writing, Intent, Touch and
concern, Notice (privity not
required).
Where common scheme
exists, subsequent purchasers
with notice are bound.
Damages.
Injunction.
Injunction.
Servitudes
1. Easements: the grant of a nonpossessory property interest that entitles its holder to use and enjoy other’s land.
The holder’s land is called dominant and the land being use/enjoyed is servient. Subject to Statute of Frauds.
The scope of an easement is set by the terms of the grant or the conditions that create it (cannot be unilaterally
expanded). Easements are either Affirmative or Negative and are also either Appurtenant or In Gross:
a. Affirmative: right to go onto servient land and do something (e.g. access, lay utility lines).
i. Creation: Four ways (“PING”) (1) Prescription; (2) Implication; Necessity; Grant.
1. Prescription: By Adverse Possession—(“COAH”) (1) Continuous use for the
statutory period, (2) Open and notorious, (3) Actual use, (4) Hostile (no consent).
a. CA: Statutory period is 5 years (with payment of taxes)
2. Implication: Implied from existing use—(One parcel is split into two). Use is (1)
apparent and (2) the parties expect that the use would survive division because it
is reasonably necessary to the dominant owner’s land use and enjoyment.
3. Necessity: Landlocked setting—right of way is implied by necessity if grantor
conveys a portion of his land with no way out, except over grantor’s remaining land.
a. Note: necessity easement (no express grant) expires when necessity ends.
4. Grant: Easement for more than 1 year must be in writing that complies with the
formal elements of a deed, called a “deed of easement.”
b. Negative: holder can prevent the servient landowner from doing something affecting dominant land.
4 categories: (“LASS”)—(1) Light, (2) Air, (3) Support, (4) Stream water from an artificial flow.
i. Minority: Scenic View.
ii. Creation: ONLY by an express writing signed by the grantor (not automatic!).
c. Appurtenant: When it benefits its holder in his physical use or enjoyment of his property. Two
parcels of land are required: (1) dominant has the benefit; (2) servient has the burden.
i. Ex. Right of way across A’s land to get to B’s land. B is dominant/A is servient.
ii. Transferability: The benefit passes automatically with the dominant tenement, regardless of
whether it is even mentioned in the conveyance. The burden also passes automatically with
the servient estate, unless the purchase is Bona Fide without notice of the easement.
d. In gross: When it benefits a holder in some personal or pecuniary way, that is not related to his use
of enjoyment of his land. Servient land is burdened; there is no dominant land.
i. Ex. Right to place billboard on another’s lot, swim in another’s pond, lay power lines.
ii. Transferability: Personal not transferable; Commercial is transferable.
1. Personal = ex. Swim in pond. Commercial = ex. Fish for bait for bait company.
e. Termination of all types of easements:☼ (“END CRAMP”) (1) Estoppel, (2) Necessity, (3)
Destruction, (4) Condemnation, (5) Release, (6) Abandonment, (7) Merger, (8) Prescription.
i. Estoppel: Servient owner materially changes his or her positions in reasonable reliance on
the easement holder’s assurances that the easement will no longer be enforced.
ii. Necessity: If created by necessity, easement expires when no longer necessary.
1. If the easement by necessity was expressly granted, it does not automatically end.
iii.
Destruction: servient land is destroyed through no fault of the servient owner.
iv.
Condemnation: by eminent domain.
v. Release: Easement holder gives servient owner written release of the easement.
vi.
Abandonment: Easement holder demonstrates by physical action the intent to never
use.
1. Mere non-use or mere words are insufficient to terminate by abandonment.
vii. Merger (or Unity of Ownership): Easement is extinguished when title to the easement
and title to the servient land become vested in the same person.
1. Easement is not revived upon later separation.
viii. Prescription: Servient owner interferes with the easement holder’s rights through
Adverse Possession (interference required!). Recall—Continuous, Open/Notorious, Actual,
Hostile.
2. License: The mere privilege to enter another’s land for some delineated purpose. Not subject to Statute of
Frauds, thus no writing required. Licenses are freely revocable (at will), unless estoppel bars revocation.
a. Classic cases: (1) Tickets: freely revocable at any time. (2) Oral Easements: Oral easements
(“neighbors talking by fence”) violate the statute of frauds treated as freely revocable licenses.
b. Estoppel: Bars revocation only when the licensee has invested substantial money, labor, or both in
reasonable reliance on the license’s continuation.
24
Servitudes (continued)
3. Profit: The profit entitles its holder to enter the servient land and take from it the soil or some substance of
the soil (minerals, timber, oil). The profit shares all the rules of easements.
4.
Covenant: a promise to do or not to do something related to land. Not the grant of a property interest (as
with an easement). A contractual limitation or promise.
a. Negative (restrictive covenant): a promise to refrain from doing something related to land.
b. Affirmative: promise to do something related to land.
i. Distinguish from Equitable Servitude: basis of remedy—covenants seek money damages.
Equitable Servitude seeks injunction.
c. When do Covenants Run with the Land? Covenant runs when it is capable of binding successors.
i. Land is either burdened or benefited.
1. Burden side: elements necessary to run (“WITHN”) (1) Writing between original
parties, (2) Intent of original parties that the covenant would run, (3) Touch and
Covenants Running with the Land
concern the land (affect legal relationship as owners, including fees and covenants
A Horizontal Privity B
not to compete), (4) Horizontal and Vertical privity, (5) Notice of the promise to
(Burdened)
(Benefited)
the second holder(A1) when he took.
|
|
a. Horizontal: originally created by succession of estate—A and B had to
|
|
have been grantor/grantee, landlord/tenant, mortgagor/mortgagee only.
Vertical
Vertical
Privity
Privity
b. Vertical: some non-hostile nexus (contract, devise, descent) between first
|
|
(A) and second owner (A1)—not through adverse possession.
|
|
2. Benefit side: elements necessary to run (“WITV”) 1) Writing between original
A1
B1
parties, (2) Intent of original parties that the covenant would run, (3) Touch and
(WITHN)
(WITV)
concern the land (affect legal relationship as owners, including fees and covenants
not to compete), (4) Vertical privity only (some non-hostile nexus).
5.
Equitable Servitude: promise that equity will enforce against successors (accompanied by injunctive relief).
a. Creation: (“WITN”) (1) Writing generally, but not always, (2) Intent by the original parties that the
promise would be enforceable by and against assignees, (3) Touch and concern the land so as to
affect the parties as landowners, (4) Notice must be given to the assignees of the burdened land.
i. NOTE: PRIVITY IS NOT REQUIRED TO BIND SUCCESSORS.
6.
Implied Equitable Servitudes:☼ “The General or Common Scheme Doctrine”—Can enjoin someone from
using their land in a certain way if the elements of the doctrine are satisfied. Imposes a “reciprocal equitable
(negative) servitude” to hold an otherwise facially unrestricted lot holder to the restrictive covenant.
a. Elements: Originally held by one owner
i. Upon subdivision (when sales began), the subdivider had a general scheme of residential
development, which included defendant’s lot.
ii. Defendant lot holder had notice of the promise contained in the prior deeds. 3 kinds (“AIR”)
1. Actual notice: literal knowledge of the promises in the prior deeds.
2. Inquiry notice: neighborhoods seems to conform to common restrictions.
3. Record notice: imputed to buyers on the basis of publicly recorded documents.
a. Courts are split—some take view that subsequent buyer is on record notice
of the contents of prior deeds transferred to others by a common grantor.
b. Defenses: To defend against the enforcement of an equitable servitude, must show Change in
Conditions (change must be so pervasive that the entire area or subdivision has changed).
i. Never a defense: limited or piecemeal change to the area is never a defense.
25
Adverse Possession
Possession for a statutory period of time can, if certain elements are met, ripen into title.
a. Elements: (“COAH”)
a. Continuous uninterrupted use for the given statutory period.
i. CA: Statutory period is 5 years (with payment of taxes).
b. Open and Notorious, the sort of possession that the usual owner would make under the circumstances.
Noticeable and out in the open, not hiding, so the true owner can know that you are there.
c. Actual and not hypothetical or fictitious.
d. Hostile without the consent of the owner. The possessor’s subjective state of mind is irrelevant.
(Possessor’s knowledge of an owner does not matter).
b. Tacking: One adverse possessor may tack on his time with the land to his predecessor’s time, so long as there
is privity, which is satisfied by any non-hostile nexus (blood, contract, deed, will). Tacking is NOT allowed
when there is ouster by another hostile adverse possessor.
c. Disabilities: statute of limitations will not run against a true owner who is afflicted by disability at the
inception of the adverse possession. Note: Disabilities cannot be tacked.
i. Common disabilities: Insanity, infancy, imprisonment.
ii. Ex. Owner is sane, adverse possessor comes on, person then goes insane – SOL will run. Vs.
Owner is insane, adverse possessor comes on – SOL will not run.
iii.
CA distinction: Owner may challenge within 20 years with disability; 5 years after
disability is lifted.
Land Conveyancing: Purchase and Sale of Real Estate☼
Every conveyance of real estate consists of a two step process:
1. Contract: The land contract must be (1) in writing and (2) signed by the defendant. It must (3) describe the
land and (4) state some consideration. Note: writing must have all essential terms, including price.
a. Land description: If the description is inaccurate (contract is more than actual size), then defendant
Reduction
is entitled to Specific Performance with a pro rata reduction in purchase price.
permitted
b.
Exception to writing requirement: “The Doctrine of Part Performance”—if two of the three are
where
satisfied, equity will decree specific performance for an oral contract: (1) Buyer takes physical
difference is
material and
possession of the land; (2) Buyer pays all or part of the purchase price; (3) Buyer makes substantial
the reduction
improvements to the land.
price is not
c.
Risk
of Loss: Apply equitable conversion—once the contract is signed, Buyer (subject to the
an excessive
condition that he pay at closing) is the owner of the land. Upon destruction (through no fault of either
variance
from the
party) between signing of the contract and closing, Buyer bares risk of loss, unless stated otherwise.
parties
d. Implied Promises: There are two implied promises in every land contract
agreement
i. Seller promises to provide marketable title at closing: Title free from reasonable doubt.
(i.e. the
Title unmarketable if: (1) Based on adverse possession (even a portion); (2) Encumbrances
abatement
must be
(cannot have servitudes or mortgages, unless Buyer waives); or (3) Zoning violation.
appropriate).
1. Note: Seller has the right to satisfy an outstanding mortgage or lien at the closing,
with the proceeds of the sale. (Buyer cannot claim title is unmarketable so long as
Broker’s
the parties understand that the closing will result in the mortgage being satisfied).
commissions:
Broker entitled
ii. Seller promises not to make any false statements of material fact: majority of states hold
when broker
seller liable for failure to disclosure latent material defects (lies and omissions).
finds someone
1. Disclaimers: If the contract contains a general disclaimer of liability (for example,
ready, willing,
“property sold as is” or “with all faults”): Disclaimer will not excuse sell from
and able to buy
who can meet K
liability for fraud or failure to disclosure.
conditions.
e. No Warranties: The land contract contains no implied warranties of fitness or habitability.
i. Common law norm: caveat emptor (let the buyer beware).
ii. One important exception: The implied warranty of fitness and workmanlike
construction applies to the sale of a new home by a builder-vendor.
Contract stays in force until the “closing”…
26
Land Conveyancing (continued)
2. Closing: the controlling document is now the deed. To pass legal title from seller to buyer, the deed must be
“LEAD” Lawfully Executed and Delivered.
a. Lawful Execution: must be in writing, signed by the grantor. Need not recite consideration, nor
must consideration pass to make a valid deed. The description does not have to be perfect—must be
unambiguous and a good lead (can research and discern what the grantor means, e.g. “all my land”).
b. Delivery:☼ satisfied when grantor physically or manually transfers the deed to the grantee (mail,
agent, messenger). HOWEVER, delivery does not require actual physical transfer of the instrument.
i. Legal standard for delivery: Did grantor have the present intent to be immediately bound,
irrespective of whether or not the deed has been literally handed over? If yes, delivery made.
ii. Express rejection: grantee’s express rejection of the deed defeats delivery.
iii.
Oral Conditions: If the deed is absolute on its face, an oral condition (not included in the
deed) at the time of transfer is void. It is not provable. Delivery is deemed accomplished.
iv.
Delivery by escrow: Grantor may deliver an executed deed to a third party, known as an
escrow agent, with instructions that the deed be delivered to grantee once certain conditions
are met. Once the conditions are met title passes automatically to grantee.
1. Advantage of escrow: If grantor dies or becomes incompetent or is otherwise
unavailable before the express conditions are met: title will still pass from escrow
agent to grantee once the conditions are met.
Types of deed (and covenants contained therein):
1. The quitclaim: It contains no covenants. Grantor isn’t even promising that he has title to convey. This is the
worst deed buyer could hope for.
a. Note: recall that grantor implicitly promised in the contract to provide marketable title at the closing.
2. The general warranty deed: The best deed a buyer could hope for. Warrants against all defects in title,
including those attributable to grantor’s predecessors. The general warranty deed typically contains all six of the
following covenants (seisin, right to convey, encumbrances, quiet enjoyment, warranty, further assurances).
a. Present covenants: The first three are present covenants, and are thus breached, if ever, at the time
the deed is delivered. (Statute of limitations begins to run from the instant of delivery)
i. The covenant of seisin: Grantor warrants that he owns the estate he now claims to convey.
ii. The covenant of right to convey:☼ Grantor promises that he has the power to make the
conveyance. No temporary restraints on grantor’s power to sell.
1. Ex. Of legal age to sell, no clouds on title, etc.
iii.
he covenant against encumbrances: Grantor promises that there are no servitudes or
mortgages on the land (rendering the title unmarketable).
b. Future Covenants: The last three are future covenants, which are not breached, if ever, until grantee
is disturbed in possession. (Statute of limitations for breach begins on future date of disturbance).
i. The covenant for quiet enjoyment: Grantor promises that grantee will not be disturbed in
possession by a third parties lawful claim of title.
ii. The covenant of warranty: Grantor promises to defend grantee should there be any lawful
claims of title asserted by others.
iii.
he covenant for further assurances: Grantor promises to perform whatever future acts are
reasonably necessary to prefect grantee’s title if it later turns out to be imperfect.
3. The statutory special warranty deed: Provided for by statute in many states, this deed contains two promises
that grantor makes only on behalf of himself. (Note: no representations on behalf of grantor’s predecessors):
a. Grantor promises that he has not conveyed the estate to anyone other than grantee; and
b. Grantor promises that the estate of free from encumbrances made by the grantor.
Once the deed is conveyed, it must be recorded...
27
Courts infer
grantee’s
acceptance
from a
valid
delivery.
Express
rejection
rebuts the
inference of
acceptance
T
T
The Recording System
1. Bona fide purchaser = purchases for value and without notice.
a. Value = remit substantial pecuniary consideration.
Recording
b. Notice = Actual, Inquiry (constructive), Record (constructive).
Statues do
i. Actual: Prior to closing, Buyer gets literal knowledge of a previous buyer’s existence.
not protect
subsequent
ii. Inquiry: Whatever an examination of the land would reveal (i.e. another in possession).
judgment
iii.
Record: Another deed was properly recorded within the chain of title.
creditors.
1. Chain of Title: Search through the grantor/grantee index.
c. Protection: only bona fide purchasers and mortgagees (not donees, unless Shelter Rule Applies).
2. Types of Recording Statues:
a. Notice: If at the time Buyer takes he is a Bona Fide Purchaser (value and no notice), he wins.
i. Language: “A conveyance of an interest in land shall not be valid against any subsequent
purchaser for value, without notice thereof, unless the conveyance is recorded.”
b. Race-Notice: If the Buyer is (1) a Bona Fide Purchaser and (2) wins the race to record, he wins.
i. Language: “Any conveyance of an interest in land shall not be valid against any subsequent
purchaser for value, without notice thereof, whose conveyance is first recorded.”
3. Problems with Chain of Title: Thee discrete chain of title problems—
a. Shelter Rule:☼ One who takes from a BFP will prevail against any entity that the transferor or BFP
would have prevailed against. Therefore, a donee (or buyer with notice) can “step into the shoes” of
the BFP even though she otherwise fails to meet the requirements of BFP status.
i. Ex. O conveys to A, who does not record. Later, O conveys to B, a BFP, who records. B
then conveys to C, who is a mere donee or who has actual knowledge of the O to A transfer.
In the contest of A vs. C, C prevails because B would have prevailed.
b. Wild Deed: If a deed, entered on the records, has a grantor unconnected to the chain of title, the deed
is a wild deed. It is incapable of giving record notice of its existence. Wild deed is a nullity.
i. Ex. O A (does not record). A B (does record—wild deed). O C (records). C prevails.
C is BFP with no notice (wins in notice state) and properly records first (wins in race-notice).
c. Estoppel By Deed: One who conveys realty in which he has no interest is estopped from denying the
validity of that conveyance if he subsequently acquired the interest he previously transferred. BUT,
the person who recorded something he does not won (the first buyer) does not make a valid recording
as applied to notice for the subsequent buyer.
i. Ex. X A (X does not own, but A records). O X (estopple by deed applies, between X
and A only, A owns). Then X B (BFP without notice because A’s deed invalid). B wins.
4. Model: The Case of the Doubt Dealer—O conveys Blackacre to A. Later, O conveys Blackacre, the same
parcel, to B. O, our double dealer, has skipped town. In the battle of A (gets there first) vs. B (gets there last).
a. Two brightline rules:
i. If B is a BONA FIDE PURCHASER, and we are in a NOTICE jurisdiction, B wins,
regardless of whether or not she records before A does.
ii. If B is a BONA FIDE PURCHASER and we are in a race-notice jurisdiction, B wins if she
records properly before A does.
Mortgages☼
A mortgage is a security interest in land, intended by the parties to be collateral for the repayment of a monetary
obligation. A mortgage is the union of (1) Debt and (2) Voluntary Transfer of a Security Interest in the debtor’s
land to secure the debt. The debtor is the mortgagor and the creditor is the mortgagee.
1.
Types: Mortgages can be legal or equitable—
a. Legal Mortgage: Must be in writing to satisfy the statue of frauds.
i. Known as: “Mortgage Deed” or “Note” or “Security Interest in Land” or “Deed of Trust” or
“Sale Leaseback”
If a dead is given
b. Equitable Mortgage: Creditor receives a deed that is absolute on its face (instead of a note).
for security
i. Between Debtor and Creditor: Parol evidence is freely admissible
purposes, courts
treat as a
ii. If Creditor sells to bona fide purchaser, Debtor’s only recourse: Fraud action (recover
mortgage and
proceeds of the sale, but cannot get the land back).
require lender to
Continued
foreclose by
judicial action.
28
Mortgages (continued)
2.
Parties’ Rights: once the mortgage is created—
a. Debtor-mortgagor has title and the right to possession (unless and until foreclosure).
b. Creditor-mortgagee has a lien: the right to look to the land if there is a default.
i. Note: Recording Statutes Protect Mortgagees (creates record notice of the lien).
3.
Transferability: All parties to a mortgage can transfer their interests. The mortgage
automatically follows a properly transferred note.
a. Creditor-mortgagee can transfer his interest by (1) endorsing the note and delivering to the
transferee; OR (2) executing a separate document of assignment.
i. Holder in Due Course: If the note is indorsed and delivered, the transferee is eligible to
become a holder in due course. Elements needed for Holder in Due course status:
1. Note must be negotiable made payable to the named mortgagee;
2. the original note must be indorsed, signed by the named mortgagee;
3. the original note must be delivered to the transferee (no photocopies);
4. the transferee must take the note in good faith without notice of illegality; and
5. the transferee must pay value for the note (more than nominal).
ii. Defenses: HDC will take the note free of any personal defenses that could have been raised
against the original mortgagee, but not free of real defenses. (Defenses disable foreclosure).
1. Personal: (1) lack of consideration, (2) fraud in the inducement, (3)
unconscionability, (4) waiver, (5) estoppel.
2. Real: (“MAD FiFI4”) (1) Material Alteration, (2) Duress; (3) Fraud in Factum (lie
about the instrument), (4) Incapacity, (5) Illegality, (6) Infancy, (7) Insolvency.
b. Recording the mortgage: As with deeds, in a notice state, a subsequent BFP prevails over a prior
grantee or mortgagee who has not yet recorded properly at the time the BFP takes. In race notice, a
BFP would win if he has no notice and records first. If mortgagee records first, it creates record notice.
c. Liability: Personally liability on the original debt depends on how the note/mortgage is transferred.
i. If Buyer “assumed the mortgage” – the original mortgagor and the buyer (if signed) are
personally liable. Buyer is primarily liable. The original mortgagor is secondarily liable.
ii. If Buyer “takes subject to the mortgage” – Buyer assumes no personal liability on the debt.
Original mortgagor is fully liable. But, if the mortgage is recorded, the mortgage remains on
the land. Thus, if O does not pay, the mortgage may be foreclosed against B’s land.
4.
Foreclosure: If the mortgagee-creditor looks to the land for satisfaction, a
foreclosure action is commenced—
a. Procedure: Proper Judicial Proceeding is required. The land is sold; sale proceeds satisfy the debt.
i. Proceeds less than debt: mortgagee brings personal action against debtor for deficiency.
ii. Proceeds more than debt: junior liens paid off in order of their priority (Each claimant
entitled to satisfaction in full before subordinated lienholder takes); surplus goes to debtor.
1. Note: Before any creditor is paid, attorney’s fees, expenses of the foreclosure, and
interest on the mortgage is paid.
b. Effect of the Foreclosure:
i. Junior: Foreclosure terminates interests junior to the mortgage being foreclosed (so long as
Jr. has notice). Junior paid in order of priority; can seek deficiency; but no interest in land.
1. Jr. is a “necessary party” to Sr.’s action – failure to join Jr. mortgage remains.
ii. Senior: Foreclosure does not affect any interest senior to the mortgage being foreclosed.
1. Buyer takes “subject to the mortgage” – not personally liable; still attached to land.
c. Priorities: Creditor must record (until recording, no priority). Once recorded, “first in time, first in
right.” Exception: Superpriority to the “Purchase Money Mortgage” – money given to acquire land.
PMM gets first priority on the parcel he financed, regardless of senior mortgages (i.e. from an “after
acquired collateral clause” that creates a senior interest in holdings “owned or hereafter acquired”).
d. Subordination: By private agreement, a Sr. creditor may agree to subordinate his priority to a Jr.
5.
Redemption: Ability to get land back prior to (and in approximately ½ jurisdictions
after) the foreclosure.
a. Equitable Redemption: Prior to foreclosure sale, debtor redeems land by paying missed payments +
interest + costs. If mortgage is accelerated: debtor pays full balance + interest + costs. After
foreclosure, redemption right cut off. Note: Cannot waive right to redeem (a “clogging” is prohibited).
b. Statutory Redemption: right to redeem after foreclosure (usually 6 months). Mortgagor remains in
possession for statutory period. Redemption by mortgagor nullifies the foreclosure.
29
Purchase
Money
Mortgage has
priority over
non-PMM.
PMM vs.
PMM,
traditional
priority rules
apply.
Lateral Support
1. Negligence: If land is improved by buildings and an adjacent landowner’s excavation causes that improved land
to cave in, the excavator will be liable only if he acted negligently.
2. Strict Liability: Strict liability does not attach to the excavator’s actions unless plaintiff shows that, because of
defendant’s actions, plaintiff’s improved land would have collapsed even in its natural state (i.e. without
the improvements). For strict liability to attach, P would have to show that the improvements on her land did
not contribute to the land’s collapse.
Water Rights
1) There are two major systems for determining the allocation of water in the watercourse (streams, rivers, lakes):
a. Riparian Doctrine: “Riparians” are owners of land that boarder the water course and share the
Priorities: Natural (home
right of reasonable use of the water. Liable if one’s use unreasonably interferes w/other’s use.
use) prevails over Artificial
(irrigation/ manufacturing).
b. Prior Appropriation Doctrine: Water belongs initially to the state, but the right to divert it and
Even if natural use totally
use it can be acquired by an individual (regardless of whether he is a riparian owner).
deprives artificial, will not
i. Priority: Priority of beneficial use (including agriculture) is sufficient to create the
be deemed “unreasonable”.
appropriation right. First in time, first in right usually applies.
2) Groundwater (percolating water) beneath the surface of the Earth not confined to a known channel:
a. Surface owner rights: entitled to make reasonable use of the ground water (not wasteful).
3) Surface waters (from rain, springs, or melting snow) not yet reaching a natural watercourse or basin:
a. Common enemy rule: Surface water is a common enemy and a landowner may change drainage
or make other improvements to combat water flow. Unnecessary harm to other’s land prohibited.
Possessor’s Rights
The possessor of land has the right to be free from trespass and nuisance:
1) Trespass: the invasion of land by a tangible physical object. To remove a trespasser, bring ejectment action.
2) Private nuisance: the substantial and unreasonable interference with another’s use and enjoyment of land.
Tangible invasion not required. Ex. Odors, noise.
a. Hyper-sensitive plaintiff: Super-sensitivity or specialized use does not lead to nuisance.
Eminent Domain
The government has the Fifth Amendment power to take private property for Public Use in exchange for Just
Compensation. Two kinds of takings—
1) Explicit takings: acts of governmental condemnation. Ex. Gov’t condemns private land for public highway.
2) Implicit takings: Regulatory taking whereby a governmental regulation has the effect of a taking, even though
it is not intended. Ex. Ban on residential development on a lot you just purchased for that reason.
a. Burden: Must show that the regulation as worked an economic wipeout of your investment.
b. Remedy: Government must (1) Compensate the owner OR (2) Terminate the Regulation and Pay
Damages that occurred while the regulation was in effect.
Zoning
Pursuant to its police powers, government may enact statues to reasonably control use of land.
1) Variance: the principle means to achieve flexibility in zoning. The proponent must show (1) undue hardship
and (2) that the variance will not work detriment to the surrounding property values.
a. Granted or denied by Administrative Action.
2) Nonconforming use: A once lawful, existing use now deemed nonconforming by a new zoning ordinance. It
cannot be eliminated all at once unless just compensation is paid. Otherwise, it could be deemed an
unconstitutional taking.
3) Unconstitutional exactions: Exactions are those amenities that government seeks in exchange for granting
permission to build. Ex. Town says you can build if you provide Public Park, streetlights, etc.
a. Scrutiny: To pass constitutional scrutiny, these exactions must: be reasonably related both in
nature and scope to the impact of the proposed development.
i. If they are not, the exactions are unconstitutional.
30
Constitutional Law (United States Constitution)
The Federal Judicial Power (Article III) (15%)
Can the court hear the case?
For the Federal Courts to hear a case, there must be a “case and controversy”. Justiciability requires:
1.
Standing (2-3Qs): whether the plaintiff is the proper party to bring a matter to the court for adjudication.
1. Injury: Plaintiff must allege and prove an existing or imminent injury by either (1) asserting injuries
that Plaintiff personally suffered OR (2) seeking injunctive or declaratory relief by showing a
likelihood of future harm.
i. Exam Tip: Who has the best standing? (1) Person personally suffering an injury; if multiple
injuries (2) the person who has economic loss.
2. Causation and redressability: Plaintiff must allege and prove that the defendant caused the injury
so that a favorable court decision is likely to redress the injury. (I.e. the opinion cannot be advisory).
3. No third party standing: Plaintiff cannot assert claims of others who are not before the court.
i. Exceptions: There are instances when a party can bring an action on behalf of others:
1. Close relationship: between plaintiff and injured party.
a. Example—Doctor-patient (asserting rights of patients in abortion cases);
but not a parent for the child when the parent does not have custody.
2. Unlikely to assert: if injured third party is unlikely to be able to assert own rights.
a. Example—Criminal defendants on behalf of prospective jurors who are
discriminated against in the peremptory challenge stage of jury selection.
3. Associational standing: an organization can sue for members if (1) members have
standing, (2) interests are germane to the organization, (3) claim/relief does not
require individual members.
4. Taxpayer standing: a taxpayer has standing if (1) the law he seeks to challenge was
enacted under Congress’s taxing and spending power, and (2) he alleges that
Congress has exceeded some specific limitation on that power.
4. No general grievances: Must not be suing solely as a citizen or a taxpayer for gov’t to follow law.
i. Exception: Taxpayer has standing to challenge government expenditures (money) as
violating Establishment Clause (but no standing for property grant to religious institutions).
ii. Exam Tip: The fact pattern will usually say: plaintiff suing as “citizen” or “taxpayer”.
2.
Ripeness: Is the matter ready for review? Ripeness usually achieved when violation of law occurs, defendant
is prosecuted, and defendant challenges the law’s constitutionality. If someone wants declaratory judgment
without first violating, ask whether a federal court may grant pre-enforcement review of a statute or regulation.
1. Evaluation: (1) the hardship that will be suffered without pre-enforcement review and (2) the fitness
of the issue and the record for review.
i. Example—FDA rule that drugs must state generic name. Companies resisted & sought
declaratory judgment. FDA move to dismiss—not ripe. Court: nothing gained by waiting.
3.
Mootness: If events after the filing of a lawsuit end the plaintiff’s injury the case must be dismissed as moot.
1. Exceptions: when the end of P’s injury does not end suit—
i. Wrong capable of repetition but evading review (will happen to that plaintiff again).
ii. Voluntary cessation by defendant of the harm to plaintiff (but could start again at any time).
iii.
Class action where named plaintiff’s claim is moot, but one other in class has ongoing
injury.
31
Declining Jurisdiction
1. Political question: Allegations of constitutional violations that the federal courts will not adjudicate:
1. The “republican form of government clause”
2.
3.
4.
2.
i. Exam Tip: If a local government practice or structure is challenged by claiming a
violation of the republican form of government clause, the Court will dismiss as a
political question.
Foreign policy: challenges to the President’s conduct of foreign policy (including War w/out vote).
Challenges to impeachment removal process: for senators and other politicians.
Gerrymandering: challenges to partisan gerrymandering (districts redrawn to maximize votes).
State Immunity: Generally, Federal Courts and State Courts may not hear suits against State Governments.
(Note: the 11th Amendment bars suits against states in Federal court. Sovereign Immunity bars suits against
states in State court or Federal agencies).
a. Exceptions to Immunity: States may be sued under the following circumstances—
i. Waiver: State explicitly waives immunity. (CA: not waived--CONFIRM).
ii. §5 of the 14th: States may be sued pursuant to federal laws adopted under §5 of the 14th
Amendment when it is acting to remedy / prevent an already recognized constitutional
violation, and when the law is proportional and congruent to the constitutional violation. But,
Congress cannot authorize suits against states under other constitutional provisions (e.g. the
commerce clause).
iii.
Federal Government: the Federal Government may sue State Governments.
b. Suits against officers: Suits against state officers are allowed:
i. State officers may be sued for injunctive relief.
ii. State officers may be sued for money damages (so long as it comes out of their own
pockets and not from the state treasury). The state officer must be personally liable.
iii. State officers may not be sued if the state treasury will be paying retroactive damages.
3. Abstention: Federal courts many not enjoin pending State court proceeding (even if it has jurisdiction to hear).
The Federal Judicial Power (continued)
How the case gets to Supreme Court Review? Cases come to the Supreme Court in different ways:
1. Writ of Certiorari: Virtually all cases come to the Supreme Court by writ of cert. Court has complete
discretion to hear the case. Four votes are needed to accept a case. Writ of Cert. comes from: (1) All cases
from State courts and (2) all cases from US Courts of Appeals.
a. Final judgment rule: Court can only hear the case after a final judgment by the lower court.
b. State court review: For the Supreme Court to review a state court decision, there must not be an
independent and adequate state law ground of decision. State court has the last word on purely state
law issues. If a state court decision rests on two grounds, one state law and one federal law, if the
Supreme Court’s reversal of the federal law ground will not change the result in the case, the Supreme
Court cannot hear it.
2. Appeal: Direct appeal to the Supreme Court is permitted from 3-judge federal district courts. Appeal skips
the court of appeals and certiorari is not required. Supreme court obligated to hear the case.
3. Original jurisdiction: Matter is initially filed in Supreme Court for: Ambassadors, public ministers, consuls.
4. Original & Exclusive: Suits between state governments (can only be heard in the Supreme Court).
32
The Federal Legislative Power (Article I) (20% along with Executive)
A. Congress’ Authority to Act: Congress must have express or implied power to act. There is no general police
power. State and local governments have police power.
1. Police Power exceptions: Congress can exercise police power in certain “MILD” areas (1) Military, (2)
Indian reservations, (3) Federal Land and territories, or (4) District of Columbia.
(a) Exam Tip: Congress does not have general police power!
2. Necessary and Proper Clause (Art 1. §8): Congress can choose any means not prohibited by the
constitution to carry into effect the enumerated powers in Article I (Congress’s express powers).
3. Tax and Spend Power: Congress may tax and spend for the general welfare. Congress may create any
tax to raise revenue and any spending program to spend it if Congress believes it promotes welfare.
(a) Exam Tip: General Welfare is a correct answer only for Tax & Spend OR where Congress has
the police power (MILD). Congress generally cannot act by saying it is for general welfare.
4.
Commerce
Power: Congress may regulate the channels and instrumentalities of interstate commerce,
Commerce:
and persons or things in interstate commerce (ex. Trucks, planes, internet). Commerce refers to all
Congress
regulates foreign
forms of intercourse (electricity, radio waves, stock, insurance, cattle, people if they cross state lines).
commerce
(a) Activities: Congress may regulate economic activities that have a substantial effect (alone or
exclusively.
cumulatively) on interstate commerce, even if the matter is otherwise local. However, where the
effect is non-economic, a substantial effect cannot be based on cumulative impact.
5. 10th Amendment: All powers not given to the Federal Government are reserved in the states. Congress
th
10 : Congress
cannot compel state regulatory or legislative action. Congress can induce state government action by
cannot direct
putting strings on grants (conditions must be express and relate to the purpose of the spending program).
state police in the
police’s “police
Congress may prohibit harmful commercial activity by state governments.
power function.”
6. §5 of 14th Amendment: Congress may act only to prevent or remedy violations of rights recognized by
courts (no expansion of rights). Must be “proportionate” and “congruent” to remedying the violations.
33
The Federal Legislative Power (continued)
B. Delegation of Powers
1. Permissible: No limit on Congress’ ability to delegate legislative power to executive agencies or to the
judiciary. (e.g some executive commissions (Communications) can regulate in the public interest).
(a) Exam Tip: “Excess of delegation of legislative powers” is always wrong.
2. Impermissible: Congress may not delegate executive power to itself or its officers. Cannot pass a law
and then give one of its officers (legislative agents) the power to enforce or implement the law.
(a) Exam Tip: Congress can give, but Congress cannot take powers from another branch.
3. Legislative Veto & Line Item Veto: Both unconstitutional because they violate the “bicameral and
presentment” requirements of passing a law. For congress to act, there always must be bicameralism
(passage by both House and Senate) and presentment (giving the bill to the President to sign or veto).
(a) Line Item: President cannot pick and choose parts of bills. Must veto or accept in their entirety.
(b) Legislative: Congress cannot attempt to overturn executive action by resolution because there is
no bicameralism or presentment in a resolution.
The Federal Executive Power (Article II)
1) Foreign Policy
a. Treaties: Treaties are agreements between the United States and a foreign country that are negotiated
by the President and are effective when ratified by the Senate.
i. Treaties prevail over conflicting state laws (state laws that conflict are invalid).
ii. If a treaty conflicts with a federal statute, the one adopted last in time controls.
iii.
If a treaty conflicts with the U.S. Constitution, the treaty is invalid.
b. Executive Agreements: An executive agreement is an agreement between the U.S. and a foreign
country that is effective when signed by the President and head of the foreign nation. No senate
approval required. Can be used for any purpose (anything that can be done by treaty).
i. Executive Agreements prevail over conflicting state laws.
ii. Executive Agreements never prevail over conflicting federal laws or the Constitution.
c. Commander-in-chief power: President has broad powers as Commander-in-Chief to use American
troops in foreign countries, but cannot declare war (Congress’s job).
i. Exam Tip: If dealing with President’s power to send troops: (1) dismiss as political question;
(2) dismiss because President has broad powers as Commander-in-Chief.
2) Domestic Affairs
a. Appointment Power:
i. President selects U.S. ambassadors, federal judges, and officers (with Senate approval).
ii. Congress may vest the appointment of inferior officers in the President, heads of
departments, or lower federal courts. Thus, congress has discretion over “inferior officers.”
1. Ex. Congress can vest the appointment of the “independent counsel” (special
prosecutor) in the lower federal courts (panel of judges).
a. Note: Independent Counsel is inferior to Attorney General (an Officer).
2. Congress may not give itself or its officers the appointment power. If congress
creates a new executive agency, Congress cannot appoint any of the members
b. Removal Power: Unless removal is limited by statute, the President may fire any executive branch
officer (but not the special prosecutor).
i. Congress can limit removal of any office where independence from the President is desirable
(e.g. President cannot remove Independent Counsel but can remove the Cabinet).
1. Note: Congress only limits removal where there is good cause (cannot prohibit).
c. Impeachment & Removal: President, Vice-President, Federal Judges, and Officers can be impeached
and removed from the office for treason, bribery, and high crimes and misdemeanors.
i. Process: House impeaches (requires majority vote). Senate removes (requires 2/3).
d. Presidential Immunity: absolute immunity from civil suits for money damages for any actions while
in office. Can still be sued for acts that occurred prior to taking office.
e. Executive Privilege: Can keep secret papers and conversations, but must yield to other important
governmental interests (i.e. criminal investigation).
f. Pardon Power: Can pardon those accused or convicted of Federal crimes. (Not for Impeachment).
i. Exam Tip: President may pardon only as to federal crimes (even where the President claims
there is a federal reason). Criminal only. Not for civil, including civil contempt (in jail).
34
President
may not
pardon
state
crimes.
Federalism (20%)
Where there is a challenge to state or local government action, the following doctrines apply:
1. Preemption: The Supremacy Clause of Article III provides that the Constitution, and laws and treaties made
pursuant to it, are the supreme law of the land. If there is conflict between Federal law and State law, Federal
law wins out. Can be found in various ways:
a. Express preemption: If a Federal statute says that Federal law wholly occupies a field, then State and
Local laws are preempted. (E.g. Federal Meat Labeling Act).
b. Implied Preemption: Preemption can be implied in the following ways—
i. If Federal and State law are mutually exclusive, Federal law preempts State law.
1. Exam Tip: State may set environmental laws stricter than Federal standards, unless
Congress clearly prohibits.
ii. If State law impedes the achievement of a Federal objective, Federal law preempts State law.
iii.
If Congress evidences a clear intent to preempt State law (though legislative history),
Federal law preempts State law, even if the text of the law is silent. (E.g. Immigration law).
1. Exam Tip: Any attempt by State to control Immigration is preempted.
c. State Tax and Regulation: Federal Government has “intergovernmental immunity”—
i. Tax: Unconstitutional to pay a state tax out of Federal Treasury.
1. Exam Tip: If Federal employee (individual) is paying out of own pocket OK.
ii. Regulation: States cannot regulate the government if they put burden on Federal activity.
1. Exam Tip: Federal government never has to comply with State pollution standards.
2. Dormant Commerce Clause & Privileges Immunities Clause (Article IV)
a. Dormant Commerce Clause: principle that State and Local laws are unconstitutional if they place an
undue burden on interstate commerce. (Note: aka Negative Implications of the Commerce Clause).
b. Privilege & Immunities (Article IV): no state may deny citizens of other states the privileges and
immunities it accords its own citizens. An Antidiscrimination provision. Not applied to Corporations.
i. Exam Tip: Applies only when the state discriminates against people of other states.
ii. Analysis: Does the law discriminate against out-of-staters? (Not treat in/out-of-staters
alike)
1. Law does not discriminate:
a. Dormant CC: Even if no discrimination, will still apply if the law burdens
interstate commerce. Balancing test applied: Does burden outweigh
benefit?
i. If yes violation. (Ex. One state requires straight mud flaps on
trucks when all other states require curved. Burden to have to
change each time).
b. P&I: Does not apply.
2. Law does discriminate:
a. Dormant CC: Violation occurs if it places a burden on interstate
commerce, unless the discrimination is necessary to achieve an “important
governmental purpose” (e.g. important governmental purpose = preserving
natural interests) and there are no less restrictive means available.
i. Exceptions: (1) Congressional Approval; OR (2) Market
Participant (A state or local government may prefer its own
citizens in receiving benefits from gov’t programs or in dealing
with gov’t owned businesses e.g. college
b. P&I: Violation occurs if law discriminates against out-of-staters with
regard to their civil liberties or important economic activity (livelihood,
not recreation/hobby), unless the discrimination is necessary to achieve
“important governmental purpose.”
3. Privileges Immunities Clause (14th Amendment): State governments cannot prevent their own citizens from
exercising rights of US Citizens (ie. the right to travel).
a. Exam tip: always a wrong answer unless it involves the right to travel. Ex. When State discriminates
against new residents vs. old residents regarding benefits based on length of residency—a violation.
b. More likely to be found a P&I violation if the right is fundamental (right to practice law in a state).
35
4.
5.
State Taxation of Interstate Commerce: States may not use their tax systems to help in-state business (e.g.
State cannot give tax credit for purchase of products produced instate and no credit for purchase of products
made out of state—an impermissible use of State tax burden on interstate commerce).
a. Substantial Nexus requirement: States can only tax activities related to the State, and the taxation of
interstate business must be fairly apportioned (only its fair share of activity connected to the state).
Full Faith and Credit: Courts in one State must give full faith and credit to judgments of courts in other
States, so long as: (1) the court rendering judgment had personal and subject matter jurisdiction, (2) the
judgment was on the merits, and (3) the judgment is final.
36
Individual Liberties
1. Governmental Action: The Constitution applies only to government action (Private conduct need not comply).
a. State Action requirement: Federal, State, or Local government must be acting.
b. Exceptions to State Action: Situations where Private conduction must comply with the Constitution:
i. Public Function: Constitution applies if a private entity is performing a task traditionally,
exclusively done by the government (e.g. company owned-town, election for government
office). Note: Private owned utility companies are not public functions—can terminate
service without due process.
ii. Entanglements: Constitution applies if the government (or court) affirmatively authorizes,
encourages, or facilitates unconstitutional activity. Either the government must stop OR the
private
conduct must comply. Inconsistencies:
Grant of land usually does
1. Courts cannot enforce racially restrictive covenants (contract among members of
not constitute state
involvement (except in
neighbors that they will not sell to blacks).
case of restaurants racially
2. State Action when gov’t leases premises to restaurant that racially discriminates.
discriminating).
3. State action when state provides free books to a private school that racially
discriminates – state is encouraging constitutional violations.
No state action when state
grants land to a private
4. No state action found when private school (even 99% funded by government) fired
museum that discriminates
a teacher because of speech (not encouraging the firing of teachers).
on the basis of national
a. Rule: Government subsidy is insufficient for finding a state action.
origin.
5. No state action found when NCAA (largely made up of public colleges/
universities) orders a suspension of a Basketball coach at a State University.
a. NCAA is a private institution (no due process requirement).
6. State action when private entity regulates interscholastic sports w/in State.
a. Ex. State athletic association must give due process to a high school for
violations in recruiting. (What is the difference between NCAA and State
Athletic Association—Operates in one State vs. the country).
7. No state action when private club (w/liquor license) racially discriminates.
c. Congress, by Statute, may apply constitutional norms to private conduct, in certain situations:
i. 13th Amendment: Can be used to prohibit private race discrimination. Congress has broad
power to prohibit private discrimination.
1. Exam Tip: The 13th Amendment prohibits slavery. Therefore, discrimination does
not violate the 13th Amendment. Discrimination violates Federal laws adopted by
congress under the 13th Amendment.
ii. Commerce power: Can be used to apply constitutional norms to private conduct (e.g.
prohibit hotels and restaurants from discriminating based on race b/c of economic effect).
iii.
§5 of 14th: Congress cannot use §5 of the 14th Amendment to regulate private behavior.
Can only use §5 of 14th to regulate State and Local Government action.
2. Application of the Bill of Rights: Bill of rights applies directly only to the Federal Government.
a. Application to States: The Due Process clause of the 14th Amendment applies the Bill of Rights
(selectively) to State and Local governments. Most apply. Notably, First Amendment applies.
i. Never found to apply: (1) 2nd Amendment right to bear arms; (2) 3rd Amendment right to
not have soldiers quartered in a person's home; (3) 5th Amendment right to grand jury
indictment in criminal cases (States don’t have to use grand juries); (4) 7th Amendment right
to jury trial in civil case (i.e. NY could abolish jury trials in civil cases); (5) 8th Amendment
right against excessive fines. (NY can apply an excessive fine). But the other prohibitions of
8th Amendment–cruel and unusual punishment–do apply!
3. Levels of Scrutiny: When dealing with individual liberties, court applies different levels of scrutiny—
a. Rational Basis Test: Law will be upheld if it is rationally related to a legitimate government purpose.
i. Requirements: A conceivable legitimate purpose (not an actual purpose). Highly deferential.
ii. Burden: Challenger—show (1) no conceivable legit. purpose OR (2) no rational relationship.
b. Intermediate Scrutiny: Law upheld if it is substantially related to an important government purpose.
i. Requirements: Actual purpose must be important. Narrowly tailored (not least restrictive)
ii. Burden: Government—show (1) actual important purpose AND (2) substantial relationship.
c. Strict Scrutiny: Law upheld if necessary to achieve a compelling government purpose.
i. Requirements: Actual, vital purpose. Least restrictive way to obtain result. Most exacting.
ii. Burden: Government—show (1) actual purpose, compellingly vital AND (2) necessary.
37
Due Process
Clauses found in the 5th Amendment (applies to Federal Government) and 14th Amendment (applies to States).
A. Procedural Due Process: Violation occurs when government does not give Notice and Opportunity to be
Heard before a deprivation of life, liberty or property. Two questions:
1.
Has there been a deprivation of life, liberty, or property? (If No, Government need not provide
procedural due process; If Yes, ask question 2: what procedures are required?)
a. Liberty: deprivation if a loss of a significant freedom provided by Constitution or statute.
i. Exam Tip: (1) Except in an Emergency, before an adult can be civilly committed there
must be notice and a hearing. (2) When parent institutionalizes a child, there only has to
be a screening by a neutral fact finder. *(3) Harm to reputation by itself (without money
loss) is not a loss of liberty. (4) Prisoners rarely have liberty interests.
b. Property: deprivation if there is an entitlement and that entitlement is not fulfilled.
Entitlements are reasonable expectations of continued receipt of a benefit.
i. Exam Tip: The court does not distinguish between “rights and privileges” and therefore
a rights/privileges distinction is always the wrong answer choice.
c. NOTE: Government negligence is not sufficient for a deprivation of due process. Must be
intentional government action or at least reckless action for liability to exist.
i. Exception: in emergency situations, the government is liable under due process only if its
conduct “shocks the conscience” (intent to cause harm is shown); reckless not enough.
d. NOTE: Generally, the government’s failure to protect people from privately inflicted harms
does not deny due process. Government is only liable it if literally creates the danger.
2. What procedures are required? (A balancing test is applied—three part):
a. The importance of the interest to the individual;
b. The ability of additional procedures to increase the accuracy of the fact-finding;
c. The government’s interest in administrative efficiency.
i. Examples of what is required:
1. Welfare: Before welfare benefits are terminated, must be notice & hearing.
NOTE: Prior hearing before
2. Social Security: After disability benefits terminate, there must a review period.
driver’s license is suspended or
3. Student Discipline: Before public school disciplines child, there must be notice
terminated is required. However, if
and an opportunity to explain. (No trial type hearing required).
suspension is based on prior judicial
4. Custody: Before a parent’s right to custody can be terminated permanently,
determination that traffic laws were
violated (w/prior hearing) no
there must be notice & hearing.
additional prior hearing is required
5.
Punitive
damages: Awards require instructions to a jury and judicial review to
to suspend or terminate the license.
ensure reasonableness. Large unreasonable award can be due process violation.
The state’s interest in removing
6. Enemy Combatant: An American Citizen apprehended by US Government in a
unsafe drivers outweighs the
driver’s right to a prior hearing.
foreign country and held as an enemy combatant must be accorded due process.
7. Attachment/Seizure: Except in exigent circumstances, prejudgment attachment
or government seizure of assets must be preceded by notice & hearing.
a. Exigent circumstance: person will dispose of property if given notice.
b. Innocent owner: Joint property seized because of one owner’s
criminal conduct; other owner cannot claim due process violation.
B. Substantive Due Process: Violation occurs when the government does not have an adequate reason for taking
away life, liberty, or property. (Used to protect “economic liberty” and safeguard “privacy”).
1. The Constitution provides only minimal protection for economic liberties. A rational basis test is
used for laws affecting economic rights. (Ex. Due process challenge to Minimum Wage Laws, Trades
or Professional requirements (bar exams), Consumer protection laws—all get rational basis review).
2. Types of “rights” protected under the due process clause:
a. Takings Clause: Government can take private property for public use if it provides
just compensation for the taking.
b. Contract Clause: No state shall impair the obligations of contracts.
c. Privacy Rights: A fundamental right protected under substantive due process (Court
applies strict scrutiny—the law must be necessary to achieve a compelling governmental
purpose).
38
Due Process (continued): Substantive Due Process rights (in detail)
1) Takings Clause: Government can take private property for public use if it provides just compensation.
a. Is there a taking?
i. Possessory taking - Government confiscation or physical occupation of property is a taking.
(Does not matter how small—ex. Gov’t regulation that apt must leave space for cable box).
ii. Regulatory taking – Government regulation is a taking if it leaves no reasonable
economically viable use of the property. Not a taking just because value goes down.
1. NOTE: Government conditions on development of property must be justified by a
benefit that is roughly proportionate to the burden imposed; otherwise it is a taking.
2. NOTE: A property owner may bring a takings challenge to regulations that existed
at the time the property was acquired. (Ex. Can acquire property knowing about the
limits on development and then bring a takings challenge).
3. NOTE: Temporarily denying an owner use of property is not taking (if reasonable).
b. If either taking is found, then ask:
i. Is it for public use? Virtually every taking is for public use. Taking is for public use so long
as the government acts out of reasonable belief that the taking will benefit the public (can
take and sell to private developers). (If it is not for public use, the Government must return
the property).
ii. Is just compensation paid? Just compensation is measured in terms of loss to the owner in
reasonable market value terms (note: gain to the govt is irrelevant).
2) Contract Clause: No state shall impair the obligations of contracts.
a. Application: Applies only to state or local interference with existing contracts. Never applies to the
Federal Government, even if federal government interferes with existing contract.
i. State or local interference with private contracts must meet intermediate scrutiny.
1. Does the legislation substantially impair a party's rights under an existing contract?
2. If so, is the law a reasonably and narrowly tailored means of promoting an
important and legitimate public interest?
ii. State or local interference with government contracts must meet strict scrutiny. (Court is
suspicious of locality trying to get out of its contract without paying damages).
b. The ex post facto clause does not apply in civil cases. (Applies only in criminal cases). Retroactive
civil liability only needs to meet a rational basis test. (Note distinction with a bill of attainder which
is a law that directs the punishment of a specific person or persons without a trial.)
i. Exam Tip: Ex post facto usually appears as a wrong answer in contract clause situations.
3) Privacy Rights: A fundamental right protected under substantive due process (Court applies strict scrutiny—
the law must be necessary to achieve a compelling governmental purpose).
a. The right to marry; to procreate; to custody of one's children (A state may create an irrebuttable
presumption that a married woman’s husband is the father of her child—even w/known biological); to
keep the family together (broader than parents and children, includes entire family related to one
another); to control the upbringing of one's children (Government may interfere with parenting
decisions only if it meets strict scrutiny--ex. It violates due process for a court to order grandparent
visitation over the parent’s objections); to purchase and use contraceptives.
b. The right to abortion (strict scrutiny is not used! Standard below “The Undue Burden Test”:
i. Prior to viability, states may not prohibit abortions, but may regulate abortions so long as
they do not create an undue burden on the ability to obtain abortions. (Ex: (1) 24 hour
waiting period for abortions is not an undue burden. (2) Req. that licensed physicians perform
is not an undue burden. (3) Prohibition of “partial birth abortions” is NOT an undue burden.
ii. After viability, states may prohibit unless necessary to protect woman's life or health.
NOTE: Government has no duty to subsidize abortions or provide abortions in hospitals.
NOTE: Spousal consent and notification laws are unconstitutional.
NOTE: Parental notice and consent laws for unmarried minors. A state may require so long as it
creates an alternative procedure where a minor can obtain an abortion by going before a judge
who can approve the abortion (minor's best interests or mature enough to decide).
c. Right to engage in private consensual homosexual activity. (No level of scrutiny articulated).
d. The right to refuse medical treatment, even life-saving (Competent adults) (No level of scrutiny). A
state may require clear and convincing evidence that a person wanted treatment terminated before it is
ended AND may prevent family members from terminating treatment for another.
39
Owner is
unlikely to
prevail in a
challenge if
the
regulation
promotes
an
important
public
purpose
and permits
the
continued
use of the
owner’s
property.
Neither the
State nor
Federal Gov’t
is required to
grant medical
benefit
payments for
abortions.
Denial of
benefits falls
under rational
basis review.
e.
There is no constitutional right to physician-assisted suicide.
Equal Protection -- Apply whenever the government draws a distinction between people.
1. Analysis: (1) The classification? (2) Level of scrutiny should be applied? (3) Law meet the level of scrutiny?
2. Provisions: The Equal Protection clause of the 14th Amendment applies only to state and local governments.
Equal protection is applied to the Federal Government through the due process clause of the 5th Amendment.
i. Exam Tip: 14th Amendment never applies to the Federal Government.
3. Classifications: Either falls under strict scrutiny, Intermediate scrutiny, or Rational Basis review.
i. Race and National Origin (Strict Scrutiny)
1. Proving the existence of racial classifications?
a) The classification exists on the face of the law.
b) If the law is facially neutral, proving a racial classification requires demonstrating both
discriminatory impact and discriminatory intent (Washington v. Davis).
(i) Example: peremptory challenges based on race denies equal protection.
2. Racial classifications benefiting minorities: Affirmative Action (apply Strict scrutiny)
a) Numerical set-asides require clear proof of past discrimination (quotas are rarely allowed, and
only then to allow clear proof of discrimination).
b) Educational institutions may use race as one factor in admissions decisions to help
minorities. Colleges and universities have a compelling interest in diversity. However,
Colleges and Universities cannot add points to application scores solely on the basis of race.
c) Seniority systems may not be disrupted for affirmative action.
ii. Gender (Intermediate Scrutiny w/a twist--allowed only if there exceedingly persuasive justification).
1. Proving the existence of gender classifications?
a) The classification exists on the face of the law.
b) If the law is facially neutral, proving a gender classification requires demonstrating both
discriminatory impact and discriminatory intent.
(i) Example: use of peremptory challenges based on gender denies equal protection.
2. Gender classifications benefiting women (apply Intermediate scrutiny).
a) Based on role stereotypes will not be allowed. (Ex. Alimony must go to both spouses).
b) Gender classifications that are designed to remedy past discrimination and differences in
opportunity will be allowed. (Ex. Social Security benefits formula is higher than for men—
compensates women for past wage discrimination).
iii. Alienage☼ (Generally, Strict Scrutiny, with exceptions).
1. Laws prohibiting aliens from obtaining positions generally fail under strict scrutiny.
a) Exceptions apply—
(i) Self-government and the democratic process: Only a rational basis test is used.
Example: The government may discriminate against aliens with regards to Voting, being
on a Jury, being a Police officers, a Teacher, or a Probation officer, BUT one does not
have to be U.S. citizen to be a Notary Public.
(ii) Congressional discrimination: Only a rational basis test is used. Example: Congress
has plenary power to regulate Immigration.
(iii) Undocumented alien children: It appears that intermediate scrutiny is used. Example:
Texas law that children of citizens and documented aliens right to public education; but
undocumented aliens do not have same right (Court: law is unconstitutional).
iv. Non-marital children (Intermediate Scrutiny)
1. Laws that deny a benefit to all non-marital children, but grant it to all marital children are
unconstitutional. (Intermediate applied, but it always fails).
2. Laws where some non-martial children could inherit (i.e. those who can prove by paternity test
connection to the father), but others may not is found to be constitutional under intermediate test.
v. All other Types of Discrimination (Rational Basis Review)
1. Age discrimination*: Ex. equal protection challenge to gov’t mandatory retirement
(i) Exam tip: Mandatory retirement challenge -- rational basis applies and gov’t wins.
2. Disability discrimination: Ex. Zoning limited ability to have home for mentally disabled (Gov’t
LOST, but rational basis was applied).
3. Wealth discrimination: Poverty is not a suspect class.
4. Economic regulations: Ex. To be a push cart vendor, must work there for 8 years (upheld)
40
5.
Sexual orientation discrimination: Only rational basis review, but law discriminating against
sexual orientation was struck down (in Romer).
Equal Protection (continued)
4. Fundamental Rights Protected under Equal Protection (and not SDP) and gets SS
a. The right to travel (Note: The right to travel is a fundamental right under privileges and immunities clause
AND is protected under the equal protection clause).
i. Laws that prevent people from moving into a state must meet strict scrutiny.
ii. Durational residency requirements must meet strict scrutiny.
1. Example: Law that one must live in the state for a certain period in order to receive welfare
benefits is not permissible (Court held unconstitutional).
2. Exam Tip: Voting – duration requirement is 50 days (max).
iii. Restrictions on foreign travel need meet only the rational basis test.
b. The right to vote
i. Laws that deny some citizens the right to vote must meet strict scrutiny.
Equal
Protection
1. Example: Poll taxes are unconstitutional.
prohibits
2. Example: Property ownership requirement for voting is unconstitutional (except in a “Water
state
District” Election—this is the only instance were property ownership is a valid requirement).
dilution of
ii. One-person-one-vote must be met for all state and local elections. Any elected body, all districts
the right to
vote by
must be about equal in population.
malapportio
1. Exam Tip: Voter approval does not justify deviation for one person one vote.
nment of
iii. At-large elections are constitutional unless there is proof of a discriminatory purpose.
electoral
1. Proof: suppressing minority-race voting power.
districts.
a) Note: An at-large election is where all of the voters vote for all of the officer holders.
iv. The use of race in drawing election district lines must meet strict scrutiny. If the government uses
race as a predominant factor to benefit minority, the gov’t must meet strict scrutiny.
v. Counting uncounted votes without standards in a presidential election violates equal protection.
c. No fundamental right to education
41
First Amendment (20%)☼
Freedom of Speech
1. Content based vs. content-neutral restrictions
a. Content based restrictions generally must meet strict scrutiny. Two types of content based laws—
i. Subject matter restrictions: application of law depends on the topic of the speech.
ii. Viewpoint restrictions: application of law depends on the ideology of the message.
b. Content-neutral laws burdening speech generally need only meet intermediate scrutiny
i. Example: If applied to all speech—prohibitions on all parades and demonstrations are permitted.
2. Prior Restraints: judicial order (or administrative system) that stops speech before it occurs—
a. Court orders suppressing speech must meet strict scrutiny.
i. Note: Procedurally proper court orders must be complied with until they are vacated or overturned.
A person who violates a court order is barred from later challenging it.
ii. Exam tip: Gag orders on the press to prevent prejudicial pretrial publicity are not allowed.
b. Licenses: The government can require a license for speech only if there is an important reason for
licensing and clear criteria leaving almost no discretion to the licensing authority. Must have procedural
safeguards to prompt determination of requests for licenses and judicial review.
3. Vagueness and overbreadth
a. Vagueness: A law is unconstitutionally vague if a reasonable person cannot tell what speech is prohibited
and what is allowed. Vague laws deny due process. Especially concerned about speech. Laws regulating
speech must be clear. (Ex. Law is vague when it outlaws the selling of Books “tending to corrupt morals”)
b. Overbreadth: A law is unconstitutionally overbroad if it regulates substantially more speech than the
constitution allows to be regulated. (Ex. City ordinance that prohibits all live entertainment used to close
strip club – overbroad, struck down).
c. Fighting words: Fighting words are not protected by the 1st Amendment. But, laws are usually found
EQUAL PROTECTION ISSUES CAN BE DIVIDED INTO 3 QUESTIONS:
1 - WHAT IS THE CLASSIFICATION?
Two ways to determine the existence of classifications:
a)
The classification is on the face of the law; or
b)
If the law is facially neutral, there is both a discriminatory intent for the law and a discriminatory
impact to the law.
2 - WHAT IS THE LEVEL OF SCRUTINY?
Strict Scrutiny
Law must be necessary to achieve
a compelling government purpose.
● Race
● National origin
● Alienage - generally
● Travel (but not foreign
travel)
● Voting
Intermediate Scrutiny
Law must be substantially
related to an important
government purpose.
● Gender
● Illegitimacy
● Undocumented alien
children
Rational Basis Test
Law must be rationally related to a
legitimate government interest.
● Alienage classifications
related to self government
& the democratic process
● Congressional regulation
of aliens
● Age
● Handicap
● Wealth
● All other classifications
3 - DOES THIS LAW MEET THE LEVEL OF SCRUTINY?
unconstitutionally vague and overbroad. Fighting words convictions are usually not upheld.
i. Exam Tip: Speaker prosecuted under fighting words law—answer: the law is vague and overbroad.
42
d. Symbolic speech. The government can regulate conduct that communicates if it has an important interest
unrelated to suppression of the message and if the impact on communication is no greater than necessary to
achieve the government's purpose.
i. Flag burning is constitutionally protected speech.
ii. Draft card burning is not protected speech. (Important interest in emergency military mobilization).
iii. Nude dancing is not protected speech.
iv. Burning a cross is protected speech, unless there proof of intent to threaten or intimidate.
v. Contribution limits in election campaigns are constitutional; expenditure limits are
unconstitutional (can’t limit the amount a person spends overall).
e. Anonymous speech is protected: The right to speak includes the right to not disclose one’s identity.
Unprotected (or less protected) Speech
1. Incitement of illegal activity: The government may punish speech if there is a substantial likelihood of
imminent illegal activity and if the speech is directed to causing imminent illegality.
2. Obscenity and sexually-oriented speech.
a. Test—
i. The material must appeal to the prurient interest (shameful / morbid interest in sex) (Local standard).
ii. The material must be patently offensive under the law prohibiting (Law’s jurisdiction standard).
iii. Taken as a whole, the material must lack serious redeeming artistic, literary, political or scientific
value (National standard, not a local standard).
b. Zoning ordinances: may be used to regulate the location of adult bookstores and movie theaters.
c. Child pornography may be completely banned, even if not obscene, but Must use a child in production.
d. The government may not punish private possession of obscene materials; but the government may punish
private possession of child pornography.
e. The government may seize the assets of businesses convicted of violating obscenity laws.***
f. Profane and indecent speech is generally protected by the 1st Amendment. Can’t cleanse English language.
i. Exception: over the broadcast media (applies to over the air signals and NOT to cable or internet).
ii. Exception: in schools (in their disciplinary role).
First Amendment (continued)
Unprotected (or less protected) Speech
3. Commercial speech
a. False and deceptive ads are not protected by the 1st Amendment.
b. True commercial speech that inherently risks deception can be prohibited.
i. The government may prevent professionals from advertising or practicing under a trade name.
(Rationale: Bad professionals can change their name to fool the public).
ii. The government may prohibit attorney, in-person solicitation of clients for profit (ambulance
chaser). (Can offer pro bono representation; can solicit by mail).
iii. The government may not prohibit accountants from in-person solicitation of clients for profit.
c. Other commercial speech can be regulated if intermediate scrutiny is met. (Ex. Attorney’s could not solicit
accident victims until 30 days – the government has an important interest to protect privacy of victims and
the means are substantially related to that goal).
d. Regulation standards: Government regulation of commercial speech must be narrowly tailored, but it
does not need to be the least restrictive alternative.
4. Defamation
a. Public official: If the plaintiff is a public official or running for public office, the plaintiff can recover for
defamation by proving falsity of the statement and actual malice (Defendant knew the statement was false
or acted in reckless disregard for the truth).
1. Damages: Compensatory, Presumed/Punitive.
b. Public figure: If the plaintiff is a “public figure” (thrusts themselves into the limelight i.e. Celebrities) the
plaintiff can recover for defamation by proving falsity of the statement and actual malice.
1. Damages: Compensatory, Presumed/Punitive.
c. Private figure/Public concern: If the plaintiff is a “private figure” and the matter is of “public concern,”
that state may allow the plaintiff to recover for defamation by proving falsity and negligence by defendant.
1. Damages: Compensatory for Actual Injury
2. Damages: Presumed (automatic damages) or punitive damages only by showing actual malice.
43
5.
6.
7.
d. Private Figure/Private concern: If the plaintiff is a “private figure” and the matter is not of “public
concern,” the plaintiff can recover presumed or punitive damages without showing actual malice.
1. Damages: Compensatory for Actual Injury; Presumed or Punitive Damages.
Privacy
a. The government may not create liability for the truthful reporting of information that was lawfully obtained
from the government. (No invasion of privacy when the media lawfully obtains info from gov’t).
b. Liability is not allowed if the media broadcasts a tape of an illegally intercepted call if the media did not
participate in the illegality and it involves a matter of public importance.
c. The government may limit its dissemination of information protect privacy. Generally, there is nothing in
the 1st Amendment that requires the gov’t to open proceedings and papers.
i. Note: Where press and public have a right to attend: criminal trial and pretrial proceedings.
No protection for govt speech spoken on the job within the scope.
Other government restrictions based on the content of speech must meet strict scrutiny.
Places Available for Speech
1. Public Forums: Government properties where government is required to make available (sidewalk, park, etc.)
a. Regulation: Must be subject matter and viewpoint neutral; if not strict scrutiny must be met. Must be
time, place, or manner regulations that serve an important governmental purpose (with alternatives).
Need not use least restrictive alternative (Ex. City can require use of its equipment at concert).
b. Permits: City officials cannot have discretion to set permit fees for public demonstrations.
2. Limited Public Forums (designated public forums): Government properties that could be closed.
a. Regulations: If the government chooses to keep them open, same rules as public forums apply.
b. Examples: School facilities (evening and weekend are non-public forums unless opened limited forum).
3. Nonpublic forums: Government properties that are (and can be) closed to free speech.
a. Regulations: Must reasonable and viewpoint neutral. Need not be subject matter neutral.
b. Examples: (1) Military bases; (2) Outside prisons/jails; (3) advertising space on city bus; (4) sidewalks on
post office property; (5) Airports (prohibit solicitation of money; cannot prohibit distribution of literature).
4. Private Property: There is no 1st Amendment right of access to private property for speech purposes.
Nonpublic
a. Exam Tip: Cannot use privately owned shopping centers for speech purposes.
includes meeting
room in public
library.
44
First Amendment (continued)
Freedom of Association
1. Laws that prohibit or punish group membership must meet strict scrutiny.
a. To punish membership in a group it must be proven that the person: (1) Has active affiliation; (2)
Knowledge of the Illegal Activities; and (3) Specific Intent to further the illegal activities.
2. Laws that require disclosure of group membership, where such disclosure would chill association, must
meet strict scrutiny. Do not have to give out membership lists if it would keep people from joining.
3. Laws that prohibit a group from discriminating are constitutional unless they interfere with intimate
association or expressive activity. Many state and local governments have adopted laws preventing private
clubs from discriminating on race/gender etc. Usually upheld, unless—
a. Where freedom of association protects discrimination:
i. Small, intimate gathering.
ii. Discrimination is integral to expressive activity. (ex. Boy scouts can discriminate against gays).
Freedom of Religion
1. The free exercise clause
a. The free exercise clause cannot be used to challenge a neutral law of general applicability. (Can’t smoke
peyote for religious purposes).
1. If the law is not neutral or not general, must meet strict scrutiny.
b. The government may not deny benefits to individuals who quit their jobs for religious reasons.
2. The establishment clause
a. The test (Lemon test): (Secular purpose; Effect cannot advance/inhibit; X, not excessive engagement).
i. There must be a secular purpose for the law. If the primary purpose is to advance religion, it violates.
ii. The effect must be neither to advance nor inhibit religion. The government must not symbolically
endorse religion or a particular religion. (Nativity scene by itself is not allowed, but is allowed if
accompanied by symbols of other religion and secular symbols).
iii. There must not be excessive entanglement with religion. The government generally cannot pay
teacher’s salaries in parochial schools.
b. The government cannot discriminate against religious speech or among religions unless strict scrutiny is
met.
c. Government sponsored religious activity in public schools is unconstitutional. (School prayer (even
student delivered at football games) and even voluntary school prayer; “silent prayer” is unconstitutional).
But religious student and community groups must have the same access to school facilities as non religious
groups (must allow student bible club after school if other clubs are allowed).
d. The government may give assistance (books, etc) to parochial schools, so long as it is not used for
religious instruction.
i. The government may provide parents with vouchers that they may use in parochial schools.
45
Contracts/Sales/Equity (UCC Article 2 and 2A)
Applicable Law (Key Issue #1)
1. Multistate Bar Exam: (1) The Common Law of Contracts and (2) the UCC Article 2.
a. Common Law: Applies to contracts for employment, services, and real property.
b. UCC Article 2: Applies to contracts for the sale of goods, regardless of price, regardless of parties.
i. When goods and services are in same contract: Must determine while is more important to the
transaction (what is the K primarily about?). If the goods are more important: UCC applies.
Exception: If K explicitly divides payment, then apply UCC to goods and CL to the rest.
c. UCC Article 2A: Leases of goods, by any parties. Not for leases other than goods (i.e. real property).
Contract Formation
1. Contract: Legally enforceable agreement. Requires mutual assent and valid consideration.
a. Express Contract: created by the parties’ words, either oral or written.
b. Implied Contract: created by the parties’ conduct.
2. Quasi-contract: an equitable remedy that applies whenever the application of contract law yields an unfair or
inequitable result. Not limited by contract rules; governed by equity. Protects against unjust enrichment.
a. Exam tip: Whenever there is no contract or the contract is not enforceable, look for quasi-contract.
3. Bilateral Contract: there is an offer that can be accepted by any reasonable way (promise, performance, etc.).
4. Unilateral Contract: there is an offer that can be accepted only by performance (complete performance).
a. Exam Tip All contracts are bilateral unless the offer says it can be accepted “only by performance.”
Process of Contract Formation (Key Issue #2)
1. Offer: A manifestation of an intention to be bound, created by words or conduct. Creates power of acceptance.
a. Context: Advertisements are generally not offers, unless it is a reward OR it specifies quantity and who
can accept (e.g. $10 coat, first come, first serve). An advertised “offer” (e.g. sign in a store) with no
quantity is not an offer (even if it includes a price).
b. Content: The contents of an offer must be specific—
i. Terms: Vague or ambiguous terms, like “reasonable” or “fair” or “appropriate” no offer.
1. Example: “Seller agrees to sell buyer a car for a reasonable price.”
ii. Requirements contract: Where the amount of goods is to be measured by the buyer’s need, a
commitment to exclusivity gives rise to an order—“all” or “all of buyer’s requirements”. Valid offer
1. Exam Tip: look out of increase in requirements. The buyer can’t take the seller by surprise. Any
increase in the buyer’s requirements must be in line with the buyer’s prior demands.
iii. Open price term:☼ Contract leaves price open to be determined at later date OR does not state a price
1. Common law: Sale of real property-- no offer unless (1) property description and (2) a price.
2. Common law: Employment K – duration of employment required.
3. UCC Article 2: Sale of goods--there is an offer if the parties so intend. No price is necessary.
Vague price term (ex. “Reasonable/Fair/Appropriate”) is not an offer under either common law or
Article 2. But a missing price term under UCC still have an offer.
2.
Termination of the Offer, before acceptance: An offer cannot be accepted if it is terminated.
a. Lapse of Time: Offer cannot be accepted after specified date. If no date given, after a reasonable period.
b. Offeror’s Revocation: Only effective if received by the offeree before acceptance.
i. Direct Revocation: a statement by the offeror directly to the offeree indicating unambiguously that
the offeror changed his mind. (Don’t have to say “I revoke” – just words that show a change of mind).
ii. Indirect Revocation: conduct by the offeror unambiguously indicating a change of mind that the
offeree is aware of. (Need to have both Offeror Conduct and Offeree Awareness).
iii. Irrevocable Offers: NOTE: generally, offeror can revoke at any time before acceptance, except—
1. Option: a promise to keep the offer open (any duration) that is paid for (consideration required).
2. Detrimental reliance: irrevocable if offeree reasonably and foreseeably relies to his detriment.
a) Mere preparation can be reasonable foreseeable reliance that makes the offer irrevocable.
3. Part performance: For unilateral contract, start of performance (not mere preparation)
owner can’t revoke. For bilateral contract, start performance is acceptance (can’t revoke).
4. “Firm offer” under Article 2: a signed, written promise by a merchant to keep an offer open.
No payment needed. 3-month cap. No time specified reasonable time. Promise needed.
46
Process of Contract Formation (continued)
Termination of the Offer, before acceptance (continued)
c. Offeree’s Rejection:
i. Counteroffer: operates as a rejection ending the original offer (Note: bargaining is not a rejection).
1. If the offeree asks a question regarding price, considered mere bargaining and not a rejection.
ii. Conditional Acceptance: operates as a rejection and terminates an offer.
Note: Addition
1. If offeree accepts “On the condition that,” “provided that,” or “if” – it is just like saying no.
of an arbitration
iii.
Acceptance w/additional or different terms: depends on applicable law—(Battle of the forms)
clause OR
1. Common Law: acceptance must mirror the offer (different term is a rejection).
disclaimer of
implied
2. UCC Article 2: acceptance need not mirror the offer. Additional terms become part of K, only
warranty is a
a) If both parties are merchants;
material change.
b) If the term is not a material change (likely to cause hardship or surprise to offeror); and
c) If the offeror does not object within a reasonable time.
d. By Operation of Law:
i. Death/insanity of either party before acceptance: the offer is terminated if any party dies before
acceptance, whether or not the other party knows of the death.
1. Exception: Death of a party does not terminate an option. Free to accept within the option
period.
ii. Destruction of the proposed K's subject matter
iii. Supervening illegality
3.
Acceptance
a. Who can accept:
i. A person who knows about the offer AND (can't accept unkown award for lost dog)
ii. who is the person to whom the offer was made (can't assign offer)
1. Exception: Options can be assigned unless otherwise provided.
b. Method of Acceptance: Offer can control the manner of acceptance. If explicit, contract governs.
i. Unilateral: Accepted only by complete performing. (If no performance no contract; no breach).
1. NOTE: Start of performance means the offeror can’t revoke; but no contract b/c no acceptance.
Ex. Offeree is free to leave the job because there has been no acceptance and thus no contract.
ii. Bilateral: Accepted by a promise to perform, start performance, or full performance.
c. Improper Performance as Acceptance: Improper performance creates an implied contract. Improper
performance creates both acceptance and a breach of contract. (Both Common Law and UCC).
i. Example: O offers P $5,000 to paint her house white. P does not respond with words; instead, P
paints the house maroon. This improper performance on the unilateral contract implied contract.
ii. If Seller sends wrong goods and buyer accepts, there is acceptance and a breach.
iii. UCC Exception—Accommodation exception: If the seller lets the buyer know why it is delivering
the wrong goods, seller has not accepted the buyer’s offer to buy, and therefore no breach.
d. Silence as Acceptance: An offeror cannot single handedly turn an offeree’s silence into acceptance.
e. Effect: Mailbox rule☼—acceptance is effective when mailed (Note: revocation effective when received).
i. Exceptions to the Mailbox Rule:
Note: If in the past,
1. If the offer provides otherwise: Offer specifies a receive date, must be in-hand on that date.
silence acted as
2. Irrevocable offer (option): Acceptance must be received before the end date of the irrevocable
acceptance, failure
to reject an offer
period. Acceptance cannot be mailed on the end date and be considered received.
within a reasonable
3. Acceptance, then rejection: Mailbox rule applies to the acceptance. Acceptance will be valid,
time can constitute
unless the rejection is received first and the offeror relies on the rejection.
an acceptance
4. Rejection, then acceptance: Mailbox rule does not apply. If rejection is sent first, the mailbox
rule does not apply to the subsequent acceptance. Order of receipt by offeror will control.
ii. Exam Tip: Look out for (1) people in different places and (2) conflicting communications.
47
Defenses Against Formation (Key Issue #2a)
Flaw in the agreement process that makes the contract unenforceable.
1. Defendant’s lack of capacity to contract: Under 18; intoxicated; mentally incompetent. An incapacitated
defendant (not plaintiff) has the right to disaffirm (avoid) the contract. Incapacitated plaintiffs can enforce.
a. Implied reaffirmation: An incapacitated party can impliedly reaffirm a contract by retaining the benefit of
the contract without complaint after she gains capacity. 3 requirements: (1) D lacked capacity at the time
of the agreement; (2) D later gained capacity; (3) D retained the benefit of the contract without complaint.
b. Necessaries: Incapacitated party is liable for necessaries (food, shelter, clothing, or medical care), but only
on a quasi-contract basis. (Not liable for contract price, but liable for the reasonable value of benefit).
2. Duress: Physical Harm and Economic Duress can be used by defendant to avoid the contract.
a. Physical Harm: Can’t threaten physical harm or inflict physical harm when contracting.
Economic Duress: Can’t threaten economic harm. Occurs when: (1) someone threatens to breach an
existing contract unless he gets a better deal; (2) the buyer only makes the new agreement because he
desperately needs to get the first deal done; and (3) there is no alternative source of supply.
3. Misrepresentation: A material misrepresentation that induced the agreement (whether or not the seller
intended to misrepresent the fact – even honest and innocent) can be a fatal flaw.
a. Example: O honestly and innocently believes his house has no roaches. Statement induces A to buy the
house. House turns out to have roaches. The contract is avoided for misrepresentation.
4. Mistake of Fact at the Time of Agreement
a. Mutual Mistake of Material Existing Fact: Both parties are under mistaken belief regarding a material
aspect of the agreement contract unenforceable.
i. Market value: a mistake as to market value (price) is not considered material.
b. Unilateral Mistake of Material Existing Fact: The mere fact that one party is laboring under a mistaken
belief is not a fatal flaw in the agreement process as long as the other party was not aware of the mistake.
5.
Lack of Consideration☼
a. Consideration: a bargained-for exchange of legal detriment/benefit (e.g. money or promise or action).
i. Promise: One party’s promise can be consideration for another party’s promise.
ii. Forbearance: Not doing something in exchange for a promise is consideration for the promise.
b. Past Consideration: Not consideration, unless expressly requested and expectation of payment. But, if a
promise based on past consideration is in writing—
i. Multistate: promise is still not enforceable because there is no consideration.
c. Adequacy of consideration: Irrelevant! So long as there is a bargain, law does not care about adequacy.
d. Pre-existing duty rule:☼ Applies to Modifications to an existing contract. Modification requires
consideration. If offeree does something he was already obligated to do, there is no new consideration.
Any additional work, new promise, etc. creates new consideration agreement enforceable. Exceptions:
i. If there's an addition to or change in performance (creates new consideration).
ii. Unforeseen difficulty so severe as to excuse performance
iii. 3rd party promises to pay for you
1. Modification in writing:
a) Multistate: promise is still not enforceable because there is no new consideration.
2. UCC Article 2: There is no pre-existing duty rule under Article 2. Do not need new
consideration to MODIFY a contract, but you do need GOOD FAITH. (Ex. Later increase in
purchase price).
e. Partial payment as consideration for promise to forgive balance of debt:☼
i. Due and Undisputed: Partial payment of a debt that is Due and Undisputed is not consideration for
the other party’s promise to forgive the debt.
1. Promise is in writing—
a) Multistate: promise is still not enforceable because there is no consideration.
ii. Due and disputed: Payment is consideration for the promise to release and promise is enforceable.
The law favors the settlement of disputed claims.
f. Promise to pay debt barred by statute of limitations: A promise to pay a debt that is barred by statute of
limitations is enforceable, not because it creates consideration, but because there is a writing. For both
Multistate and NY: the writing serves as a substitute for consideration.
g. Promissory estoppel as a substitute for consideration: Requires a promise and foreseeable, detrimental
reliance on the promise. No bargained for exchange of consideration, but reliance nonetheless.
i. Exam tip: P.E. is never the first choice as an answer – first look for consideration. If there is no
consideration, look for foreseeable and detrimental reliance on a promise as a consideration substitute.
48
Defenses Against Formation (continued)
6. Illegality: A contract is unenforceable if the subject matter of the contract is illegal (i.e. sale of drugs; murder)
a. Note: If the subject matter was not illegal, but the purpose was illegal, K is enforceable so long the other
party to the contract did not know of the illegal purpose. (ex. Agree to buy ticket to fly to pick up drugs).
7. Public Policy: Issues of need and scope
a. Covenant not to compete: Needs to be (1) reasonable time period and (2) reasonable geography; with
employment contract, must also be a (3) business need for protection. (Ex. Against chef, but not busboy).
b. Exculpatory Clause: Clause eliminating contract liability—can contract away liability for negligence in
appropriate circumstances, but not for intentional torts or gross negligence.
8. Unconscionability: Look for oppressive terms or unfair surprise at time of agreement. The fact that the terms
were harsh later on is irrelevant.
a. Substantive unconscionability means terms of the K are unfair;
b. Procedural unconscionability because other party may not have seen the terms or because of the legalese.
49
Statute of Frauds☼ (Key Issue #3) (Used to keep out Oral K)
Contracts that fall “within the Statute of Frauds” means the statute applies.
Types of Contracts within the Statute of Frauds require a writing. (Note: most K do not require a writing).
1. Real estate: transfer of an interest in real estate for more than one year’s duration requires a writing.
a. Sale: sale of land must be in writing (sale = interest is transferred forever). Need all terms (i.e. price)
b. Lease: A lease of One Year or less is not required to be in writing. More than one year, writing required
c. Easement: easement for more than 1 year requires writing.
2. Service Contract incapable of being fully performed within 1 year from the date of the agreement: Ignore
what actually happens; look at what might have happened under the terms of the contract.
a. A task: theoretically, any task can be performed within one year. No writing if service can possibility be
performed within one year (regardless of whether it actually takes more than a year to complete).
b. Employment for “rest of person’s life”: Writing depends on jurisdiction (CHECK FOR CA)—
i. Multistate: Lifetime contracts do not have to be in writing (b/c person could die within the year).
c. Employment for more than 1 year: Writing required for service that is impossible to complete in 1 year.
d. Employment for 1 year, starting at later date: Writing required b/c cannot be performed within 1 year
of the agreement. Clock starts at agreement and not when the performance begins.
e. Service taking place more than 1 year after agreement: Writing required b/c cannot be performed
within 1 year of the agreement. Duration of the service is irrelevant (even if only a one night gig).
3. Sale of Goods for $500 or more (UCC Article 2 SOF): Writing required for $500 exactly or more.
4. Lease of Goods where lease payments total $1,000 or more (UCC Article 2A): The lease payments must
total $1000 or more over the course of the lease.
5. Promise to “answer for” the debt of another (limited to guarantees): Writing required for a guarantor’s
agreement to pay “if the debtor does not pay” (only then is the guarantor liable). Not a promise to pay.
a. Main purpose exception: if the purpose of the guarantee is to benefit the guarantor, it is not within SOF.
6. Promise by an estate representative to use her own funds to pay estate expenses.
7. Promise in consideration of marriage: Writing is required for prenuptials and postnuptial (agreement to
renounce all claims to the other’s assets if they get married). No writing required for mere promise to marry.
Application of the Statute of Frauds to contract modifications
Key: Whether the contract as modified falls within the SOF.
1. Modification turns a 1 year lease of real estate (no writing) into a 3 year lease (writing).
2. Modification turns a 3 year lease of real estate (writing) into a 9 month lease (no writing).
3. Modification turns a $600 sale of goods (writing) into a $450 sale of goods (no writing).
a. UCC Article 2: If goods contract specifies “all modifications must be in writing” writing required.
4. Modification turns service contract for 2 years (writing) into a term for 9 months (no writing).
a. Common Law: If contract specifies that “all modifications must be in writing” NO writing.
When SOF does not require writing, clause that requires written modification is unenforceable.
Satisfying the Statute of Frauds with a Writing
1. Common law: look to
i. The contents of the writing or writings – it must contain all material terms (who and what) and
ii. Who signed the writing – must be signed by the person against whom you are trying to enforce it, i.e. the
defendant
i. If only one person signed, the writing is not legally enforceable against the other party → she will
have a SoF defense.
2.
3.
4.
Sale of goods (Article 2): writing must contain a quantity and be signed by the party asserting the SOF
defense (the defendant, ie. “the party to be charged”). Note: No price is required.
a. Exception: Merchant to Merchant—plaintiff’s signed writing can satisfy the SOF if
i. Both parties are merchants;
ii. The writing signed by the plaintiff confirms a prior agreement and contains a quantity term;
iii. There is no response from the other merchant (defendant).
Lease of goods (Article 2A): writing must be (1) signed by defendant, (2) state that it’s a lease, (3) the
number of items being leased, (4) the length of the lease and (5) the rental payments (price).
Other SOF prongs (Common Law): writing must contain all material terms (“who” & “what”) and be
signed by party asserting a Statute of Frauds defense (the defendant).
50
a.
Note: If only one party signs the writing, Statute of frauds can be a one way street. The writing does not
satisfy the SOF against a party that does not sign. (I.e. party who does not sign can claim that the writing is
insufficient – can claim SOF as a defense).
Statute of Frauds (continued)
Satisfying the Statute of Frauds without a Writing
1. Full performance of service contracts: Exception to the writing requirement when full performance is done
on a service contract. SOF is satisfied by full performance, even though there is no writing.
a. Part performance of a service contract does not satisfy the SOF.
i. Note: Can still recover in Quasi-contract for the reasonable value of the part performed services.
2. Part performance in contracts for the transfer of an interest in real estate: For partial performance in a
transfer of real estate to satisfy the SOF without a writing, two out of three things required: (1) partial
payment; or (2) buyer’s improvement of real estate; or (3) buyer’s possession.
a. Note: Full payment alone is insufficient to overcome writing requirement. Must have 2/3 requirements.
3. Sale of Goods (UCC Article 2 SOF):☼ normally, for $500+ of goods, a writing is required. Exceptions—
a. Part performance (for goods delivered by seller or paid for by buyer):
i. Delivered goods: Goods that are delivered by seller to buyer on oral promise (where writing would
have been required) satisfy the SOF. No writing required—Seller loses the SOF defense.
ii. Undelivered goods: No exception to the writing requirement exists for goods that are not yet
delivered. For undelivered goods (where a writing would have been required), writing still required.
Seller can still raise SOF defense to undelivered goods.
iii. Paid for goods: If buyer pays for the goods, the seller loses its SOF defense. (K enforceable for $
amount of partial payment). Full payment for goods satisfies the SOF—no writing is required.
b. Judicial admission: Under UCC Article 2 SOF, if the party admits (pleading, in testimony or in
response to discovery) there is a contract, no writing required.
Written Authority to sign for another (Equal Dignities Rule): An agent is sent on behalf of the contracting party
1. If the underlying agreement falls within the SOF, you need written evidence of the agent’s authority.
2. If the underlying agreement does not fall within the SOF, agent’s authority does not have to be in writing
Terms of the Contract (Key Issue #4)
1. Words of the Parties:
a. Effect of a writing (used to keep out written K): the Parol Evidence Rule☼ keeps out evidence of what
the parties said and wrote (that contradict the writing) before they reduced the terms of their agreement to
writing. Must have a written agreement for the rule to apply (a later written version is more reliable than
anything that came before it.
i. Exceptions to Parol Evidence Rule:
1. To correct a clerical error (e.g., a typo, transposing numbers, etc.)
2. To establish a defense to the enforceability of an agreement (not trying to change the contract,
trying to get rescission) i.e. show it is void or voidable (to prove fraud, duress, undue influ.)
3. To explain the written contract (show what a term means)
a) Can explain or supplement/add terms of K with evidence based on 1) course of dealing, 2)
TRADE USAGE, 3) course of performance.
4. To supplement a “partially-integrated” writing [a final statement of the terms included, but not
a complete statement of all terms agreed to]. Can supplement the terms in the writing with
evidence of consistent additional terms. (Where K is not complete on its face) UNLESS K is
ordinarily a separate K.
ii. Changing an agreement after it has been reduced to writing (modification): Can introduce evidence
that occurred after the writing. Recall, any modification must have consideration (except UCC).
1. Note: Parol Evidence does not apply (only applies to terms agreed to before a later writing)
2.
Conduct of the Parties (Hierarchy from most important to least important): In a dispute over the terms of a
contract, the court may consider the following extrinsic evidence—
a. Course of performance: what the parties have done under this contract. How the parties acted is the best
evidence of what the contract meant.
b. Course of dealing: what the parties have done under their earlier contracts.
c. Usage of trade: what others in the trade do under similar contracts.
51
Terms of the Contract (continued)
3.
Seller’s Warranties of Quality in a Sale of Goods (UCC Article 2):
a. Express warranties [fact, promise or description, but not opinion]. Created where seller makes a statement
of fact, promise, or description of goods. Mere expression of an opinion is not an express warranty.
i. Examples: “guaranteed”; “made of solid oak”; -- but not “all parts are top quality” (this is puffery).
ii. Models: The seller’s use of a sample or model is an Express warranty (not implied warranty) that
the goods that the buyer gets will be exactly like the model.
b. Implied warranty of merchantability (goods are fit for their ordinary purpose): seller must be a
merchant who deals in goods of the kind.
i. Note: The only provision of UCC Article 2 where a special kind of merchant is necessary).
ii. If merchant does not ordinarily deal in the goods sold, no implied warrant attaches.
c. Implied warranty of fitness for a particular purpose (goods are fit for the buyer's special purpose):
i. buyer has special purpose;
ii. buyer is relying on Seller to select suitable goods; and
iii. Seller knows that the buyer is relying on him
1. (Note: seller does not have to be a merchant).
4.
Seller’s Warranties of Quality in a Lease of Goods (UCC Article 2A):
a. There are the same implied warranties in a lease of goods as in a sale of goods.
i. Exception: Finance lease—there is no implied warranty of merchantability made by the bank who is
party to the lease, only an implied warranty made by the underlying company. (Ex. Ross leases a
computer from Citibank, which bought the computer from Gigabyte Computer Co.).
5.
Limitations on Warranty Liability in Sales and Leases of Goods (UCC Article 2 and Article 2A)
a. Disclaimer of warranties (clause that eliminates warranties)
i. Express: Cannot disclaim an express warranty. “No Express Warranties” clause is invalid.
ii. Implied: A seller or lessor can disclaim all implied warranties by using “as is” or “with all faults”.
1. If “as is” is not in the K, disclaimer of implied warranted must be conspicuous (large print; likely
to draw the attention of a reasonable person).
b. Limitation of remedies (doesn’t eliminate warranty, just limits recovery). Rules—
i. You can limit the buyer’s remedies for express and implied warranties;
ii. The test of the validity of limitation is whether it is unconscionable “shocks the court’s conscience”;
1. Ex: Stove burns down house. Warranty liability limitation of remedy limits to “replacement
parts” – whether homeowner can recover depends on whether the term is “unconscionable”.
iii. Unconscionability is measured at the time of the contract, not at the time of the mishap.
iv. Personal Injury: it is presumed to be unconscionable to limit recovery for personal injury in a
transaction involving consumer goods.
1. Ex. Stove burns down house. Homeowner is injured in fire. No limitation on remedy.
6.
Seller’s Delivery Obligation in a Sale or Lease of Goods Involving a Common Carrier (e.g., UPS, Fed Ex,
American Airlines, Red Ball Freight)☼
a. Shipment contract (delivery obligations): Most contracts are shipment contracts—
i. get the goods to a common carrier;
ii. make reasonable delivery arrangements; and
iii. notify buyer. (Seller does not have to get the goods to the buyer)
b. Destination contract (only delivery obligation): seller must get the goods to where buyer is located.
i. Exam Tip: FOB = “Free on Board”, if FOB is followed by any city other than where the SELLER
is located, then you have a destination contract. (FOB Seller’s Location = no destination contract).
FOB obligates seller to get goods to location indicated after the FOB term.
1. If the K is FOB [Seller’s location], buyer must pay for the delivery to buyer (and a shipment
contract is formed, meaning risk of loss is on buyer).
Continued
52
Terms of the Contract (continued)
7.
Risk of Loss in Sales of Goods (UCC Article 2)☼
a. When goods are damaged before the buyer gets the goods, and neither the buyer or the seller is to blame,
who bears the risk of loss? The consequences are significant:
i. If the seller bears the risk of loss: the seller must provide new goods to the buyer for no additional
cost, or is liable for breach of contract.
ii. If the buyer bears the risk, the buyer must still pay the contract price.
b. The following hierarchy determines who bears the risk of loss:
i. Agreement of the parties controls.
ii. Breach: the breaching party is liable for any uninsured loss (even if loss is unrelated to the breach).
iii. Delivery by common carrier: the risk shifts to the buyer when seller completes delivery obligations
1. Shipment Contract: shifts to buyer when goods delivered to common carrier; delivery
arrangements are made; and the buyer is notified of the arrangements.
2. Destination Contract: shifts to buyer only upon receipt of the goods (stay with seller in transit).
iv. No common carrier (e.g. buyer pick up or seller to deliver)--depends on whether seller is merchant
1. If the seller is a merchant, seller bears the risk of loss until the buyer takes physical possession;
2. If the seller is a non-merchant, the seller bears the risk of loss until seller "tenders” the goods
(i.e., makes the goods available to the Buyer—where they are and how to pick them up).
8.
Risk of Loss in Leases of Goods (UCC Article 2A)
a. A Lessor bares the risk of loss even though the goods are in possession of the lessee.
i. Exception: Finance leases—the lessee bares the risk of loss in a finance lease.
Performance of the Contract (Key Issue #5)
1. Performance of Contracts for the Sale of Goods (UCC Article 2)
a. Perfect tender rule: the standard by which a seller’s performance is measured. Seller must deliver
Assurances
perfect goods in the right place at the right time. If not, buyer has right to:
When
i. Accept and sue for damages
reasonable
grounds for
ii. Reject non-conforming goods.
insecurity
iii. Accept some and reject others and sue for damages.
arise with
b. Cure: a seller who fails to make perfect tender may have an option to cure. Depends on whether the time
respect to
for the seller’s performance has expired.
performance,
the other party
i. Note: If the seller has reason to believe that the wrong goods would be acceptable to the buyer (from
may demand
past dealings), and delivery is made after the deadline, the seller can cure within a reasonable time.
in writing
ii. Exam tip: Cure after deadline is allowed where buyer has accepted non-conforming goods in the past.
assurances.
c. Installment sales contract
Failure to do
so within 30
i. Formation: language that requires or authorizes the seller to deliver the goods in separate installments
reasonable
1. Note: Conduct of the seller does not matter. Must be authorized by the buyer.
time (30 days)
2. Example: Deliver 500 bagels by 9:00 a.m. each morning and that BAR/BRI will pay on delivery.
= repudiation.
ii. Perfect tender rule does not apply to an installment sales contract. If there is imperfect tender, Buyer
Aggrieved
party can seek
cannot reject either the installment or the entire contract.
damages or
1. Rejection: rejection for imperfect tender can only be made if there is substantial impairment.
await
2. Policy: assumes seller will cure in the course of ongoing performance.
performance.
d. Acceptance of the goods [distinguish from acceptance of an offer]: We assume there was a contract
If treating as
breach, must
formed (already offer and acceptance).
give notice. If
i. When acceptance occurs, buyer must have an opportunity to inspect (payment alone is insufficient).
no notice,
1. Note: If the buyer retains the goods without objection, after having a reasonable opportunity to
must accept if
inspect them, then the buyer has impliedly accepted the goods.
goods are
tendered.
ii. Effect of acceptance: Once a buyer accepts goods, it is too late for the buyer to reject.
Rejection
1. Non-conforming goods: A buyer who accepts non-conforming goods can still get damages.
without notice
e. Revocation of Acceptance of the Goods: General rule-- once a buyer accepts, the buyer cannot revoke.
= breach by
i. Exception: a buyer can revoke acceptance only if:
aggrieved
party (has
1. The non-conformity substantially impairs their value
defense of
2. Excusable ignorance of grounds for revocation or reasonable reliance on seller’s assurance of
change of
satisfaction, and
position in
3. Revocation within reasonable time after discovery.
reliance)
53
Buyer who
receives
nonconforming
goods can
accept all,
reject all, or
accept
some, reject
some. If
some are
rejected,
must
seasonably
notify seller
(Note:
failure to
include
defect in
notice
means
Buyer
cannot rely
on defect if
Seller could
have
cured.).
f.
g.
Note: “Revocation” after acceptance (for substantial impairment); “Rejection” before acceptance (for
failure of perfect tender, except in installment contracts).
a) Revocation/Rejection Buyer can return goods & need not pay.
Buyer's Payment Obligation: (1) Checks are acceptable; (2) seller does not have to take a check (3) but if
the seller insists on cash, the buyer has an additional reasonable time to get the cash.
Performance of the Contract (continued)
2. Performance of Contracts (Common Law)
a. Substantial performance is the standard [means there is no material breach -- materiality threshold is
Generally,
50%]. Perfection is not required.
failure to
render timely
i. If you commit material breach, you have not substantially performed. Material breach will excuse
performance
the non-breaching party from performing (paying). Non-breaching party can sue for damages.
will not be
1. Breaching party can seek reasonable value of work done under Quasi-contract.
material (In a
ii. Substantial performance will not excuse the non-breaching party from performance (paying the
non UCC
contract).
breaching party for the full contract). Non-breaching party can offset damages from the breach.
However,
1. Note: any breach of Contract (material or not) gives rise to a cause of action for damages.
where a K
b.
Divisible
contracts: If price for each is divided for each unit, divisible contract applies—substantial
provides that
performance is measured on a unit by unit basis.
“time is of
the essence”,
i. Example: Contract to paint cabanas provides for the payment of $9,000 per cabana, 10 in total. (Note:
failure to
the K is not $90,000 for all 10 cabanas). Painter paints only 3 of 10. Painter substantially performed
timely
on 3 cabanas, so painter gets $27K. There may still be a material breach for the entire contract.
performance
1. Note: If K is $90,000 for all 10 cabanas, K is not divisible.
will be a
material
a) If Painter paints 9/10 substantial performance (entitled to full contract) and will be liable
breach.
for damages on the 10th not painted.
b) If Painter paints 3/10 material breach (not entitled to contract; only entitled to reasonable
value of the work under a theory of quasi-contract).
If K was
assigned, and
there is
substantial
performance,
obligor may
offset damages
directly against
assignee; does
not have to pay
full then seek
damages from
assignor.
Excuse of Performance Based on Later Events (Key Issue #6)
1. Excuse Based on the Other Party's Breach
a. UCC Article 2: If seller fails to make perfect tender, buyer can reject all goods, not just non-conforming.
b. Common Law: A Material breach excused performance of other non-breaching party (excused).
2.
Excuse Based on the Other Party's Repudiation by Words or Conduct (Anticipatory repudiation)
a. An unambiguous statement (1) that the repudiating party will not perform (2) made prior to the time
that performance was due.
b. Non-breaching party can rely on the anticipatory repudiation of the breaching party and excuses the other
party’s duty to perform (gives rise to immediate claim for breach).
i. Common Law: Anticipatory repudiation acts as a “material breach.”
ii. Retraction: Can retract anticipatory repudiation, so long as the non-breaching party has not relied.
1. Example: Painter is told by owner that owner is not going to pay. Painter take another job.
Owner cannot retract. Owner could have retracted before the painter took another job.
c. Conduct that indicates that one party will not adhere to the contract operates as a repudiation or inability
to perform.
i. Example: Owner tells painter he will give him a unique painting for the work. Owner sells the
painting. Owner’s conduct acts as an anticipatory repudiation of the contract.
3.
Excuse Based on Insecurity (UCC Article 2 Sale of Goods)
i. If the repudiation is AMBIGUOUS or the circumstances cause you to become INSECURE,
ii. If the words or conduct of one party gives “reasonable grounds for insecurity, “then the other party
can suspend performance until it receives adequate assurance if it is commercially reasonable to
“Payment in
suspend performance.
Full” on a
4.
Excuse Based on a Later Agreement
a. Modification (substituted agreement): Modification agreement discharges the original contract
immediately (modification needs new consideration). If there is a breach, it is only of the modified K.
b. Accord and satisfaction: Accord is a new agreement between people who are already subject to a
54
check, where
there is a
dispute as to
amount
owed, is an
accord, and
if it is cashed,
there is
satisfaction.
contract. The new agreement is to do something different. Satisfaction is performance of the accord.
i. Accord wipes out the debt only when the accord is satisfied. (Note: Accord does not take effect
immediately, only take effect when satisfied).
ii. Breach: can sue either on the accord or on the original debt, but NOT BOTH.
c. Rescission (cancellation): rescission before performance excuses performance.
i. Note: Cancellation after performance does not cancel the contract. For rescission to be effective,
EACH party must have some performance remaining.
ii. May be made orally unless the subject matter is within the SoF or involves a K for the sale of goods.
iii. If only one party desires to rescind, party must have legal grounds (e.g. mistake, misrep, duress).
d. Novation (substitution of party):☼ where one party to a contract is excused from contract obligations and
another party is substituted (only where the remaining party to the original contact agrees to substitution).
Note: when the remaining party does not agree, it is mere delegation (original party still liable).
Continued
55
Excuse of Performance Based on Later Events (continued)
5. Excuse Based on a Later Unforeseen Occurrence that Makes Performance Impossible, Impractical, or
Frustrates the Purpose of the Performance. (Exam Tip: Start out assuming later unforeseen occurrences do
not matter).
Contractor:
while duties
a. Impossibility
generally
i. Destruction of thing necessary for performance (Note: Spending more money is not an excuse).
discharge upon
ii. UCC Article 2: For contract of sale of goods—
destruction,
1. where seller has the risk of loss, seller’s performance is excused if goods that have been
builder can
always rebuild.
identified to the contract are unexpectedly destroyed.
Risk of loss stays
a) Exception: Inventory-- In Contracts for the sale of a fungible item (nothing special about the
with builder.
good), destruction of the seller’s quantity of the item does not excuse the seller’s obligation.
2. where buyer has the risk of loss, buyer’s performance is not excused if the goods that have been
identified to the contract are unexpectedly destroyed.
iii. Death or incapacity of a person essential for performance: Death provides an excuse for nonIn personal
performance only where the person who died has special skills. If the person did not have special
service
skills, the non-breaching party’s estate is not excused from performance.
contract,
iv.
Supervening
government regulation or order: If the performance of the contract will be illegal
performance
based on a government regulation or order occurring after the contract, the governmental order excuses
is excused by
illness of the
performance.
party
b. Impracticality -- Requires that a party encounter extreme and unreasonably difficulty or expense that was
performing
not anticipated, making performance commercially impracticable.
the service.
c. Frustration of purpose (generally a buyer’s remedy): Requirements to show frustration—
i. at the time of the contract both parties understood what the buyer’s purpose was; and
ii. later, an unforeseen event frustrates that purpose (must be impossible to complete that purpose).
6.
Excuse Based on the Failure of an Express Condition☼
i. Express condition: contract language that does not create an obligation, but limits obligations
created by other contract language (Ex. "if," "so long as," "provided," "on condition that," “unless” &
“when”). Strict compliance required. If violated, non-breaching party is excused from performance.
b. Satisfaction clauses: Satisfaction means reasonable satisfaction (an objective standard). If the contract
states that one party must be satisfied, it is not the party’s subjective preference that controls: if a
reasonable person would be satisfied, the party would have to pay (even if personally unsatisfied).
i. Exception: Art or matters of personal taste, then all that matters is whether the person requiring
satisfaction (the buyer) is satisfied (don’t care about what a reasonable person would think).
c. Conditions precedent/concurrent/subsequent: a matter of timing—
i. condition precedent: the condition must be fulfilled before the obligation matures.
ii. condition concurrent: the condition must run along side the obligation.
iii. condition subsequent: performance comes first and then the occurrence of the condition cuts it off.
d. Excusing (eliminating) a condition by later action or inaction of person who is protected by the
condition. Exam Tip: Ask (1) Who is protected by the condition? And (2) Did that person say or do
something to lose the protection of the condition by one of the follow ways?
i. Failure to cooperate (ex. K calls for B to get for 5% mortgage. B looks for none. B breaches).
ii. Estoppel (later statement by protected party and reliance by other party): When party gives up
the protection of the condition, the party is later estopped from asserting the condition.
Remedies for Breach of Contract (Key Issue #7)
1. Equitable: In Rem Remedies (the plaintiff is seeking “the thing itself” rather than monetary damages) 2 types:
(1) Specific Performance: compelling a party to do what he agreed to do. (An equitable remedy available
only if monetary damages are inadequate. Plaintiff usually not entitled unless compelling reason).
Plaintiff must Show: (1) not guilty of laches (undue delay); (2) no adequate remedy at law; (3) unique.
i. Real property: Real property is viewed as unique; there is no monetary substitute.
ii. UCC Article 2: only if the goods are unique: either (1) an antique; (2) a work of art; (3) custom made.
iii. Services: Specific performance is not available in a service contract.
1. Negative specific performance: Courts prevent a breaching party from working for a competitor.
(2) Replevin: Get goods if (1) unable to cover despite effort and (2) goods identified in the K (set aside).
a. Unpaid seller's right to reclaim goods (UCC Article 2): Seller generally has no right to get goods back
from a buyer who has not paid for them. (Note: Seller never has right to reclaim the goods from a 3rd party).
56
Commercial
Impracticabi
lity: seller’s
duty to
perform
discharged
where it is
impracticable
1) embargo
2) crop
failure
3) war
4) labor
strike
5) unforeseen
cost increase.
b. Narrow exception: If buyer is insolvent on the date the buyer receives the goods, the seller can reclaim
the goods. Seller has 10 days to make demand to reclaim. The ten day rule runs from receipt of goods
(not delivery). Buyer must still have goods at the time of the demand.
c. Entrustment: entrusting owner has no right to get her goods back from a later BFP. Owner must bring
action for conversion against seller. (Ex. Owner gives watch to maker to fix. Maker sells to BFP).
Remedies for Breach of Contract (continued)
2. Monetary Remedies (Damages)
a. No punitive damages: purpose of contract damages is to compensate, not punish.
b. Liquidated damages: permissible if damages were difficult to estimate and the clause is a reasonable
Down
forecast of probable damages. (If criteria not met, the liquidated damage is an impermissible penalty)
payment
i. Permissible: Figure is flexible. The damages are graduated – they increase with the length of the
Down payment
delay. E.g. $100 per day for each day late. (Typically used in building/construction industry).
may be
liquidated
ii. Impermissible: Fixed figure (shot gun clause) is usually an impermissible penalty. E.g. $20K for late.
damage for
c. Expectation damages: put the plaintiff in as good a position as full performance. Benefit of the bargain
material breach
damages. Subtract what the owner was supposed to pay from what the owner actually paid.
if the parties
i. UCC Article 2: “Cover” (purchase substitute goods)
agree at time of
contracting.
1. Buyer: When seller breaches, Buyer can get difference between original K and the cover K
(alternatively, if buyer does not/cannot cover, B gets difference between K and market price).
(Note: Buyer is also always entitled to recover his deposit, whether or not K is canceled).
a) Example: B contracts to buy carpeting for $2,500. S does not deliver. B pays another
supplier $2,800 for the same carpeting. How much can B recover for S’s breach? $300.
b) Buyer cannot take advantage of seller’s breach: B must use good faith to get price/quality.
c) Favorable bargain: B contracts to buy an antique chair for $4,000. B pays, then discovers
the chair is not antique. B keeps the chair & sues for breach of contract. The chair is worth
$2,000. Had it been antique, the chair would be worth $7,000. What are B’s damages?
$5000. Buyer’s expectation is an antique chair worth $7,000. Buyer got chair worth $2K.
(i) Buyer is entitled to the benefit of a favorable bargain.
2. Sellers: When buyer breaches on sale of good (one of a kind or only one), Seller can get
difference between the original K and the cover K. If price is the same, no damages.
a) Exception: Lost volume sellers (dealers in goods that are not one of a kind) can get lost
profit from buyer’s breach of contract. If breach deals with a good sold out of regular
inventory, seller can get expectation damages (the lost profit; not the entire contract price).
b) Seller who resells must use good faith.
d. Incidental damages: either (1) the cost of arranging a replacement deal or (2) expenses the buyer incurs
taking care of non-conforming goods (e.g. warehousing, etc.). Incidental damages are always recoverable.
e. Consequential damages: special damages that are reasonably foreseeable at the time of the contract.
Consequential damages means that as a result of the breach, something else happened to cause the nonbreaching party to lose money). Recovery depends on whether this kind of damage was reasonably
foreseeable to the breaching party at the time of contract. (Ex. lost profits S knows B will incur on resale).
f. Rule of mitigation (avoidability): You cannot recover for damages that you could have avoided with
reasonable effort. Non-breaching party has the duty to mitigate his or her damages.
i. Employment: Comparable employment: the same kind of work in the same city. Do not have to
actually take the job. But cannot recover the damages she could have reduced by reasonable cover.
ii. Burden: This rule of mitigation is a defense (not something the plaintiff has to prove: burden on
breaching employer to show that plaintiff could have mitigated).
1. Example: Kay Sera is fired in violation of her contract. She makes $900 a week. Her employer
alleges that Kay can get a comparable job paying $800 a week. What are Kay’s damages? $100.
5 Main Remedies: 1. Deposit; 2. Expectation Cover; 3. Expectation Market; 4. Specific Performance; 5. Replevin.
57
Third Party Problems (Key Issue #8)
Exam Tip: to have third party problems, you must have three parties.
1. Delegation of Duties: General rule: contractual duties may be delegated without the obligee’s consent.
Note: when duties are delegated, the delegating party remains secondarily liable as a surety. Delegation may be
written or oral -- must have PRESENT INTENT.
a. Exceptions:
i. Contract prohibits delegation: If the contract prohibits delegation, you can’t delegate.
ii. Contract prohibits assignment: If the contract says no assignment, then there is no delegation either.
iii. Special Skill/Personality:Can’t delegate where K involves special skills or party w/special reputation.
b. Consequences if delegate does not perform: The delegating party remains liable. (Contrast with a
novation (i.e. consent to substitute) where the original party does not remain liable).
Delegates liability: if the delegate gets consideration for performing the duties, the delegate will
also be liable (creates TPB obligation).
Third Party Problems (continued)
2. Assignment of Rights (transfer of rights/benefits): two people make a contract; later, one person transfers his
rights under the contract to a third party. Two step process (1) contract, (2) assignment. Note: When the rights
are assigned, the assigning party can receive no further benefit from those rights.
a. Parties
Revocation
i. the assignor is the person who later transfers rights (i.e. payment for service) under a contract;
Gratuitous
ii. the assignee is the person to whom rights are transferred (assignee will now get payment).
assignment is
revocable.
iii. the obligor is the person who owes performance under the contract (i.e. make the payment).
b. Requirements for making an assignment:
Assignment
i. Consideration is not required for a valid assignment. Gratuitous assignments are valid.
revoked if
ii. Writing: if the amount being assigned is more than $5,000, the assignment must be in writing
assignor takes
performance
iii. A promise to assign is invalid: must have language of PRESENT assignment. “I assign” or “I hereby
directly from
assign” – assignment is a present transfer of rights.
obligor.
iv. Restrictions on assignments:
1. Language that prohibits an assignment does not invalidate an assignment. There may be a
Not revocable
where assignee
breach of K, but the assignment is still valid. (Ex. Rights under this contract are not assignable.)
reasonably
2. Language invalidating an assignment does make the assignment void. (Ex. "All assignments of
relies to his
rights under this contract are void”)
detriment.
v. Court-imposed limitation (Common Law):☼ cannot substantially change duties of the obligor.
1. Substantial changes: Services to be performed in another location;
2. Not substantial changes: mere payment to another in the same place.
vi. Assignment of a requirements contract: Requirements contracts are assignable as long as the
If Assignee
assignee’s requirements are not out of line with the assignor’s.
does not
c. Revocation of Assignment
perform an
i. An assignment for consideration is irrevocable.
explicit
condition of the
ii. A gratuitous assignment is generally revocable UNLESS:
K, the obligor
1. The obligor has already performed
does not have
2. A token (i.e. a tangible claim, such as a stock certificate) is delivered
to perform.
3. An assignment of a simple chose (i.e. an intangible claim, such as a K right) is put into writing OR
Assignee as
breached!
4. The assignee can show detrimental reliance on the gratuitous assignment
iii. A revocable gratuitous assignment may be terminated by:
1. The death or bankruptcy of the assignor
2. Notice of revocation by the assignor to the assignee or the obligor
3. The assignor taking performance directly from the obligor
4. Subsequent assignment of the same right by the assignor to another
d. Rights of an assignee:
i. Enforcement: Assignee can sue the obligor if obligor does not perform as promised. Assignment
transfers the right to enforce the contract. Creates privity of contract between assignee/obligor.
ii. Defenses: Obligor has same defenses against assignee as it would against assignor.
1. Example: If assignor did not perform services for obligor, assignee cannot collect.
58
Third Party Problems (continued)
3. Third-Party Beneficiary Law
a. Third-party beneficiaries: Contract with intention to benefit someone-else. (NOTE: three parties are
present from the beginning (unlike assignment where the third party comes along later)).
b. Parties defined:
i. Third-party beneficiary: a person who did not make a contract, but still has rights under it, because
the contract was intended to benefit him.
1. Intended/incidental beneficiary: if the third party is named in the contract, the third party is an
intended beneficiary. Only an intended beneficiary has legal rights.
a) If not named in the contact, the third party is an incidental beneficiary (with no rights).
2. Creditor/donee beneficiary: if the third party is a creditor of the promisee, the third party is a
creditor beneficiary (Promisee owed the 3rd party before hand).
a) If no prior obligation, the third party is a donee beneficiary
b) Exam Tip: in virtually every case, TPB will be donee beneficiary.
ii. Promisor: person who promises to do something for the third party.
iii. Promisee: the other contracting party.
c. Rescission or modification of the contract: A contract can be rescinded or modified by the promisor and
promisee before the third party beneficiary’s rights have vested. TPB rights vest when he (1) there is
manifest assent to a promise in a manner requested by the parties; (2) brings a suit to enforce the promise
OR (3) materially changes position in detrimental reliance on the promise. Then K cannot be modified.
d. Rights of a third-party beneficiary: An intended beneficiary can sue the breaching promisor, even
though there is no privity of contract between them. No greater rights than original contracting parties.
i. Defenses: the promisor can raise any defense he has against the promisee when he is sued by the third
party beneficiary. (If promisor did not have to perform for promisee (because of some excuse from
performance), promisor does not have to perform for 3rd party, even when 3rd party relies).
ii. Suing the promisee: Creditor beneficiary can go against the promisee for damages arising out of the
promisor’s breach. Can also go against the Promisor. (Note: Donee can only sue the promisor¸not
promisee).
e. Rights of the promisee: Just like any other contract -- Can sue for breach, does not matter that it was
intended to benefit someone else -- can sue for SP to force promisor to provide benefit to the TPB. Can
even recover damages if the TPB was a donee (but in that case damages are unlikely to be high as the
performance was gratuitous).
59
Corporations
Organization of Corporations – Moderately popular topic
1. Formation Requirements (People, Paper, Acts) (IGNORE FOR CA)
a. Incorporators (People): An incorporator (1) executes the certificate and delivers it to the
Department of State and (2) holds the organizational meeting.
i. Number: One or more are required.
ii. Who: Adult human’s only. Corporations cannot be incorporators.
b. Certificate of Incorporation (Paper): Two purposes—(1) it’s a contract between corporation and
shareholders and (2) it’s also a contract between corporation and state.
i. Information: The following must be in the Certificate—
1. Corporate name: Must have “Corporation” “Inc” or “Limited” in the name.
2. Address: County in NY of the Office of Corporation (Don’t actually have to do
business where the office of corporation is located).
3. Agent for service: Name the NY Secretary of State as agent for service
a. Service: Must give an address for forwarding process; may (but don’t have
to) name a registered agent for service of process.
4. Incorporators: Name and address of each incorporator.
ii. Duration: May make a statement of duration. If none, presume perpetual existence.
iii.
Statement of Purpose: A statement of corporate purpose is required.
1. General statement allowed: “engage in all lawful activity, after first obtaining
necessary state agency approval”
2. Specific statement allowed:☼ If the corporation later does something not stated in
the specific corporate purpose, an ultra vires act (beyond the certificate’s scope)
a. Common and CA law: Contract could be void -- beyond the corporation’s
capacity.
iv.
Capital Structure (Stock): Capital structure is made up of (1) Authorized stock:
maximum number of shares the corporation can sell. (2) Issued stock: number of shares the
corporation actually sells. (3) Outstanding stock: shares that have been issued and not
reacquired.
1. Information that must be included in the certificate:
a. Authorized Stock
b. Number of shares per class
c. Par value, rights, preferences, and limitations of each class.
d. Information on series (subdivided class) of preferred shares.
2. Note: at least one class of stock or bonds must have unlimited voting rights and at
least one class of stock must have unlimited dividend rights.
c. Acts: What must be done by the incorporators and Department of State to incorporate?
i. Step 1: Each incorporator signs certificate and acknowledges it before a notary. They deliver
it to the New York Department of State. If it conforms with law, and filing fees are paid, the
Department files the certificate. Filing is conclusive evidence of valid formation. At that
moment we have a de jure corporation.
ii. Step 2: Incorporators then hold an organizational meeting (or they can do it by written
consent). At the meeting: (1) adopt bylaws AND (2) elect initial directors (at that point
board of directors take over management).
2. Legal Significance of Formation of Corporation
a. Internal affairs: Duties, relationship among directors, officers, shareholders, etc. of a New York
corporation are governed by New York law (regardless of where the corporation is doing business).
b. Legal person: power to contract, transfer property, buy/sell securities (own or others), sue or be sued.
i. Loans: To guarantee a loan not in the furtherance of corporate business, you need the
approval of 2/3 of the shares entitled to vote.
ii. Political contributions: no more than $5,000 per year per candidate or organization.
iii.
Charitable contributions: unlimited.
c. Limited Liability: Directors/Officers are generally not liable. Owners/shareholders have limited
liability (pay for stock, and not any corporate liability). Corporation is liable for its obligations.
60
Organization of Corporations (continued)
3. De facto Corporation Doctrine/Corporation by Estoppel: A business failing to achieve de jure corporate
status nonetheless is treated as a corporation (so shareholders will not be personally liable for business debts).
a. De Facto Corporation:
i. there is a relevant incorporation statute;
ii. the parties made a good faith, colorable attempt to comply with it; and
iii.
some exercise of corporate privileges. If applicable, treated as corporation for all
purposes except in an action by the state. (As good as being de jure, except in an action by the
state).
1. Status in New York: because the Department of State’s filing the certificate is
conclusive proof of formation, the doctrine was thought to be abolished. BUT case
law suggests it may be alive, but only in limited circumstances.
a. Example, incorporators put together a proper certificate and deliver it to the
Department of State, but the Department failed to file it (without rejecting
it). Not de jure, because not filed. Can argue de facto corporation.
b. Corporation by Estoppel: theory is that one dealing with a business as a corporation, treating it as a
corporation may be estopped from denying the business’s corporate status. So such a person, under
this theory, cannot sue the individual proprietors.
i. Can sue the individual proprietors if they are being treated as a corporation.
4. Bylaws: establish internal procedures and responsibilities of people like officers, set forth the type of notice
required for meetings, etc.
a. Not required for existence: De jure corporation can exist without bylaws; adoption of bylaws is not a
condition precedent to formation of a corporation. But almost every corporation has them.
b. **Bylaws inconsistent with the certificate: Certificate controls because it is a contract with the state.
c. Filing: Bylaws are not filed with the state. It is an internal document that only binds insiders.
d. Initial adoption: Incorporators at the organizational meeting adopt the first bylaws.
i. These have the status of a shareholder bylaw.
e. Amend, repeal or adopt new: Shareholders amend, repeal, and adopt new bylaws.
i. Board of directors: amend, repeal, adopt only if the certificate or shareholder bylaw allows.
1. NOTE: shareholders can amend or repeal any director-adopted bylaw.
5. ***Pre-incorporation Contracts (LP):☼ When a promoter (acting on behalf of a corporation not yet formed)
does something (e.g. enters K for office space) on behalf of the unformed corporation, who has liability?
a. Corporation’s liability on pre-incorporation contracts: corporation is not liable on preincorporation contracts until it adopts the contract after incorporation. Adoption occurs in 2 ways—
i. Express adoption: Directors’ action to adopt the contract.
ii. *Implied adoption:☼ From the corporation’s knowing acceptance of a benefit of the contract
(e.g. using leased office space).
b. Promoter’s liability: Generally, unless the contract clearly indicates that the parties do not intend the
promotor to be liable, the promoter remains liable on pre-incorporation contracts until there has been a
novation, i.e., an agreement of the promoter, the corporation, and the other contracting party that the
corporation will replace the promoter under the contract.
i. If Corp. is never formed: Promoter is liable (assuming contract does not specify otherwise).
ii.
If Corp. is formed: Promoter still liable (along with Corporation if adopted) until a novation.
Even if the corporation adopts the contract, both remain liable until novation.☼
6. Secret Profit Rule: When the promoter is dealing with corporation itself, promoter cannot make a secret profit
on her dealings with the corporation (but can make known profits).
a. Sale to corporation of property acquired before becoming promoter.
i. Equation: Profit = price paid by corporation minus fair market value (FMV).
b. Sale to corporation of property acquired after becoming promoter.
i. Equation: Profit = price paid by corporation minus price paid by promoter.
c. Profit is made by Promoter: Only liable if made in secret, not liable if Board consents or ratifies.
7. Foreign Corporations: Foreign corporations (incorporated outside NY) doing business in NY must “qualify”—
a. Doing business: regular course of intrastate business activity. Not occasional, sporadic, or meetings.
b. To “Qualify”: Applying to the N.Y. Department of State and designating the Secretary of State as
agent for service of process. Give info. from certificate and proof of good standing in its home state.
61
Issuance of Stock BY CORPORATION (Major Issue #2) – Moderately popular
1. Issuance: Issuance of stock occurs when a corporation sells or trades its **own stock.**
a. Issuance of stock is one way a corporation can raise capital. Investors buy stock and thereby become
equity holders -- owners of the corporation. Their equity interest brings with it various rights
b. This is to be distinguished from issuance of bonds. With a bond, the investor makes a loan to the
corporation, to be repaid (usually with interest) as agreed in the contract. The holder of a bond is a
creditor (not an owner) of the corporation.
i. Debenture: a loan, the repayment of which is not secured by corporate assets.
2. Subscriptions: a written, signed offer to buy stock from the corporation (offer made by the shareholder).
a. **Revocation of preincorporation subscriptions:☼ A pre-incorporation subscription is irrevocable for
three months, unless it says otherwise in the contract OR all subscribers agree to revoke.
b. Revocation of post-incorporation subscriptions: Revocable until acceptance. Acceptance occurs
when the Board accepts the offer. (At that point, there is an agreement to sell to this subscriber.)
c. Uniform selling: Corporation cannot decide to sell only to some subscribers and not others--The
corporation must be uniform within each class or series of stock.
d. Subscriber default (MC possible, probably not essay):
i. If he has paid less than half of the purchase price, and fails to pay the rest within 30 days of
written demand, the corporation can keep the money paid and cancel the shares. The shares then
become authorized and unissued.
ii. If subscriber has paid half or more, and fails to pay the rest within 30 days of written demand, the
corporation must try to sell the stock to someone else for cash (or a binding obligation to pay).
a. If no one will pay the remaining balance, the defaulting subscriber forfeits what
he has paid and the shares are canceled.
b. If someone will pay more than the remaining balance due, the defaulting
subscribers recovers any excess over what he agreed to pay. But, deduct from that
the corporation’s expenses in selling. [Corporation adds the amount given by the
subscriber to the new subscriber’s money to determine if there is any excess].
3. Consideration:☼ What must the corporation receive when it issues stock?
a. Permitted forms of consideration (Five forms):
i. Money
ii. Tangible or intangible Property
iii.
Labor or services already performed for the corporation
1. forming the corporation counts as already performed for the corporation (even
though the corporation did not exist at the time).
iv.
Binding obligation to pay in the future in cash or in property.
v. Binding obligation to perform future services having an agreed value.
b. Prohibited forms of consideration: Anything other than the five permitted forms of consideration.
i. Somebody “pays” with an improper form, it is unpaid stock, all treated as “water.”
c. Amount of Consideration: On new issues, corporation must get at least par value, if there is any.
a. Par means “minimum issuance price.” Can get more, but can’t get less.
b. No par means there is no minimum issuance price. Can sell for any price.
i. Board sets price to sell no par stock, unless the certificate reserves to shareholders.
c. ***Treasury stock is stock that was previously issued and had been reacquired by the corporation.
The corporation may then sell the treasury stock at any price (treated as stock w/ no par value).
d. Acquiring property with par value stock: Form is valid. Property must be at least worth par.
i. Board values the consideration in a par issuance. (Value determination of conclusive if it
is made without fraud). In no-par, Board values unless certificate allows shareholders to.
1. (LP) Value based on fraud Corporate Waste Director’s are liable.
d.
***(LP) Consequences of Issuing par stock for less than par value (“water” stock):☼
a. The corporation (or creditors if the company is insolvent) can sue directors or person buying
the watered stock for the “water” (the difference between par value and what was paid).
i. Director liability: Directors are liable if they knowingly authorized the issuance.
ii. Person buying the stock: Shareholder is charged with notice of the par value and liable.
iii.
Third party: Shareholder transfers water stock to 3rd Party. TP is not liable if
she acted in good faith (did not know about the water). Do not have to paid value (do
not have to be BFP). Can get as a gift. Can pay less than value. Note: Buyer/Directors
still liable.
62
Issuance of Stock (continued)
4.
***Shareholder’s Preemptive Rights☼
a. Preemptive right: right of an existing shareholder to maintain her percentage of ownership by buying
stock whenever there is a new issuance of common stock for money (which includes cash or checks).
i. Treasury stock: Sale of treasury stock is not included (no preemptive rights).
ii. Authorized & sold w/in 2 years: shares authorized by the original certificate and sold
within 2 years of formation DO NOT have preemptive rights, unless certificate says so.
b.
If the certificate of incorporation is silent regarding preemptive rights, do they exist?☼
i. For corporations formed before February 22, 1998 (older corporations): Yes,
preemptive rights are automatic, even when certificate is silent.
ii. For corporations formed on or after February 22, 1998 (newer corporations): No,
the certificate must specify. If it is silent, there are no automatic preemptive rights.
c. Note: There are no preemptive rights when issuance is to acquire property. Only MONEY $$$$$!
Directors and Officers (Major Issue #3) (Heavily Tested)
1) Statutory Requirements for Directors:
a) Number: Corporations must have one or more adult natural person directors.
i) Setting the number: (1) In the bylaws, or (2) by shareholder actions, or (3) by the board if a
shareholder bylaw allows. Not set in the certificate.
ii) If no number is specified, then there is one director.
b) Election: Incorporators elect initial directors. After that shareholders at the annual meeting elect.
i) Classified board: Election need not be yearly. Can be staggered. The board is divided into classes (2,
3, or 4 classes of directors, with at least 3 directors in a class), and one class is elected each year.
c) Removal of directors before the expiration of their term
i) Removal with Cause:
(1) Shareholders can always remove for cause.
(2) Directors can remove other directors for cause, only if permitted in the certificate or bylaws.☼
(a) If silent, board cannot remove a director for cause (exam will usually use silence).
ii) Removal without Cause:
(1) Shareholders only can remove without cause, and only if the certificate or bylaws allow.
(a) If silent, shareholder’s cannot remove without cause.
(2) Directors can never remove other directors without cause.
iii) Note: Director cannot be removed if cumulative voting is in effect and the number of votes cast against
removal would have elected her.
d) Filling a vacancy on the board (e.g., a director dies or resigns or is removed with cause)
i) General rule: The remaining directors selects the person who will serve the remainder of the term.
ii) Special rule: If director is removed by shareholders without cause, shareholders select replacement.
e)
Board of Director’s Action☼
i) Board can take a valid act: (1) Unanimous written consent to act without a meeting; or (2) meeting.
(a) If neither is met, the “act” taken is void, unless later ratified by a valid act.
(b) Meetings: Can be anywhere in the world. Can be via conference call if all participants can
simultaneously hear each other (unless certificate states that no conference calls are allowed).
ii) Notice requirements for board meetings:
(1) Regular Meetings: Notice is not required for regular meetings (time and place usually bylaws).
(2) Special Meetings:☼ Notice is required (the method is set in the bylaws).
(a) If notice is not given to a director: Any action taken at the meeting is void unless the
director not given notice waives the notice defect either (1) in writing & signed at any time
(before meeting OR after meeting) OR (2) by attending the meeting without objection.
iii) No proxy: A Proxy for director voting is void against public policy.
iv) No voting agreements: Voting agreements for director voting are void against public policy.
63
Directors and Officers (continued)
…...Statutory Requirements for Directors (continued)
f) Quorum for a meeting:
i) To do business, we must have a majority of “entire board” (duly constituted board - that means the
number of positions if no vacancies). If quorum breaks during session, business is over.
ii) Once we have a quorum, passing a resolution (which is how the board takes an act at a meeting)
requires majority vote of those present.
iii)
Changing the Quorum/Resolution rules:☼
(1) Decrease a quorum: Change by certificate or bylaw; BUT never less than 1/3 of the directors.
(2) Increase a quorum (make voting tougher): Change by certificate only, not bylaws.
(3) Decrease a resolution: Can never change; resolution requires majority of the directors present.
(4) Supermajority vote (2/3 present) to pass a resolution: Change by certificate only, not bylaws.
2) Role of Directors
a) Generally, board of directors manages business of corporation. It sets policy, monitors and supervises
officers, declares dividends and other distributions, recommends fundamental corporate changes, etc.
b) If the certificate or bylaws allow, a majority of the “entire board” can delegate substantial management
functions to a committee of ONE or more directors. But, the board cannot delegate all powers and
responsibilities to a committee.
i) Committees CANNOT: (1) Amend, repeal, or adopt bylaws; (2) fill a board vacancy; (3) set director
compensation; (4) submit a fundamental corporate change to shareholders.
(1) Committee can recommend these actions. Committees usu. advise on shareholder deriv. suits.
3)
Duty of Care☼
a) A director is a fiduciary with a duty of care.
i) Standard: A director must discharge her duties in good faith and with that degree of diligence, care
and skill that an ordinarily prudent person would exercise under similar circumstances in like position.
ii) Exam Tip: For duty violations, always state the standard first, and then discuss breach and liability.
b) Violations of the duty of care:
i) Nonfeasance: A breach of the duty of care if the director does nothing in furtherance of his duties.
Liability attaches only if his breach caused a loss to the corporation. (Show breach & causation).
ii)
Misfeasance: A breach of the duty of care if the board does something to hurt the corporation (e.g.
lose money). Liability attaches if this breach is not covered under the Business Judgment Rule.☼
(1) Business Judgment Rule: A court will not second-guess a business decision if it was made in
good faith, was reasonably informed, and had a rational basis. (Only in trouble if the board acts
irrationally or with gross negligence). If they deliberate/analyze BJR applies no liability.
4)
Duty of Loyalty (Conflict of Interest)☼
a) A director is a fiduciary with a duty of loyalty
i) Standard: a director must act in good faith and with the conscientiousness, fairness, morality and
honesty that the law requires of fiduciaries. [Business Judgment Rule DOES NOT APPLY].
ii) Exam Tip: For duty violations, always state the standard first, and then discuss violation and remedy.
b) Violations of the duty of loyalty (involves conflicts of interest for the director)
i) Interested Director Transaction:☼ any deal between the corporation and one of its directors (or
business of which its director is also a director or officer or has a substantial financial interest).
(1) Interested director transactions will be set aside UNLESS the director shows either
(a) the deal was fair and reasonable to the corporation when approved OR
(b) the material facts and her interest were disclosed or known and the deal was approved by
(i) Shareholder action; or
(ii) Board approval by sufficient vote, not counting the votes of interested directors; or
(iii) Unanimous vote of disinterested directors if disinterested directors are insufficient to
take an act of the board (i.e. if the disinterested directors are not a majority of present).
1. Note: interested directors count toward a quorum of the board for business, but
their vote doesn’t count.
(2) For Compensation: Board can set compensation of directors in any capacity, unless certificate or
bylaw says they can’t. Compensation must be reasonable and in good faith. If excessive, a waste
of corporate assets. (Waste Breach of duty of loyalty)
(3) Stock options as incentive: A corporation may want to give a director or officer (or any
employee) stock options as an incentive to service. If listed on a stock exchange, use must be
authorized under exchange policies. If not listed, options must be approved by shareholder vote.
64
Directors and Officers (continued)
……Duty of Loyalty (continued)
………..Violations of the duty of loyalty (continued)
ii) Competing Ventures: Director cannot go into competition with the corporation (either as a director of
a competing corporation or by founding a competing corporation).
(1) Remedy: If competes, corp. gets a constructive trust on the director’s profits, maybe damages.
iii) Corporate Opportunity:☼ Director cannot USURP a corporate opportunity.
(1) Qualifications: Something the corporation needs or has an interest or tangible expectancy in, or
that is logically related to its business.
(a) Example: Ross is a director of C Realty Corp., which develops condo projects. Ross learns
of some land that has been zoned for condos and buys it for himself as an investment.
(2) When director can take: Director cannot take until (1) tells the board and (2) board rejects it.
(3) Remedy: If there is usurpation, the usual remedy is a constructive trust.
(a) If director still has it, he must sell it to the corporation at his cost
(b) If director has sold it at a profit, the corporation gets the profit.
5) Other State Law Bases of Director Liability (not duty of care nor duty of loyalty violations)—
a) Ultra vires act (discussed above).
b) Watered stock (discussed above).
c) Improper loans: The board of directors votes to lend a director money from corporate funds. Valid?
i) For corporations formed on or before February 22, 1998 (older corporations): shareholder vote
required (in which a quorum is a majority of disinterested shares), unless the certificate allows board
to decide that a loan benefits the corporation.
If the loan is
ii) For corporations formed after February 22, 1998 (newer corporations): instead of shareholder for personal
use only (i.e no
vote, all that is needed is the board conclusion that the loan benefits the corporation.
benefit to
iii) Sarbanes-Oxley Act restricts loans to executives in registered Corporations.
corp), need
d) Improper distributions (discussed below).
shareholder
6)
approval.
When Directors are liable, exactly which directors are liable?☼
a) General rule: A director is presumed to have concurred with board action unless her dissent is noted in
writing in corporate records (An oral dissent is NOT good enough).
i) To note in writing in the corporate records, must
(1) Get it in the minutes; or
(2) Send it in writing to the corporate secretary at the meeting; or
(3) Send a registered letter to the corporation promptly after adjournment.
(a) Director cannot dissent if he voted for the resolution at the meeting.
b) Exceptions: Director will not be liable when—
i) Director missed a meeting: Director is not liable if she registers written dissent within reasonable
time after learning of the action. (Deliver the dissent or sending by registered mail to the secretary)
ii) Good faith reliance☼ on information, opinions, reports, or statements by
(1) officers or employees whom the director or officer believes competent and reliable,
(2) lawyers or public accountants whom the director or officer believes are acting competently, or
(3) a committee of which the person relying is not a member, as to matters within its authority.
7) Officers
a)
Officers owe the same duties of CARE and LOYALTY as the directors☼
Power to bind:
Look for actual, b) Status: officers are agents of the corporation, so they can bind the corporation to deals if they have agency
authority to do so. (Watch for a cross-over with agency.)
apparent, or
ratification of
c) Positions: The Board may select a president, one or more vice-presidents, a secretary, a treasurer, and any
contract entered
others the Board may determine or for which the bylaws provide.
into by officer.
i) One person can hold multiple offices simultaneously.
President has
d)
Selection and removal of officers☼
apparent authori
to make ordinar
i) Directors select and remove officers, unless the certificate allows shareholders to elect them.
contracts (not to
(1) If shareholders elect them, only the shareholders can fire them. Directors can suspend for cause.
make unusual o
(2)
If directors remove an officer, the corporation may be liable for breach of contract damages.
extraordinary
Officer cannot get his job back. He can only get damages. Cross-over with contracts.☼
contracts-outside
scope of bus.).
ii) Judicial action: The attorney general or holders of 10 percent of all shares may sue for a judgment
removing an officer for cause. Court can bar reappointment of a person so removed from office.
iii) Compensation of officers: set by directors.
65
Directors and Officers (continued)
8) Indemnification of Directors and Officers
a) Indemnification is sought when a person is sued in her capacity as officer or director and incurs costs,
attorneys’ fees, fines, a judgment or settlement; she seeks reimbursement from the corporation.
i) Action by or on behalf of the corporation (corp. suing the officer or director)—three possibilities:
(1) Prohibited: reimbursement is prohibited if the officer or director was held liable to the corporation
(2) Of right: the corporation must reimburse the director or officer if she was successful in defending
the action on the merits or otherwise.
(a) Enforcement of right: If corporation refuses to reimburse, and the director/officer sues the
corporation to force it to reimburse her, and wins, she CANT recover attorney’s fees for 2nd
suit.
(3) Permissive: Situation not satisfying (a) or (b), the corporation may reimburse the officer or
director. Director/officer must show that she acted in good faith and for a purpose reasonably
believed to be in the corporation’s best interest.
(a) Reimbursement in the “permissive” category can include settlement amount, expenses
and attorney’s fees (not any judgment, though)
(b) Eligibility determined by:
(i) The Board (with a quorum of directors being non-parties); or, if there is no such quorum,
(ii) Shareholders or a quorum of those directors who are disinterested; or
(iii) The Board pursuant to report from independent legal counsel.
ii) Action by or for someone other than the corporation, reimbursement is permitted if the director or
officer shows she acted in good faith and for a purpose reasonably believed to be in the best interest
of the corporation.
(1) In a criminal case, must also show she had no reason to believe her conduct was unlawful.
(2) Reimbursement can include judgment, settlement, expenses and attorney’s fees.
b) Court ordered reimbursement: the court in which the officer or director gets sued can order the
corporation to reimburse the officer or director for litigation expenses and attorney’s fees, if it finds the
director/officer is reasonably entitled to it. It cannot include a judgment against.
c) Certificate or bylaws can provide for indemnification by (1) resolution of board or (2) shareholders or
(3) by agreement, unless the director or officer acted in bad faith (was deliberate and dishonest in a way
material to the case or wrongfully profited).
d) Advances: Corporation can advance litigation expenses to the director or officer, but she must repay
them if its turns out that she is not entitled to reimbursement.
e) Insurance: Corporation can buy insurance to cover director and officer liability.
f) Certificate may provide for elimination of director liability to the corporation or shareholders for
damages for breach of duty (generally duty of care, not duty of loyalty violations) EXCEPT:☼
i) Where a judgment adverse to the director established that the director acted in—(1) bad faith; or (2)
with intentional misconduct; or (3) received an improper financial benefit; or (4) approved an
unlawful distribution or loan.
Shareholders (Major Issue #4) – Heavily Tested
1) Holding shareholders liable for the debts of the (closed) corp (state general LL rule first, then exception).
a) Pierce the corporate veil:☼ Courts can pierce and hold shareholders personally liable if they have abused
the privilege of incorporating and if fairness demands that the shareholders not have limited liability.
i) Purpose: Prevent fraud or achieve equity /Prevent use of corporation as cloak for illegality when—
(1) Alter ego (identity of interests, agency, excessive domination):
(a) dummy corporation: shareholders carry on business in personal capacity; purely personal.
(b) Parent controls the daily operations of a subsidiary—true movers behind sub’s action.
(c) Group of separate corporations are operated as one—dominated; no mind, existence, or will.
(i) NOTE: In NY, Person commingles personal and corporate funds; uses corporate car as
own; uses corporate credit card for personal use are likely not enough (tough standard).
(ii) There is no PCV if the corporation has any mind, existence, or will of its own.
(2) Undercapitalization when formed: Shareholders fail to invest enough to cover prospective
liability. For liability in NY, need to also show excessive domination or fraud or illegality.
ii) Types of actions: PVC is more likely in a tort than contract (just throw it in).
b) Wages:☼ In a close corporation, the ten largest shareholders are personally liable for wages and
benefits to the corporations’ employees.
66
Shareholders (continued)
2) Shareholder Management of Corporation
a) Generally, the board of directors (not shareholders) manage the corporation. Public policy: Board must
exercise the management power, and that shareholders should not encroach directly on that power.
i) There is a trend away from that public policy in some instances.
b) Shareholders can manage the business directly in a close (or "closely held") corporation: one that has
few shareholders and there is no public market for the stock. (Most corporations on the Bar exam are
close corporation). In a close corporation, shareholders can do away with the board.
i) Power is vested in the shareholders to manage a close corporation in the certificate. A provision
in the certificate can restrict or transfer Board power to shareholders or others, if:
(1) all incorporators or shareholders (voting and nonvoting) approve it;
(2) all subsequent shareholders have notice;
(3) it is conspicuously noted on front and back of all shares; and
(4) shares are not listed on an exchange or regularly quoted over-the-counter.
ii)
In a close corporation run by shareholders, managing shareholders have a duty of care and loyalty.☼
(1)
Trend toward imposing fiduciary duties on shareholders in their dealings with each other.
Especially, controlling shareholders cannot use their power for personal gain at the expense of
minority shareholders or the corporation or to oppress minority shareholders or the corporation.
They owe a duty of utmost good faith.☼
(a) Courts are increasingly willing to protect minority shareholders in a close corporation because
they have no way out. The duty is owed not to the corporation but rather director to the
minority shareholder.
c) Professional service corporations: Members of a licensed profession, like doctors and lawyers, cannot
practice the profession through a general business corporation. But they can form a professional service
corporation, usually abbreviated “P.C.”
i) Licensed professionals: Shareholders, officers, and directors must be licensed. Employees do not.
ii) Liability:
(1) Malpractice: the professionals are liable for their own malpractice, but not of the others.
(2)
Contracts: the entity (not the professionals) is liable for contracts entered by the entity and for
rent due on leases in the P.C.’s name.☼
iii) Requirements: In general, the P.C. is governed by rules of the business corporation. Certificate must
meet the general corporation requirements except for the use of “P.C.” and must indicate the
profession to be practiced and include the names and addresses of the original shareholders,
directors, and officers. There must also be certification that each shareholder, director, and officer is
licensed to practice the profession.
(1) If one of the shareholders dies or is disqualified from the practice, PC must purchase his stock.
3)
Shareholder Derivative Suits (Shareholder as Plaintiff)☼
a) Derivative suit: shareholder suing to enforce the corporation’s claim, not her own personal claim. Where
the corporation is not pursuing its own claim, shareholder steps in to prosecute the claim.
i) Always ask: Could the corporation bring this suit?
(1) Examples: breach of contract, violation of duty of care or loyalty (corporate opportunity, waste).
(2) Examples of personal claim: corporation did not honor shareholder’s preemptive rights.
ii)
Recovery: Generally, recovery goes to the corporation. Shareholder gets costs and attorney’s fees.☼
(1) Shareholder recovery: Shareholder may be able to recover if recovery by the corporation would
return the money to the people who are breaching their duties (against whom the claim arises).
(a) Ex. In a close corporation with 3 shareholders – court may give to 2 of 3, if 3rd breached.
iii) Unsuccessful suits: Shareholder does not recover costs and expenses. Shareholder is likely liable to
the defendants for costs, but not for attorney’s fees (in a lot of states we can have this judgment
include attorney’s fees if Shareholder sued without reasonable cause).
(1) Res judicata: other shareholders cannot later sue the same defendants on same transaction.
Continued
67
Shareholders (continued)
…...Shareholder Derivative Suits (continued)
b) Requirements for bringing a shareholder derivative suit: (Note-- A director or officer can sue another
director or officer on behalf of the corporation to account for violating duties without these showings)—
i) Stock ownership: The person bringing suit must have (1) owned stock (or held a voting trust
certificate) at the time the claim arose or have gotten it (2) by operation of law (inheritance and
divorce decree) from someone who owned the stock when the claim arose.
(1) Duration: must own stock when the action is brought and through entry of judgment.
ii) Adequate representation: Must adequately represent the interests of corporation and shareholders.
iii) Demand: Must also make a demand that directors bring suit unless it would be futile.
(1) Futile: If **(1) majority of the board is interested or under the control of interested directors; or
(2) the board did not inform itself of the transaction to extent reasonable under the circumstances;
or (3) the transaction is so egregious on its face -- could not be sound business judgment.
(2) Special pleading requirement: Plaintiff must plead with particularity her efforts to get the board
to sue or why demand is excused.
iv) Security: The plaintiff shareholder can be required to post security for costs unless plaintiff owns 5%
or more of any class of stock or her stock is worth more than $50,000.
c) Board refuses demand (unlikely scenario on exam since demand would be excused in this case): If
demand is made and refused, Shareholder can sue only if she can show a majority of the board is interested
or its procedure was incomplete or inadequate.
d) Special litigation committee: If Shareholder brings a derivative suit, and the corporation wants it
dismissed, corporation can move to dismiss based on finds by independent directors (or a committee).
Special litigation committee can decide that a suit is not in the corporation’s best interests (e.g., low chance
of recovery, or cost of suit will exceed recovery).
i) The Court will look at (1) independence of those making the investigation; (2) the sufficiency of the
investigation, in deciding whether to dismiss the suit.
e) (Rarely tested) The corporation is jointed as a defendant, because it did not sue.
f) Party settlement/dismissal: Only with court approval. The court may notify shareholders whose interests
will be substantially affected.
4) Voting – Occasionally tested
a) Who Votes?
i) General rule is that record owner as of record date has the right to vote (Note: may not be a person
that still owns the stock – if stock is sold, but seller was record owner of record date, seller votes).
(1) record owner: person shown as the owner in the corporate records.
(2) record date: voter eligibility cut-off, set no fewer than 10, no more than 60 days before meeting.
ii) Exceptions to the general rule that the record owner on the record date votes:
(1) Even if it is the record owner on the record date, corporation does not vote treasury stock.
(Corporation does not vote the stock it holds in treasury).
(2) Death of shareholder (executor can vote the shares).
(3) Proxies: A proxy is a 1) writing (fax, email), 2) signed by record shareholder or authorized
agent, 3) directed to secretary of corporation, 4) authorizing another to vote the shares.
(a) Duration: Proxy is good for 11 months unless it says otherwise.
(b) Revocation: can revoke a proxy, even if it says it is irrevocable.
(i) Proxy coupled with an interest: this is an irrevocable proxy—If (1) it says irrevocable
and (2) proxy with interest – the proxy-holder has some interest in the shares other than
voting (i.e. S sells B her shares after the record date but before the annual meeting).
iii) Voting trusts and voting agreements
(1) Voting trust (block voting): (1) written trust agreement controlling how the shares will be
voted; (2) copy to corporation; (3) transfer legal title of shares to voting trustee; and (4) original
shareholders receive voting trust certificates and retain all shareholder rights except for voting.
(a) Term: 10 year max, but within 6 months of expiration, can extend for another term (10 years).
(2) Voti\ng agreement (pooling): (1) in writing and (2) signed. (Note: Not specifically enforceable).
(a) Proxy: proxy to voting agreement is irrevocable if it says so.
(b) Special circumstances of a close corporation: Directors cannot enter into voting
agreements. If two shareholders agree to vote each other as directors, cannot agree about
what actions they will take as directors. (Permissible to use best efforts to cause corp. to act).
68
Shareholders (continued)
…...Voting (continued)
b) Where do shareholders vote?
i) Two ways shareholder can take a valid act:☼ (1) unanimous written consent, signed by the holders
of all voting shares to act without a meeting; or (2) a meeting.
(1) Exception: If the certificate allows, can take action without meeting if there is agreement in
writing of the holders of a majority of the shares entitled to vote (all stock).
ii) Annual meeting (can be held anywhere): Where shareholders elect the directors.
(1) Court can order the annual meeting if not held.
iii) Special Meetings (can be held anywhere): Can be called by (1) the board or (2) named in certificate.
(1) Elect Directors: A special meeting to elect directors must be called by the Board if there is a
failure to elect a sufficient number of directors to conduct the business of the corporation. If the
Board fails to call such a meeting, the holders of 10 percent of the voting shares may demand in
writing that the corporation hold the meeting. In this case, the corporate secretary must give
notice of the meeting. If the secretary fails to do so, the shareholders may give the notice.
iv) Notice requirement:☼ must give written notice (e-mail is OK) to every shareholder entitled to vote,
for every meeting (annual or special) between 10 and 60 days before the meeting. When and where.
(1) For both: must inform if the proposed action would entitle shareholders to appraisal rights and
tell why (and even include the statute about appraisal rights).
(2) For special: (1) who called it and the (2) purpose of the meeting (because this limits the business
that can be done at that meeting).
(a) Purpose: Must be proper for SH (ex. Removing a director, not removing an officer).
(3) Failure to give proper notice to all shareholders’ action taken at the meeting is void unless
those not receiving notice waive the notice defect.
(a) Express: in writing and signed anytime; or
(b) Implied: if attend the meeting without objection
c) How do Shareholders vote?
i) There must be a quorum at the meeting (requires a majority of outstanding shares, not shareholders).
Once a quorum is met, it is not lost if people leave the meeting (Note: different than directors rule).
(1) Reducing quorum: in certificate or bylaws but never fewer than 1/3 of shares entitled to vote.
(2) Increasing quorum: in certificate can require supermajority quorum.
(3) Reducing majority approval for passing resolution: never! Majority or more required.
(4) Increasing majority approval for passing resolution: in certificate can require supermajority.
ii) Resolutions: If quorum is met, a majority may act to bind the corporation. Majority means majority of
the shares actually voting in favor or against the proposal. (Abstentions don’t count.)
d) How and when do shareholders use Cumulative Voting?
i) Cumulative voting is only available in voting for directors.
(1) Formula: Multiply number of shares times number of directors to be elected.
(2) Use: Can apply all votes to one seat or divide among many seats.
(3) Authorization: Cumulative voting exists only if the certificate allows.
ii) How many shares are needed to elect a board member with cumulative voting? You need one
share more than this percentage—
100
(1)
X + 1 (X is the number of directors being elected)
5) Sale of Stock by Shareholder
a) Free transferability: Can give away or sell. Can sell for any price (even less than Par). Par only applies
to the corporation when it is making an issuance (i.e. corp selling its own stock).
b) Restrictions: Set in the certificate or bylaws or by agreement.
i) Right of First Refusal: Corporation requires holder to give it the first right to purchase if holder sells.
(1) Action against the selling shareholder: Stock transfer restrictions will be upheld provided that
they are reasonable under the circumstances, which means not an undue restraint on alienation.
(a) A right of first refusal is acceptable so long as the price offered is reasonable.
(2) Action against transferee (buyer) of stock: cannot be invoked against transferee unless either 1)
it is conspicuously noted on the stock or 2) the transferee had actual knowledge of the restriction.
ii) Approval right: Restriction that corp. give approval to sell is unlikely to be valid.
69
Shareholders (continued)
6) Rights of shareholders to inspect (and copy) the books and records of the corporation.
a) Note: Directors have unfettered access to the books and records.
b) Shareholders have different statutes granting them access:
i) Statute: a right to any shareholder upon 5 days written notice to inspect and copy (1) minutes of
shareholder proceedings and (2) the record of shareholders.
(1) The corporation can demand that the shareholder give an affidavit that (1) his purpose is not other
than in the interest of the corporation and (2) he has not within 5 years tried to sell any list of
shareholders. No more detail than that may be demanded.
(2) Shareholder refusal of affidavit means that the corporation may deny access.
ii) Statute: a shareholder can make a written request for the corporation’s latest annual balance sheet,
profit and loss statement and latest interim statements distributed to shareholders or public.
Corporation must provide the documents; can do so by mail.
iii) Statute: right to inspect and copy a list of the current directors and officers. Any shareholder can
demand that on 2 day’s written demand.
c) Common law right to inspect: For all shareholders, to inspect records at a reasonable time and proper
place for a proper purpose (related to her role as a shareholder). Scope is unclear; may be very broad.
7) Distributions: Payments to shareholders in the form of (1) dividends, (2) payment to repurchase shares, or (3)
to redeem shares [forced sale to corporation at price set in certificate]. Not a stock split.
a) Declaration: Distributions are declared in the Board’s discretion. Thus, there is no shareholder “right” to a
distribution until it is declared.☼ (Once it’s declared, the shareholders affected have a right to it.)
i) Court order: A court will interfere with the Board’s discretion and order a distribution only on a
showing of bad faith or dishonest purpose.
b) Which Shareholders get Dividends? Rarely tested.
i) Common Stock: Divide dividend $ amount by number of shares.
ii) Common & Preferred: Preferred have fixed value and take first off the top. Rest to Common.
iii) Common & Preferred Participating: Preferred takes first for the fixed value preference amount AND
get paid again with the Common.
iv) Common & Preferred Cumulative: Preferred takes first and gets fixed value times the number of
years in which no dividend was paid (plus this year). Rest to Common.
c)
Which funds are used for ANY distributions?☼
i) Surplus: Assets – liabilities – stated capital = Surplus Capital (i.e. Net assets – stated capital). Surplus
can be used for distributions at the board’s discretion.
ii) Stated Capital:☼ Can never be used for distributions. Stated Capital is computed the following way—
(1) Par Stock: Stated Capital is the par value of the stock. The excess over par goes into surplus.
(2) No Par Stock: Within 60 days after issuance, the Board can allocate any part, but not all, to
surplus. If the Board does not do this, it is ALL stated capital.
d)
Making Distributions: Corporation can make distributions even though it lost money last year;
corporation cannot make distributions if it is insolvent or if the distribution would render it insolvent (i.e.,
After the distribution the corporation is insolvent).☼
i) Insolvent: Corporation is unable to pay its debts as they come due in the ordinary course of business.
e)
Liability: Directors are personally liable for unlawful distributions, as are shareholders who knew the
distribution was unlawful when they received it.☼
i) The corporation can sue. That also means it can be a derivative suit. Also, A director or officer can sue
on behalf of the corporation.
ii) Note: Remember, however, directors' possible defense of good faith reliance. (See above).
f) Redemptions are set in certificate, and must be done proportionately within each class of stock.
Repurchases are individually negotiated, and can discriminate except in close corporation, where
must give equal opportunity to all shareholders.
70
Fundamental Corporate Changes (Major Issue #5) – Moderately Popular Topic
1. Characteristics of Fundamental Corporate Change
a. Changes that are so fundamental that, most of them require both that the directors approve and that
the shareholders approve. In addition, in most, the corporation must notify the Department of State
by delivering a document which the Department files.
b. Appraisal rights (only in closed corporations): The dissenting shareholders’ right of appraisal is the
right of a shareholder to force the corporation to buy her shares at fair value.
i. Actions by corporation triggering the shareholder’s right of appraisal:
1. Some amendments to the certificate;
2. **consolidation;
3. **your corporation merges into another corporation;
4. **your corporation transfers substantially all of its assets; or
5. your corporation’s shares are acquired in a share exchange
a. BUT even if the corporation is doing one of these things, there is no
right of appraisal if the company is listed on a national securities
exchange or NASDAQ. Why? In a publicly traded corporation, a
disgruntled shareholder can sell her stock on the market.
ii. Actions taken by shareholders to perfect the right:
1. Before the shareholder vote, file written objection and intent to demand payment.
2. Abstain or vote against the proposed change.
3. After the vote, make written demand to be bought out.
iii.
If the shareholder and the corporation cannot agree on fair value, the
corporation sues and the court determines the value. (Note: No “minority discount” in
NY—cannot undervalue)
2. Amendment to the Certificate of Incorporation (rarely tested)
a. Minor changes: relating to office location, registered agent, etc. are made by Board.
b. Major changes: change of name, purpose or duration, increase or decrease of shares or par,
creation of new classes of stock, denial or grant or limitation of preemptive rights, must be approved
by (1) director action (i.e. Approval and recommendation) and (2) a majority of the shares entitled
to vote (majority of ALL shares outstanding, and not just a majority of those actually voting).
c. Amendments to change or strike a supermajority quorum or voting requirements for Board of
Director voting or to strike a provision restricting Board authority: follow approval required—
i. For corporations formed on or before February 22, 1998 (older corporations): Must get
Board approval and shareholder approval by 2/3 of the shares entitled to vote.
ii. For corporations formed after February 22, 1998 (newer corporations): Must get Board
approval and shareholder approval by a majority of the shares entitled to vote.
d. Amendment to change or strike a supermajority quorum or voting requirement for Shareholder
(not director) voting: need director approval & shareholder approval by 2/3 of shares entitled to vote.
e. Filing: If amendment is approved, deliver certificate of amendment to Department of State for filing.
f. Dissenting shareholder rights of appraisal: if the amendment alters or abolishes a preference,
changes redemption rights, alters or abolishes a preemptive right or limits voting rights.
3. **Mergers [A Corp. merges into B Corp.] OR Consolidations [A Corp. and B, Inc. form C Corp.]
a. Process: Each company’s board adopts a plan of merger (or consolidation) and each corporation’s
shareholder’s approve. Shareholder votes required for approval—
i. For corporations formed on or before February 22, 1998 (older corporations): Must get
approval by 2/3 of the shares entitled to vote.
ii. For corporations formed after February 22, 1998 (newer corporations): Must get
approval by a majority of the shares entitled to vote.
b. Short-form merger: No shareholder approval required in “short-form” merger, where a parent
Short form reqs:
1) board of parent
corporation owns 90%-or-more of each class of stock of a subsidiary that is merged into a parent.
adopt plan
c. Filing: Deliver certificate of merger (or consolidation) to Department of State for filing.
2) notice: plan give
d. Appraisal rights: For mergers, only those shareholder’s who disappeared. For consolidations both
to outside
constituents. And short-form mergers, minority subsidiary holders even though they didn’t have a vote.
shareholders of sub
(minority) and
e. Effect of merger or consolidation: General rule of successor liability☼—the surviving company
3) certificate must
succeeds to all rights and liabilities of the constituent companies, which have disappeared.
be filed not less
than 30 days after
notice.
Continued
71
Fundamental Corporate Changes (continued)
4. Transfer (not just a mortgage) of ALL or SUBSTANTIALLY ALL of the Assets (not in the ordinary
course of business) OR A Share Exchange (one company acquires 1 or more classes of stock of another)
a. These are fundamental changes for the selling corporation only. (Not for buying corporation).
i. Ex. S Corp. wants to sell all assets to B, Inc., or B, Inc. wants to acquire all S Corp’s shares.
A mortgage of
substantially all of
b. Process: Each company’s board authorized the deal (or consolidation) and each corporation’s
the assets is not a
shareholder’s approve. Shareholder votes required for approval (seller’s votes only)—
fundamental
i. For corporations formed on or before February 22, 1998 (older corporations): Must get
change and so may
approval by 2/3 of the shares entitled to vote.
be approved by
board action
ii. For corporations formed after February 22, 1998 (newer corporations): Must get
alone.
approval by a majority of the shares entitled to vote.
1. Note: Buyer’s shareholders do not vote to approve the purchase.
c. Share exchange: deliver plan of exchange with the Department of State for filing.
d. Transfer of assets: no filing is required.
e. Appraisal Rights: For shareholders of the selling corporation only. Not for the shareholders of the
buying corporation (because it is not a fundamental corporate change for the buyer).
i. Exception: no right of appraisal even for shareholders of selling corporation if a sale of assets
is for cash and the company will dissolve and distribute cash to shareholders within one year.
Such a corporation is essentially dissolving.
f. Liability: General rule is no successor liability (different from the merger b/c selling of assets
means A still exists)☼—the company acquiring assets will not be liable for the torts of the company
whose assets it acquired unless (1) the deal provides otherwise, or (2) the purchasing company is mere
continuation of the seller, or (3) the deal was entered fraudulently to escape such obligations.
5.
Dissolution – most popular topic in fundamental changes☼
a. Voluntary (never tested): No Board vote necessary. Shareholder vote is required—
i. In NY, For corporations formed on or before February 22, 1998 (older corporations):
Must get approval by 2/3 of the shares entitled to vote.
ii. For corporations formed after February 22, 1998 (newer corporations): Must get
approval by a majority of the shares entitled to vote.
1. Either way, certificate of dissolution delivered to the Department of State for filing.
b. Involuntary:☼ Judicial - someone is asking for a court order of dissolution.
i. By Board resolution or resolution of majority of shares entitled to vote, stating that
corporation has insufficient assets to discharge liabilities or that dissolution would be
beneficial to shareholders (unlikely).
ii. One-half or more of shares entitled to vote may petition if directors too divided to manage or
shareholders too divided to elect directors or magnitude of internal dissention makes
dissolution beneficial to shareholders (unlikely).
iii.
Any shareholder entitled to vote may petition if shareholders unable to elect
directors for two annual meetings (unlikely).
iv.
20% percent☼ or more of voting shares (groups allowed) in corporation
whose shares are not traded on a securities market (only closed corporation) may petition on
either:
1. Management’s illegal, oppressive (conduct that substantially defeats the
expectation of minority shareholders), or fraudulent acts toward complaining
shareholders OR
2. Management’s wasting, diverting, or looting assets.
a. Management: Directors or managing shareholders in a closed corporation.
c. Denial:☼ Court may deny dissolution if there is some other way the complaining shareholder can
obtain a fair return on his investment, e.g., by ordering buy out. Court will consider whether
liquidation is necessary to protect the petitioners and is the only way to get fair return on investment.
d. *Avoiding Dissolution: corporation or non-complaining shareholders can avoid dissolution by, within
90 days of the petition, buying the petitioners shares at fair value on terms approved by the court.
e. Winding up (liquidating): After dissolution, the corporation exists to liquidate-- (1) gather all
assets, (2) convert to cash, (3) pay creditors (first, no matter what, even if shareholders agree to take
first), and (4) distribute remainder to shareholders, pro-rata by share unless there's a dissolution
preference.
72
Controlling Shareholders and related topics (Major Issue #6) (Least tested, only occasionally)
1. TRADITIONAL RULE: Outside the close corporation, shareholders generally do not owe fiduciary duties to
each other or to the corporation. They can act in their own self-interest.
2. CONTROLLING SHAREHOLDER
a. Duties owed:☼ A shareholder who also occupies a control position (such as a director position)
or whose ownership is such that she has working control over the corporation owes a fiduciary
duty to minority shareholders and, sometimes, to others (including the corporation). Cannot use
a dominant position for individual advantage at the expense of minority or corporation.
i. Problem usually arises in close corporation, but can be in public too.
b. Sale of Controlling Shareholder's Interest: Control shareholder can sell her shares at a premium
(no case imposes liability for this). But, courts may impose liability in this situation IF something
else happened too…
i. Controlling shareholder sold to looters without making a reasonable investigation.
1. Watch for facts that would put a reasonable person on notice of a problem, e.g.,
agent approaches controlling shareholder on behalf of an undisclosed principal.
2. Remedy: (1) Disgorge the sellers profit AND (2) the seller is probably liable for
all damage to the corporation.
ii. Controlling shareholder de facto sells a corporate asset (buyer did not want control,
wanted to loot the asset).
1. Remedy: All shareholders should share in the premium paid by the buyer.
iii.
Controlling shareholder sells a corporate office, e.g., a position on the
Board, sell shares and then seller and her friends on the Board then leave.
1. Note: Fiduciaries cannot sell their position.
2. Remedy: Disgorge the profit.
3. Freeze-out mergers: All mergers must have a legitimate corporate purpose, even though approved by the
requisite number of shares. Watch for “freeze-out” merger aimed solely at cashing out minority shareholders
unfairly. Usually, majority shareholders cause their corporation to merge with another corporation which they
own. The minority shareholders’ shares are purchased for cash, so they have no interest in either corporation.
Courts may be increasingly protective of minority.
a. Court will probably look at the transaction as a whole. It will look at price and the entire
course of dealing. Factors:
i. whether the deal is tainted by self-dealing or fraud;
ii. whether the minority shareholders are dealt with fairly;
iii.
whether there is a legitimate business reason for the merger.
4. Market trading on inside information. Suppose a director or an officer engages in market trading based upon
inside information from the corporation. She makes a profit by doing so. In New York, the director or officer
has breached a duty to the corporation by doing this.
a. Remedy: The Corporation can sue to recover the profit he made in market trading.
5. Common law prohibition on insider trading: Nondisclosure of "special facts" (or “special circumstances”).
All directors and officers (and probably controlling shareholders) owe an affirmative duty to disclose special
facts in a securities transaction with a non-insider. Cannot trade on secrets; they must disclose or abstain.
a. Special facts: Those a reasonable investor would consider important in making an investment
decision. They bear on potential value of the securities.
i. Note: If director makes affirmative misrepresentations to the buyer, director is
committing common law fraud.
b. Suit: A shareholder with whom the director or officer deals and violates the special facts doctrine
can sue for damages.
c. Measure of damage: difference between price paid and value of stock a reasonable time after
public disclosure (i.e. if price went up after disclosure to the market, there are damages).
73
Evidence (Federal Rules of Evidence with CEC Distinctions)
Relevance (Major Issue #1)
1. Basic Principles: Evidence is RELEVANT if it has any tendency to make material fact more probable or less
probable than would be the case without the evidence.
2. CA distinction WTF IS PROP 8?: Prop 8: in criminal proceedings, all relevant evidence is admissible.
3. The Rule: All relevant evidence is admissible, unless there is an exception—
a. Some specific exclusionary rule is applicable, or
b. The court makes a discretionary determination that the probative value of the evidence is
substantially outweighed by pragmatic considerations. (Six types of pragmatic considerations)
i. Danger of unfair prejudice (Prejudice to a party).
Judge and Witnesses
ii. Confusion of the issues (Confusion for the jury).
J can call any witness.
iii. Misleading the jury (Confusion for the jury).
Cross Examinations
iv. Undue delay (Waste of time for the judge).
Judge may exercise
v. Waste of time (Waste of time for the judge).
reasonable control
vi.
Unduly cumulative (Waste of time for the judge).
over the examination
1. Exam Tip: Judges have wide discretion to balance probative value with pragmatic
of a witness to aid in
getting the truth, avoid
considerations and the determination will be fact specific. As a result, it is difficult
waste of time, protect
to formulate MBE questions on this issue (essays, define relevance and exceptions).
witness. Can cut-off
2. Note: “Unfair surprise” is not a reason to exclude evidence.
examination.
4.
Policy Based Exclusions: Rationale is a balancing of relevance and pragmatic considerations and the
encouragement of beneficial out-of-court conduct.
a. Liability Insurance
i. Rule: Evidence that a person has (or does not have) liability insurance is inadmissible for
the purpose of proving fault or absence of fault (i.e. to prove negligence).
1. Key concept: purpose determines the admissibility of evidence.
ii. Exception: Such evidence may be admissible for some other relevant purpose, such as
1. proof of ownership or control, if that issue is controverted (in dispute); or
2. impeachment of a witness (who may show bias)
a. Bias relationship between witness and party could cause witness to lie.
Bias purpose is almost ALWAYS admissible.
iii. Dual Purpose evidence: When evidence is admissible for one purpose, but inadmissible
for another purpose, the judge should give the jury a “limiting instruction” (mention in
essay)
b. Subsequent Remedial Measures (SRMs)
i. What are SRMs? Repairs, design changes, or policy changes taken after an accident that
could have prevented the accident.
ii. Federal Rule: Subsequent Remedial Measures are inadmissible for the purpose of proving
(1) negligence; (2) culpable conduct; (3) product defect; or (4) a need for a warning.
1. Rationale: encourages post accident repairs.
iii. Exception: Such evidence may be admissible for some other relevant purpose, such as
1. proof of ownership or control if that issue is controverted, or
2. feasibility of a safer condition, if that issue is controverted (e.g. defense says
it is impossible to make it safer).
a. Ex. Cannot show feasibility of the change if it is not in dispute.
iv. CA distinction: SRMs are admissible in a products liability action based on strict liability
(i.e. manufacturing defect /defective design/failure to warn cases).
c. Settlements in Civil Cases
i. Rule: (1) If there is a disputed claim¸ (2) evidence of settlements, offers to settle, or
statements made in settlement discussions are (3) inadmissible if used to prove liability.
1. Rationale: To encourage settlements and frank settlement discussions.
2. Statements: Even statements of fact that are admitted in settlement are out.
3. Disputed claim: The ban on settlement evidence only applies if, at the time of
the discussion, there is a claim (a demand of some sort; does not have to be a
lawsuit) and that claim is disputed by the other side (either validity or amount).
a. Ex. A spontaneous offer to settle after an accident is admissible.
ii. Exception: Settlement evidence may be admissible if offered to impeach a bias witness.
74
Relevance (continued)
.......Policy Based Exclusions (continued)
d. Offer to Pay Hospital or Medical Expenses
i. Rule: Evidence that a party has paid or offered to pay an accident victim’s hospital or
medical expenses is INADMISSIBLE to prove liability. (Rationale: Encourage charity).
1. Ex. A spontaneous offer to PAY Medical Bills after an accident is inadmissible;
but spontaneous admission of liability is admissible (there is no disputed claim,
so this is not a settlement offer—the statement re: liability is valid).
2. CA distinction: Both the offer to pay and the accompanying admission of fact
are inadmissible to prove liability.
e. Pleas and Plea Discussions in Criminal Cases
i. Rule: The following are inadmissible against a defendant in a PENDING CRIMINAL
litigation or in a SUBSEQUENT CIVIL case—
1. An offer to plead guilty;
2. A withdrawn guilty plea
3. Nolo plea (plead no contest; do not admit or deny guilt) – always evidence Q.
4. Statements of fact in connection with offer to plead guilty; a withdrawn
guilty plea; or a nolo plea.
ii. Note: A plea of guilty that is not withdrawn is admissible against the defendant in
subsequent litigation based on the same facts in both federal court and California court.
f. CA distinction: Statements made in the context of mediation proceedings are all protected (no FRE
counterpart).
5.
Character Evidence☼
Character evidence refers to a person’s general propensity or disposition, e.g., the character traits of
honesty (or dishonesty), peacefulness (or violence), carefulness (or carelessness).
Four questions: (1) What is the purpose, (2) What is the method to prove character? (Specific acts, opinion
testimony, reputation in the community, etc.) (3) is it criminal or civil, and (3) what is the pertinent character
trait (the specific trait which is substantively at issue in the case)?
Purpose Matters: Different types of purpose for which the evidence is offered—
o Propensity: If evidence of a person’s character trait is offered to prove that the person has a
“propensity” to act in a certain way (“conduct in conformity”) -- NOT OK.
o Veracity of witness: Evidence of a witness’s character for truthfulness offered to impeach.
o Non-propensity purpose: If evidence of person’s prior bad act is offered for some purpose
other than proving propensity.
o Trait as element: If evidence of a person’s character trait is offered because the trait is an
essential element of a claim or defense.
Note: There is no crime where a character trait will be an element of a crime or
element of a defense.
General Rule: Character evidence is not admissible to prove propensity. Character evidence is
admissible for proving veracity of a witness; a non-propensity purpose; or trait as element.
A. Character Evidence in Criminal Cases (rules differ from Civil cases)
1. Defendant’s (good) character offered by DEFENDANT
i. Rule: Evidence of the defendant’s character by the prosecutor is generally not
admissible to prove propensity (“conduct in conformity”) until and unless D opens one
or both doors (to D and V character traits).
ii. Exceptions: When Defendant can introduce and when Prosecution can introduce—
1. Defendant may introduce evidence of his own character for a relevant trait.
2. If Defendant introduces his character, the Prosecution may rebut with
evidence of Defendant’s bad character for the same trait.
iii.
Form: When character evidence is admissible to prove propensity (see
exceptions above), the only proper methods to introduce the evidence are through:
1. Federal: reputation (in community) or opinion (from one person).
a. No specific acts are allowed for propensity in either Federal or CA.
Continued
75
Relevance (continued)
.......Character Evidence (continued)
………… Character Evidence in Criminal Cases (continued)
2. Defendant’s (bad) character offered by PROSECUTION to rebut only: If defendant has
opened the door by calling character witnesses, then prosecution may rebut in two ways—
i. By direct in calling its own witnesses to testify to the defendant’s relevant bad
character. Form:
1. Federal and CA: Reputation or opinion.
a. Note: If only D takes the stand and denies the charge, Prosecution
cannot introduce evidence of D’s bad character because D did not
“open the door” by presenting character evidence.
ii. By cross-examining defendant’s character witnesses by questioning (in addition to rep
or opinion) their knowledge of specific instances of conduct by the defendant that are
relevant to the character trait at issue. (May not establish the specific acts by extrinsic
evidence – intrinsic only). Form:
1. For reputation witnesses: “Have you heard?”
2. For opinion witnesses: “Did you know?”
a. Purpose must be to test the witness’s knowledge, not to prove the act.
b. Good faith requirement: Even though the prosecution is not proving
the specific act, it must have a good faith basis to believe that the
specific act took place.
iii.
CA distinction: Specific acts NOT allowed on cross, only reputation or
opinion (except in DV cases) (double check!!!!).
3.
4.
Victim’s Character ☼
i. Federal Rule: A criminal defendant may offer evidence of victim’s violent character,
prosecution can show defendant’s character for the same trait (only time when D opening
the door to V’s character may also open D’s own character evidence).
1. Form: Reputation or Opinion only (not specific acts).
2. CA Distinction: specific acts allowed on both direct and cross for VICTIM’S
bad trait.
3. CA Distinction: Prosecution CANNOT discuss DEFENDANT’S character for
the same bad trait (DOUBLE CHECK).
ii. In a homicide case or self -defense case, a criminal defendant may offer evidence of the
victim’s violent character to prove that the Victim was the first aggressor.
1. Form: Reputation or Opinion only (not specific acts).
2. Rebuttal: The prosecution may rebut with victim’s peacefulness.
iii.
Special rule for Defendant’s knowledge of Victim’s character for Violence:
The defendant may offer evidence of his own knowledge of the victim’s bad character for
violence (i.e. knowledge of specific acts) for the purpose of showing that he reasonably
believed in the need to use self-defense. Purpose other than showing first aggressor.
1. Form: Because this is not propensity evidence, ANY form is allowed
(reputation, opinion or specific acts).
Victim’s Character in a Sexual Misconduct Case – Rape is probably Evidence Q on MBE
i. The (“Rape Shield”) Rule: In a case involving alleged sexual misconduct (civil or
criminal), the defendant ordinarily may not introduce evidence of
1. the victim’s reputation for promiscuity or
2. the victim’s prior sexual conduct.
ii. Exceptions (criminal): A defendant may introduce through specific acts (but not
opinion or reputation)—
1. Evidence of the victim’s other sexual activity with the defendant, but only if
the defense is consent (that the victim consented). Admissible only to prove that
the defendant had consent (she has said yes before).
2. Evidence of the victim’s sexual activity with others, but only to prove that
someone other than the defendant was the source of physical evidence
(you’ve got the wrong guy).
76
iii.
iv.
1.
2.
Evidence required to be admitted by the defendant’s Due Process rights.
Exceptions (civil):
Reputation, opinion & specific instances all are admissible if: (i) not excluded
by another other rule and (2) probative value substantially outweighs unfair
prejudice
Reputation evidence is admissible only if V herself made it an issue.
Continued
77
Relevance (continued)
.......Character Evidence (continued)
B. Character Evidence in Civil Cases
a. Rule: Character evidence is generally inadmissible to prove propensity in Civil Cases.
i. Plaintiff cannot offer evidence of defendant’s character.
ii. Civil defendants cannot offer evidence of their own good character.
1. even if the civil case is based on criminal conduct
iii.
Civil defendant cannot offer character evidence that plaintiff was first aggressor
(propensity reasoning).
b. Exceptions: Evidence of person’s character is admissible in civil action where such character is an
essential element of a claim or defense. (Note: any form—reputation, opinion, acts). Two situations:
i. Negligent hiring or negligent entrustment;
ii. Defamation (liable and slander)
iii.
Child custody
iv.
Sexual assault or child molestation CA distinction: propensity evidence NOT allowed
for civil cases involving sexual assault/child molestation, only criminal cases).
6.
Defendant’s Other Crimes for Non-Character Purpose (M.I.M.I.C. Rule)
a. General Rule (again): A defendant’s other crimes or specific bad acts are not admissible during the
prosecution’s case-in-chief if the only purpose is to prove propensity, i.e., because of defendant’s bad
character he is more likely to have committed the crime currently charged.
b. General Exception: If the defendant’s other crimes or specific bad acts are offered for some purpose
other than propensity, then the evidence will not be barred by the rule against character evidence.
i. MIMIC rule: If defendant’s other crimes or bad acts may be admissible if offered to show
something specific about the charged crime (apart from a propensity to commit the crime).
1. Motive: prior act shows precisely why defendant committed this crime.
2. Intent: prior act shows defendant’s state of mind for this crime.
3. Mistake/accident (i.e. absence of): prior act shows absence of mistake for this crime.
4. Identity: prior act can establish defendant’s identity for this crime (ex. D’s location).
a. Can bring in a prior act if there is a specific and unusual modus operandi
that tends to identify the perpetrator--M/O in both crimes must be unique.
5. Common scheme or plan: prior act helped to facilitate this crime
a. Note on terminology
i. If an objection is “sustained” the evidence is inadmissible.
ii. If an objection is “overruled” the evidence is admissible
ii. Timing: If a MIMIC category is satisfied, the prosecution may use other-crimes evidence as
part of its case-in-chief; MIMIC evidence is not dependent on defendant’s introduction of
favorable character evidence.
iii.
Method of proof of MIMIC-purpose crimes:
1. By showing a prior conviction, or
2. By evidence that proves the crime occurred (D need not been arrested/charged).
iv.
Burden of Proof: The “sufficiency” standard—The prosecution must produce sufficient
evidence for a reasonable jury to conclude that the D committed the prior act by a
preponderance of the evidence (Not reasonable doubt).
v. Other Requirements for MIMIC Evidence (put it in the essays for extra points):
1. Pragmatic considerations: Court must weigh probative value vs. prejudice.
2. Limiting instructions: Court must instruct jury re: purpose of MIMIC evidence.
3. Pre-trial notice: Upon defendant’s request, prosecution must give pretrial notice of
intent to introduce MIMIC evidence.
vi.
MIMIC Evidence in Civil Cases: Although MIMIC evidence most often appears in
criminal cases, it may also be used, if relevant, in civil cases, such as tort actions for fraud or
assault.
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Relevance (continued)
7. Other Sexual Misconduct to Show Propensity for Sexual Assaults
a. Federal Rule: In any criminal or civil case alleging sexual assault or child molestation, the
prosecution may offer evidence of the defendant’s prior sexual assaults for the purpose of
proving the defendant’s propensity to commit sexual assault.
i. Propensity Reasoning: “Once a rapist, always a rapist” is allowed in federal court.
b. CA distinction: Sexual offense, DV, or abuse of an elder or dependent person, evidence of such
prior acts are admissible for criminal cases only (not civil).
8.
Similar Occurrences
a. General rule: To be relevant, evidence must relate to some time, event, or person involved in the
present litigation. Otherwise, the evidence is inadmissible.
b. Exception: In limited and specific circumstances, other similar occurrences may be admissible,
even if they relate to a time, event, or person other than that involved in the present litigation.
i. Plaintiff’s Accident History:
1. Rule: Generally, a plaintiff’s history of accidents or law suits is inadmissible.
2. Exception: Plaintiff’s prior accidents may be admissible to show (1) a fraudulent
scheme or plan OR (2) Causation (that another accident caused the injury).
a. Must show that the prior acts are relevantly connected to the current suit.
b. Not that the defendant is litigious (i.e. simply showing similar suits).
ii. Similar Accidents Caused by Same Event or Condition
1. Rule: Other similar accidents are generally not admissible.
2. Exception: other accidents involving the same instrumentality or condition and
occurring under substantially similar circumstances may be admitted for 3 potential
purposes: (1) to show the existence of a dangerous condition; (2) causation; and
(3) prior notice to the defendant.
a. Related rule for Experiments and Tests: The standard for admitting
experiments and tests is the same. There must be substantial similarity
between experiment and the disputed fact.
iii. Intent in Issue
1. Rule: Prior similar occurrences may be relevant to draw an inference of intent from
a person’s prior conduct (similar to MIMIC).
iv. Evidence relevant to rebut a defense of impossibility
v. Comparable Sales on Issue of Value
1. Rule: The selling price of other property of a similar type, in the same general
location, and close in time to the period at issue, is admissible as evidence of value
of the property at issue.
vi. Habit
1. Habit Rule: Habit of a person (or routine of a business organization) is admissible
to infer how the person (or business) acted on the occasion at issue in the litigation.
a. Recall: character evidence relating to person’s propensity is usually not
admissible to prove conduct on a particular occasion.
2. Definition: Habit is a repetitive response to a particular set of circumstances. Thus,
habit has two distinguishing characteristics: (1) frequency and (2) Particularity.
a. Exam Tip: On a multiple-choice question, look for key words indicating
frequency: “always,” “invariably,” “automatically,” “instinctively.”
3. Business Routine: The regular practice of an organization is admissible to prove
conduct on a particular occasion.
vii. Routine practice (business habit)
viii. Industrial Custom as Standard of Care – e.g. adopting a particular safety measure
1. Rule: Evidence as to how others in the same trade or industry have acted in the
recent past may be admitted as some evidence as to how a party in the instant
litigation should have acted, i.e., as evidence of the appropriate standard of care.
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Authentication of Writings (Major Issue #2)
EXAM TIP: Whenever a “writing” appears on the exam, be on the lookout for three potential issues (aside from
relevance): Authentication; Best Evidence Rule; and Hearsay (each discussed below):
1) The Authentication Rule: If the relevance of a writing depends upon its source or authorship, a showing must
be made that the writing is authentic (genuine), i.e., that it is what it purports to be. (Terminology: The process
of authentication is called “laying a foundation.”)
a) Methods of Authenticating Writings: Party is seeking to prove that a document was written by X—
(1) Admission by party against whom the evidence is offered.
(2) Eyewitness testimony (Ex. Witness says X signed the document).
(3) Proof of the author’s handwriting
(a) By lay opinion: The witness must have familiarity with X’s handwriting as a result of
Oral Statements
experience in the normal course of affairs – not as a result of preparation for the litigation.
requiring
authentication as to
(b) Expert opinion and comparison: The expert must be qualified and must compare
identity of the
DOCUMENT to a genuine sample or exemplar X’s handwriting.
speaker: may be
(c)
Jury comparison: The trier of fact compares the document to an exemplar X’s handwriting.
identified by anyone
(4) Ancient Document Rule—authenticity may be inferred if document is
who has heard the
voice at any time (i.e.
(a) at least 20 years old (30 years in CA); and
lay opinion allowed).
(b) facially free of suspicion (no weird deletions);
(c) found where it would be expected; and
(d) treated as authentic by people who care about its authenticity.
(e) California distinction: Statement must have been acted upon as true by persons with interest
in the matter.
(5) Circumstantial Evidence: “I mailed him this letter, and I received a signed response in the mail
the next week.”
(6) Genuine Exemplar: an example of the signature established as real.
(7) Solicited reply doctrine: evidence that it was received in response to a prior communication to
the alleged author (Ex. a signed contract by X sent back to P, when P first sent the contract to X).
(8) Record from an instrument: proof of accuracy and good working order when record produced.
b) Procedural Considerations: The “sufficiency” standard—Authentication is a matter of “conditional
relevance,” which means that the party offering the evidence must produce sufficient evidence for a
reasonable juror to conclude that the document is genuine (e.g., that X is the author).
i) Similar to the standard for proof of prior bad acts (MIMIC).
c)
Self-authenticating Documents: Some documents are presumed authentic. No foundation needed.
(1) Official publications: ex. government pamphlets.
(2) Certified copes of public or private documents on file in public office: ex. mortgage or deed.
(3) Newspapers or periodicals: ex. Wall Street journal to prove a stock price on a certain day.
(4) Trade inscriptions and labels: ex. label on product to prove manufacturer.
(5) Acknowledged document: ex. notarized document.
(6) Commercial paper: ex. a check.
(7) Certified Business records, offered into evidence under the business records hearsay exception –
must be certified:
(a) by someone within the business
(b) who knows how the records are regularly made
(c) and that they were made in the regular way
(d) at or about the time of the event recorded.
d) Authentication of Photographs
i) Photograph as “demonstrative” evidence: If the purpose of the photograph is to “illustrate” a
witness’s testimony, it can be authenticated by the Witness testifying, based on personal knowledge
that the photograph is a fair and accurate representation of the people or objects portrayed.
ii) Photograph as a “Silent Witness”: Sometimes, a photograph is not illustrating a witness’s testimony,
but rather is itself the evidence (e.g., photos from surveillance cameras, automatic teller machines,
etc.). A party offering such a photograph must show:
80
(1) That the camera was properly installed and working.
(2) That the film was properly removed and developed.
(3) And that the film has not been tampered with.
(a) The most effective way to show an absence of tampering is by establishing a: chain of
custody (everyone who possessed the film must testify that it was not tampered with).
Best Evidence Rule – witness can always testify based on personal knowledge (Major Issue #3)
1) Overview of the rule: the “Best Evidence Rule” is better understood as the “original writing rule.”
a) Rule: If a party seeks to prove the contents of a writing, the party must either—
i) Produce the writing, or
ii) Provide an acceptable excuse for its absence.
(1) If the court finds the excuse acceptable, the party may use secondary evidence, such as oral
testimony to prove the contents.
(2) If the party fails to produce the document, and there is no excuse, the other party can make a “best
evidence” objection, disallowing testimony other than the writing.
b) Definition: a “writing” includes documents, recordings, films, and X-rays.
2) Analysis
a) When does the Best Evidence Rule apply? I.e. when does the writing need to be produced:
i) Only when the party seeks to prove the contents of a writing; arises in two principal situations—
(1) The writing is a legally operative document (i.e., the writing itself creates rights and obligations).
(a) Examples: deeds, mortgages, divorce decrees, written contracts.
(2) Or, the witness is testifying to facts that she learned solely from reading about them in a writing
(or viewing them on a video, or hearing them on a tape).
(i) Note: The best evidence rule does not apply when a witness with personal knowledge
testifies to a fact that exists independently of a non-legally operative writing.
1. Ex. At a hearing, a transcript is not a legally operative document, and the testimony
is an event that exists independent of it being transcribed, so a witness can testify
without producing the writing.
b) What qualifies as the “original writing”?
i) Definition of original: The original includes the writing itself; any counterpart intended to have the
same effect; any negative of film or print from the negative; computer print-out.
(1) Handwritten copies are NOT originals. CA: Handwritten notes describing original are allowed
ii) Definition of duplicate: A duplicate is any counterpart produced by any mechanical means that
accurately reproduced the original (e.g., photocopy, carbon copy, computer print-outs).
(1) RULE for duplicates: A duplicate is admissible to the same extent as an original, unless
(a) There is a genuine question about the authenticity of the duplicate. Or
(b) It would be unfair to admit the duplicate. (Original has a characteristic not in the duplicate).
c) When will non-production of the original be excused?
i) Rule: A party need not produce the original (or an acceptable duplicate) if the original:
(1) Is lost or cannot be found with due diligence, or
(2) Has been destroyed without bad faith, or
(3) Cannot be obtained with legal process (outside the jurisdiction).
ii) Application: If the court is persuaded by a preponderance of the evidence that the excuse has been
established, then secondary evidence (oral testimony) is admissible (e.g., oral testimony or a
handwritten copy).
iii) California Rule: All evidence is admissible unless there is a genuine dispute or admission would be
unfair. Oral testimony about a writing is only permissible if both the writing and any copies are
unavailable.
3) “Escapes” from the Requirements of the Best Evidence Rule
a) Voluminous records can be presented through a summary or chart, provided the original records would be
admissible and they are available for inspection.
b) Certified copies of public records, if the public records are unmovable.
c) Collateral documents, if the court, in its discretion determines that the document is unimportant to the
issues in the case.
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4) Exam Tip: The Limited Reach of the Best Evidence Rule: When in doubt, don’t pick the best evidence rule
as a choice in multiple choice. It does not apply often – only applies to writings, when parties are seeking to
prove the CONTENTS of the writing, photocopies almost always good, does not apply when the witness has
personal knowledge (of a fact not in a legally operative document) and there are escapes.
Witnesses (Major Issue #4)
1) Competency of Witness (Can the witness testify?)
a) Rule: Witness is “competent” to testify if: the witness (1) has personal knowledge, and (2) takes an oath
(must demonstrate an understanding of the obligation to tell the truth, and Promise to tell the truth).
Note: Judge
b) CA distinction: Must have ability to express oneself and understand duty to tell the truth.
may call
i) Rule for Children as witnesses—
witnesses and
(1) Federal: Children must understand the obligation to tell the truth and promise to tell the truth. No
interrogate any
testimony without an oath.
witness that
testifies.
2) Objections to form of questions or testimony (objection must be made before W answers; else waived):
a.
b.
c.
d.
e.
f.
g.
h.
i.
Calls for narrative or speculation
Leading question
Misleading (can’t be answered w/out making an unintentional admission)
Compound (more than one question)
Argumentative
Conclusory
Cumulative
Unduly harassing/embarrassing
Assumes facts not in evidence.
3) Form of Testimony: Leading Questions
a) Leading: A question is “leading” when the form of the question suggest the answer (e.g., “Isn’t it a fact
that . . . .”; or unevenly balanced alternatives).
b) Rule: Leading questions are generally not allowed on direct examination of witness.
i) Exceptions: Leading questions may be allowed on direct examination in four situations:
(1) Preliminary introductory matters (those not in dispute).
(2) Youthful or forgetful witness.
(3) Hostile Witness.
(4) Adverse party or someone under the control of the adverse party.
c) Leading questions generally are allowed on cross examination of witness.
4)
Writings in Aid of Oral Testimony☼
a) Present Recollection Refreshed (WATCH FOR HEARSAY ISSUES)
i) Basic rule: Witness may not read from a prepared memorandum (would be hearsay); must testify on
basis of current recollection.
ii) Refreshing Recollection: But, if a witness forgets something he once knew, he may be shown a
writing (or anything else) to jog his memory. He just say “I don’t remember.” Witness may not then
read from the refresher.
iii) Acceptable Refreshers: Anything.
(1) Note: No need to authenticate, no need to use best evidence, and not hearsay—refresher is not
evidence. The evidence is the witness’ present recollection.
iv) Safeguards against abuse: If an item is used to refresh a witness’s memory, the opposing party has
a right to:
(1) Inspect it.
(2) Use it on cross examination.
(3) Introduce it into evidence (opposing party has the option of showing it to the jury).
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Witnesses (continued)
…...Writings in Aid of Oral Testimony (continued)
b) Past Recollection Recorded (Hearsay Exception)
i) Rule: A writing may be read to the jury as a “past recollection recorded” if:
(1) The witness once had personal knowledge,
(2) The witness now forgets, and showing the writing to witness fails to jog his memory, and
(3) The writing was either made by the witness or adopted by the witness, and
(4) The writing was made when the event was fresh in the witness’s memory.
(5) And, the witness can attest that, when made, the writing was accurate.
(6) California distinction: The writing could have been made by anyone for the purpose of recording
the witness’s statement at the time it was made. The writer must testify to its accuracy.
ii) Method: If the foundation for a recorded recollection is satisfied (points (1)- (5) above), then:
(1) The witness may read the document to the jury,
(2) But the witness may not show the document to the jury.
(3) But the opposing party may show the document to the jury (by introducing it as an exhibit).
5) Opinion Testimony
Not based on scientific
a) Lay Witness
technical or otherwise
i) Rule: Circumstantial evidence in the form of lay opinion testimony is admissible if it is: specialized knowledge.
(1) Rationally based on the witness’s perception (personal knowledge), and
(2) Helpful to the jury (i.e. gives jury more info than would testimony limited to descriptions of
perceptions).
ii) Examples: A lay witness may testify about such things as Sobriety (or drunkenness); Emotions;
Speed; Handwriting; Value of witness’s own property, and Smells.
b) Expert Witness
i) General Rule: Witness may testify to an opinion as an expert only if:
(a) The witness is qualified (by education and/or experience—determined by Judge)
(b) The testimony is about a subject matter where scientific, technical, or specialized
knowledge will be helpful to the jury.
(c) The opinion has a proper basis (see below), and
(d) The opinion is reliable (see below).
ii) Specifics of the Elements for Experts:
(1) Proper Basis of Opinion
(a) Opinion must be based upon a “reasonable degree of probability or reasonable certainty,” and
(b) The opinion must be based on one of the following three data sources:
(i) The expert’s personal knowledge (for example, a treating physician)
(ii) Evidence that is already in the trial record (made known to the expert through a
hypothetical question)
(iii) ***Facts outside the record, but only if those facts are of a type reasonably relied on by
experts in the particular field.
1. Note: Expert can rely on hearsay (tested). The expert may give an opinion, and
describe in general terms the basis, but may not disclose the contents of the hearsay.
The opponent, however, may disclose the underlying basis on cross-examination.
(2) Reliability
(a) Rule: To be admissible, expert opinion must be sufficiently reliable. That means:
(i) The expert has used reliable methods and
(ii) The expert has reliably applied those methods to the particular facts of the case.
(b) Reliability standard for scientific evidence (not tested often on MBE)
(i) Federal Rule (the Daubert standard): Judge ask the following reliability questions:
1. Has the methodology been tested?
2. Are there known rates of error?
3. Has the methodology been subject to peer review?
4. Has the methodology been generally accepted?
(ii) CA distinction: (the Frye standard, higher than Daubert): NY asks only whether the
methodology has been generally accepted by the relevant professional community.
Continued
83
Witnesses (continued)
……Opinion Testimony (continued)
c) Ultimate Issues
i) Rule: Opinion testimony (lay or expert) generally is permissible even if it addresses an “ultimate
issue” in the case (e.g., “X was drunk,” “That’s X’s signature is on the check”).
(1) Exam Tip: Usually a wrong answer because opinion is now permissible for ultimate issues.
Note: If a witness is giving a legal conclusion, it is likely inadmissible on the grounds that it is
not helpful to the jury (and not on the grounds that the witness is testifying to the ultimate issue),
e.g. the driver was drunk, but saying driver was being reckless is unhelpful, jury can decide.
ii) Exception (federal only): Only place Ultimate Issue is a good objection—In a criminal case, an
expert witness may not testify that the defendant did or did not have the required mental state.
(1) In insanity case: can give diagnosis, but cannot give the ultimate conclusion of the defendant’s
required mental state.
d) Learned Treatise in Aid of Expert Testimony (Hearsay Exception)
i) Federal Rule: If a party can establish that a treatise is reliable authority, then the treatise may be
used on direct or cross-examination of an expert.
Treatise may be used as
(1) Establishing Authority: Three ways to establish authoritativeness—
substantive evidence if (1)
(i) Your own expert testifies that the treatise is authoritative,
the expert is on stand
(ii) Your opponent’s expert admits that the treatise is authoritative, or
AND (2) the treatise is
(iii) The judge takes “judicial notice” that the treatise is authoritative
established as reliable.
(2) How Used: Admissible to Impeach and also—
(a) The treatise may be read to the jury as substantive evidence (hearsay exception).
(b) The treatise may not itself be introduced as an exhibit (may not be shown to the jury).
ii) California Distinction: Much narrower than federal rule. Only covers historical works, books of
science or art and published maps or charts and the treatises allowed only for matters of “general
notoriety or interest.”
6) Cross Examination
a) Cross-examination is a right. If a witness testifies but then cannot be cross-examined, the witness’s direct
testimony will be struck.
b) Proper subject matter of cross-examination:
i) Matters within the scope of direct examination, and
ii) Matters that affect the witness’s credibility.
7)
Credibility and Impeachment☼
a) General Definitions
i) Credibility: whether a witness is truthful (believable). It rests on three things:
(1) Perception.
(2) Memory.
(3) Honesty.
ii) Impeachment: process of trying to demonstrate that a witness is not credible.
iii) Rehabilitation: process of trying to repair a witness’s credibility after the witness is impeached.
b) Impeachment of Own Witness
i) Federal Rule: Any party may impeach any witness.
84
Witnesses (continued)
8) Impeachment Methods
a) Overview: Methods of impeachment—
(1) Prior Inconsistent Statements
(2) Bias, Interest or Motive to Misrepresent
(3) Sensory Deficiencies
(4) Reputation or Opinion
(5) Criminal Convictions
Bad Character for Truthfulness
(6) Bad Acts (without conviction)
(7) Contradiction
b) Impeachment definitions
i) Intrinsic impeachment: Cross-examination of the witness you are trying to impeach.
ii) Extrinsic impeachment: Impeaching by introducing documentary evidence or calling other witness
c) Impeachment Methods (in detail)
(1) Prior Inconsistent Statements: A prior inconsistent statement is simply a prior statement (orally
or in writing) that is materially inconsistent with the witness’s trial testimony.
(a) Rule: A prior inconsistent statement may be used to impeach a witness (i.e., not as
substantive evidence that the prior statement is true b/c it is hearsay).
(b) Exception: A prior inconsistent statement may be admitted both to impeach and as
substantive evidence (i.e., prove the truth of the prior statement), if the statement was made:
(i) Orally under oath, and
(ii) As part of a formal hearing, proceeding, trial, or deposition. (Note: statements to
police are not formal proceedings; distinguish from party admissions (below)).
1. California Distinction: Prior inconsistent statements, even not under oath, are
admissible for its truth.
(c) Procedure: A witness who is being impeached with a prior inconsistent statement must be
given an opportunity to explain or deny the prior inconsistent statement. Timing—
(i) Federal: The inconsistent statement may be proven by extrinsic evidence, so long as the
Witness is later given an opportunity to return to the stand and explain.
a. [Extrinsic allowed before intrinsic].
(ii) Exception: If the Witness is the opposing party, there is no need to given the
witness/party an opportunity to explain the prior inconsistent statement before
impeaching the statement with extrinsic evidence (both NY and Federal).
(d) Related Hearsay Issue for Party Statements: A prior statement of the opposing party is
admissible for substantive evidence under the hearsay exception for party admissions
(Note: does not have to be under oath or part of a formal proceeding, trial, deposition, etc.)
Bias: If prior bad
acts help to establish
bias, extrinsic
evidence will be
admissible.
Bad acts for
impeachment of
truthfulness can be
proved only by
intrinsic evidence.
(2) Bias, Interest or Motive to Misrepresent: Some relationship between the witness and a party –
or some other interest in the litigation – that could cause the witness to lie – bad acts can all be
brought up?
(a) Rule/Procedure: Bias, because it is so important, may always be proven by extrinsic
evidence. Generally, a witness need not be confronted with the alleged bias before it may be
proven by extrinsic evidence (intrinsic cross examination not required first).
(i) Applies when the witness is: The witness is (1) a party; (2) a friend, relative, or
employee of a party; (3) someone paid by a party; (4) someone with a grudge against a
party; (5) anyone who has something to gain by the case coming out one way.
1. Witness w/pending charge testifies for Prosecution has bias (impeach w/arrest).
(3) Sensory Deficiencies: Anything that could affect the witness’s perception or memory.
(a) Rule/Procedure: For sensory deficiencies, intrinsic confrontation is not required and
extrinsic evidence is allowed.
(i) Applies when the witness has: bad eyesight, bad hearing, mental retardation,
forgetfulness, intoxication at time of event or while on the witness stand.
85
Witnesses (continued)
………..Impeachment Methods (continued)
(4) Reputation or Opinion about Witness’s Bad Character for Truthfulness:☼ Veracity.
(a) Rule: A party may impeach a witness (the “target witness”) by calling another witness (the
“character witness”) to testify to the target witness’s bad character for veracity (even where
the “target witness” is a party).
(b) Procedure: Any witness who has testified may be impeached by this method and extrinsic
evidence is allowed.
(c) Form of the testimony: Specific acts are not allowed. Reputation and opinion only—
(i) Federal: Reputation and/or Opinion.
(5) Criminal Convictions: reflects on Witness’s Character for Truthfulness (once convicted,
always a liar).
(a) Federal Rule: Witnesses may be impeached with a conviction, but timing and type of crime
limitations must be met.
(i) Timing: To be admissible, a conviction (or the release from prison, whichever is later)
must be within ten years of the trial. If 10+, unadmissible unless probative value >
unfair prejudice. California Distinction: No remoteness test, but age of conviction is a
balancing factor.
(ii) Admissible crimes:
1. Crimes of “dishonesty” or “false statement”—any crime (felony or misdemeanor)
that, by definition, involves a lie or a betrayal of trust is always admissible (no
balancing required).
a. Examples: Perjury, false statement, fraud (of any kind), embezzlement
i. BUT NOT crimes of violence, drug crimes, theft.
2. Other crimes that do not involve “dishonesty” or “false statement”— a felony
may be admissible if the probative value of the conviction (on the issue of veracity)
outweighs the risk of unfair prejudice to a party.
(iii) Inadmissible: misdemeanors not involving dishonesty or false statement.
(iv) Procedure: Conviction may be proven intrinsically (during cross examination) or
extrinsically (by the record of the conviction).
(v) Timing: No need to give the witness an opportunity to explain.
(b) California Rules:
(i) Criminal Cases: All felonies and misdemeanors involving moral turpitude (not just
honesty) are admissible subject to balancing. Extrinsic evidence ok.
(ii) Civil Cases: All felonies involving moral turpitude are admissible subject to
balancing. Extrinsic evidence ok. Misdemeanors are inadmissible (whether or not they
involve moral turpitude).
1. Note: Only applies in criminal cases and to the criminal defendant. Defendant
receives a pre-trial hearing—Sandoval hearing where court decides if prior
convictions can be used against him if he is testifying.
(c) Balancing Probative Value and Unfair Prejudice (Both Federal and CA)
(i) Factors that Make a Conviction Probative:
1. Seriousness (murder is more probative of veracity than possession of marijuana) and
2. Relation to trust and deception (theft is more probative than reckless driving)
(ii) Factors that make a conviction unfairly prejudicial:
1. Inflammatory nature (child molestation is more prejudicial than DWI) and
2. Similarity to the currently charged offense (the prejudice is particularly high if the
prior offenses and the charged offense are identical).
(6) Bad Acts (w/o conviction): reflecting poorly on witness’s Character for Truthfulness.
(May not be a crime at all). Note: Arrest in itself is not a bad act for truthfulness purposes.
(a) Federal Rule: Witness may be asked about prior bad acts if those acts relate to truthfulness.
(b) California Rule: Prior bad acts are inadmissible for impeachment in civil cases. In criminal
cases, a witness may be asked about prior bad acts that show the witness’s moral turpitude.
(Includes criminal conduct that does not relate to truthfulness.) EXTRINSIC EVIDENCE
ALLOWED. Stricter than FRE for civil cases and broader than FRE for criminal cases.
86
(c) Limitations:
(i) Basis: The cross-examiner must have a good faith basis to believe the bad act occurred.
(ii) Proof: The bad act may be proven by intrinsic evidence only, no extrinsic. (Cannot
rebut answer if W denies the act).
(iii) Exam tip: Proof by extrinsic evidence may still be allowed if the bad act is relevant for
some other purpose (i.e. proof of bias—ex. Witness for Prosecution w/pending charge).
Witnesses (continued)
………..Impeachment Methods (continued)
(7) Contradiction
(a) Rule: A witness may be impeached by showing that she made a mistake or lied about any
fact she testified to during direct examination.
(b) Procedure:
(i) If the contradiction goes to an issue that is significant to the case, then it may be proven
by extrinsic evidence.
(ii) If the contradiction goes to a matter that is collateral (insignificant to the issues in the
case or to the witness’s credibility), then proof is limited to intrinsic evidence (and the
cross-examiner cannot rebut the witness’s answer).
9) Rehabilitation
a) Rule: Generally, a witness may be rehabilitated (evidence to support a witness’s credibility) only after the
witness’s credibility has been attacked through impeachment.
i) Bolstering: Introducing evidence to support a witness’s credibility before the witness’s credibility has
NY AND
been attacked is called bolstering and is not allowed. California Distinction: Prop 8 allows
MULTI: Prior
identification is
bolstering by both defense and prosecution.
admissible for
ii) Exception: A witness’s prior statement of identification is admissible, even if the Witness’s
impeachment
credibility has not yet been attacked. (Ex. V as witness identifies D in lineup. D can testify in court
and substantive
that D did the crime, AND that V identified D in the lineup). Note: The exception applies only to the
evidence.
person making the identification (trial witness), not someone else present at the prior identification.
(1) California distinction: prior identification testimony is a hearsay exemption (not hearsay).
Requires: (1) ID of another (2) made at a time when the witness’s memory was fresh (3) witness
testifies that he made the ID and it was a true reflection of his opinion at that time.
b) Methods of Rehabilitation
i) Show Good Character for Truthfulness
(1) Rule: If a witness’s character for truthfulness has been attacked (through impeachment methods
(4) Reputation/Opinion, (5) Convictions, or (6) Bad Acts), then the opposing party may introduce
corresponding evidence of the witness’s good character for truthfulness.
(2) Form of the rehabilitation (same as the rule for impeachment): No specific acts allowed.
(a) Federal: Reputation or Opinion.
ii) Prior consistent statement
(1) Rule: A prior statement may be used to rehabilitate if:
(a) The prior statement is consistent with the witness’s trial testimony, AND
(b) The opposing party has suggested through impeachment that the witness is has a motive to
lie (usually bias), and
(c) The prior statement was made before the motive to lie arose.
(2) Purpose: A prior consistent statement that fits within the rule is admissible to rehabilitate and
as substantive evidence that the prior statement was true. (Non-hearsay in fed, hearsay exception
in CA)
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Privileges (Major Issues #5)
A. Introduction: The Purpose of “Privilege” is to foster beneficial relationships
i) General Rule: In Federal Court, apply the Federal Rules of Evidence. In State Court, apply State Law.
ii) Exception: In Federal DIVERSITY cases (where state law will govern the substantive claims), still apply
the Federal Rules of Evidence, but apply state law with respect to
(a) Burdens of proof and presumptions
(b) Dead Man’s Statutes
(c) Privileges*
iii) Recognized Privileges
1. Federal: Federal courts use the common law of privileges and recognize the following privileges:
(1) Attorney-Client; (2) Spousal; (3) psychotherapist-patient; (4) Social worker-client
(i) Federal common law does not recognize doctor-patient; but most states do. In Federal
Diversity cases, most of the time, doctor-patient is recognized.
2. California: In addition to the four recognized by Federal Courts, California also recognizes:
(5) Doctor-Patient; (6) Journalist sources
Privileges (continued)
B. Attorney-Client Privilege/psychotherapist/social worker
i) Rule: Confidential communication (only) between an attorney and client (or their representatives) made
during professional legal consultation will be privileged unless the privilege is waived by the client or an
exception applies.
1. Attorney—member of the bar or person that client reasonably believes is a member of the bar,
and it includes representative of the attorney—any agent reasonably necessary to facilitate the
Attorney’s
Representatives:
provision of legal services (e.g., accountant working with attorney to “translate” client’s financial
If a physician
matters. Secretaries, paralegals, investigators, etc.)
examines a client
2.
Client—includes person seeking to become client (e.g., privilege attaches at outset of formal
at the request o the
consultation with attorney even if client does not retain attorney), and includes representative of
attorney, the A-C
privilege applies to
client—any agent reasonably necessary to facilitate the provision of legal services (e.g., for
statements made to
corporate client, any employee who communicates with corporation’s attorney to enable attorney
the doctor b/c
to
provide legal services to the corporation). California: Includes corp officers who are “natural
doctor is rep. of
persons” to speak to lawyer (CEO) and not just authorized agents; also includes officers who is
attorney.
directed to speak to the lawyer after doing something for which the corp. may be held liable.
3. Communications: Privilege applies only to communications themselves, not to underlying
information, pre-existing documents, or physical evidence.
4. Confidential: Client must intend confidentiality (e.g., no privilege if client knows that third party
is listening in; or if client asks attorney to disclose the communication to a third party).
(a) Joint client rule: If two or more clients with common interest consult the same attorney, their
communications with counsel concerning the common interest are privileged as to third
parties. But if the joint clients later have dispute with each other concerning the common
interest, privilege does not apply as between them.
5. Professional legal consultation: The primary purpose of the communication must be to obtain or
render legal advice, not business or social advice
6. California: Psychotherapist distinctions: broadly covers all shrinks (from school, anywhere),
mental health assistants, interns, counselors, etc. Does not apply to court-appointed therapists or if
therapists has reasonable belief that the patient is a danger to himself or others.
ii) Losing the Privilege
1. Waiver—The Client is holder of the privilege, so the client alone has power to waive by
disclosure of the communication to a third party. The privilege continues after the attorney-client
relationship ends. After the death of the client, client’s estate holds the privilege and may waive it.
California Distinction: A/C privilege is lost after death.
2. Through Exceptions—
(a) Future crime or fraud: E.g., client tells attorney, “Help me disguise the bribes I made so that
they look like legitimate business expenses.”
(b) California Distinction: Can also reveal info if attorney reasonably believes that she must
disclose in order to prevent a crime that is likely to kill or cause substantial bodily harm to
someone (still confidential info under FRE?)
88
(c) When the client puts the legal advice in issue: E.g., in tax fraud prosecution, defendant
defends on ground that she relied on advice of her attorney in reporting income.
(d) Attorney-client dispute: E.g., client sues for malpractice; attorney sues client for fees
3. Third parties—presence of third party unrelated to the matter breaks confidentiality.
C. Physician-Patient Privilege (not in Federal Rules, in most state including California)
i) Rule: Confidential communication or information acquired by physician from patient for the purpose
of diagnosis or treatment AND the information is conveyed was pertinent to diagnosis or treatment of a
medical condition is privileged. (Note: Insurance exam does not qualify).
1. Most states: includes therapists, nurses, and physician’s assistants; California: only licensed
physicians (or someone the patient reasonably thinks is licensed), no dentists, nurse, or other
medical worker, but includes physician’s nurse.
2. Federal Distinction: Covers only Psychotherapists (doctor or other professional certified to
diagnose or treat mental or emotional illness).
ii) Losing the privilege:
1. Waiver: The privilege will be waived if the patient expressly or impliedly puts physical or
mental condition in issue (e.g., plaintiff in a personal injury case by seeking damages, or
defendant asserting an insanity defense). If condition in issue, doctor can testify.
(a) Note: Denial by a defendant regarding a medical issue does not put the condition in issue
(when plaintiff puts it in issue). Person with medical issue must put the medical issue into
play in order to waive the privilege. If the opposing party puts the medical issue into play, the
person with the diagnosis or treatment may still assert the privilege.
(b) Example: P sues D, alleging that D was intoxicated at time of accident. D denies the
allegations. P seeks pretrial discovery of an emergency room hospital report analyzing D’s
blood alcohol content shortly after the accident. D objects on ground of privilege. What
ruling? Defendant wins. D did not put into issue. ER report is privileged.
2. Third parties: presence of third party unrelated to the matter breaks confidentiality.
3. California: Does not apply to criminal cases (REALLY?!) or to info that the physical is required
to report to a public office (e.g. gun shot wounds). Also does not apply in commitment
proceedings, competency proceedings, proceedings to revoke a license.=
Spousal Privileges (Two types)—
iii) Spousal Communication Privilege
1. Rule: Confidential communications between spouses (if married at the time) will be privileged.
(a) Note: Divorce does not end the privilege for communications made while married.
2. Application: Applies to relationship between married spouses, covering communications, so
long as they are confidential, and made while married. Applies in any type of case.
3. Waiver: Privilege may be waived, but only by both spouses simultaneously.
iv) Spousal Immunity (Spousal Testimony Privilege)
1. Rule: In a criminal case, the prosecution cannot compel the defendant’s spouse to testify against
the defendant spouse. (Covers any testimony against--observations as well as communications)
2. Application: Applies only to CRIMINAL cases, covering testimony against a spouse, so long
as witness and defendant are currently married.
Spousal communication privilege is based on reliance of
(a) Note: Divorce does end the privilege.
intimacy in the marital relationship: abusive language
and misconduct directed at the spouse are not privileged.
3. Wavier Privilege may be waived by the witness spouse.
4. California distinction: Applies in civil and criminal matters.
v) Exceptions (applicable to both privileges): Can be compelled to testify about communication or acts:
1. In furtherance of future crime or fraud (E.g., joint criminal activity).
2. Destructive of the family unit (E.g., spousal or child abuse).
89
Hearsay☼ (Major Issue #6)
1. Hearsay is an out of court statement (oral or written) by a person (declarant) offered to prove the truth of
the matter asserted.
i. Rule: Absent an exception or exclusion, hearsay is inadmissible (because the declarant’s credibility,
perception, memory or sincerity cannot be tested through cross-examination).
2. Non-Hearsay (Generally): For hearsay, purpose is key. Whether a statement is or is not hearsay will depend
upon the purpose for which it is offered. Some out-of-court statements may look like hearsay at first glance,
but are not hearsay if they are not offered to prove the truth of the matter asserted in the statement.
i. Hearsay Tip: Ask yourself, “Do we care whether or not the declarant is telling the truth?” If the
answer is “no,” then the statement is not hearsay (nor offered for the truth).
ii. Four Principal Categories of Non-Hearsay Purposes
1. Impeachment: A prior inconsistent statement may be offered to show that the Witness is an
inconsistent person, without being offered to prove the truth of the prior statement.
a. But, if the purpose of the prior statement is to prove the truth of the assertion, then
it will be hearsay.
2. Verbal Acts (Legally Operative Words): If certain words have “independent legal
Showing effect on hearer:
significance” – in other words, if the law attaches rights and obligations to certain words
cannot be used as
simply because they are said – then they will not be hearsay.
substantive evidence of the
a. Examples:
truth of the information in
the statement (ie. the truth of
i. words of offer, repudiation or cancellation of contract;
the declarant’s statement).
ii. words that have the effect of making a gift or a bribe;
iii.
words that are themselves an act of perjury or a criminal
In a negligence case, where
misrepresentation or a defamation (oral or written).
knowledge of danger is at
issue, a person’s warning
iv.
words of permission
statement is admissible
3. To Show Effect on Person Who Heard or Read the Statement: A statement that is relevant
(nonhearsay) for the limited
simply because someone heard it (or read it) is not hearsay.
purpose of showing
a. Examples: Hearing something can put someone on notice or can give someone a
knowledge or notice on the
part of the listener.
motive or can make someone’s belief reasonable, or can make someone rely.
4. Circumstantial Evidence of Speaker’s State of Mind (less important): A statement that
unintentionally reveals something about the speaker’s state of mind is not hearsay.
a. Examples: Statements demonstrating insanity, lies that demonstrate a consciousness
of guilt, questions that demonstrate a lack of knowledge.
Note: Party Admissions under Federal Rules is non-hearsay,but hearsay exception in CA
Hearsay (continued)
3. Prior Statements of Trial Witness: A witness’s own prior statement, if offered to prove the truth of the matter
asserted in the statement, is hearsay and is inadmissible, unless an exception or exclusion applies.
a. Prior statements of WITNESSES (only) that are “excluded” from the definition of
hearsay are ID/PIS/PCS (see below).
Top Ten Hearsay Exceptions/Exemptions to Know for the Bar Exam:
Declarant must be
Party admission
Opposing Party
Former testimony
Forfeiture by wrongdoing
Statement against interest
Unavailable
Dying declaration
Excited utterance
Present sense impression CA: No
Statement of present mental,
emotional, or physical condition
Anyone
9.
Statement for purpose of medical
treatment or diagnosis CA: No
10.
Business and public records
(Also, recall Past Recollection Recorded (anyone) and Learned Treatises)
1.
2.
3.
4.
5.
6.
7.
8.
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Silence:
Admission
can be
express or
inferred from
conduct,
including
silence in
response to
another
person’s
statement.
For silence to
constitute
adoptive
admission of
the other’s
statement, the
circumstance
must
establish that
the party
would
naturally
respond if it
were untrue.
Guilty plea is
More Non Hearsay: ☼
a party
1) Party Admissions (declarant must be a party)
admission
a) Rule: Any statement made by a party is admissible if it is offered against the party (i.e. by other side). (merely
i) Terminology: Federal Rules call party admissions “exclusions”. California: “exceptions”.
evidentiary, not
conclusive, if
ii) Note: The statement of a party can be used even if they were made without personal knowledge.
b) Vicarious Admissions: A statement by an agent or employee of a party, is admissible against the party offered in other
proceeding).
(principal, employer), if it concerns a matter within the scope of the agency or employment, and was
made during the agency or employment.
c) Vicarious Admissions by Co-Conspirators: A statement of one co-conspirator is admissible against
other co-conspirators if the statement was made during and in furtherance of the conspiracy.
i) California Distinction: Jury determines conspiracy (Judge determines in Fed).
ii) Adoptive Admissions: Expressed or Implied adoption of a statement of another (sometimes by
silence, but NOT if the other person is police)
d) Prior Inconsistent Statement Under Oath at Trial or Dep
i) Declarant must now testify in court
ii) Federal: used as substantive and impeachment evidence if prior statement made under oath during a
formal proceeding.
iii) California: Hearsay exception (hearsay, but admissible)
e) Prior Consistent Statement to Rebut Charge of Recent Fabrication/Improper Influence/Motive and
the statement was made before the motive to lie arose (e.g. Brangelina).
i) Declarant must now testify in court
ii) Used to rebut an accusation of motive to lie
iii) Federal: rehabilitate and substantive evidence that the prior statement was true.
iv) California: Hearsay exception (hearsay, but admissible)
f) Statement of ID of a Person Made After Perceiving the Person
i) “That’s the guy who robbed me”
ii) California: prior identification testimony is a hearsay exemption (not hearsay). Requires: (1) ID of
another (2) made at a time when the witness’s memory was fresh (3) witness testifies that he made the
ID and it was a true reflection of his opinion at that time.
2) Former Testimony (declarant must be unavailable)
a) Threshold Requirement: Unavailability of the person who made the statement.
i) Grounds (“PAILS”): Privilege; Absence of Jurisdiction; Illness or death; Lack of memory;
Stubborn refusal to testify. California distinction: Def of unavailable doesn’t include refusal to
testify or lack of memory.
(1) California distinction: unavailable does not include evading court orders or failed memory.
b) Elements: The declarant is unavailable; the prior statement was given in a proceeding or deposition, it is
offered against a party who, in the prior occasion, had a meaningful opportunity and similar motive to
cross-examine or develop the testimony. (Note: Grand Jury testimony would not apply b/c no chance to
cross).
i) Party against whom the testimony is offered was a party in the former action or the predecessor in
interest (includes grantor-grantee and other privity relationships)
ii) Note: The relevance of the former testimony to the current trial must be substantially similar.
c) California distinction: Predecessor in interest NOT a requirement -- party just must have had an
opportunity and similar motive to cross-examine the witness.
Hearsay Exceptions (continued)
3) Forfeiture by Wrongdoing (declarant must be unavailable)
a) Rule: A party who intentionally and wrongfully makes a declarant unavailable cannot raise a hearsay
objection to admission of the declarant’s out-of-court statements.
i) Note: Includes engaging in or acquiescing in wrongdoing that was intended to, and did, procure the
unavailability of the declarant as a trial witness.
b) Procedural Issue: Burden of proof regarding party’s wrongdoing
i) Federal: Preponderance of the evidence. California distinction: Clear and convincing evidence.
(1) Former Testimony and Forfeiture: If the judge finds that a grand jury witness’s unavailability
is due to the defendant’s unlawful conduct, trial jury may hear the witness’s grand jury
testimony, provided defendant’s fault is proven (clear & convincing evidence).
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Rule: California distinction: (1) Only applies in serious felony case (fed: any crim or civil case); (2)
exception only applies if the declarant was killed or kidnapped (no other reason for unavailability); (3)
statement must have been recorded (on tape or inwrting) by a law enforcement official before the declarant
was killed or kidnapped.
4) Statement Against Interest (declarant must be unavailable)
a) Rule: When a declarant is (1) unavailable; the declarant’s statement is admissible if the statement is (2)
against the declarant’s pecuniary (money), proprietary (property) or penal (criminal) interest (i.e. a
personally damaging statement). If admissible, the statement can be used against anyone. California
distinction: also includes statements that carries the “risk of social disgrace.”
b) Statement must have been against interest when made.
c) Declarant must have personal knowledge of the facts.
d) Declarant does not have to be a party.
i) Note: declarant may be a party or a witness and may be “unavailable” b/c he is asserting a privilege
against self-incrimination or other privilege not to testify. A statement the declarant made out of court
may nonetheless be admissible if the statement is against the declarant’s interest.
e) Qualification in Criminal Cases: Statements against a declarant’s penal interest, when offered to
exculpate a defendant, must be supported by corroborating circumstances. California distinction:
Corroboration is NOT required when offered to exculpate the accused.
5) Dying Declaration (declarant must be unavailable i.e. DEAD)
a) Rule: When a declarant is (1) unavailable; the declarant’s statement is admissible if the statement was
made under a (2) belief of certain and impending death, AND the statement (3) concerns the cause or
circumstances of the declarant’s impending death.
i) Note: Required belief of death—“I need a doctor”, “I’ll get him for this” shows belief of survival/life.
b) Application: Only available in certain types of cases—
i) Federal: Any civil case; or criminal homicide case (Note: not available in attempted murder trial).
(1) CA: Applies in all cases (crim and civil), but declarant MUST be dead.
6) Excited Utterance (declarant can be anyone) CA: called “spontaneous statement” exception
a) Rule: Declarant’s statement is admissible if (1) the statement concerns a startling event, and (2) the
statement was made while the declarant was still under the stress caused by the event.
i) Factors that make a statement excited: (1) nature of the event; (2) passage of time; (3) verbal clues.
(1) California: Statement must describe (not just concern/relate to) a startling event.
7) Present Sense Impression (declarant can be anyone) CA: No equivalent hearsay exception (closest is for
“contemporanoues statements”
a) Rule: Declarant’s statement is admissible if (1) the statement describes an event and (2) the statement is
made while the event is occurring, or immediately thereafter (seconds, not minutes). No corroboration is
required.
8) Statement of Present Mental, Emotional, or Physical Condition (declarant can be anyone)
a) Rule: Declarant’s statement is admissible if (1) it is a spontaneous and contemporaneous statement
concerning (2) the declarant’s then existing (a) physical condition or (b) state of mind (including
emotions, mental feelings, intent or future plans, sensations, and bodily health).
i) Note: State of mind includes statements of future intent to do something with a third person.
ii) Does not apply to a statement of memory or belief about a past condition.
b) California distinction: Past bodily conditions are admissible only if (1) Declarant is unavailable (2)
Physical sensations are an issue in the case (“last week I felt great and intended to file tax returns” used to
prove intention to file, NOT actual filing).
9) Statement for purpose of medical treatment or diagnosis (declarant can be anyone)
a) Rule: Declarant’s statement is admissible if (1) made to a medical professional (doctor, nurse, EMT),
(2) concerning (a) present symptoms, (b) past symptoms, or (c) the general cause of a medical
condition, (4) for the purpose of treatment or diagnosis.
i) Does not apply to statements of fault or identity of the wrongdoer made to the medical professional.
ii)
92
b) California distinction: No equivalent hearsay exception (other than narrow past bodily condition
exception made to anyone, not just medical personnel AND statements made by those under 12 in a child
abuse/child neglect case.
10) Business and Public Records (declarant can be anyone)
a) Rule: Declarant’s statement contained in a record is admissible if
(1) The records of events, conditions, opinions or diagnoses ofa business (any type, including public
agencies—i.e. the police, hospitals, etc.)
(2) are made in the regular course of business (i.e., relevant to the business), and
(3) the business regularly keeps such records, and the record was
(4) made contemporaneously (at or about the time of the event recorded), and
(5) the contents consist of:
(a) information observed by employees of the business, or
(i) Note: a bystander’s statement in a record is inadmissible (b/c the declarant is not an
employee of the business), unless another exception applies (i.e. excited utterance, etc).
(ii) Note: the observation by the employee must be relevant to the business. (No opinions).
(b) a statement that falls within some other hearsay exception might not be admitted in the form
of a business record if it is not relevant, but the nurse can testify about the statement.
(c) California distinction: Only readily observable facts, not diagnoses.
b) Public Records: In addition to observations by employees of the public agency, may also include
conclusions by public employees (e.g., police officer’s conclusion about fault in an accident report).
i) But note: Police reports may not be offered against the defendant in a criminal case.
ii) California distinction: Must be made by official within the scope of duty. Must be made at or near
the time of the act, condition or event. The source of info and method and time of prep indicate its
trustworthiness. Does not automatically exclude police reports/observations in criminal cases and
uses balancing. Does not include findings of official investigations.
c) Laying the Foundation for Business Records: Two ways—
i) Live testimony: Must call a knowledgeable witness who can testify to the five elements of the
business records hearsay exception (often called a “custodian of records”).
ii) Affidavit: Submit written certification under oath attesting to elements of business records exception.
(1) New York Qualification: Written certification may be used only in civil cases and only for the
business records of a non-party.
11) Judgments (admissible to prove any fact essential to the judgment)
a) Prior Criminal Conviction
(1) Federal rule: judgments of felony convictions are admissible in criminal and civil actions to
prove any fact essential to the judgment.
(2) In a criminal case, the govt may use the judgment for this purpose only against the accused.
(3) CA rule: only permissible in civil cases.
b) Judgment in Former civil case: not allowed in either subsequent criminal or civil case.
Note on the Confrontation Clause
In criminal cases, the 6th Amendment requires that the defendant be “confronted” with the witness against him.
Application to hearsay: There is no confrontation clause problem if:
1) the declarant is subject to cross-examination by D at trial, or
2) the declarant was subject to cross-examination by D at the time the prior statement was made; or
3) D has forfeited his confrontation right by wrongfully making the declarant unavailable, or
4) the out-of-court statement is not testimonial (i.e. NOT Grand Jury testimony). For police
interrogations, testimonial if out of court statement if it relates to past events, not testimonial if relates to police
assistance to meet an ongoing emergency (911 call). Police reports are testimonial, business records are not.
Exam Tip: Violates Confrontation Clause is likely wrong, unless Grand Jury or Police
Interrogations are offered as Statements Against Interest.
93
Two Final Miscellaneous Hearsay Issues
1) Procedural Issue: Laying the Foundation for Hearsay Exceptions
a) Whether a party has established the required elements of a hearsay exception is to be decided by the judge
(by a preponderance of the evidence). And in making that determination, the judge may rely on
anything (including inadmissible evidence). In CA, judge IS bound by evidence rules.
2) Hearsay Declarants and Impeachment
a) If hearsay is admitted, the opposing party may use any of the impeachment methods to attack the
credibility of a hearsay declarant.
b) Note: the general requirement that an impeached witness be given an opportunity to explain or deny an
apparently inconsistent statement does not apply to hearsay declarants.
94
Other relevant topics in Evidence
1) Judicial Notice: the recognition of a fact as true without formal presentation of evidence.
a) Facts appropriate for Judicial Notice: indisputable facts that are either matters of common knowledge
in the community or capable of verification by resort to easily accessible sources of unquestionable
accuracy (manifest facts). Ex. Scientific principles.
b) Procedure: formal request by party (even on appeal). Conclusive in civil cases; not necessarily conclusive
in criminal cases (jury is not required to accept the as conclusive any judicially noticed fact).
c) Adjudicative facts: The Federal Rules govern only judicial notice of adjudicative facts (those relating to
the particular case).
d) Notice of Law: Courts must take judicial notice of federal and state law and the official regulation of the
forum state and the federal government. Courts may take judicial notice of municipal ordinances and
private acts or resolutions of Congress or of local state legislature, or foreign laws.
2) Real Evidence
a) Defined: Real or demonstrative evidence is actual physical evidence addressed directly to the trier of fact.
Real evidence may be direct, circumstantial, original, or prepared (demonstrative).
b) Admissibility: Real evidence must be relevant and meet the following legal requirements:
i) Authentication (must be what the proponent claims it to be) either by: (1) testimony or (2) a
substantially unbroken chain of possession.
ii) Condition: Must be shown to be substantially the same condition at trial.
iii) Legal relevance (balancing test): auxiliary policy outweighing the need to admit—(1) physical
inconvenience, (2) indecency, (3) undue prejudice.
c) Types of Real Proof: (1) Reproductions (photos) and explanatory evidence, (2) Maps, Charts, Models, (3)
Exhibit of Child in Paternity suit, (4) Exhibitions of Injuries, (5) Jury view of the scene, (6) demonstrations.
3) Procedural Considerations
a) Burdens of Proof
i) Production: the party who as the burden of pleading usually has the burden of producing or going
forward with evidence sufficient to make out a prima facie case. Other side then rebuts.
ii) Persuasion (proof): After the parties have sustained their burden of production of evidence, the
question is whether the party with the burden of persuasion has satisfied it. The burden of persuasion
for civil cases is usually by a preponderance of the evidence (more probable than not), although some
civil cases require proof of clear and convincing evidence (high probability). For criminal cases the
burden of persuasion is beyond a reasonable doubt.
b) Presumptions: a presumption is a rule that requires that a particular inference be drawn from an
ascertained set of facts.
i) Effect—Shift Burden of Production: a presumption operates, until rebutted, to shift the burden of
production to the party against whom the presumption operates.
(1) Exam Tip: Presumption does not shift the burden of persuasion.
ii) Rebutting a Presumption: presumption destroyed when adversary produces evidence against.
iii) Distinguish True Presumptions from Inferences and Substantive Law: True can be rebutted.
(1) Permissible Inferences: allows the party to meet his burden of production, but does not shift the
burden to the adversary. (Ex. negligence from res ipsa loquitor; or destroyed evidence was
unfavorable to the spoiler; or undue influence when will’s drafter is principal beneficiary).
(2) Presumptions in Criminal Cases: the presumption of innocence in criminal cases is merely a
permissible inference; the burden of production never shifts to the accused.
(a) Exam Tip: If, in a criminal case, a presumed fact (1) establishes guilt, (2) is an element of
the offense, or (3) negates a defense, it must be proved beyond a reasonable doubt.
(3) Conclusive Presumptions: It cannot be rebutted (Ex. child under 7 cannot commit a crime).
iv) Specific Presumptions: the following are common rebuttable presumptions—(1) legitimacy; (2)
against suicide; (3) sanity; (4) death from unexplainable absence for 7 years; (5) owner of car =
driver/agent; (6) chastity; (7) regularity; (8) continuance for natural course; (9) mail delivery; (10)
solvency; (11) Bailee’s negligence; (12) marriage ceremony = valid marriage.
v) Conflicting Presumptions: judge applies presumption based on weightier policy and logic.
vi) Choice of Law Regarding Presumptions in Civil Actions: State law governs (if rule is state law).
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Torts
Intentional Torts4 (defendant intends to commits a wrongful act)
1. Battery: defendant commits a (1) harmful or offensive contact with (2) the plaintiff’s person.
a. Offensive: unpermitted by normal/reasonable person (i.e. extreme or hypersensitivity is not
Battery
considered).
established by
i. Ex. no petting a person’s hair (this is unpermitted).
showing intent
to touch or
b. Person: Anything connected to the plaintiff (not limited to skin or flesh).
reckless injury
i. Ex. purse snatched; slapping a horse which a person is riding.
to person.
c. Harm: Battery need not result in instantaneous harm. Time lag does not matter.
i. Ex. Poison lunch at 9am, eat at 12pm. Battery through the sandwich. Liable for later injuries.
ii. Actual damages not required.
2. Assault: defendant must put plaintiff in (1) an apprehension of (2) an immediate battery.
a. Apprehension: Knowledge; understanding; awareness (not a synonym for fear).
i. Unloaded gun problem: defendant threatens P but cannot consummate the attack. If P
Unintended Battery
Intent for assault can
knows he cannot be touched, no recovery. If P does not know whether he can be touched, a
be transferred to
reasonable person would think he could be touched, recovery available.
intent for battery, if a
b. Immediate battery: (1) words alone lack immediacy (pure verbal threat to touch is not an assault)—
battery occurs from
need conduct (some overt action to create immediacy--Ex. shake fist, display weapon); (2) even when
an intended assault
(even if battery was
there is threatening conduct, must look at the words, if any—Words can negate the immediacy (Ex.
not intended).
conditional words—“if you weren’t ____, I would beat you”; words in future tense—“at 5pm tonight
I’m going to beat you” – both are not assault).
3. False Imprisonment: defendant commits (1) an act of restraint and (2) confinement in a bounded area
(resulting imprisonment). Act of restraint only counts if the plaintiff (a) knows of it or (b) is harmed by it.
a. Restraint: Threats are sufficient. Barriers are restraint, but not necessary. Omission can be an act of
Plaintiff can
restraint (failure to act if a preexisting obligation). Knowledge or harm required.
recover in false
i. Ex. “If you leave, I will kill you (or another).”
imprisonment for
ii. Ex. Disabled person is left on a plane without a wheelchair. (This is an omission).
all foreseeable
b.
Confinement:
(1) Keeping someone out of a space (denying admission) is not confinement. Must
damages,
including for
lock them in! (2) If there is a means of escape, it does not destroy the claim, unless it is a reasonable
humiliation.
means of escape and it can be reasonably discovered.
i. Ex. Jumping out a high window or squeezing out small window is not reasonable.
4. Intentional Infliction of Emotional Distress: defendant intends to commit (1) outrageous conduct (2)
resulting in severe emotional distress suffered by the plaintiff.
a. Purpose: Defendant must deliberately try to upset the plaintiff.
b. Conduct: Only when the conduct is outrageous can D be liable. Conduct is outrageous if it “exceeds
all bounds of decency tolerated in a civilized society.”
i. Mere insults are not outrageous.
ii. Hallmarks of outrageousness:
1. where conduct is continuous or repetitive
a. ex. continuous harassing phone calls.
2. defendant is a common carrier or an inn keeper (duty of high courtesy).
a. ex. hotel playing practical joke.
3. the plaintiff is a member of a fragile class of persons: (a) child, (b) elderly, (c)
pregnant women (defendant must know the woman is pregnant).
iii.
Knowledge: aiming or targeting a plaintiff’s phobia (extreme sensitivity) can raise an
otherwise non-outrageous conduct to outrageous. Defendant that targets with knowledge will
be liable for the extreme resulting harm of the extremely sensitive plaintiff.
iv.
Severe Distress: does not need to be any particular form or that you see a
doctor/physiatrist, but must be severe.
4
Overview Observations: (1) extreme sensitivity of a plaintiff is never taken into account in deciding if
plaintiff has satisfied elements (assume P is a reasonable person); (2) there are no incapacity defenses in
intentional torts (every defendant is capable of being held liable if they satisfy the elements).
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Intentional Torts (continued)
5. Trespass to Land: Defendant must commit a (1) physical invasion of (2) land (through an intentional act).
Intent is
a. Intent: Defendant got to the location through a deliberate or purposeful act; there is no requirement satisfied if D
that the defendant know he is on another’s land. The intentional act must cause the invasion.
knows with
substantial
i. Can get somewhere involuntarily (if you don’t enter intentionally, there is no trespass).
certainty
b. Invasion: (1) enter by foot, in car, boat, etc. OR (2) project or propel or throw tangible objects.
that his
i. A non-physical invasion of land cannot be a trespass. Light, sound, odors are not physical. actions will
1. Ex. shining lights on another’s land; blasting music; omitting vial smells.
bring about
physical
c. Land: Plaintiff’s interest are not limited to the surface of the property—includes air above and soil
invasion.
above, but only out to a reasonable distance.
6. Trespass to Chattels and Conversion (two torts dealing with intentional invasions of personal property).
a. Definitions:
i. Personal Property: everything owned, except land and buildings. (Includes animals)
ii. Intentional invasion: (1) damage to personal property; or (2) denial of possession.
1. Ex. vandalism and theft. Need actual harm.
b. Distinction between the torts: goes to the extent of the harm
i. Slight harm: Trespass to Chattels. (Ex. scratch a car)
ii. Significant harm: Conversion. (Ex. smash the windshield of a car; steal the car).
c. Remedies: Two types of remedies—
Full value means FMV
i. Trespass to Chattels: only get cost of repair or rental.
at time of conversion,
ii. Conversion: Full value, not just cost of repair or rental (characterized as forced sale). not replacement cost.
gets title after pay.
1. Note: Owner has privilege to reclaim—not liable for actual damage caused by Dentry.
Affirmative Defenses
1. Consent: defense to all intentional torts.
a. Threshold: Who can give valid consent? Only people with legal capacity can consent—
i. Children (can consent to some things (i.e. Wrestle), but not others (i.e. Sexual intercourse)).
ii. Intoxicated: no capacity to consent.
iii.
Insane: no capacity to consent.
b. Consent for the sane sober adult—
i. Express Consent: Spoken or written giving defendant permission to behave in a certain way.
1. Exception: Not valid if it was given as a result of duress or fraud (ex. failure to
inform a sexual partner that you have a sexually transmittable disease = fraud).
ii. Implied Consent:
1. Based on custom or usage
a. Ex. Engage in activity where routine invasions are typical (Ex. retail store).
b. Sports: When you play sports you consent to everything that typically
happens in the game, whether it violates or conforms with the rules.
2. Based on defendant’s reasonable interpretation of plaintiff’s objective conduct.
a. Never consider the subjective thoughts of the plaintiff.
b. Ex. a goodnight kiss after a romantic dinner – up to jury to determine
reasonableness. If reasonable implied consent
iii.
Scope: If the defendant exceeds the scope of consent, the defendant is liable.
2.
Necessity (only a defense to the three property torts: trespass to land, trespass to chattels, conversion)
a. Public Necessity: When defendant invades plaintiff’s property (real or personal) in an emergency to
protect a significant group of people or the community as a whole NO LIABILITY.
i. Example: shoot a dog (personal property) to save the children the dog is threatening.
b. Private Necessity: When defendant invades plaintiff’s property in an emergency to protect an
interest of his own, he may be liable for damages—
i. A limited defense: (1) private necessity obligates the defendant to pay for the harm (actual
damages); (2) but never to pay nominal or punitive damages. (3) As long as the emergency
continues, the defendant can stay in a position of safety (on plaintiff’s land).
1. Note: land owner cannot chase a person off land if there is danger off the land.
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Affirmative Defenses (continued)
3. Self defense, defense of others, defense of property (Protective Privileges)
a. Defendant must show (1) proper timing and (2) a reasonable belief that the threat is genuine.
i. Timing: Proper if the threat that the defendant is responding to is imminent or in progress.
Improper if the threat is over. (NO REVENGE)
ii. Accuracy: The D must have a reasonable belief that his interests are being threatened.
Reasonable mistake does not destroy the privilege. Must act in good faith.
1. Self-defense: reasonable mistake as to existence of danger allowed
2. D of others: reasonable mistake as to whether the other person is being attacked or
has a right to defend himself allowed
3. Dof of property: reasonable mistake as to whether an intrusion has occurred or
whether a request to desist is required allowed. No mistake allowed as to whether
the entrant has a privilege.
4. Ex. Store can detain you for a short period to check if you are shoplifting. Even if
you didn’t steal anything, they can detain if it is reasonable.
iii.
Force: Once you have the protective privilege, you are obligated to limit yourself to the
force necessary under the circumstances.
1. Reasonalbe force may be used, but excessive force tort liability
2. Genuine threat to human life (self or 3rd person): may use deadly force.
3. Property: No deadly force to protect property. No deadly traps (no spring guns)
4. Privilege of arrest: D has the privilege to arrest/detain the P? Appropriate force?
a. Felony arrest by PO: officer must reasonably believe that a felony has been committed and the person
he arrests has committed it. Reasonable degree of force; deadly only when threat of serious harm.
b. Felony arrest by private citizen: felony must haven in fact been committed, and person must
reasonably believe the arrestee committed it. Reasonable degree of force; deadly only when threat of
serious harm.
c. Misdemeanor arrests: must be a breach of peace and committed in the presence of the arresting party.
Reasonable degree of force; never deadly force.
5. Discipline: Parent/teacher may use reasonable force to discipline children.
6.
Defamation☼
1. Elements: A (1) defamatory statement (oral or written) by defendant of or concerning plaintiff. There is (2)
publication of the statement, and (3) there are damages, maybe. (Note: Truth is a defense).
a. Defamatory: Adversely affects reputation. Reputation is like personal property.
i. Usually need allegation of fact reflecting negatively on a trait of character (loyalty, honesty).
ii. Mere name calling: usually not defamatory (lacks ability to harm reputation).
iii.
Allegation of fact that reflects negatively on a trait of character: clearly defamatory.
iv.
Statement of opinion: can be defamatory if a listener would assume that speaker has fact
basis for the opinion.
b. Plaintiff: Must be alive. Cannot defame a dead person.
c. Publication: Publication requires only that the defamatory statement be exposed to a minimum of one
person other than the plaintiff himself. More people = more damage. Does not have to be intentional.
d. Damages, maybe: Damages do not have to be proven by every kind of defamation plaintiff.
i. Libel: defamation that has been embodied in a permanent form (i.e. written, filmed, taped).
Liable plaintiffs do not have to prove damages.
ii. Slander: defamation that has been spoken.
1. Slander per se: oral statements that are so damaging to reputation that they are
treated like libel, so there is no damage requirement. Four common law types—
a. Statement concerning plaintiff’s business or profession.
b. Statement that the plaintiff has committed a crime of moral turpitude.
c. Statement imputing a woman’s unchastity (sexually active single woman).
d. Statement imputing that a person has a loathsome disease.
i. Types: (1) leprosy or (2) venereal disease (syphilis, clap, etc.).
2. Slander not per se: Must show damages in the form of economic harm.
a. Social harm does not count!
e. Affirmative Defenses:
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i. Consent: implied or express.
ii. Truth: a defendant who has been sued for defamation can always come to court to
demonstrate that what he said is factually correct.
iii.
Privilege☼
1. Absolute privilege: based on the status of the speaker (who is being sued); either
(1) spouses (can’t be held liable for defaming a third person to a spouse), or (2)
government officers in connect with official duties—application in the judicial
branch, where lawyers care considered government officers (writing in a brief,
statement in court, trial memorandum).
2. Qualified privilege: exists in a socially useful context for the speech being
challenged. Ex. (1) recommendation; (2) credit reference; (3) statements to police.
a. If you limit yourself to things that are relevant, you will not be held
liable for defamation if you make a reasonable mistake of fact.
First Amendment Defamation
1. When are plaintiffs obligated to bring First Amendment Defamation? Topic relates to Public Concern.
Republisher
a. About Public Officials (Judge, Mayor) or Public Personalities (Athletes throwing a game).
may reply on
2. Elements (two additional): A (1) defamatory statement (oral or written) by defendant that specifically
research of
identifies plaintiff. There is (2) publication of the statement, and (3) there are damages, maybe; (4) the
original
plaintiff has to show falsity (truth is not a defense, it is now an affirmative element of the claim); (5) fault— publisher,
unless
plaintiff must show that defendant knew it was false, acted recklessly in investigating, or acted negligently.
a. Public figure: Plaintiff must prove malice (fault at the level of knowledge or reckless disregard). reason to
questions
b. Private figure: Plaintiff can prove mere negligence (no reasonably investigation as to the statement’sgood faith/
accuracy).
accuracy.
c. No recovery for a reasonable mistake. (Protects the media on reporting).
Privacy Torts
1. Appropriation: Defendant using the plaintiff’s name or picture for commercial advantage.
a. Exam tip: Subject to a newsworthiness exception. Ex. If a sports magazine puts an athlete on the
cover, it is not actionable. If Cereal Company puts athlete on a box w/out permission, it is actionable.
i. Packaging –actionable
ii. Advertising –actionable
iii.
Trademark –actionable
2. Intrusion: The invasion by the defendant of plaintiff’s solitude, in a way objectionable to an average person.
a. Ex. Wiretapping, intercept of communication, covert videotaping, eavesdropping, peeping.
b. Exam tip: (1) the plaintiff has to be in a place where there is an expectation of privacy; (2) this tort
does not require a trespass.
3. False Light: The widespread dissemination of a major misrepresentation to the plaintiff, objectionable to the
average person. Allows P to recover emotional damages.
a. Distinguish from defamation where publication only requires one other person.
i. Ex. Widespread: published in newspaper.
b. The substantive statement does not have to be defamatory. It can be, but does not have to be.
i. Ex. Misrepresentation that is not defamation: mischaracterization of religious beliefs.
c. Exam Tip: This is not an intentional tort. Plaintiff’s knowledge or mistake is irrelevant.
4. Disclosure: The widespread dissemination of confidential information about the plaintiff, objectionable to
the average person.
a. Distinguish from defamation and false light: the information is TRUE.
b. Ex. (1) Academic records, (2) Financial records, and (3) Medical records.
c. Exam Tip: (1) there is a newsworthiness exception (news publishing confidential information of
public officials/public personalities is ok); (2) dual life: plaintiff operates in two separate spheres, both
reasonably public but plaintiff is trying to keep them separate—the defendant will carry information
from one area to another—the underlying information will not be found to be confidential.
5. Affirmative defenses to Privacy:
a. Consent: implied or express (to all four privacy torts).
b. Absolute and qualified privilege: (1) spouse, (2) government officers, (3) socially useful (to false
light and disclosure privacy torts only).
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Misrepresentation
1. Fraud: Defendant makes
i. an affirmative misrepresentation (silence is not enough),
ii. made with scienter (intent or knowledge the statement is false),
iii.
in order to induce reliance.
iv.
The plaintiff must rely (reliance is required, always justifiable to rely on assertion of fact;
if an opinion, reliance is justified if defendant has superior skill).
v. And, there must be damages.
a. Exam tip: someone lies to you on purpose for the goal of cheating you, you fall for it, you got cheated.
2. Negligent Misrepresentation:
a. Misrepresentation by D in a business or professional capacity
b. Breach of duty toward a particular P
c. Causation
d. Justifiable reliance; and
3. Wrongful Institution of Legal Proceedings
a. Malicious Prosecution: (i) institution of criminal (or civil) proceedings against P; (ii) termination in
P’s favor; (iii) absence of probable cause for prior proceedings; (iv) improper purpose; and (v)
damages. Prosecutors are immune from liability.
b. Abuse of Process: (i) wrongful use of process for an ulterior motive and (ii) definite act or threat
against P in order to accomplish ulterior motive.
4. Interference with Business Relations:
a. Elements: (i) existence of a valid contractual relationship between P and a 3rd party or valid business
expectancy; (ii) D’s knowledge of the relationship or expectancy; (iii) intentional interference by D
including a breach or termination of the relationship or expectancy and (iv) damages.
b. Ds conduct may be privileged where it is a proper attempt to obtain business for itself or protects its
interests.
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NEGLIGENCE☼ (Duty, Breach, Causation [Actual/Proximate], & Damages)
1) Duty: When a person acts, a duty of care is owed to foreseeable victims. No duty of care is owed to
unforeseeable victims (unforeseeable victims always lose negligence claims).
a) Who is an unforeseeable victim: those not within the “Zone of Danger” – (very far away from the action).
i) Exceptions: surprise plaintiff who will not be barred:
(1) Rescuers: always owed a duty and always safe from being thrown out as unforeseeable.
(2) Intended beneficiaries may be foreseeable (i.e. beneficiary of a will).
(3) Medical professionals owe duty of care to viable fetuses, In botched abortion cases, child may
not recovery for wrongful life, but parents may recover medical expenses and pain & suffering in
labor (same with botched sterilization).
ii) Acting under similar circumstances:☼ The amount of care DEPENDS on the circumstances.
iii) Reasonably prudent person: no external attributes (no height, sex, weight, race); but it has a highly
defined personality. A defendant is not allowed to have any shortcomings (even mentally
retarded/disturbed) as compared to the reasonably prudent person—objective harsh standard.
(1) Limited Exceptions: (a) If the defendant has superior knowledge, it will be considered (tested
against the reasonably prudent superior knowledge person). Does not have to be about
intelligence; knowledge of a specific circumstance will suffice. (b) If the defendant has certain
physical characteristics: Ex. Blind is the standard of a reasonably prudent person who is blind.
(2) If emergency -- duty oc care of reasonable person under the same emergency.
(3) Children: (a) Children under age 4 are incapable of negligence; (b) Children ages 4-18 are
supposed to exercise the care of a child of the same age, experience, and intelligence acting under
similar circumstances (subjective standard, flexible and customized—lenient).
(a) Exception: If child is engaging in an adult activity, we do not use the special standard of care.
Use RPP standard. (Ex. operating a motor vehicle—power boat, tractor, jet ski, snowmobile).
Physician’s duty of care to
(4) Professionals: people who have special skill and training and provide services to the public (often
non-patients – there is no
duty of care, unless there is
licensed; DOCTORS): Professionals owe the care of the average member of their profession
a special relationship. Ex.
practicing in a similar community. Compared to real world colleagues in the community.
No duty to warn friend
Custom of the profession is the standard. Experts must testify as to the standard.
visiting patient that patient
(a) Note: Apply a national standard of care to Specialists (not community standard).
is contagious. Duty to warn
parents that patient is
(b) Informed consent: A doctor has the duty to explain the risks of a medical procedure.
contageious when he sends
Plaintiff can bring negligence claim if consent is not given and risks materialize.
patient home with parents
(i) Exceptions: no duty to disclose (1) commonly known risks; (2) patient declines the
(omission to act is breach of
information; (3) patient is incompetent; (4) if disclosure would be harmful to patient.
duty – should have educated
and informed)
(5) Common Carriers and innkeepers: held to a very high standard to passengers/guests.
Physician’s duty of care to
non-patients – there is no
duty of care, unless there is
a special relationship. Ex.
No duty to warn friend
visiting patient that patient
is contagious. Duty to warn
parents that patient is
contageious when he sends
patient home with parents
(omission to act is breach of
duty – should have educated
and informed)
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Negligence (continued)
……Duty (continued)
Occupiers of real estate:☼ Duty to people coming on land and get hurt by dangerous condition. Duty turns on the
legal status of the entrant—
(i) Undiscovered trespasser: no duty of care. If hurt (both from dangerous condition or an
affirmative action), there is no recovery.
(ii) Discovered trespasser: those known about and those anticipated—duty owed to protect
from an (1) artificial, (2) highly dangerous, (3) concealed, and (4) known (to the land
occupier) condition. [Known man-made death traps].
1. Ex. people take frequent unauthorized short cuts across a piece of someone’s land.
2. No duty to protect from natural, moderately dangerous, open and obvious, or
unknown condition (no duty to inspect and discover conditions).
(iii) Licenses: social guests. Duty to protect from conditions (1) concealed from the licensee
and (2) known by the occupier. (Applies to natural and moderately dangerous).
[All known traps on the land].
(iv) Invitee: guests entering land open to public. Duty to protect from all conditions that are
(1) concealed and (2) danger is one that occupier knew about or could have discovered
with a reasonable inspection (duty to inspect). [All reasonably knowable traps]
a. Child trespassers: Child is owed standard of reasonably prudent person under
the circumstances with regard to all artificial conditions on the land. If (1)
owner knows or should have known of dangerous artificial condition, (2) owner
knows/should know that children frequent the vicinity of the condition, (3)
children due to their age, do not appreciate the risks, (4) expense of remedying
the situation is slight compared to the magnitude of the risk.
2. If a duty is owed, there are ways to satisfy duty and avoid liability:
a. Fix the problem (repair, make the thing safe), OR
b. Give a warning: Warnings satisfy duties (when occupier does not fix).
(6) Statutory duties of care (Negligence Per se): criminal or regulatory statute (technically
inapplicable) is nonetheless used as the duty standard for the case. Two part test for borrowing a
statute and making it a duty standard— (Does not apply for every violation of a statute!)
(i) Plaintiff is a member of a class of persons the statue seeks to protect; and
(ii) The accident is in the class of harms that the statute seeks to prevent.
1. Exceptions: (1) if statutory compliance would be more dangerous than statutory
violation, we do not borrow the statute; (2) if compliance would be impossible
(beyond D’s control) under the circumstances, we do not borrow the statute.
a. If we do not borrow the statute, apply reasonable prudent person under the
circumstances.
2. Note: If exceptions do not apply, violation of the statute is conclusive breach.
(7) Duties to Act Affirmatively: There are no duties to act affirmatively (i.e. no duty to rescue).
(a) Duties of care attach only as a byproduct of action: There is no duty to rescue (even
when it is easy, even when it is moral to do so).
(b) Exceptions: (1) If the defendant put the plaintiff in peril that triggers a duty to rescue. (2)
If there is a preexisting relationship, there is a duty to rescue (e.g. relative; common carrier or
inn-keeper and their patrons; land occupier and invitee); (3) if defendant voluntarily rescues
the plaintiff and is careless in the rescue, defendant is liable for injuries.
(i) Even when duty of rescue applies, do not have to put yourself in harms way. Do
what is reasonable under the circumstances.
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Negligence (continued)
….. Duty (continued)
(8) Negligent Infliction of Emotional Distress (seeking fear damages): When no direct physical
trauma, must show
(i) breach of another duty of care and
(ii) near miss: although there is no physical trauma, plaintiff was in a zone of danger, and
(iii) subsequent physical manifestations/injury (note: nightmares are insufficient), other than
misreporting relative’s death or mishandling a relative’s corpse.
(iv) Still need causation and damages
(v) Plaintiff seeks recovery for an emotion other than those cause by being in a zone of
physical danger—strong modern trend toward recovery outside zone of danger if
(vi) physically present (but not necessarily close enough to be harmed) and
(vii) observed negligent injury to a close family member.
1) Breach: Plaintiff identifies the Defendant’s wrongful conduct and must explain why it is unreasonable.
a) Custom or usage may establish standard of care, but does not control whether conduct is negligent.
b) Violation of applicable statute = negligence per se.
c) Res ipsa loquitor (the thing speaks for itself): If plaintiff is unable to identify the wrongful conduct,
plaintiff must show two things as a substitute of direct evidence of breach—
i) Accident is of a type which does not normally occur in the absence of negligence; and
ii) Accident is normally due to negligence of one in defendant’s position (b/c D had exclusive control).
(1) Jury is free to make any decision. Res ipsa gets you to the jury, not a guarantee of victory.
2) Causation
a) Actual (Factual) Cause: BUT FOR causation. A link between the breach identified and the injury.
i) Essay tip: Repeat the breach as the factual cause. State, “but for”… If the negligence was not the
actual cause, defendants will argue “even if” I was not negligent, the injury would have still occurred.
ii) Multiple Defendants: “But For” test does not work for multiple defendants. Two tests—
(1) Mingled cause cases: two separate acts of negligence that merge and cause one injury. If we use
the “but for” test it does not work, because “even if” one party was not negligent, the other party’s
negligence would have caused the injury, and vise-a-versa. In this case, use “substantial factor”
test of causation—was each defendant a substantial contributing factor?
(a) If yes, defendant is a cause. If yes for both, both are JOINTLY liable.
(2) Unascertainable cause cases: two defendants, one caused the injury, but the identification of the
tortfeasor is impossible. It is a 50/50 proposition. Normally, plaintiff must show a
preponderance of the evidence (more than 50%). In this case, shift the burden of proof to the
defendants to offer an explanation showing they were not the cause. If neither can show they are
not liable, they are BOTH held liable.
b) Proximate (Legal) Cause: Plaintiff must show that liability is fair under the circumstances based on
foreseeability. The consequences of the breach must be foreseeable.
i) Two types of situations:
(1) Direct cause: Defendant commits breach and immediately after plaintiff suffers injury. In a direct
cause case, the injury is almost always foreseeable (thus liability is almost always fair).
(a) Limitation: outcome is unforeseeable if the injury is absurd.
(2) Indirect cause: Defendant commits a breach and the breach causes no injury or only partial
injury; then additional injuries occur later. Liability attaches if there is forseeability.
Four well settled cases of indirect cause fact patterns holding Defendant liable—
(a) Intervening medical negligence (foreseeable that a doctor could make injury worse).
(i) The doctor is also liable.
(b) Intervening negligent rescue (foreseeable that a rescuer could make injury worse).
(i) The rescuer may also be liable.
(c) Intervening protection/reaction forces (foreseeable that other people protecting themselves
from defendant’s initial breach could make an injury worse).
(d) Subsequent disease or accident (foreseeable that a person in a weakened state from an
injury could get a subsequent injury/disease/or have an accident).
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Negligence (continued)
3) Damages: Economic/Punitive (medical bills, lost wages, pain & suffering).
a) Egg Shell Skull Rule—once the defendant commits the other elements, D must pay for all damages, even
if surprisingly great in scope. “Take your plaintiff as you find your plaintiff.”
b) P may recover punitive damages if D’s conduct is wanton or malicious
c) P has duty to take reasonable steps to mitigate damages
i) Exam Tip: Applies to ALL TORTS (negligence, intentional, strict products).
Affirmative Defenses in Negligence
1) Comparative Negligence (majority view)
a) Defendant offers evidence that the plaintiff failed to exercise proper care (i.e. plaintiff is at fault).
b) Jury is instructed to compare the fault of the parties, weigh the fault against each other, and assign each
percentage of fault to both the plaintiff and the defendant.
c) Plaintiff’s recovery is reduced by his portion of fault.
i) If there is a counterclaim—allocate fault, then apply separately to damages caused by the particular D.
2) Contributory Negligence (C.L./minority): Defendant avoids liability if he can prove P was also negligent.
a) Note: tortfeasor might still be held liable if he had the last clear chance to prevent the injury.
Equitable Remedies in Torts
Injunctions: can be negative (prohibitory) or affirmative (mandatory) AND permanent (after judgment) or
preliminary (after complaint is filed). ANALYSIS—
1) Permanent Injunction:
1. Must first establish liability on the merits (substantive tort analysis).
2. Must then show why Injunctive relief is appropriate (four part test): Must show—
i)
no adequate remedy at law (e.g. (1) D has no money; (2) Harm is impossible
to measure);
ii)
a protectable property interest or other protectable right;
iii)
that the injunction is enforceable (e.g. (1) more complex the conduct, the
harder the enforcement court will be reluctant to grant; (2) Length of time is harder to enforce
court will be reluctant; (3) Activities outsider the jurisdiction court will be reluctant).
iv)
balance of hardships (the benefits to the Plaintiff outweighs the harm to the
Defendant)
a) Special Defenses to a Permanent Injunction
i) Unclean hands: if plaintiff engages in misconduct that can result in denial of injunctive relief.
ii) Laches: prejudicial delay—if the plaintiff has neglected to file a lawsuit and only belatedly files the
injunction the plaintiff may not be able to get an injunction (if defendant changes position in reliance).
iii) First Amendment: Defendant may be able to argue that an injunction will violate prior restraint.
2) Preliminary Injunction: Freeze the status quo pending trial. Plaintiff must show—
i) A likelihood of success on the merits and
ii) Plaintiff must suffer irreparable harm.
Strict Liability Torts
1. Animals: Injuries caused by animals (three scenarios)—
1) Domesticated Animals: Dog bites—absent negligence, no strict liability in connection with
ownership of an animal. However, if the owner has knowledge of the animals vicious propensities
(i.e. a first bite) and continues to keep as pet, then there is strict liability.
i. Owners can be liable on a negligence theory – abusing their animals (i.e. not feeding them,
beating them) and animal causes injury as a result.
2) Trespassing cattle: Owner is strictly liable for trespassing cattle and the damage caused.
3) Wild Animals: Owners that keep wild animals are strictly liable.
i. Strict liability = defendant’s safety precautions are irrelevant.
2. Ultra Hazardous Activities
1) Elements: (1) Activity cannot be made safe; (2) Activity poses a risk of severe harm; (3) Activity is
uncommon in the community where Defendant is conducting the activity. (Determined by Court).
i. Defendant is strictly liable for any harm.
2) Examples: (1) Blasting or explosives; (2) Dangerous Chemical/Biological substances; (3) Nuclear
energy or radiation.
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3.
Ultra Hazardous Activities
1) Elements: (1) Activity cannot be made safe; (2) Activity poses a risk of severe harm; (3) Activity is
uncommon in the community where Defendant is conducting the activity. (Determined by Court).
2) Examples: (1) Blasting or explosives; (2) Dangerous Chemical/Biological substances; (3) Nuclear
energy or radiation.
a. Extent of Liability: Duty owed to all foreseeable Ps to make safe the dangerous activity.
b. Defenses:
i. Best defense: assumption of risk
ii. Contributory negligence NOT a defense unless P knew of the danger and his
unreasonable conduct was the very cause of the ultrahazardous activity miscarrying.
iii. Comparative negligence scheme generally applies.
Strict Liability for Products☼
Note: When a party is injured by a product, they are likely to have many claims (negligence, warranty, fraud).
They may also have a strict liability cause of action—
1. Elements of strict liability for products—Merchant, Defect, Existing (unchanged from D’s possession), damage
1) Defendant was a merchant (routinely deal in goods of this type)
i. Casual sellers: not merchants—cannot be strictly liable.
ii.
Service providers: not merchants to items incidental to the service.
Note: At trial, P need
not present expert
iii.
Commercial lessors: ARE merchants—can be held strictly liable (e.g. car rental co.)
testimony of defect –
iv.
No privity: Defendant is a merchant, but not the merchant the plaintiff dealt with—strict
can merely show that
liability applies to all merchants in the supply chain – can sue all and any.
product did not
function properly. 2) Product is defective and unreasonably dangerous
Issue of whether
i. Manufacturing Defect: product differs from all the others that came off the assembly line in
defect caused injury
a way that makes it more dangerous than consumers would expect. (Consumer Expectation)
will be for the jury.
1. Defendant’s safety precautions do not matter – strict liability is strict.
ii. Design Defect: product could have been physically constructed in an alternative way that is
(1) safer, (2) cost effective, and (3) practical (useful for primary purpose).
Defendant must
1. Design Defect includes information:
sell or place in
a. Warnings (failure to warn): Products with warnings are safer. Selling a
the stream of
commerce.
product that needs a warning, absent a warning, is a defective product.
Warnings must be (1) clear, (2) understandable, and (3) prominent.
3) Defect must have existed when the product left the defendant’s hands: subsequent mishandling or
Only voluntary
deterioration due to age does not trigger strict liability.
and unreasonably
1. If product is NEW, it is assumed the problem existed when D held the product.
encountering a
2. If the product is purchased in non-normal channels, must prove that the defect
known risk OR
misuse is an
existed at the time it left the defendant’s hands.
Contributory
unforeseeable
negligence is
4) Plaintiff is a foreseeable user making a foreseeable use: Many foreseeable uses of consumer
manner serves as a
not a defense.
products
are
technically
misuses.
Misuse
does
not
bar
recovery.
defense.
i. Ex. Chair is used to stand on to get a high object and breaks—foreseeable use.
2. Strict Liability Defenses (for products, but also applies to animals, hazardous materials, etc).
1) Comparative Fault: Did the user contribute to harm. If so, reduce recovery by percentage of fault.
Nuisance Defined by the injury plaintiff suffers (and not the conduct of the defendant)—i.e. a type of harm.
1. Private Nuisance: Interference with land: interfering with use and enjoyment of land to a substantial and
unreasonable degree.
1) Substantial interference: is that which is offensive to the AVERAGE person, not hypersensitive.
2) Unreasonable interference: the severity o the inflicted injury must outweigh the utility of D’s
conduct.
3) Inconsistent land use: D and P both want to use their land, so court must balance the equities between
the way D wants to use his land AND P’s right to be free from excess interference.
i. Exam tip: find the choice that mostly closely embodies a balance of the equities.
of the defendant)—i.e. a type of harm.
2. Public Nuisance: An act that unreasonably interferes with the health, safety, or property rights of the
community (e.g. whore house). Individual damages not available unless they suffer unique damages.
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Vicarious Liability:
Holding a passive party liable because of a relationship to the active—
1) Employer/employee: employer liable if employee was acting within scope of employment.
a) Intentional torts by employees: generally outside the scope of employment. There are exceptions,
however, (1) if the employee is given the authority to use force as part of the job, then abuse of authority
leads to vicarious liability; (2) if the job creates animosity or friction (e.g. repossession agent); (3) if the
employee is acting in a misguided effort to serve the employer’s purpose.
2) Hiring party/independent contractor: General rule is no vicarious liability.
a) Exception: A land occupier (owner) is vicariously liable if an independent contractor hurts an invitee.
3) Automobile owner/driver: General rule is no vicarious liability -- CA RULE????
a) If car is borrowed to do an errand for an owner, then there is a principle-agent relationship liability.
4) Parent/child: No vicarious liability.
5) Tavern owner/patron: generally no, but tavern owner who unlawfully supplies alcohol will be liable for the
conduct of served.
a) Unlawful supply: (1) Underage; and (2) serving someone already intoxicated.
6) General rule: negligent supervision or negligent hiring trumps may mean VL.
Joint Tortfeasor problem
Plaintiff sues two defendants who are jointly liable.
1) Comparative contribution (Majority): Plaintiff can fully recover from ANY of the joint tortfeasors (but must
subtract out any portion of fault attributed to him). If one defendant pays more than his share of fault, the
overpaying defendant can get the excess back from the other defendant.
a) Indemnity: Exception to comparative contribution—When paying defendant gets all of his money back...
i) Vicariously liable party can get all of his money back from the active tortfeasor.
(1) Ex. Owner is indemnified by driver, if owner pay plaintiff for driver’s negligence damages.
ii) Non-manufacturer held strictly liable for a consumer product (e.g. the retail store).
(1) Ex. Retail store sells defective toaster made by Manufacturer. Plaintiff sues retail store and
recovered under strict liability. Manufacturer indemnifies retail store for all damages.
2) Common Law Rule: Defendant only pays his portion of liability.
Wrongful Death (Claims brought on behalf of decedent: Survival Claim vs. Wrongful Death)
Not a cause of action – it is a procedural device. When there is a dead person with a spouse/child suing on behalf—
Wrongful Death: cause of action in tort for economic damages of the surviving spouse, children, etc. No
damages for own emotional suffering or pain and suffering (can get for decedent’s). SOL 2 years from the date of
death, but at death, decedents underlying personal injury claim is still timely.
a) Tort claim is derivative—any defense against the tort claim can be used against the wrongful death claim.
b) Recovery is limited to pecuniary damages: loss of income, medical expenses, loss of potential
inheritance, loss of voluntary support, but NO RECOVERY for grief.
Damages: punitive damages and allocate to spouse/child that suffer pecuniary loss (not consortium loss).
o Not distributed based on the Will; distributed to spouse or child in proportion to the sustained loss.
-Survival Claim: for decedent’s underlying personal injury claim.
Any cause of action the plaintiff could have brought if still alive. Can include damages for decedent’s pain and
suffering. If on the date of death the underlying claim is still timely, the executor gets either the time still
remaining on the decedent’s claim or 1 year from the date of death (whichever is longer).
Damages: damages go to estate, distribute by Will.
Loss of Consortium
Cause of action for an uninjured spouse—
1) Loss of services (e.g. cook, clean, fix).
2) Loss of society (e.g. no one to talk to, socialize with).
3) Loss of sex.
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Agency
LIABILITY OF PRINCIPAL FOR TORTS OF AGENT – respondeat superior and vicarious liability
A. Issue: Whether the principal will be vicariously liable for torts committed by agent.
B. Two-Part Test: Principal will be liable for torts committed by agent if: (1) a principal-agent
relationship exists, and (2) the tort was committed by the agent within the scope of that relationship.
1. The Principal-Agent Relationship.
a) Principal-agent relationship requires: Assent, Benefit, and Control
(1) Assent: informal agreement between a principal (with capacity) and agent.
(2) Benefit: the agent’s conduct must be for the principal’s benefit.
(3) Control: the principal must have the right to control the agent by having
the power to supervise the manner of the agent’s performance.
Hypo: Tory Victus went to
(a) Sub-agents: agent enlists the help of a sub-agent. There can be
E-Stop-L Gas Station to
no vicarious liability for a subagent’s tort, unless there is
have her brakes repaired. Eassent, benefit, and the right to control that sub-agent tortfeasor.
Stop-L Gas Station had an
(i) Exam Tip: unlikely to find assent and control.
independent contractor
arrangement with the brake
(b) Borrowed agents: a principal borrows another principal’s
repairer. Brake repairer
agent. Is the borrowing principal responsible for the agent?
negligently repaired Tory
There can be no vicarious liability for a borrowed agent’s
Victus' brakes, resulting in
tort (for the borrowing principal), unless there is assent,
an accident. Is E-Stop-L
Gas Station liable? Yes.
benefit, and the right to control the borrowed agent tortfeasor.
The general is rule there is
(i) Exam Tip: will not find a right to control.
I.
no vicarious liability for an
independent contractor’s
torts. Except, ultra
hazardous activities and
estoppel. In this case,
brake repair is an ultrahazardous activity and
therefore there will be
independent liability.
Moreover, the gas station
will be estopped from
denying vicarious liability
if it has held out its
independent contactor
with the appearance of
agency.
Hypo: Employer instructs
employee to drive across
town to deliver files to a
branch office. On the way
back, employee stops to
pick up shirts at the dry
cleaner for work the next
day. In the parking lot of
the dry cleaner, employee
hits a pedestrian. Is
employer liable? The
principal will be liable for
its agent’s torts within the
scope of agency. In this
case, the agent was on a
detour, a mere departure
from an assigned task
because the tort occurred
one the back to work.
Therefore, this tort
occurred within the scope
of agency and there will be
vicarious liability.
b) Contrast Agent with Independent Contractor:
(1) Factors: There is no right to control an independent contractor, b/c there is
no power to supervise the manner of the independent’s performance.
(2) Rule: There is no vicarious liability for an independent contractor’s torts
(because there is no control).
(a) Exceptions: Where Principal is liable for Inde. Contractor—
(i) Ultra hazardous activity exception—if the independent
contract is involved in ultra hazardous activities, there is
vicarious liability.
(ii) Estoppel: If you “hold out” your independent contractor
with the appearance of agency, you will be estopped from
denying vicarious liability (even for independent
contractor’s tort)
2. Scope of Principal-Agent Relationship Factors: Three part weighing test—
a) Was conduct "of the kind" agent was hired to perform? If the conduct was
within the job description, it is likely to be within the scope of agency.
b) Did the tort occur "on the job"?☼ Frolic v. Detour: A Frolic is a new and
independent journey. If an agent is on a frolic, principal is not vicariously liable. A
Detour is a mere departure from an assigned task (Ex. On his way back). If the
agent is on a detour, the agent is within the scope of agency and principal will be
vicariously liable.
c) Did the agent intend to benefit the principal? If the agent even in part intended to
benefit the principal, it is enough to call the action within the scope.
When servant
3. Intentional Torts
(a) Rule: Intentional torts are ordinarily outside the scope of agency.
(b) Exceptions. Intentional torts are within the scope if the conduct was:
(1) Specifically authorized by the principal.
(2) Natural from the nature of employment.
(3) Motivated by a desire to serve the principal.
(a)
Example: Bouncer in a bar (fits all three exceptions).
107
invites 3rd party
in her vehicle
without express
authorization by
maters, this is
outside the scope
II. LIABILITY OF PRINCIPAL FOR CONTRACTS ENTERED BY AGENTS
A. Issue: Whether principal is liable for contracts entered into by its agent.
B. One Test: Principal is liable for contracts entered into by its agent if the principal authorized the
agent to enter the contract.
C. Four types of authority: actual express, actual implied, apparent or ratification.
1. Actual Express Authority:☼ Principal used words to express authority to agent.
Hypo: Agent tells Principal
a) Rule: Oral, Private (whisper), Narrow (tailored to the words used to express).
that she is an expert in
b)
Exception: For Land—an interest in real estate which could last longer than 1
negotiating real estate
transactions. Principal
year requires the express authority to be in writing.
whispers into Agent's ear at
c)
Express authority will be revoked by:
party that principal wants
(1) Unilateral act of either party, or
Agent to negotiate the sale
of Green Acres Farm.
(2) Death or incapacity of the principal.
Agent negotiates the sale of
d) Except: express authority cannot be revoked if there is a durable power of
Green Acres Farm for the
attorney. A power of attorney is a written expression of authority to enter a
Principal. Is Principal
transaction (with conspicuous survival language—i.e. “survives incapacity,”
bound on the sale? No.
The principal will be liable
“survives death”).
on its expressly authorized
e) SOF: If K must be in writing under SOF, then authority must also be in writing
contracts. In this case,
(Equal Dignities Doctrine).
because the contract
involved the sale of land,
the express authority must
have been in writing.
Therefore, the oral,
private whisper was not
sufficient to authorize this
contract. There can be no
liability on the
unauthorized contract.
Principal will not be liable.
Hypo: Charles owns an
antique store. A shipment
of antique clocks arrives
from London. Charles tells
his employee Dufus not to
sell a special grandfather
clock. Charles goes to
lunch. Dufus sells the clock.
Is Charles bound on the
sales contract? Yes. The
principal will be liable on
its authorized contacts. In
this case, there was no
actual express or implied
authority to sell the clock.
Nonetheless, there was
apparent authority
because (1) the principal
did cloak Dufus with the
appearance of authority
and (2) the buyer relied
reasonably on Dufus’s
appearance of authority.
Therefore Charles in liable
based on apparent
authority.
Springing
Power of
Attorney: POA
is in effect upon
some occurrence
(e.g. incapacity).
Power holder
must declare in
writing when
event occurs.
Hypo: Paula collects rare books. She hires Alice to find a rare book to complete her collection.
Alice searches everywhere for the rare book. As Alice is about to pay for the book, Paula dies. Is
Paula's estate bound by the contract? No. The principal will be liable on its authorized
contract. In this case, actual express authority terminated upon the principal’s death.
Therefore there was no express authority to enter the contract. Therefore the estate will not
be liable on the contract. The Agent becomes liable personally on the unauthorized contract.
2. Actual Implied Authority:
a) Authority which agent reasonably believes the principal has given, because:
(1) Necessity: There is implied authority to do all tasks which are necessary to
accomplish an express task. (Ex. express authority for something, implied
authority to do the smaller tasks leading up the expressly authorized act).
(2) Custom: There is implied authority to do all tasks customarily performed
by persons with the agent’s title or position (Ex. title of Lawyer has
implied authority to do many different tasks).
(3) Prior dealings between the principal and the agent. There is implied
authority to do all tasks which the agent believes to be authorized from
prior acquiescence by the principal.
3. Apparent Authority:☼ The “appearance of authority” Two-Part Test: (1) Principal
"Cloaked" agent with the appearance of authority and, (2) third-party reasonably relies on
appearance of authority.
a) Secret Limiting Instruction – Principal still liable where Agent has actual authority
(or is cloaked with authority), but principal has secretly limited that authority. Agent
acts beyond the scope of the limitation.
b) Lingering Authority - Principal still liable where Actual authority has been
terminated, but afterwards, agent continues to act on principal's behalf; until
persons with whom the agent usually contracts receives notice of termination.
Hypo: For many years, Agnes has sold goods as Priscilla's agent. Priscilla finds out, however,
that Agnes has been stealing money from her. Priscilla terminates Agnes. Agnes continues
selling to customers and runs away with their money. Is Priscilla bound on contracts entered into
by Agnes after termination? Yes. The principal will be liable on its authorized contracts. In
this case, there was no actual express or implied authority because it has been terminated.
Nonetheless, apparent authority still lingers because (1) the principal has cloaked the agent
with the on going appearance of authority and (2) the customers may continue to rely
reasonably on the lingering authority until they receive notice of termination.
Continued
108
LIABILITY OF PRINCIPAL FOR CONTRACTS ENTERED BY AGENTS (continued)
……Types of Authority (continued)
4. Ratification: Authority can be granted after the contract has been entered, if:
Hypo: Priscilla gives Agnes a
power of attorney to purchase
a) Principal has knowledge of all material facts regarding the contract, and
steel drums. Agnes enters a
contract to purchase 11,000
b) Principal accepts its benefits.
wooden barrels. Priscilla tells
c) Ratification cannot alter the terms of the contract. (Must ratify the whole, and may
Agnes "great job, I love wooden
barrels, but I only need 10,000."
not try to change any terms of the contract—attempt to change no ratification).
Is Priscilla bound? No. The
principal will be liable on its
authorized contracts. In this
case, there was no actual
express or implied authority to
purchase wooden barrels
because the power of attorney
said steel drums. Nor, is there
any evidence of apparent
authority to purchase steel
drums. Nonetheless, the
principal arguably ratified the
contract (1) knowledge and (2)
acceptance of its benefits
because she said “great job”
(knowledge) and “I love wooden
barrels” (acceptance). But in
New York, ratification is not
valid because it was not
complete because there is an
attempt to change the deal.
Thus, no authority/liability
D. The Rules of Liability on the Contract
1. General Rules:
a) If no authority, principal is not liable on the contract. If no authority, agent is
liable on the contract.
b) If authority, principal is liable on the contract. If authority, agent is not liable on
the contract.
2. Exception:☼ If principal is partially disclosed (only the identity of principal concealed) or
undisclosed (fact of principal concealed), authorized agent may nonetheless be liable at
the election of the third-party (may choose to sue the agent or undisclosed principal—can’t
recover from both though).
III. DUTIES AGENT OWES TO PRINCIPAL
A. Duty to exercise reasonable Care.
B. Duty to obey reasonable instructions (i.e., not lie or break the law).
C. Duty of Loyalty.
a) Self-dealing - Agent cannot receive a benefit to the detriment of the principal.
b) Usurping the principal's opportunity, or
c) Secret profits (“at the principal’s expense”)
D. Hypo: Priscilla authorizes Agnes to buy diamonds. Agnes spots choice diamonds, and secretly buys
them for herself for $1 million. Agnes then resells the diamonds for $2 million.
(a) What duties, if any, has Agnes breached? The agent has breached the duty of loyalty by
(1) self dealing (i.e. receiving a benefit to the principal’s detriment); (2) usurping the
principal’s opportunity to buy diamonds; and (3) making a secret profit at the
principal’s expense.
(b) What remedies, if any, does Priscilla have against Agnes? The principal may recover any
losses caused by the breach, and also may disgorge the agent’s profits.
Agency Mini Review
1. Principal's Liability for Agent's Torts:
(a) Assent, benefit, control, plus scope.
(b) No vicarious liability for independent contractor’s torts.
(c) Intentional torts, generally outside scope.
2. Principal's Liability for Agent's Contracts:
(a) Express authority oral, except land (need writing); revocable unless durable.
(b) Implied authority 1) necessity; 2) custom; or 3) prior dealings.
(c) Apparent authority principal cloaks plus third party relies.
(d) Ratification = knowledge + acceptance of benefits (NY rule: unless modified).
(e) Authorized agents not liable unless undisclosed principal.
3. Duties Agent Owes Principal:
(a) Care
(b) Obedience
(c) Loyalty (disgorge profits)
109
Partnership
PARTNERSHIP FORMATION (“General Partnership”)
A. Definition: A general partnership an association of two or more persons who are carrying on as coowners of a business for profit. Sharing of the profits is the key. Purpose must be legal.
B. Sharing of the profits: The contribution of money or services in return for a share of the profits (if
any) is prima facie evidence of a general partnership. (Ex. an employee for a wage is NOT a partner).
C. Formalities: There are no formalities to becoming a general partnership. You are deemed to be a
partnership by conduct alone. (i.e. holding yourself out as partnership; sharing profits).
If a would-be partner lacks capacity, such as non-age (must be 18 to enter
II. LIABILITIES OF PARTNERS TO THIRD-PARTIES into partnership), he is not personally liable for the obligations of the
partnership, but he is bound to the extent of his capital contributions.
A. Agency Principles Apply.
Hypo: Paula convinced
1. Partners are agents of the partnership for carrying on usual partnership business.
her friend Peter to start a
2. Partnership is bound by torts committed by partners in scope of partnership business.
sailing school, and agreed
to lend Peter money to
3. Partnership is bound by contracts entered by partners with authority.
purchase a boat for that
B. GENERAL PARTNERS ARE PERSONALLY LIABLE FOR DEBTS OF THE PARTNERSHIP
purpose. At a party,
Paula told a wealthy
(Each partner may be personally liable for any other partner).
friend: "My partner
1. Incoming partner's liability for pre-existing debts: An incoming partner is not liable for
Peter and I are starting
prior debts, except any money which is contributed to the partnership by an incoming
a sailing school and we
need a boat." The
partner can be used by the partnership to satisfy prior debts.
wealthy friend offered to
2. Outgoing partner's liability for subsequent debts: An outgoing partner retains liability on
sell Paula and Peter a
boat, and agreed to allow
future debts for 2 years, unless partner files a notice of disassociation with the secretary of
Peter to take it for a test
state and all persons are deemed to have this notice 90 days after such a notice is filed.
ride the next day. Later
that night, however, Peter
C. Doctrine of General Partnership Liability by Estoppel☼ - One who represents to a third-party that
and Paula fight and
a partnership exists will be liable as if a partnership exists (even if a partnership does not exist).
decide to drop the sailing
school idea. The next
day Peter takes the boat
for a ride and destroys
the boat. May wealthy
friend sue Paula for the
loss of the boat?
General partners are
liable for all
partnership obligations,
including co-partners
torts. In this case,
however, Paula and
Peter never really
formed a general
partnership because
there was only a lending
relationship not based
on the sharing of the
profits. Nonetheless,
Paula has represented to
a third party that she is
a partner in a
partnership will be
liable under the
Doctrine of General
Partnership Liability by
Estoppel. Therefore,
she is liable for the copartner (Peter’s) tort.
D. Contrast Formation and Liability Within Other Unincorporated Business Organizations.
1. Limited Partnerships (LP)
a) Defined: partnership with at least one general partner and at least limited partner.
b) Formation: File a certificate of limited partnership (w/names of general partners)
c) Liability and Control: Differs between General and Limited Partners
(1) General Partners: still liable for all debts and obligations of the business,
but they may exercise substantial managerial control.
(2) Limited Partners: Not liable for partnership’s debts and obligations. But,
they may not exercise substantial managerial control.
2.
Registered Limited liability Partnerships (LLP): limited to partnerships engaged in
professional services (e.g. lawyers).
a) Formation: Register by filing a statement of qualification with the Secretary of
State.
b) Liabilities: No partner will be liable for the partnership debts and obligations.
Partner is always liable for his own wrongs (and anyone under direct supervision).
3.
Limited Liability Companies (LLC):
a) Original Purpose: To provide owners of business the same limited liability of
shareholders in a corporation plus the beneficial tax status of a partnership.
b) Formation: File the Articles of Organization Liabilities: The members (owners)
are not liable for any debts of the company, if the company has partnership
characteristics…
c) Partnership Characteristics:
(1) Members control, but may delegate to managers;
(2) Limited Liquidity: Member interests are not freely transferable;
(3) Limited Life: events of dissolution.
d) L.L.C. = Limited liability plus limited liquidity plus limited life plus limited tax.
110
III. RIGHTS AND LIABILITIES BETWEEN GENERAL PARTNERS
A. Partners are FIDUCIARIES of each other and the partnership.
1. Duty of loyalty: partners may not engage in (1) self dealing, (2) usurp partnership
opportunities, or (3) make a secret undisclosed profit at the partnership’s expense.
2. Remedy: Action for Accounting—only form of action that can be brought by a partnership
against one of its own partners for a breach of duty of loyalty. Partnership may recover (1)
losses caused by the breach and (2) may disgorge profits made by the breaching partner.
B. Partners' rights in Partnership Property: relatively illiquid, except share of profits.
1. Specific Partnership Assets: (1) land, (2) leases, and (3) equipment, owned only by the
Mortgage on Partnership
partnership. No individual partner may transfer partnership assets without partnership
Property: A partner’s
authority. (Caveat: make sure the partnership owns, and not a partner. (who paid?))
ownership interest in any
specific item of partnership
2. Share of profits and surplus: Each partner’s share of profits, if any; and it is personal
property (i.e. land) is not
property owned as such by each partner. Individual partners may freely transfer their
that of outright ownership,
share
of profits and surplus to third parties (including through a Will).
but merely that of a tenant in
3. Share in management: Management (voting, etc) is asset that belongs only to the
the partnership. An
attempted mortgage of
partnership and not any individual partner. Individual partners may not transfer their share in
partner’s interest in specific
management to some third party (Ex. cannot sell right to vote—it is not their right to sell).
property has no effect upon
4. Conflict between specific partnership assets and personal property: whose money was
passing of title. Mortgagee
used to the buy the property is the rule. If partnership money was used to buy the property, it
has no rights against the
property. A loan secured on
becomes partnership property. If personal money was used to buy the property, it becomes
the mortgage will therefore
personal property.
be enforced personally
against the mortgagor, and
the mortgagee will have no
rights against other partners
or the partnership.
Hypo: John buys a car in John's own name with John's money which John uses in partnership
business. John dies. Does John's spouse Yoko get the car or is it a specific asset of the
partnership? In this case, because John bought the car with his own money, it is his own car,
and therefore he may freely transfer the car (i.e. it is not partnership property).
C. MANAGEMENT -- Absent an agreement, each partner entitled to EQUAL control (vote).
Hypo: A, B, and C agree to contribute money and share profits 60-30-10. How do they vote?
Absent agreement, each party is entitled to equal control, regardless of how much money is
contributed by each and how profits are shared.
D. SALARY -- Absent an agreement, partners get NO SALARY.
Hypo: A and B are partners. A works 96 hours a week. B sleeps all day. Does A get any salary?
In the absence of an agreement, partners get no salary; partners are only entitled to a share
of profits.
Exception: Partners do receive salary for helping to wind-up the partnership business.
E. PARTNER'S share of profits and losses.
1. Absent an agreement, PROFITS SHARED EQUALLY.
2. Absent an agreement, LOSSES SHARED LIKE PROFITS.
Hypos:
(1) If Agreement -- silent on profits and losses? In the absence of an agreement on profits, they
are shared equally; in the absence of an agreement on losses, they are shared just like
profit (here equally).
(2) If Agreement -- "Profits shared 60/40." Losses shared? In the absence on an agreement on
losses, they are shared just like profits (here 60/40).
(3) If Agreement -- "Losses shared 60/40." Profits shared? Absence of an agreement on
profits, they are shared equally (does not matter how losses are shared).
(4) Partner A puts up all of the money. Partner B does all of the work. Partner C gives the
partnership its fine name. Partner D does nothing. How are profits shared? In the absence
of an agreement, profits are shared equally.
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Note: a partnership can be terminated if the
IV. DISSOLUTION
business can only be carried on at a loss.
A. Key definitions:
1. Dissolution: Dissolution occurs upon any material change in the partnership (bankruptcy,
Hypo: A and B dissolve
Unless otherwise
the AyeBee Partnership.
incapacity, death, or withdrawal) of any single general partner. This begins the end.
agreed, death
In winding up, they
2. Termination: Termination is the real end.
liquidate the partnership
dissolves a
assets and have a total of
3. Winding Up: The period between dissolution and termination in which the remaining
partnership.
$700,000 to distribute.
However,
partners
liquidate
the
partnership’s
assets
to
satisfy
the
partnership’s
creditors.
How should that amount
authority of a
B. Compensation and liability for winding up.
be distributed, if (1) the
partner to act for
partnership owes
1. Compensation for winding up: Partners receive salary for helping to wind-up.
partnership
$600,000 to trade
2. Partnership's liability during winding up: Is the partnership/partner still liable?
ceases only on
creditors; (2) Partner A
loaned the partnership
notice of the
a) Old Business: The partnership, and therefore individual general partners, retain
$100,000; and (3)
death. Deceased
liability
on
all
transactions
to
wind-up
old
business
with
existing
creditors.
Partner B made capital
estate still liable
contributions of
b) New Business: The partnership, and therefore individual general partners, still
on K made by
$200,000? First, all
retain liability on new business transactions during wind-up, until notice of
other partners
outside trade creditors
dissolution is given to all creditors (or 90 days after filing statement of dissolution
receive $600K; second
inside Partner A must
with the state)
receive $100K in return
C. Priority of distribution
for loan. The
partnership still owes
1. Each level of priority must be fully satisfied before beginning the next level in this order:
to Partner B the full
a) First, creditors must be paid: All outside non-partner trade creditors and all
repayment of its capital
contributions ($200K).
inside partners who have made loans to the partnership must be repaid as well.
That liability is a loss.
b)
**Second, capital contributions by partners must be paid: any money paid in by
Losses are recovered
the partners must be fully repaid (this is not a loan, this is capital to the partnership)
from Partner A and B.
Equal profits means
c) Profits and surplus, if any: absent an agreement, partners share profits equally.
equal losses. Partners
2. Rule: Each partner must be repaid his or her loans and capital contributions, plus that
A and B must pay in to
the corporation the
partner's share of the profits or minus that partner's share of the losses.
equal % share of the
a) If there are losses, which include un-repaid capital contributions by partners, all partners
loss, $100 each ($200K
total). Partnership
must pay into the partnership their percentage of loss allocation, which is then used to
now has $200K.
pay for the losses (i.e. pay the partner who contributed the capital). Note: partner who
Partner B now gets the
contributed the capital must also pay in his percentage share, then he gets it back.
Partnership Dissolution: Notice rule to creditors (creditors
need actual notice of withdrawal; “cash basis” parties only
need constructive notice—in newspaper suffices).
Silent partner: no need to give notice of withdrawal
because a silent partner never creates appearance of agency.
Partnership Mini-Review
1. Formation
(a) No general partnership formalities
(b) Association, two or more persons carrying on as co-owners of a business for profit (sharing of profits
is prima facie evidence of the formation of a general partnership).
2. Liability to Third-Parties
(a) General Partners are liable personally for partnership obligations.
(b) Estoppel representators are liable as if partners.
(c) Limited Partners, Registered Limited Liability Partners, and LLC members have limited liability.
3. Relations Between Partners
(a) Fiduciaries remedy for breach = Accounting action
(b) Only the share of profits is liquid personal property.
(c) Absent an agreement, equal control, no salary, equal profits, and losses like profits.
4. Dissolution
(a) Definitions: Any material change (death or withdrawal of partners)
(b) Priority: (1) all outside creditors; (2) inside creditors (loans); (3) capital contributions (of partners);
(4) profits if any shared equally.
(c) Distribution Rule: Each partner must receive their loans and capital contributions, plus their share of
profits, but also minus their share of losses.
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