8/23/22
The court system
Consists of federal courts and state courts
Federal court system
● Federal court was created by the US constitution
○ 3 level court system:
■ Magistrate courts
■ Federal district courts (Hear both civil & criminal cases like kidnapping and robbing
bank)
■ Federal appeals courts
*Federal courts won't hear state matters
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Federal district courts
○ Each state has at least one federal court
● Federal appellate courts
○ Has 3 judges
○ Federal district court decisions are reviewable in the US court of appeals
● Specialized federal courts
○ Special jurisdiction
○ Property cases (patents, trademarks, copyrights), government will always be defendant in those
cases
○ US court of international trade- Hears customs matters
○ US tax court (only tax matters)
○ US bankruptcy court (only bankruptcy cases) *bankruptcy only handled federally
● U.S. Supreme court
○ Established by the US constitution
○ Highest court of appeal
○ State disputes go to supreme court
○ Court issues a “Writ of Certiorari” or application to accept any appeals
*the supreme court is the precedent for any and all cases. Supreme court always has final say.
*federal judges are always attorneys
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Three basic functions in the legal system:
○ Provides decisions in resolving disputes among society
○ Assist in the effort of the parties to take full benefits from the justice system
○ Upholds the integrity of the law
*under US constitution federal judges are given lifetime tenure
State court systems
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State courts are made up of
○ Justice of peace courts: traffic violations, class c misdemeanors
○ County courts: class A & B misdemeanors
○ District courts: criminal, civil, felonies
○ Courts of appeals: criminal, civil
○ Probate courts: wills, trusts
*state supreme court only hears civil matters
State courts systems
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State courts of appellate jurisdiction
○ All states have at least one court of appellate jurisdiction
○ *cannot take a criminal matter to the TX supreme court
○ A party normally has a right to appeal to at least one appellate court
Rules of civil procedure
○ Plaintiff files suit
○ Defendant responds
○ Most courts have adopted the federal rules of civil procedure to govern
■ Procedural aspects
■ Pleadings
■ Discovery
■ Trial procedure
Jurisdiction
● Meaning: Is the power to speak the law
● Defines the courts limitations
● Generally established by statutes or constitution
● The plaintiff must elect a court with
○ Subject matter jurisdiction
○ Jurisdiction over the person or property of the defendant
○ Usually choose a jurisdiction in which you reside or do business in.
● Subject matter jurisdiction in state courts
○ Statutory limitation in the types of disputes a court may hear
○ Such as only suits involving more that $2000
● Subject matter jurisdiction in federal courts
○ As dictated by the constitution federal subject matter is limited to cases involving
○ Federal question: patents, trademarks, copyrights, bankruptcy, federal crimes, maritime
law
○ Diversity of citizenship: two different parties in two different states. Taking a case away
from a state court and moving it to a federal court. (where $75,000 or more is a
controversy requirement) Erie doctrine: using state law in federal court.
● Personal jurisdiction
○ After the plaintiff has selected the appropriate court on the basis of subject matter
○ They must determine if that court may exercise jurisdiction over the defendant
○ In personam jurisdiction is generally established through the service of process
(summons)
■ Notifying the defendant usually in person of that suit that has been filed
● Jurisdiction over out of state defendants
○ Defendant must be within the territorial jurisdiction of the court to be served
○ Out of state defendants can be served if they are served in the state of if they can be
reached by long-arm-statutes
■ State of residence
■ State in which firm is located
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State in which firm is incorporated
State of headquarters
**State in which the firm does business in (this would require that the firm have
minimum contacts with that state)
■ Schoenbeck V Masterlink concrete pumping
■ **Personal jurisdiction: “if you show up, you're stuck”
Jurisdiction over property
○ When the court is unable to obtain jurisdiction over person of the defendant
○ It has limited authority to establish jurisdiction based on the existence of the defendant's
property in the state
In Rem jurisdiction
○ When defendants property is the subject of the dispute
○ The court in the area in which that property is located will have the jurisdiction to resolve
all claims against that property
○ It doesn't matter if defendant is present
○ Cow example: If you own a ranch but live in a different county, and your cow escapes
and injures someone, regardless of if you were present you are liable.
Relations between the court systems
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There are disputes that can only be resolved in state courts and cases that can only be resolved in
federal courts
Exclusive jurisdiction
○ Federal courts have exclusive jurisdiction over disputes involving federal crimes,
bankruptcy, patents, and copyrights
State courts have exclusive jurisdiction over disputes involving
○ Divorces
○ State crimes
○ Other matters under state law
The court hearing the case whether federal or state applies its procedural rules and follows its
substantive law
Both systems jurisdiction when
○ There is diversity of citizenship an the amount in controversy is over $75,000
○ The dispute involves a federal question and congress has not conferred exclusive
jurisdiction on the federal courts
Concurrent jurisdiction
○ When both federal and state systems have the same power to hear a case concurrent
jurisdiction exists
○ Federal question jurisdiction
○ The state and federal courts may hear a federal question case except when congress has
stated explicitly or implicitly that state courts may not have jurisdiction over a particular
matter of federal law
■ Explicit cases: congress prived by statues that the federal courts have exclusive
jurisdiction
■ Implicit cases: congress provides exclusive jurisdiction by unmistakeable
implication from the legislative history
Applying the appropriate law in federal court
○ Under the Erie doctrine federal courts in diversity cases are required to use appropriate
states statutory and common law
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The federal court may follow its own federal rules of civil procedure
Applying the appropriate law in state court
○ When a dispute is brought in a state court involving incidents that have taken place in
more than one state ** a conflict of law may arise
○ Traditional conflict of law rules are gradually being replaced by significant interest tests
○ Court examines the various state interest in need of consideration and then determines
which state had the most significant interest
Venue
● On the basis of fairness state statutes provide that a lawsuit must be brought in a court located in
the district where either the defendant or the plaintiff lives
○ Change of venue: defendants may request a change of venue where the case is filed. This
is due to witnesses, or extreme publicity, or will reduce the ability to get a fair trial
● Forum non conveniens
○ The forum is not suitable
○ A doctrine that applied based on fairness and convenience of the parties
○ Even though the original court has jurisdiction
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Basic trial procedures
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A car gets rear ended and caused damage which caused a lawsuit
Someone has been hurt which caused a lawsuit
Pleading stage
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Pleading: the complaint
○ Person with damages wants to be compensated
○ If the dispute happened in Arlington, then jurisdiction is established in Arlington.
■ Statements must be detailed
■ Contract dispute: someone hasn't performed in contract (has not paid)
■ Remedy sought: The person who caused the damages has not paid for damages, therefore
he is getting sued by the plaintiff
■ In a court of law, if there are no damages, there is no lawsuit
Responses to the complaint
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Answer:
○ Must be filed by the defendant id the suit is not dismissed and it responds to the plaintiff
○ The defendant may omit to the complaint in which case the plaintiff wins
○ The answer may deny the claims
○ Citing additional facts the defendant may have some affirmative defenses against the plaintiff and
request relief
○ * general denial: denied all the claims involved
Counterclaim
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Defendant may refute plaintiffs charges and assert his claim against plaintiff and request relief
When the defendant is suing the plaintiff back
Discovery Stage: Obtaining information before the trial
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Purpose of discovery
○ Prevents surprises at the trial
○ Preserve the testimony of the witnesses who might not be available at the time of the trial
○ Encourages settlement since each side has most of the same information
○ ** if there's a counterclaim it might be easier to settle it instead of taking both claims to trial
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Tools of the discovery process
○ These allow relevant information and witnesses to be gathered before the trial
○ These tools include:
■ Depositions and interrogatories
■ Expert witnesses
■ Interrogatories: list of questions to be written out and answered
Depositions and interrogatories
○ A deposition is the sworn testimony of a witness recorded by a court official
○ Written interrogatories are written questions submitted by the opposing party
○ The party receiving the interrogatories must prepare written answers usually with the aid of an
attorney and sign them under oath
Expert witnesses
○ May be used to help establish claims
○ The supreme court has been increasingly insisting that expert opinions be based on prevailing
scientific opinion or the testimony be stricken
Sanction for failing to respond to a discovery request
○ Judges have wide powers to sanction parties that fail to comply with discovery orders
○ They can even issue contempt of court citations and order default judgements
Orders for the production of documents
○ Allows a party to gain access to information in the possession of the other party such as business
records
Requests for admissions
○ Used to establish admission of facts about which there are no real disputes between the parties
Mental and physical examinations
○ May be required when the mental or physical status of a party is at issue
○ They are done under strict conditions
○ **pulmonary case
Summary judgment
○ If after discovery one of the parties determined that there are no disagreements about the facts to
their dispute
○ The party may move the court for summary judgment
○ By this motion, the judge is being asked simply to apply the law to those facts and resolve the case
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Pretrial conference
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The pretrial conference is intended to be a forum for planning the course of the trial
○ In some court systems, judges use the pretrial conference as a forum to encourage settlement
○ Judges have strong powers to pressure parties to settle
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Judge can order mediation
Trial stage
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If the dispute is not settled by dismissal, summary judgment, or settlement, a trial will be set
Non criminal cases are backed up for years due to criminal litigation
The jury
○ Under 6th and 7th amendment you have a right to jury trial in civil and criminal cases (state and
federal)
○ In federal court the amount in controversy in common law cases be only $20
○ There is no right to a jury trial in cases seeking only equitable remedy rather than monetary
damages
○ **Equitable remedy: means there are no monetary damages
○ There is no right to a jury in civil cases involving statutory enforcement
○ Statutory enforcement: building violation, city ordinance violation
Decision to use a jury
○ The parties consider several factors in deciding whether to use a jury including:
■ The judges perceived temperament
■ The complexity of evidence
■ The degree f emotion could play a part in the decision
Selection of the jury
○ The clerk of court sends notice to citizens to appear for jury duty
○ How much control parties have over selecting from a jury pool varies from state to state and
among judges
○ Jury consultants can be used in complex cases
○ Jury are selected from a pool by voir dire (asking jurors questions)
○ Persons may be disqualified by challenges by the parties under court rules
Opening statements
○ The trial begins with openings statements including facts and the law, plaintiff goes first
Presentation of direct testimony
○ Plaintiffs attorney calls witnesses to give testimony
○ Plaintiffs witnesses are questioned by plaintiffs attorney
○ Defendants attorney questions the witness in cross-examination
○ Directed motion= ends a trial. Completely up to the judge
○ ** a plaintiff’s lawyer can’t ask leading questions
○ ** a defense lawyer can ask leading questions
Closing arguments
○ Both sides summarize the evidence for the jury before it deliberates
○ Plaintiff goes before and after the defendant in most courts
○ There are time limits on the arguments
Instructions to the jury
○ Judge instructs jury on applicable law
○ *burden of persuasion on each element of the law
Reaching the verdict
○ In civil trials, jury finds for the party that showed a preponderance of the evidence
○ If no decision is reached the jury is hung and a mistrial may be declared
○ Judges do not like these results
○ Not all states require unanimous jury verdicts
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**both punishment and damages can hear that case, come up with a verdict, and come back and
deliberate
Motions for a verdict
○ Parties may request a favorable verdict at various times
○ *The judge will rule as a matter of law, not facts
○ **Defendant may ask for a erected motion on the grounds that the plaintiff has not presented
sufficient evidence to support the claims
○ The judge rules on the motion
○ If denied, case continues
○ *directed motion: whenever a defendant asks for a case to be dismissed, very rare in texas.
Remedies in civil litigation
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The remedies available are classified as equitable remedies or monetary damages
Monetary damages
○ Monetary damages include the following categories although different states use different
terminology in some instances:
○ Compensatory
■ Intended to return the injured party to the position if the injury had not occured
■ Clark v. enchanted hills community association: HOA, no damages so no case.
○ Punitive damages
■ When defendants behavior has been willful and malicious
■ Court may award exemplary damages to punish the wrongdoer (sends a message to
community that such behavior will not be tolerated
○ Nominal damages
■ When the plaintiff wins but there are no actual damages
■ A token may be awarded
■ Example: trespassing
Equitable remedies
○ This form of relief originated in england
○ These remedies have been taken over by the courts of law which now have powers in equity
■ When monetary damages are not adequate
■ Example: restraining order
○ Two types of equitable remedies:
○ Specific performance:
■ Court orders a party to complete a contract or other duty as promised
○ Injunction:
■ An order directing someone to do something or more often not to do something or face
more severe sanction
■ Temporary restraining order: short term
■ Preliminary injunction: longer term
■ Permanent injunction: final order, part of a settlement, permanent
Appellate stage
○ If one of the parties believes that an error of law has been made, that party may appeal the decision
○ In an appellate, you are filing briefs
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Enforcement stage
○ If there is no appeal or appeal is final, the judgment is final. No retrial
○ Res judicata: case wont be considered again
○ Enforcing judgment: plaintiff is responsible for collecting monetary award from defend
○ If defendant doesn't pay, court can issue a writ of execution allowing an official to seize property
to satisfy the judgment
Alternate dispute resolution
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Many disputes especially in standard business transactions are resolved by alternate dispute resolution
*arbitration clause is in contract, can't take it to court
Arbitration is most formal
Arbitration is a legal process in which two or more parties agree to allow a neutral person (arbitrator) to
resolve their dispute
Arbitration hearing procedure
○ Parties agree to the rules of the hearing with or without the arbitrators input
○ The arbitrator has the power to enforce the rules
○ Hearing is usually closed door and conducted much like a trial but with ess strict rules on civil
procedure
The award:
○ After hearing the arbitrator reaches a decision and gives award usually within 30 days
○ Award is usually given in writing but there is usually no legal justification given for the decision
unless arbitration agreement indicates so
○ Most arbitrations can't be appealed
Negotiation
○ Issues in negotiation:
○ Bargaining such as bargaining for a contract
○ Negotiated settlement is usually a contract that is agreed upon to settle a dispute
○ As a contract, it i enforceable in court and attorneys are involved in the negotiation
○ Proper negotiations usually head off to litigation
○ Stages of negotiation: most negotiations are handles by attorneys who are less likely to be
emotional than the parties to the dispute
○ Negotiator must follow orders of the parties even if the negotiator thinks the position may not be
the best to take
○ Issues are studied by each side
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Commerce clause
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The necessary and proper clause
○ Gives congress power to make all laws necessary and proper for carrying into execution those
laws
○ This provides congress with broad powers to regulate business
**All federal laws trump state laws, and state laws cant conflict with federal law
Mcculloch V. Maryland
○ Congress was not restricted to the list of powers enumerated in the constitution
Necessary and proper clause expanded the power of congress and not to limit it
Supremacy clause
○ Federal supremacy was made clear in the mcculloch decision
● Federal and state regulatory relations
○ State regulations may not impede interstate commerce without permission of congress and may
not conflict with federal regulations
○ State regulations may overlap federal regulations unless prohibited by congress
○ States were allowed to regulate interstate trucking until 1994 when congress prohibited controls
**Any law that is going to impede interstate commerce or conflicts with federal law is going to get struck down by
courts
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Taxing Power
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Federal taxation
○ The power of congress to impose taxes is nearly unlimited
○ The supreme court rarely questions the rationality of tax laws
● State taxation
○ Numerous cases have concerned schemes by states to impose heavier taxes on out of state
business relative to in state businesses
○ States usually may tax in state businesses more heavily than out of state businesses
○ Supreme court is not concerned with the level of state taxes or kinds of taxes imposed so long as
the tax is discriminatory not in interstate commerce
● Apportioning state tax burden
○ The concern of the supreme court is that the tax must have a
■ Substantial connection with the state
■ Fairly apportioned
■ Not discriminatory against interstate commerce
■ Related to government services
● Uniform division of income for tax purposes act
○ Have adopted this act so that all companies will be subject to the same rules in those states
● State taxes may not impede foreign trade
○ Congress may tax foreign trade and the states cannot impose taxes that discriminate against goods
in the international commerce
First amendment
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Business and free speech
○ The first amendment concerns restrictions on speech that congress may impose on business
○ The courts distinguish between commercial speech and political speech by business
○ The supreme court has given the right for more businesses the right to speak on political issues
○ Many state restrictions on corporate contributions to affect political issues
■ Have been stricken down as a violation of the first amendment
■ Consolidated Edison V. Public service commission of new york
Business and commercial speech
○ Governments may restrict false commercial speech or limit commercial speech under guidelines
set by the supreme court
○ The court gradually stricken more restrictions on commercial speech over the years
○ Many of the restrictions such as advertising by lawyers and pharmacies
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Were anti competitive violations of the antitrust laws as well as infringements on speech
rights
○ Four part test to obtain first amendment protection
■ First, commercial speech must concern lawful activity and not be misleading, that is, no
illegality or false advertising
■ Second, must be substantial government interest at stake
■ Third, regulation must directly advance the government interest
■ Fourth, the regulation should not be more extensive than is necessary to drive that interest
Freedom to criticize
There must be actual malice for a public figure
○ Such as a corporation
○ To recover damages for a defamatory falsehood
Second Amendment
● Right to bear arms
○ Some employers prohibit firearms on company property
○ Firms must comply with state or local law on that issue
○ Oklahoma prohibits employers from preventing employees from keeping firearms
Fourth Amendment
● Unreasonable search and seizure
○ Supreme gives strong protection to closed private property such as homes
○ Business property is also protected but not as strongly
○ Limits on search and seizures
○ Law enforcement ordinary can be required to have a warrant before conducting a search of
business property
○ Some highly regulated businesses do not fall under this protection
○ Terry v. ohio
■ If the police feel that they are in danger they can search without a warrant
■ Exigent: if you run from police they can also search without a warrant.
■ If you get arrested they can search without a warrant
● Warrantless searches
○ Individuals which would include mandatory blood, breath, and urine tests without having any
probable cause or suspicion
○ These include people who work for airlines, bus drivers, etc where public safety is at hand.
● Gathering evidence
○ Exclusionary rule
■ Improperly gathered evidence such as evidence gathered without a valid warrant may be
stricken
Fifth amendment
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Eminent domain as a development aid
○ Developers often have trouble putting together parcels of land
Regulatory takings
○ In a 1987 case, Nollan, the supreme court struck down a regulatory taking by the state of
California
○ State demanded that Nollan, a homeowner, gives part of his property to the state in exchange for a
building permit
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This violated 5th amendment
Sixth and Seventh Amendment
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6th and 7th amendment right to trial by jury in criminal cases and in common law cases
○ Does not apply to civil law cases
○ Since many violations of regulations involve civil charge only there is no right to a jury trial
○ escobedo v illinois
Eighth Amendment
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Eighth amendment prohibition of no excessive fines does not apply to large punitive damages against
business defendants
○ So long as proper procedure was followed in state or federal court
○ Cruel and unusual punishment for bails and prison sentences
Fourteenth amendment
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14th amendment has been used to extend federal guarantee to the states
○ Especially on the basis of the due process clause and the equal protection clause
○ Both protect persons and businesses from diminished constitutional protection at the hands of the
state govt. Bringing suit under 14th amendment provides broad language for a wide range of suits
■ Allowing injunctive relief if needed
Due process
○ Concerns the substance of legislation that could violate constitutional guarantees
○ States may not infringe on fundamental liberty interests without narrowly tailoring the
infringement to serve a compelling interest
○ Compelling interest: a direct discrimination, supreme court will rule it uncosntitutional
Equal protection
○ Fourteenth amendment equal protection clause prohibits states from violating the right of people
to be treated equally under the law
○ This rarely happens in business cases however some state taxing and regulatory schemes have
been held
○ The laws themselves were fine but the application of the laws was discriminatory
○ ***Anything that is determined to be strict scrutiny as a fundamental right is discriminatory and
supreme court will not allow it
○ Most regulations are subject only to review for rationality which means the legislature thought
there was a good reason to impose the regulation
Exam 1 review
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Know the difference federal and state courts, and their jurisdictions
Appeals courts do what? Appeals decisions made by federal or state courts
Tax cases have their own courts
What do each of the specialized courts do?
U.S. supreme court
Three basic functions in the legal system
**remember that federal judges are always attorneys too
Federal judges have lifetime tenure
State courts and what goes on in each of them:
○ Justice of the peace courts, county courts, district courts, courts of appeals, state supreme
court
State judges
judicial immunity (can't sue a judge for their decision)
Courts with limited or special jurisdiction
Court of appellate jurisdiction
Rules of civil procedure
Jurisdiction: the power to speak the law. In persona, In Rem. ( in person, or on property)
Federal question: Maritime, bankruptcy, tax, copyrights, trademarks, patents
Personal jurisdiction
Long arm statutes: out of state defendants can still be served
*In rem jurisdiction: it will not matter if the defendant was present.
Relations between the court systems
○ Diversity of citizenship
○ **Explicit cases: congress provides by statutes that the federal courts have
**Erie railroads v. thompson: applying the appropriate law in federal court
*if there's a conflict of law that arises we may use the significant interest test as to which state has
the most significant interest in a specific lawsuit
Venue
○ Defendant can ask to move venues if in an unfair location
Pleadings stage
○ Complaint
○ Defendant can file responsive pleading which includes a counterclaim
○ You can have two difference lawsuits but one court
Motion to dismiss (very rare)
Counterclaim
Discovery stage
○ Know the 3 purposes of discovery
○ Attorneys are required to encourage settlements
Depositions and interrogatories
Sanctions
Summary judgment
Pretrial conference
Jury: 6th & 7th amendment.
Cross examination: you can ask leading questions but not in the direct examination
Difference between monetary damages and compensatory
Chapter 5
Crime categories
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Lesser offenses
Crimes and elements of crime
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Legislatures determine criminal offenses and penalties
○ Various agencies are empowered to investigate and prosecute crimes
○ Limits on budgets mean all alleged crimes cant be investigated
A person accused of a crime must be shown to have committed a wrongful deed
○ Actus reus: have had the intent necessary
○ Mens rea: guilty mind may be based on intent or based on criminal negligence
○ Disregard for the rights of others
**Intent means they had the purpose and desire to commit this crime
A business can be convicted of a crime
○ Elonis v US
Constitutional right: fifth amendment
○ Miranda vs arizona
Defenses
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Most crimes have a statute of limitations, bring the action in time or the clock tolls
○ One may offer an alibi
○ Affirmative defense is rare
○ The facts claimed are true, but other facts prevent conviction
○ Entrapment may exist: when police make you commit the crime
○ Insanity and intoxications are defenses
○ Self defense
Evidence
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Standards for criminal trials are higher than civil trials
○ If the evidence is tainted then the evidence is out
○ Search and seizure rules must be followed or the exclusionary rule kicks in
○ Authorities obtain warrants based upon presentation of probable cause to the judge or magistrate
Prosecution process
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Bringing charges is at the discretion of the prosecutor
○ The police or other authorities may do an investigation and then charges be brought should the
prosecutor think justified
○ Some felony cases use a grand jury to obtain an indictment
○ **An indictment doesn't mean that the prosecutor will take the case
Arraignment
○ An arrested subject may be booked and taken to court for arraignment and reading of the charge
○ A plea must be entered
○ Usually defendants released on bail but in violent crimes bail may be set or even denied
○ Most cases are settled by plea bargains to save time and cost
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Discovery
○ Criminal procedures are different from civil procedure
○ In civil cases, all evidence is shared with no surprises
○ In criminal cases, each side does its own work and need disclose only certain parts of known info
○ Investigations may be ongoing and can be investigated before arrested
○ Prosecutors must reveal exculpatory evidence but that can be slippery in practice
■ Exculpatory evidence is any evidence that would be favorable to the defendant
○ Fifth amendment may be pleaded at trial
Trial
○ If no settlement, then trial
○ Parties present cases and standard is beyond a reasonable doubt
○ One found innocent may not be tried again on the same charges
○ No double jeopardy
White collar crime
● A made up term that refers to people in positions of authority
● They abuse their position of trust for personal gain
● Losses from crimes in these categories runs in the hundreds of billions of dollars a year
● Antitrust
○ Sherman and clayton acts have criminal penalties for certain violations
○ Such as price fixing and bid rigging
● Bankruptcy fraud
○ Usually involves hiding assets in bankruptcy proceedings
● Bribery
○ Offer or taking of money or other goods to influence official actions
● Counterfeiting
○ The copying of a genuine article without authorization that is passed as real
● Computer and internet fraud
○ Various federal statutes provide penalties for fraud and unauthorized access to financial accounts,
and computer files
○ Sabotage (hacking)
● Economic espionage
○ The taking of valuable business info such as trade secrets which violates federal law
○ Formulas, patents, customer list
● Embezzlement
○ Taking of money or property when in a position of trust that is subject to various state and federal
law
○ **Fiduciary relationship
● Environmental law violations
○ Violating various state and federal statutes concerned with difference parts of
● Government fraud
○ Improper billing of government agencies to delivering of inferior goods or taking benefits for
which one is not qualified
● Healthcare fraud
○ Improper billing by health care providers
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Insider trading
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Violations of securities laws that restrict those in positions of trust from exploiting privileged
information
Insurance fraud
○ Failure to provide insurance benefits that are due and lying to insurance companies about losses
actually suffered
Mail fraud
Money laundering
○ Hiding truth about origins of money and not reporting all sources of incomes
Anti-money laundering act
○ Elements of control within business operations
○ Anti-money laundering looks to identifying beneficial owner of assets
○ Trace the transmission of the assets
○ Financial institution must ask about the source of funds and document the path before they showed
up
○ Each cash transaction over $10,000 must have a report filed
Wire fraud
○ Almost any illegal activity involving electronic communication
○ Can bring in federal authorities with interstate communication used to further illegal activities
○ This is a sweeping statute that includes email communications
○ Would include kickback and bribes and other such acts are other accomplished via wire
○ Sentencing commission
○ Federal Guideline that sets specific ranges of punishments for most federal crimes based on a
point scoring system
○ Companies can help reduce the punishment suffered by having effective compliance programs
○ In place to train personnel about various legal requirements
○ Have quality internal reporting programs
○ Enforcement of standards
○ Volunteer disclosure and whistleblower programs
Elements of Torts
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Have harmed someone intentionally or unintentionally
Might have harmed someone with a product on the market
Civil liability
Torts are civil wrongs committed when one invades the protected interests of another
Business and torts
Most tort actions faced by businesses are through their agents, Employees, or products
That inflict injuries on other persons or businesses
Vicarious liability-is a legal doctrine in which a third party can be held liable for the injuries or harm
caused to a victim by another party. This rule states that in certain situations, a defendant who was not
physically present at the time of an accident (a third party) may bear liability for a victim's injuries
Most torts suffered by employees are covered by workman’s compensation laws instead of tort laws
Torts are classified as
○ Intentional
○ Based on Negligence
○ Strict Liability
Rule of Tort Law
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Tort Law is to provide compensation for wrongful injuries on the Wrongdoer
Return the plaintiff to the position they would have been in were it not for the Tort
Some Torts are also crimes but this is private or civil law not public or criminal
Negligence Based Torts
Concerns Unintentional but careless conduct that breaches a duty of care owed to a party who suffers an
injury caused by the conflict
The conduct in Question created an unreasonable risk of harm
Elements
Wrongdoer owed a duty of care to injured party
The duty was breached by an act or omission by wrongdoer (Negligence)
Causation between the negligent conduct and resulting harm
Damages suffered by injured party
If there are no damages no lawsuit can be filed
Actual cause- I was the actual cause of the injury. The actual act itself
(But) for standard- but for if I weren’t texting their wouldn’t have been a wreck
Proximate cause- Legal term foreseeable clause. I wasn’t paying attention and would hit someone. It’s
foreseeable that if I wasn’t texting I wouldn’t have hit someone.
Duty of Care
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Negligence means that a person’s conduct violates the duty of care in a particular situation
The conduct that would be expected of a reasonable person under the circumstances determines the due or
ordinary care expected
How a person ought to behave depends on the circumstances
Objective Standard or (Reasonable Person Test)
Causation
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In Negligence there must be a causation- A logical Linkage- Between The Careless Conduct and the injury
suffered
Res Ipsa Loquitur
A Doctrines that applies (The thing speak for itself) When the plaintiff has a very strong case that will
require a good defense to defeat
Need both a careless conduct and injury to sue
The case is decided on circumstantial evidence
Nothing for sure is presented in case
Cause in Fact
Evidence Links A person’s conduct with the result that would not have occurred “But For” That conduct
Proximate cause
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The standard in Most states requiring that the injury have been foreseeable by a reasonable person
Under the circumstances and that the injury suffered by reasonable related to the negligent act
If you can’t relate to particular act there is no case
Palsgraf v. Long Island Railroad (Supreme Court, 1928)
A man stumbled on a train and had fireworks. The fireworks sparked on the wheels of the train and went
off. Palsgraf got hit with a bell that had crashed down after the fireworks hit it.
Plaintiff lost the cause. There wasn’t proper linkage for the train station to have foreseen that someone with
fireworks would stumble on the train.
Need probable cause to match act
I might not have been texting while driving but I was still negligent because I was not paying attention.
Causation
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Substantial Factor
Some states use the substantial factor standard instead of proximate cause
A legal cause of injury is a cause which is a substantial factor in bringing about injury
Intervening Conduct
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If the Causal connection between an act and the resulting harm is broken by another act or event
(Intervening Conduct) That is a Superseding Cause that may relieve liability
The law wants to encourage rescue so the negligent party is liable to all injured in Rescue Efforts
**Example: Doctor’s have to be careful about helping people because of gross negligence because they can
be sued
A valid Defense will prevent Liability from being imposed in what would otherwise be a tory
As with intentional torts there are defenses of consent and privilege
Assumption of the risk
When the injured party voluntarily assumed the risk of harm by engaging in negligent or reckless conduct
The Injured party knew or should have known of the Danger but Participated in it
Schemann V. Mendard, Inc. (Ct. App. Neb, 2020)
Comparative Negligence
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Negligence contributed by plaintiff that contributed to plaintiff’s injury
The rule was adopted become Contributory Negligence thought th harsh (All or Nothing)
Most States have adopted Comparative Negligence splitting the damages between the plaintiff and the
defendant
If the plaintiff is more than 50 % percent responsible Nothing is recovered
Contributory Negligence
If the plaintiff has any negligence than there is no recovery
If the plaintiff is found to be at fault in any way they win nothing in court
**Intentional interference with personal rights and with property
**The law imposes the greatest responsibility for such actions establishing intent
Intent
The person knew what he was doing
He knew or certain results were likely to occur
Desire and purpose
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Motive (Show of Power) Is distinguished from the consequences
Intentional torts are based on willful misconduct
Acts that a reasonable person would know to invade the protected interest of others
The act is also distinguished from the consequences
Act itself proved intent
Intentional torts against persons
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Assault
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Intentional conduct directed at a person that places them in fear of immediate bodily harm
Apprehension
No physical contact needed to have an assault
How would a reasonable person have reacted under the circumstances
Battery
Has to be directed to the person for whom is going to be assaulted
■ Intentional offensive physical contact without consent
■ No physical harm need result
■ Many cases today involve Sexual Harassment
■ **Assault and Battery
○ These torts are often linked together but may occur independently
Assault and battery defenses
○ One is permitted to interfere with another's person under some circumstances
Consent
○ When the injured party gave consent to interfere with their person
Self defense/ defense of others/ defense of property
○ Allows us to protect person and property with the force is reasonable under the circumstances
○ Defense of property rarely allows use of deadly force
○ *if someone is trying to grab you, you can't just kill someone and claim self defense
False imprisonment
○ Can be both physical and psychological**
○ Physical contact or threats of violence are not required
○ Intentional holding of a person that restricts their freedom of movement
○ ***must be aware of confinement, you must be aware that you are imprisoned
Infliction of emotional distress
○ Reckless conduct that creates severe mental or emotional distress
Invasion of privacy
Intrusion into seclusion
○ Invading your private space, unwarranted, unasked for, and invasive
Appropriation of name
○ Unauthorized use of someone's photo without consent
False light
○ Published misinformation
Publishing private facts
Defenses
○ When people become public figures, their right to privacy is greatly reduced
Defamation
○ Intentional false communication to a third party (spoken/slander)(media/libel) that injures a
persons reputation
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○ Must have to prove damages
Some statements about another person are so harmful that they can be defamation per se (evil)
○ Business reputation
○ Chasity
○ Serious crime
○ Don't have to prove damages
○ Schwarz v st jude
■ Schwarz sued st jude for defamation and st jude won because there were no damages
Business torts and product liability
Tort law and business
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Businesses can be involved in all forms of torts
There are some peculiar to business which usually involves business practices
○ That have crossed the bounds of acceptable behavior
○ They may be intentional torts or negligence
Fraud
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Also called fraudulent misrepresentation or deceit
○ Involves deliberate deception
○ In business is usually involved with a breach of contract
○ Intentional tort or based on negligence
○ Damages for breach of contact
■ Compensatory or punitive
Intentional misinterpretation
○ Scienter means evil mind
○ Occurs when the deceit is done knowingly and meets the elements of fraud
○ Legal relationship between parties
○ Causation
○ Damages
Interference with contractual relations
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Intentional tort that occurs when one knows about a contract between two parties and interferes in that
relationship
○ There must be a wrongdoer, contractual relationship, and the wrongdoer must intentionally
interfere with the relationship
The action for breach of contract is against the party to the contract
Interference with prospective advantage
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Interference with another's business unreasonably
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Predatory behavior to destroy a business
Ust be intentional, cant be negligence
Many times the plaintiff will sue for both interference with contractual relationships and
interference with prospective advantage
Product liability
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Consumer products and negligence
○ Negligence by consumer product producers has long been the basis of liability
○ Rule of caveat emptor
○ **in old common law, any product you buy is a contract between the consumer and the
manufacturer that ensured product liability to solely the manufacturer
○ Nowadays, buyers must be aware of the product they are buying BEFORE purchasing it. If car is
labeled “as is”, it is your responsibility and you can't sue manufacturer for damage
○ **Privity: a relationship by law between two persons
○ Negligence in tort
■ For consumer injuries, privity of contract was eliminated
■ By negligence in tort early in the 20th century
Strict liability under contract law
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Was developed in the 20th century
○ It developed before strict in liability in tort for products
○ Link was to implied warranty of safety for products for which consumers could not be expected to
protect themselves
○ Tainted food, drink, drugs
Liability is also based on express warranty when produces promised safety
Strict liability based on implied warranty
○ Example: when you buy food it is assumed that its fit for consumption
Strict liability based on express warranty
○ Liability based on representation made by a producer about their product
Strict liability in tort
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Under strict liability a plaintiff must show defective product
○ Defect created unreasonable risk of harm to the user
○ Defect was the proximate cause or substantial factor in bringing about the injury
Oct. 4th, 2022
Real and Personal Property
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Real property is buildings and land, things that cannot be moved
Personal property can be moved
Land and things under the land such and oil and minerals are real property
Buildings and natural vegetation are real property
Personal property consist of tangible items that can be moved (common law term is “chattel”), books, cars,
stocks, bonds
Property is a protected expectation of being able to use the property for one's own advantage
○ The ability to use and control property determines most of its value
Deeds and titles
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Deeds identify land by legal description and names the owners
***Because Texas is community property of state, as a spouse buy any type of property and not have your
spouses name on the deed. Doesn't matter if she isn't contributing monetarily
Anything acquired either real or personal, your spouse has a ½ interest in it and you cannot sell it without
their consent
Quitclaim deed passes interests of grantor but does not guarantee that they are passing ownership
****Quitclaim deed does not pass ownership, only interest but not ownership
Warranty deed promises good title and it is the most desired, it does pass ownership
**most desirable deed
Special warranty deed does not warrant against any encumbrances prior to the current seller, like a lean.
Titles which usually accompany deeds are recognized formal owners of land
Fee simple: common law doctrine of estate
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Property is referred to as an estate
○ An interest in land which is or may become possessory
Ownership is measured in terms of duration
○ Exclusive possession of a piece of land for an indefinite time and the right to dispose of the
property
○ One may have land now and then have the right to become its owner in the future, called future
interest. This is particularity for children, if something happens to the owner their children get the
property
○ May have limited control for a set period of time
○ Ownership must pass to the control of others at death
○ Fee simple means ownership of the air above and the land below which would include minerals
and oil
○ *** you can still keep your mineral rights and sell your property
Tenancies
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Tenancy is possession of use of lands by any right or title
○ Whether it is fee simple or for a limited purpose
Tenancy in common is ownership by which each tenant has an undivided interest
○ Interest passes to the heirs
Joint tenancy is the most common among married couples as there is an undivided interest with a right of
survivorship
○ Joint tenancy by the entirety is required in texas because texas is a community property state
Life estate grants the right to be a tenant for life
○ Grantees are required to pay insurance and taxes
Trusts
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**A separate entity in which the grantor places property in that trust. In other words, the grantor gives up
title
Ownership that separates the legal and beneficial ownership of property
A settlor (grantor) places property in a trust
Trustee holds title and can make decisions about the property
Beneficiary of trust has equitable title to property
○ Equitable title means the right to use and enjoy the assets
Trustee manages the property for benefit of beneficiary
*corpus: body of our assets
Servitude
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A category of negative and positive requirements on property owners
○ Some are adopted voluntarily by owners but can impact future owners
○ Servitudes are usually tied to the property and cannot be avoided
○ Example: if there is a covenant, or promise, in your neighborhood, such as you are only allowed to
have a brick home, you can't tear your house down and build a log cabin.
○ Covenants and easements are the major categories of servitudes
Easements are the right to enter property owned and in possession of
○ With right to take something from the land
○ Example: can't tear up the sidewalk outside of your house because it belongs to the city.
Easements look much the same as a deed that gives legal specification to the easements rights
○ The right to drive across someones land
○ Right to have a utility company to put poles or underground cables
○ Right of having a sidewalk
Positive easements allow the holder to use the estate for certain purposes
Negative easement is giving up a right, such as a conservation easement to forego development
Profit
○ The right to remove valuable assets from the land such as minerals, oils, and trees
Once granted, easements may not be interfered with by the person in possession
Adverse possession: the use of another's land without their permission
Conditions are:
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Actual: the adverse user in fact uses or possesses of the property
Open: the use is visible so the owner is own notice
Hostile: the use of the land is without permission of the owner
Exclusive: use is not shared with others
Continuous: use must be without major interruption for as much is required by law to obtain title
by adverse possession
Easement by prescription: easement taken by adverse possession (using an easement without the
permission of the owner)
States have statute of limitations that govern time limits
○ Moran v. sims (sims owned piece of property, moran kept using property amd sims sued moran)
Covenants
○ Covenants run with land
○ Covenant is not a valid contract, more of a promise
○ Essentially a contract with an estate but it is not an interest in a estate
○ Covenants may last longer than the present ownership of the land
○ Later owners must abide by the obligation created
○ Common residential covenants are restrictions on kinds of houses that may be built in a
subdivision
■ And what may and may not be done on the property to help insure quality
Landlord and tenants
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A leasehold gives a tenant certain occupancy and use rights of the property
○ The landlord has the right to reclaim the property in the future
○ Unless prohibited by the lease, a tenant may sublease part or all of the leasehold. The right to
sublease must be in the lease contract
Leases
○ An agreement that creates a leasehold in an estate and contains covenants (conditions)
○ Such as rent payment requirements and restrictions on property use
○ State statutes help govern tenancies
Rights of a tenant
A tenant has the right in the property rented including the right to peaceful possession
○ With certain exceptions such as to enter to make needed repairs
○ State laws often give landlords other entry rights such as for periodic inspection
○ Landlords are also expected to make needed repairs in a timely manner
Implied warranty of habitability
○ If the premises become unlivable the tenancy is broken and the tenant may leave
Duties of a tenant
○ A tenant may not abuse the property so as to affect it beyond the lease term
○ There is a duty to report problems to the landlord and not let them get worse and cause damages
such as a leaking roof
○ Tenants may not be a nuisance to neighbors or engage in illegal acts on the premises
Public control of real property
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State and local statutes modify the common law of real property
Sme laws concern registration and proof of title and the recording of liens
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Government have substantial power to take and regulate private property
Eminent domain
○ Government has always been presumed to have the power of eminent domain to take private
property for public purpose
Fifth amendment requires just compensation so fair market value is paid when governments take land for
building
○ Highways
○ Schools
○ Parks
○ Government buildings
Government may also use eminent domain to buy property that is used to benefit private parties such as
railroad rights of way and utility easements
*eminent domain is a policing power
Police powers
○ Broad category to regulate property to promote the general welfare which is very broad
○ Health and safety measures are traditional but environmental controls and many other things fall
under police powers
○ Gives governments great regulatory powers that impacts on the value and the use of the property
Zoning- (police power)
○ The primary local land use control device under general state police powers
○ All sorts of limits may be placed on what can be done with property
○ **Severance damages: damages collected for the fact that the new zoning/development caused a
reduction of market value in your property. Can sue both owner of property and the city
Torts against property
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Trespass to land
○ Tort of unauthorized intrusion by a person or an instrument
○ A defense is unauthorized entry to protect property or persons from danger
○ Mistake is not a defense such as someone who thought it was ok to enter land without permission
○ There does not have to be damage to the property
○ Nominal damages can be collected
■ Smith vs. kulig (smith owns building, kulig visits building and upon exit decides to use
the fire escape, smith was found not liable for damages because technically kulig was
trespassing)
Private and public nuisance
○ An activity that substantially and unreasonably interferes with the use and enjoyment of land
○ Public nuisance is interference with a right held in common by the public
■ Nuisances can be physical: smoke, noise, odors.
Trespass to personal property
○ Intentional and wrongful interference with possession of personal property of another without
consent
○ This tort deprives the owner of the use of property for a time
○ In most states, innkeepers have a privilege to keep the personal property of guests who have not
paid their bills
Torts against property owners
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Premises liability
Invitees
○ Customers/Client in a public building
○ Reasonable duty to make the premises safe
Trademarks
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Trademarks are
○ Commercial symbols
○ Logo or marks
○ These are distinctive and nonfunctional that are used to identify goods
○ **All trademarks have to be federally registered and they are under federal question. Must go to
federal court if there is an infringement
Common law form of property recognized by the lanham act
Registration
○ Under the lanham act trademarks are registered at the patent and trademark office
○ A search is done to make sure there are no conflicts with other trademarks
○ Common and descriptive names may not be trademarked
○ Federal registration is good for 10 years but can be renewed
Classification of trademarks
○ Arbitrary and fanciful are the most favorable
○ Made up and distinctive such as exxon
Suggestive marks that hint about the product
○ Roach motel
Descriptive are not favored and must be shown to have strong public identification
○ Raisin bran
Generic marks are words that have become common but used to be trademarks
○ Aspirin
Most colleges and professional sports have licensing agents to collect royalties on their trademarks
Extent of coverage
○ Trademark cant claim too much coverage is limited to real use in practice
○ Certain words are used as trademarks on many different products made by different companies
○ Extent on coverage depends on how well known a mark is and likelihood of confusion
Infringement
○ When a seller causes confusions about the origin of a product by improper trademark use
○ It can come from copying the actual name on the goods or using a name so similar as to cause
confusion
Dilution
○ When a seller uses aa distinctive mark inherently or through acquired distinctiveness
○ Lanham act was strengthened by the trademark revision dilution act of 2006
Cybersquatting
○ When a trademark is used improperly in a domain name
○ There are some defenses for fair use such as non commercial use
○ Even if you use the mark by mistake or not for monetary gain, there still could be monetary
damages
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Counterfeiting
○ The lanham act allows parties to obtain search and seizure warrants to grab counterfeit goods
○ Either custom agents or private investigators will provide evidence to the us attorney who will
issue a warrant
○ With a custom agents present the goods are seized and destroyed and mau be used as evidence in
civil litigation
Trade dress
○ Commercial symbol also recognized by trademark law
○ Concerns look and feel of productions and their presentation
Trade names
○ Protected by common law but not registered under lanham
○ They are the names of the business
○ Protection applies to the market area of the products or service
○ Cannot claim national protection for a trade name but only has local meaning
Goodwill
○ A companies name also generates an asset called goodwill
○ Trust from the customers as value
○ Business could sell at a higher amount because of goodwill
Copyrights
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Common law protection for original expressions that have been codified by the copyright act
That act gives the owner exclusive rights to their works
The owner may:
○ Reproduce
○ Publish
○ Display
○ Perform
○ Prepare derivative works: subsequent works, or a sequel
By statute the rights are life of the author plus 70 yrs
Commercial work is 95 yrs
Registration
○ Registration is done at the copyright office in washington dc
○ Must supply two copies of the work
○ Registration means you have evidence of the work itself
Infringement and fair use
○ Test of fair use of copyrighted materials
■ Purpose and character of the copying
■ Nature of the copyrighted work
■ Extent of copying
■ Effect on copying on the market for the work
○ Fair use exemption allows one copy of many copyrighted materials for personal use
○ Katz vs google
Patents
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A statutory grant from the federal government giving the inventor of novel and genuine product
the exclusive right to make, use, and sell and invention
Parent is good for 20 years from the date of application
○ 20 year standard was adopted by the patent office to conform to the world trade
organization standards
○ Protection of a patent is strong but the patent is held out publicly
Trade secrets
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Information protected by tort law
***state civil liability
○ Cause information owner to lose competitive advantage
○ The owner must take reasonable steps to protect information
Most of trade secret information is protected by either patents or copyrights
○ Most companies with trade secrets have employees that will know trade secrets have them sign
statements acknowledging that they will not reveal those secrets
Economic espionage
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Economic espionage act holds that theft of commercial trade secrets may be a federal offense
Subject to prison and fines
Mostly used to combat large scale industrial theft
Especially in international competition
*Contracts
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Two types of contracts
○ Common law contracts
○ Uniform commercial code contracts
○ Article two of the UCC has to do with the sale of goods
○ Common law contracts do not have to do with the sale of goods
Definition of a contract
○ An agreement upon sufficient consideration to do or not to do a particular thing
○ A promise or set of promises for which the breach of which the law gives a remedy
○ *no set of promises, no contract
○ A contract is a legal relationship that consists of rights and duties of the contracting parties
○ Contract law governs the enforceability of that legal relationship
Elements of a contract
○ Agreement
○ Consideration
○ Legal capacity of the parties to contract (must be dealing with a person who has the legal capacity
to conduct a contract)
○ Lawful subject matter
○ Genuine consent to the contract (both parties must consent)
○ Compliance to the statute of frauds: some contracts must be in writing and cannot be oral. Such as
a prenup
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○ *****A-E are NECESSARY to have a contract
Consideration
○ Consideration is something of value or something bargained for in exchange for a promise
○ It is the element of a contract that keeps it from being a gift
○ Requires either legal detriment to the offeree or a legal benefit to the offeror
Adequacy of consideration
○ Courts generally do not like to inquire into the adequacy of consideration given in a contract
○ Places the bargaining responsibility of the parties of the contract
○ Courts don't measure adequacy of consideration *
○ Caley v. gulfstream aerospace
■ Gulfstream put out a handbook and forced employees to sign it. Court ruled that if you
sign an employee handbook/manual, you are signing a contract ** it is considered to be
valid consideration
Consideration
○ Promissory estoppel or detrimental reliance
■ Enforceable promise without consideration
■ Promissory estoppel can trump a will.
■ There are circumstances where consideration for a promise is not required by the courts
for the promise to be enforceable
Capacity to consent
○ Capacity refers to a party's ability to perform
■ Legally valid acts
■ Acquire legal rights
■ Incur legal liabilities (minors, intoxicated persons)
■ Insane
○ Lack capacity to contract or have partial capacity to contract
○ Party claiming incapacity has the burden of proof
Void and voidable contracts
○ A valid contract is one in which all the elements are present
■ Such contracts are enforceable by law
■ A void contract is one that does not exist at law
■ Such contract whos subject matter is illegal or a contract with an individual without
capacity to contract
○ Voidable contracts are valid contracts but one of the parties has the legal right to avoid the legal
obligation without incurring legal liability
○ General rule is that a minor may enter into contracts but those contracts are voidable at the option
of the minor
■ Minor has the right to disaffirm
■ There are some contracts that minors may not disaffirm (enlistment, marriage contract)
○ After a minor reaches the age of majority most states provide that the individual may expressly or
implicitly ratify contracts
Legality
○ For a contract to be valid its subject matter must be lawful
Illegal agreements
○ Promises that violate statutes are not enforceable contracts
Unenforceable contracts
○ These are the contracts that were valid but bc of a subsequent liability will not be enforced by the
courts
○ Passing of a statute that has forced contract to be illegal
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Contracts contrary to public policy
○ Some contracts are unenforceable because their subject matter is contrary to public policy
○ Negative impact on public warfare
○ Exculpatory agreement
■ Such agreements release one party from the consequences brought about their
wrongdoing or negligence
■ They are illegal
○ Unconscionable contracts
■ These are contracts so grossly unfair to one party normally due to unfair bargaining
power that the courts in equity will not enforce it
■ Ex: putting someone in a position where they don't have bargaining power
○ Contracts in restraint of trade
■ Contracts that restrain trade or unreasonably restrict competition are considered contrary
to public policy are not enforced by the courts
■ Even if a contract does not violate a statute it still may be an unenforceable restraint of
trade
Reality and genuineness of a contract
○ A person may enter into an agreement without full knowledge of the consequences
○ If a person contracts under
■ Fraud
■ Deceit
■ Duress
■ Undue influence
● The contract could be voidable
Fraud and misinterpretation
○ Contracts may be void or voidable due to fraud or misrepresentation
○ Contracts based on fraud may be rescinded if case is made for damages then the plaintiff must
show
■ Scienter (knowledge to defraud)
■ Misstatement of material fact
■ Justifiable reliance on the information
○ Misrepresentation is a lesser form of fraud (usually false statements)
Statute of frauds
○ Contracts must be in writing
■ Contracts for the sale of land and real property
■ Contracts that cannot be performed within one year
■ Promise to pay a debt of another
■ Promises made in consideration of marriage
● Must be signed by the party against whom its enforcement is sought
Parol evidence rule
○ Prohibits the introduction of oral evidence where the evidence presented is contrary to the terms of
a written contract
○ Oral evidence cannot
■ Contradict
■ Change
■ Add terms to a written contract
○ Oral evidence may be introduced when the written contract is incomplete of ambiguous
Oct. 18th, 2022
Performance, discharge, and breach of contracts
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Performance
○ Most contracts end by performance
○ Performance terminates the contract
Substantial performance
○ If a contract is substantially performed only a small part was that it does not impair the
whole matter are not grounds for terminating the contract
○ Parties are obligated to act in good faith to get along as well as possible
○ Subtract for what was not delivered but not sue for damages
○ Specific performance
■ Court of equity for relief to perform on the contract
Assignment and delegation
○ Transfer of contract rights to a third party is an assignment
○ Transfer of contract duties is delegation
○ Contracts for personal services generally cannot be assigned or delegated
Discharge by breach
○ When parties do not perform their obligations there is a breach of contract
Material breach
○ Performance fails to meet expectations
Anticipatory breach
○ Before performance of the contract is to take place, an anticipatory breach (repudiation)
■ Occurs if one party expresses inability or lack of desire to perform the contract
○ Non breaching party must mitigate damages at the time of the repudiation
○ Non breaching party duties are discharged and that party may sue for damages incurred
from the repudiation
○ Example: whenever you are unable to continue making car payments, if you call the bank
immediately and let them know they will try and find ways to help you and mitigate the
damages done without much punishment. This is repudiation of a contract.
Discharge by the agreement of the parties
○ The parties to a contract have the freedom to agree, modify, terminate
○ Discharge by agreement between the parties includes rescission, novation, accord and
satisfaction
Rescission
○ Means “everyone goes on their own way”. Occurs when both parties agree that their
contractual relationship should be terminated without performance
○ Rescission discharges completely the obligations of both parties
Novation
○ The parties agree to discharge one party from the contract and create new contract with
another party
○ Novation is basically a substitution of parties
Accord and satisfaction
○ Accord is an agreement by the parties to give and accept some performance different
from that originally bargained for
○ Satisfaction is the actual performance of substituted obligation
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Discharge of the original obligation occurs when the performance of substituted
obligation takes place
■ “Substituted what we would do different in that contract”
Discharge by impossibility
○ An event that makes performance impossible may end obligations
Objective impossibility is when a party dies or is incapacitated
○ Someone who passed away cannot fulfill a contract
Subjective impossibility
○ Strikes by workers
○ Shortages in supplies
○ Anticipated loss of profits in performance of the contract
Frustration doctrine
○ A contract will be discharged if some event makes it impossible to achieve
○ Example: “usually has to do with the fact that we cannot fulfill the contract bc the
purpose of the contract is no longer valid”
Remedies
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There is a basic premise of contract law is that after a breach innocent parties should be placed in the same
economic position they would have been had the contract been fully performed
○ Under normal business circumstances a monetary judgment for damages will place the injured
party in such a position
○ If the circumstances are such that the legal remedy of monetary damages is inadequate, court may
grant injured party equitable relief
Damages
○ The remedy usually granted for breach of contract is the legal remedy of monetary damages
○ A variety of damage awards are available to the courts
■ Compensatory: actual damages
■ Expectancy: Loss of profits. **must fall under economic loss rule, which means they
have to be measurable**
■ Liquidated: specified in the contract. Usually in construction contracts
■ Nominal: no economic loss
■ Punitive: punish the defendant
○ Should return the injured party to the same economic position if the contract had been
performed**
Economic loss rule
○ When there is a breach of contract the damages are the economic losses suffered
○ Which includes additional costs incurred and lost profits
○ These damages are rather strictly defined and measured
Mitigation of damages
○ When a breach of a contract occurs, the injured part is required to take reasonable efforts to
mitigate or lessen the losses that may be sustained
Equitable remedies
○ If money damages are inadequate to compensate the injury caused by the breach of contract
○ Equitable remedies such as specific performance or an injunction are available
■ Not as a matter of right but by the determination of the court
○ Specific performance
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Is an order by the court that requires the party who created the wrong to perform the
obligations contracted for
Injunction
■ An injunction is an order by the court that requires one of the parties to do or refrain from
doing certain acts
Restitution
■ A remedy to prevent unjust enrichment
■ Return of money or other assets
Quasi-contracts
■ A quasi-contract is not a contract
■ It is used by the courts to impose certain obligation on the party otherwise would create
an injustice to the other party
■ Courts created the concept of quasi-contract to give relief to innocent parties even though
no true contract exists
EXAM #3 REVIEW
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Know difference between real and personal property
Anything moveable, common law term is chattel
Deeds and titles **(you don't own property in TX unless you have a deed for said property)
○ Must have both names of spouses on the deed
○ Quitclaim deeds (lowest quality deed, least desired)
○ Warranty deed (promises good title, most desirable deed)
○ Special warranty deed (does not warrant against encumbrances, like leans)
Fee simple
○ Property referred to as estate
○ Ownership is measured in terms of duration
Tenancies (know the three difference tenancies
○ 1. Tenancy in common (no right of survivorship. Meaning this ownership goes to the heirs.)
○ 2. Joint tenancy (you have the right of survivorship. If one party dies, other party in joint tenancy
gets the property. Joint tenancy does not go to heirs)
○ 3. Life estate grants the right to be a tenant for life. (grantees are required to pay insurance, taxes,
and maintenance)
Trusts
○ Ownership that separates the legal and beneficial ownership of property
○ Trustee hold title and can make decisions about the property
○ **you cannot be a trustee and a beneficiary
Servitudes
Landlords and tenants
Public control of real property
○ Zoning
○ Can get severance damages if they change zoning
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Torts against property
○ Conversion
Premises liability
○ Reasonable duty of care to make the premises safe