IN GENERAL
Agency defined: An Agency relationship is a:
1. Fiduciary relationship;
2. Between parties (an agent and a principal);
3. Formed by mutual consent;
4. In which the agent agrees to act on behalf of
the principal; and
5. In which the agent is subject to the principal’s
control,
AGENCY Cont.
Fiduciary duty defined: An agent is obligated to
prefer the interests of the principal over that of the
agent. Failure to do so is a breach of duty, regardless
of whether the principal suffers actual damages.
1. Duty of candor: The agent must be candid with
the principal.
2. Duty to account for profits: Unless otherwise
agreed, an agent who makes a profit in
connection with transactions he/she conducts on
behalf of the principal must disgorge those
profits to the principal.
AGENCY Cont.
3. Competition during agency: Unless otherwise
agreed, an agent is prohibited from competition
with the principal concerning the subject matter
of the agency.
4. Competition after termination of the agency:
Unless otherwise agreed, the agent may compete
with the principal following the termination of the
agency, so long as the agent does not use or
otherwise
capitalize
upon
confidential
information or trade secrets.
ALLOCATING RISK OF LOSS TO
THIRD PARTIES
Authority defined: Authority is the power of the agent to
affect the legal relations of the principal by acts done in
accordance with the principal’s manifestations of consent.
1. Manifestation of Consent: A principal manifests his/her
consent, either expressly or implicitly, for the agent to
act on his/her behalf.
 Objective Standard: Whether a principal has manifested
his/her consent in determined by asking what a reasonable
person (either the agent or a third party transacting
business with the agent) would infer the authority of the
agent to be.
TYPES OF AUTHORITY
1. Actual authority: A principal manifests his/her consent
expressly or impliedly to the agent so the agent may act
on behalf of the principal. Authority can be created by
written or a ken words, or other conduct of the principal
that, reasonably interpreted, causes the agent to believe
that the principal desires him/her to act on the principal’s
behalf.
 Knowledge of the third party is irrelevant.
 Zone of authority: Unless otherwise agreed, authority to
conduct a transaction includes authority to take action that
is incidental to or reasonably necessary to accomplish a
transaction .
TYPES OF AUTHORITY Cont.
 Acquiescence: If a principal acquiesces to an act of the agent
that is outside the agent’s authority, then the principal may be
deemed to have expanded the agent’s authority.
2. Apparent authority: A third party may bind the principal to
an agent’s actions that are outside of the agent’s authority if it
is determined that the third party reasonably believes, based
upon the principal’s actions, that the agent has authority.
Apparent authority is created
a. The principal’s apparent objective manifestations that reach
the third party; and
b. The manifestations give the third party a reasonable belief
that the agent is authorized to act for the principal.
TYPES OF AUTHORITY Cont.
3. Inherent authority: Inherent agency does not derive
from a grant of authority but rather exists solely for the
protection of persons harmed by an agent’s false
statements to the third party. Inherent authority is
created when:
a. The principal is disclosed or partly disclosed to the
third party;
b. The agent makes false statements that would have
been within the agent’s authority had they been truthful;
and
c. It was reasonable for the third party to rely upon those
false statements.
CHARACTERISTICS
 2-PARTY RELATIONSHIP (Created by agreement)
 EMPLOYER-EMPLOYEE (Master/Servant relationship)
1. Principal may control physical details
2. Duties of Principal
a. Compensation
b. Indemnification
c. Reimbursement for expenditures
 INDEPENDENT CONTRACTOR
1. Procedures result free from control
TERMINATION
 HAPPENING
OF EVENT
REASONABLE TIME
 MUTUAL AGREEMENT
 OPTION OF EITHER PARTY
 OPERATION OF LAW
OR
AFTER
AGENCY
AGENCY relation in which one person, the agent,
acts on behalf of another with the authority of the
latter, the principal; “a fiduciary relation which
results from the manifestation of consent by one
person that another shall act on the former’s behalf
and subject to his control, and consent by the other
so to act. The acts of an agent will be binding on his
principal. The principal is vicariously liable for the
torts and other infractions of his agent while in the
scope of agency.
AGENCY
AGENT
One who, by mutual consent, acts for the benefit of another; one
authorized by a party to act in that party’s behalf. Compare servant.
PRINCIPAL
In the Law of Agency, a Principal is one who has permitted or directed
another to act for his benefit and subject to his direction or control.
VICARIOUS LIABILITY
The imputation of liability upon one person for the actions of another.
In tort law, if an employee, EE, while in the scope of his employment
for employer, ER, drives and delivery truck, and hits and injures P
crossing the street, ER will be vicariously liable, under the doctrine of
respondent superior, for injuries sustained by P. In criminal law, in
some jurisdiction if EE, who is employed by ER as a bartender, sells
liquor to a minor, ER will be criminally liable for the offense of EE.
Sometimes this doctrine is called Imputed liability.
TORT
TORT a wrong; a private or civil non-contractual wrong or
injury resulting from a breach of a legal duty that exists by
virtue of society’s expectations regarding interpersonal
conduct, rather than the contract or other private
relationship. “The word is derived from the Latin ‘tortus’ or
‘twisted’.” Prosser, Law of torts §1 (4th ed. 1971). The
essential elements of a tort are the existence of a legal duty
owed by a defendant to a plaintiff, breach of that duty, and a
casual relation between defendant’s conduct and the
resulting damage to plaintiff.
INTERNATIONAL TORTS
 TORTS TO THE PERSON
1. ASSULT – Threat of harm, or contract that arouses a
reasonable apprehension in another’s mind of an
imminent battery
2. BATTERY – Intentional, harmful or offensive touching
of another without his consent
3. FALSE IMPRISONMENT – Intentional confinement of
another for an appreciable time without his consent
4. DEFAMATION – Publication of a false statement about
another which harms his reputation. Two types:
 Libel are written or printed statements, and
 Slander are oral
INTERNATIONAL TORTS Cont.
 INVASION OF PRIVACY – Intrusion of privacy (Ex.
Wiretapping, harassing telephone calls); unauthorized public
disclosure of private facts (Ex. Sex life, humiliating illness);
false light publicity (Ex. Falsely associating an author to an
inferior work); or unauthorized use of name (Ex. Commercial
falsely claiming sports star uses a product)
 INFLICTION OF EMOTIONAL DISTRESS – Extreme and
outrageous conduct causes another severe emotional distress
(Ex. Sexual harassment, midnight bill collectors)
 MISUSE OF LEGAL PROCEEDINGS – Financial, emotional
and/or reputation injury to another from wrongfully instituted
legal proceedings (Ex. Frivolous lawsuit, wrongful criminal
prosecution)
TORTS AGAINST PROPERTY
1. TRESSPASS TO LAND – Entry onto; remaining on; or
causing something or someone to enter onto or remain
on another land without permission (Ex. Tenant’s refusal
to vacate)
2. TRESSPASS TO PERSONAL PROPERTY – Use
without permission or damage to personal property (Ex.
Breaking a car’s window)
3. CONVERSION OF PERSONAL PROPERTY – Failure
to return or the destruction or loss of borrowed property
NEGLIGENCE & STRICT LIABILITY
 NEGLIGENCE
1. DEFINITION: An unintentional breach of duty causing
injury using the objective standard of the reasonable
person in similar circumstances
a. Duty of care is the obligation one person owes to
another to act reasonably so as not to cause harm
b. Liability arises from causation in fact (actual cause) and
proximate cause (legal cause)
i. Ex.: Corporation that is responsible for oil spilt is not
liable to member of clean-up crew who dies of heart
attack
2. Defenses include Contributory or Comparative (relative
fault) Negligence
NEGLIGENCE & STRICT LIABILITY
Cont.
 STRICT LIABILITY
1. DEFINITION: Liability without fault
a. Applies to abnormally dangerous activities considered
i.
ultra hazardous and carry an 9inherent high risk of
injury
Ex.: Corporation is strictly liable for injury caused by
explosion at hazardous waste facility
FRAUD
FRAUD Intentional deception resulting in injury to another.
Elements of fraud are:
a. False and
b. Material misrepresentation made by one who either
knows it is falsity or is ignorant of its truth; the maker’s
intent that the representation be relied on by the person
and in a manner reasonably contemplated; the person’s
ignorance of the falsity of the representation; the
person’s rightful or justified reliance; and proximate
injury to the person.
FRAUD Cont.
It usually consists of a misrepresentation,
concealment of nondisclosure of a material fact, or
at least misleading conduct, devices or contrivance.
It embraces all the multifarious means which human
ingenuity can devise to get an advantage over
another. It includes all surprise, trick, cunning,
dissembling and unfair was by which another is
cheated. At law, fraud must be proved, in equity it
suffices to show facts and circumstances from
which it may be presumed.
CONSTRUCTIVE (LEGAL) FRAUD
Comprises all acts, omissions, and
concealments involving breach of equitable
or legal duty, trust or confidence and
resulting in damage to another. No scienter
is required. Thus, the party who makes the
misrepresentation need not know that it is
false.
EXTRINSIC (COLLATERAL) FRAUD
Fraud that prevents a party from knowing
about his right or defenses or from having a
fair opportunity of presenting them at a trial,
or from fully litigating at the trial all the
rights or defenses that he was entitled to
assert. It is a ground for equitable relief from
a judgment.
FRAUD IN FACT (POSITIVE FRAUD)
Actual fraud, Deceit, Concealing something
or making a false representation with an evil
intent (scienter) when it causes injury to
another. It is used in contrast to
CONSTRUCTIVE FRAUD which does not
require evil intent.
FRAUD IN LAW
Fraud that is presumed from circumstances,
where the one who commits it need not have
any evil intent to commit a fraud; it is a
CONSTRUCTIVE FRAUD. For example, if
a debtor’s transfer of assets impairs the
rights of his creditors, then the transfer
might be a fraud in law and the conveyance
could be set aside although the debtor had no
intention of prejudicing the creditor’s rights.
FRAUD IN THE FACTUM
This generally arises from a lack of identity or
disparity between the instrument executed and the
one intended to be executed, or from circumstances
which go to the question as to whether the
instrument ever had any legal existence; as for
example, when a blind or illiterate person executes a
deed when it has been read falsely to him after he
asked to have it read. Fraud in the factum provides a
stronger basis for setting aside an instrument than
FRAUD IN THE INDUCEMENT
FRAUD IN THE INDUCEMENT
Fraud which is intended to and which does
cause one to execute an instrument, or make
an agreement, or render a judgment. The
misrepresentation involved does not mislead
one as to the paper he signs but rather
misleads as to the true facts of a situation,
and the false impression it causes is a basis
of a decision to sign or render a judgment. It
renders an agreement voidable.
INTRINSIC FRAUD
Fraudulent representation that is presented
and considered in rendering a judgment.
Generally, “intrinsic fraud” is not a sufficient
ground for granting equitable relief from a
judgment. For example, perjury is only
intrinsic fraud because it does not prevent a
completely adversary proceeding. It only
influences the judgment, so it will not be a
ground for equitable relief from a judgment
resulting from it.
NEGLIGENCE
Failure to exercise that degree of care which a person
of ordinary prudence (a reasonable man (person))
would exercise under the same circumstances. The
term refers to conduct which falls below the standard
established by law for the protection of others against
unreasonable risk of harm. It does not comprehend
conduct recklessly disregardful of the interests of
others, nor does it include intentional infliction of
injury on another. Unless the actor is a child, the
standard of conduct to which he must conform to
avoid being negligent is that of a reasonable man
under like circumstances. Negligent conduct may
involve either
NEGLIGENCE Cont.
a. an act that the actor as a reasonable man should
recognize as involving an unreasonable risk of causing
an invasion of an interest of another, or
b. a failure to do an act necessary for the protection or
assistance of another and which the actor is under a duty
to perform.
In the law of torts, the degrees of negligence, in general, are:
SLIGHT NEGLIGENCE, which is failure to use great care;
ORDINARY NEGLIGENCE, which is failure to use
ordinary care; and GROSS NEGLIGENCE, which is failure
to use even slight care.
COMPARATIVE NEGLIGENCE
The allocation of responsibility for damages
incurred between the plaintiff and defendant,
based on the relative negligence of the two;
the reduction of the damages to be recovered
by the negligent plaintiff in proportion to his
fault.
CONCURRENT NEGLIGENCE
The wrongful acts or omissions of two or
more persons acting independently but
causing the same injury. The independent
actions do not have to occur at the same
time, but must produce the same result. The
actors are all responsible for paying the
damages, and can usually be sued together in
one lawsuit or individually in separate
lawsuits.
CONTRIBUTORY NEGLIGENCE
Conduct on the part of the plaintiff that falls below
the standard to which he should conform for his
own protection, and which is a legally contributing
cause in addition to the negligence of the defendant
in bringing about the plaintiffs harm. At common
law, any amount of contributory negligence would
bar recovery by the plaintiff. As an affirmative
defense, the defendant has the burden of proof on
this issue. Most states have overcome the harshness
of the contributory negligence rule by adopting a
COMPARATIVE NEGLIGENCE rule.
PRODUCT LIABILITY
Doctrine in the law of torts that holds a manufacturer, or
other party involved in selling a product, strictly liable when
an article, placed into the market with knowledge that it is to
be used without inspection for defects, proves to have a
defect that causes a personal injury.
Consumers who are injured because of a fault with a product
that the consumers had no ability to protect themselves
against may recover against the manufacturer under a theory
of products liability.
Thus, one who sells any product in a defective condition
unreasonably dangerous to the user or consumer or to
property may be liable for physical harm cause thereby even
though there is no contractual or other relationship (i.e. no
privity of contract) between the seller and user, and even
though the seller has not negligent.
PRODUCT LIABILITY Cont.
One area of products liability, the manufacture of
pharmaceutical drugs, has always presented
questions of latent defects. Courts have tended to
hold manufacturers to a high standard of care in
preparing, testing, and labeling drugs, but absent
evidence of any lower standard of care, they have
refused to hold the manufacturer liable for the
unforeseeable harm, on the theory that the utility
and social value of the drug normally outweighs the
known and unknown risks.
CRIMINAL LAW
CRIME
Any act which the sovereign has deemed contrary to the
public good; a wrong which the government has determined
is injurious to the public and, hence, prosecutable in a
criminal proceeding. Crimes include felonies and
misdemeanors. A “common law crime” was one declared to
be an offense by the developed case law method of the
common law courts. Today, nearly all criminal offenses are
statutory, as most jurisdictions either do not recognize
common law crimes at all or at least refuse to develop “new"
offenses not punishable under the early common law.
CRIMINAL LAW
BREACH OF DUTY TO SOCIETY FOR WHICH
GOVERNMENT BRINGS LAWSUIT
 WHITE COLLAR CRIMES
1. Fraud – Obtaining title to property of another through
deception
2. Mail fraud and wire fraud – use of mail, telephone, or
telegraph for the purpose of defrauding another
3. Bribery – Offer of payment for a favor (ex. kickback)
4. Forgery – Fraudulent altering a written document
5. Embezzlement – Fraudulent taking of employer’s property
6. Statutory violations – Ex. RICO which makes racketeering
illegal
CRIMINAL LAW Cont.
 CORPORATE LIABILITY
1. Crime committed by employees acting
within scope of employment and for
benefit of corporation
2. Individual who committed crime is
personally liable
FALSE PRETENSE
The statutory offense of obtaining property by false pretense.
Essential elements include an intent to defraud an implied or
express false representation, and obtaining property as a result of
that misrepresentation.
The crime also requires at least the intent that title to the property
pass, even if there is not an actual passing of title and in that
respect differs from larceny by trick, in which the false pretense
persuades the owner of property to permit another to take
possession but not title. Thus, if one borrows another’s vehicle
under a false credit card, it becomes larceny by trick but if one
buys the vehicle by making false statements on a credit
application, it is false pretense.
Modern statutes have expanded the false pretense to include false
promises. i.e. statements as to future fact provided that the falsity
of the statement in fact is not alone a sufficient basis to prove that
the defendant knew the statement was false when made.
EMBEZZLEMENT
The fraudulent appropriation to one’s own use of property
lawfully in his possession. It is a type of larceny which did
not exist at common law because it does not involve a
trespassory or wrongful taking; thus it is a crime created by
statute. Embezzlement is often associated with bank
employees, public officials, or officers of organizations, who
may in the course of their lawful activities, come into
possession of property, such as money, actually owned by
others. Compare misapplication; theft.
CRIMINAL (CULPABLE) NEGLIGENCE
Such negligence as is necessary to incur
criminal liability; in most jurisdictions,
culpable (criminal) negligence is something
more than the slight negligence necessary to
support a civil action for damages. Thus,
culpable negligence, “under criminal law, is
recklessness or thoughtless disregard of
consequences or a heedless indifference to
the safety and rights of others.”
CONTRACT
CONTRACT – (A promise or a set of promises enforced
under law)
A promise, or a set of promises, for breach of which the law
gives a remedy, or the performance of which the law in
some way recognizes as a duty. The essentials of a valid
contract are “parties competent to contract, a proper subject
matter, consideration, mutuality of agreement, and mutuality
of obligation,” “a transaction involving two or more
individuals whereby each becomes obligated to the other,
with reciprocal rights to demand performance of what is
promised by each respectively.” “The total legal obligation
which results from the parties agreement as affected by
law.”
ELEMENTS
AGREEMENT: CONSIDERATION: CAPACITY: LEGALITY
THE AGREEMENT
 Mutual assent between two or more persons to the same terms
of a bargain; requires an Offer and an Acceptance.
 OFFER
a. Requirements:
b. Intent to be legally bound to the contract (‘Objective Intent’ –
believable by the reasonable person standard)
c. Must contain definite terms, i.e. identities of parties, subject
matter, time of performance and price. (The latter two may be
implied in special cases)
d. Communication of offer by Offeror to the Offeree
ELEMENTS Cont.
2. Termination of offer can be made by:
a. Terms of Offer – which include a specified time limit
b.
c.
d.
e.
and/or means of acceptance which are not met
Revocation – withdrawal by Offeror
Rejection – expressed through words or conduct of
Offeree
Counteroffer – creates new offer; Offeree becomes
Offeror
Operation of Law – lapse of time, death, insanity,
destruction of subject matter, or
ELEMENTS Cont.
SPECIAL OFFERS:
Advertisement – Are invitations to receive offers from the
public; advertiser has option to accept, negotiate or reject
public’s offer to buy
b. Rewards – Become unilateral contracts in that the offeree
must perform to receive the reward
c. Auctions – Are invitations for offers to buy which may be
rejected by the seller, unless auction is “without reserve”
where seller offers to sell for any price.
d. Bids – Advertisements are invitations; bidders who offer their
bid are treated as offerors
e. Firm Offer – irrevocable offer in writing; if no time limit
stated, reasonable time (max 3 months) applies
f. Option contract – for a fee & at offeree’s option, offeror
makes irrevocable offer to perform on or before a set date
3.
a.
ELEMENTS Cont.
4. Counter offers: Are treated as new
offers rejecting original offer; roles
reverse. Ex. I’ll give you $150
instead of the $200 you (now
offeree) quoted me.
ELEMENTS Cont.
 ACCEPTANCE: A manifestation of assent by the offeree
to the terms of the offer in a manner invited or required by
the offer” – Restatement (2nd ) of Contracts
1. Who can accept? – Only the offeree can accept and
create a contract; third persons cannot
2. Unilateral Contracts – Only by oferee’s performance
3. Bilateral Contracts – When oferee promises to perform
4. Mirror Image Rule – Acceptance must mirror the offer
in that offeree accepts offeror’s terms
5. Grumbling Acceptance – “Ok, I’ll take it, but I wish you
would lower the price’ is an enforceable acceptance
ELEMENTS Cont.
6. Silence as Acceptance – Silence is not acceptance even
if offeror states it is. Exceptions: Offeree states silence
is; prior dealings establish it; or Offeree accepts the
benefit of goods or services without rejection.
7. Modes of Acceptance
a.
b.
c.
d.
Express Authorization – is stated in the offer Ex. – “Acceptance
may be by registered mail only”
Implied Authorization – Specific mode not required by offer,
rather, the customary modes are implied
Acceptance-Upon-Dispatch Rule – Acceptance is effective upon
proper dispatch, even if lost in transit; it must be sent before
revocation is received.
Nonauthorized modes of Acceptance – If sent contrary to
offer’s mode, acceptance is upon receipt
ELEMENTS Cont.
CONSIDERATION
THE THING OF
1. Legal value that is
2. Bargained for and given in exchange for act or promise
 LEGAL VALUE – Can be the performance of a service, a
refrainment from doing something, tangible or intangible
property, or something else of value. It must also be either:
1. A legal benefit to the Promisor, Ex. Jane’s new hotrod,
or
2. A legal detriment to the Promisee, Ex. It’s no longer
Dick’s
ELEMENTS Cont.
–
The
promisee’s act or promise must be bargained-for
and given in exchange for the promisor’s act or
promise, Ex. “If you stop smoking (promisee’s
act), I’ll give you $100 a month for one year,”
(promisor’s promise).
1. Past consideration is no consideration
2. Includes promise to pay for past requested act
with expectation of payment
 PROMISSORY ESTOPPEL: Enforceable due to
foreseeable reliance
 BARGAINED-FOR-EXCHANGE
ELEMENTS Cont.
CAPACITY
 ABILITY TO UNDERSTAND ACTION TAKEN
1. Minors
a. Generally under age 18
b. Right to cancel contract based on public policy
2. Mental Incompetence
a. Contract void where judged insane
b. Contract voidable where not judged insane
3. Intoxication
a. Contract
voidable where party was incapable
understanding transaction due to alcohol or drugs
ELEMENTS Cont.
 DEFENSES TO ENFORCEMENT
1. Mistake – erroneous belief about an aspect of contract
a. Unilateral Mistake – one party is mistaken
i. Contract not enforced where other party knew mistake
b.
2.
a.
b.
c.
clerical error, or enforcement would be unconscionable
Mutual Mistake
Fraud
Fraud in the factum – deceived person does not know what
he/she is signing (contract is void)
Fraud in the inducement – innocent party fraudulently
induced to enter into contract
Fraud by concealment – specific action taken to conceal
material fact
ELEMENTS Cont.
3. Duress
a. Innocent party is threatened creating non
voluntary acceptance
4. Undue influence
a. Innocent party is taken advantage of
5. Misrepresentation of fact
– innocent party induced by
misrepresentation of material fact
b. Innocent – statement of fact believed to be true
a. Intentional
ELEMENTS Cont.
LEGALITY
 STATUTES
1. Usury Laws – Limit on annual interest rates
2. Gambling
3. Sabbath/Sunday/Blue Laws
4. Licensing Laws – Requirement of certain occupations to be
licensed
 PUBLIC POLICY
1. Contract void where negative impact on society
a. Covenants not to compete
b. Exculpatory Clauses – relief from tort liability
TYPES OF CONTRACTS
 COMMITMENT: 2 contract types
1. Bilateral – Both parties make promises to each
other, Ex. House sale = promises to exchange
money for property
2. Unilateral – Only one party makes promise, Ex.
“I will pay you $10 to mow my yard.” = this
offer is for a unilateral contract – created only
when yard is mowed. If you say or promise you
will mow it, it becomes a bilateral contract
TYPES OF CONTRACTS Cont.
 DEGREE: 3 CONTRACT TYPES
1. Express – either written or oral agreement of terms by both
parties, Ex. Written care purchase; oral agreement to buy
friends stereo for $200
2. Implied – unspoken understanding between parties, Ex.
Doctor visit = he will help you, you will pay his bill
3. Quasi-Contract: one party receives a benefit from the other
party without a contract, Ex. Bill silently watches Joe paint
Bill’s house by mistake. Courts have ruled Bill must pay
because he knowingly accepted a benefit from Joe.
 STATUS: 2 CONTRACT TYPES
1. Executed – both sides have fully performed; completed
2. Executor – either or both sides not yet fully performed
TYPES OF CONTRACTS Cont.
 VALID OR OTHERWISE:
1. Valid Contract – contains all the essential elements
2. Unenforceable Contract – has elements, but not enforceable, Ex.
Expiration; oral when type requires written
3. Void Contract – element missing, Ex. Underage party
4. Voidable – party has right to cancel, Ex. Fraud, duress
 CONTRACTS THAT MUST BE IN WRITING
per STATUTE OF FRAUDS
1. executor/Administrator Contracts
2. Pre-nuptial consideration of marriage contracts
3. Interest in land contracts
4. Promises which cannot be performed within one year
5. Goods priced $500
6. Contracts involving guarantors Ex. Parent guarantees son’s car
loan
DISCHARGE
 OCCURRENCE OF CONDITION (Event which limits
duty to perform)
1. Express (written) or Constructive (read into contract in
fairness)
2. Timing
a. Condition Precedent: occurs before duty of performance
b. Condition Concurrent: occurs at moment of performance
c. Condition Subsequent: occurrence cuts off existing duty
BREACH BY OTHER PARTY
1. Material Breach
a. Non-breaching party does not receive substantial benefit
b. Action for total breach if ready, willing and able to
c.
2.
a.
b.
perform
May continue contract and sue for partial breach
(recover damages caused by breach)
Doctrine of Substantial Performance
Falls short of complete performance
Damages limited to contract price less cost of cure
BREACH BY OTHER PARTY Cont.
ANTICIPATORY REPUDIATION
Promisor indicates inability or unwillingness to perform
duties
b. Promisee may sue for performance, discharge contract, or
wait-and-see if promisor will decide to perform
4. PROTECTED INTERESTS
a. Expectation Interest
i. Interest in obtaining expected bargain
b. Reliance Interest
i. Interest in being compensated for loss suffered by change of
position in reliance on breaching party’s promise
c. Restitution Interest
i. Interest in recovery of amount by which breaching party has
enriched
3.
a.
CIRCUMSTANCES EXCUSING
PERFORMANCE
1. Impossibility
a. Duty could not be performed
b. Death or physical incapacity
c. Destruction of subject matter or means of performance
2. Impracticability
a. Extreme and unreasonable difficulty or expense
b. Difficulty not anticipated
3. Frustration
a. Purpose
has become valueless by unforeseeable
supervening act
CIRCUMSTANCES EXCUSING
PERFORMANCE Cont.
4. Novation
a. New contract substitutes new party to receive benefits
b.
5.
a.
6.
a.
7.
a.
and assume duties
Requires assent of all parties
Accord and Satisfaction
Agreement to resolve dispute on existing contract
Waiver
Voluntary relinquishment of rights
Alteration
One party makes changes to written contract without
other party’s consent
THIRD PARTY
 BENEFICIARIES
1. Incidental – no rights of enforcement
2. Intended – may enforce when rights vest
a. Creditor – receives performance in satisfaction of
existing obligation owed
b. Donee – receives performance in satisfaction of existing
obligation owned
ASSIGNMENT (Transfer) OF RIGHTS
X---------Contract ---Y------------Z
(obligor:
(Assignor/Obligee:
(Assingee:
Owes duty of
Owed right under
Recipient of
Performance)
Contract)
Transferred Right)
THIRD PARTY Cont.
1. Adequate description and words manifesting intent to
assign rights
2. Assignment extinguishes assignors rights
3. Revocable except where assignee gave consideration,
relied to detriment, or received payment/performance
4. Obligor may assert defenses against Assignee or
Assignor
DELEGATION (Transfer) OF DUTIES
X----------Contract ----------Y
(Delegator/Obligor:
(Obligee:
Transferor of duty)
party to whom Duty is Owed)
Z
(Delegate: Party to whom Duty Transferred)
THIRD PARTY Cont.
1. All duties can be delegated except:
a. If prohibited by contract of law
b. If personal skill, or
c. Will materially change Obligee’s expectancy
2. Oblige must accept unless bargain materially altered
3. Delegator remains liable
4. Delegate must perform if consideration
DAMAGES
 MONEY – COMPENSATORY
1. Put non-breaching party in as good a position as if promise
had been performed
2. Liquidated Damages
a. Agreed to by both parties at time of contract
3. Punitive Damages
a. Generally not available in contracts cases except if
independent tort committed, such a fraud
 EQUITABLE
1. Specific Performance
a. Balance hardship to breaching party versus benefit to nonbreaching party
2. Injunction – Court order requiring party to do/not do
something
DAMAGES Cont.
 RESTITUTION (Compensation for value of
benefit)
1. Ex: One party must return property to other party
 QUASI-CONTRACT RELIEF
1. Prevention of unjust enrichment
WARRANTY
An assurance by one party to a contract of the existence of a
fact upon which the other party may rely, intended precisely
to relieve the promisee of any duty to ascertain the fact for
himself or herself, and which amounts to a promise to
indemnify the promisee for any loss if the fact warranted
proves untrue. Such warranties are either made overtly
(EXPRESS WARRANTIES) or by implication (IMPLIED
WARRANTIES).
A covenant of warranty in real property is a covenant
running with the land, insuring the continuing validity of
title and the breach of which occurs at the time of
conveyance and gives rise to an action by the last vendee
against the first or any other warrantor.
BREACH OF WARRANTY
WARRANTY OF FITNESS FOR A PARTICULAR
PURPOSE
A warranty that the goods are suitable for the special
purpose of the buyer, which will not be satisfied by mere
fitness for general purposes
WARRANTY OF HABITABILITY
(More properly, an implied or express
covenant of habitability) a promise by
landlord that at the inception of the lease
there are no latent defects in facilities vital to
the use of the premises for residential
purposes, and that these facilities will remain
in usable condition during the duration of the
lease
WARRANTY OF MERCHANTABILITY
A warranty that the goods are reasonably fit
for the general purposes for which they are
sold
WARRANTY DEED
A deed that warrants that the grantor has the title he or she claims
he or she has. It purports to convey property free and clear of all
encumbrances, except those noted in the instrument. As a
guarantee of title, the warranty deed creates liability in the
grantor if the title transferred is defective. It is distinguished from
a quitclaim deed which merely conveys whatever title the grantor
has or may have and which consequently does not give rise to
damages in the event title is defective. The usual warranties
contained in the warranty deed are seisin, quiet enjoyment, right
to convey, freedom from encumbrances, future assurances, and
defense of title against all claims. A warranty deed does not
necessarily transfer a fee simple, but may also pass a life estate or
a term of years.
A general warranty deed warrants that the property being
transferred is not subject to any encumbrances or liens. A specific
warranty deed only warrants against the encumbrances or liens
specified therein.
BREACH OF WARRANTY
Infraction of an express or implied
agreement as to the title, quality, content or
condition of a thing sold or bailed.
A warranty is a guarantee and is breached
when a thing so guaranteed is deficient
according to the terms of the warranty
NEGOTIABLE INSTRUMENT
A writing which is signed by the maker or drawer,
contains an unconditional promise or order to pay a
sum certain in money, is payable on demand or at a
definite time, and is payable to order, or to bearer. A
draft, check, certificate of deposit, and note may or
may not be a negotiable instrument depending upon
whether the above elements of negotiability are
satisfied. A transferee of a negotiable instrument
may have rights superior to the assignee of other
obligations if the transferee qualifies as a holder in
due course.
NEGOTIABLE INSTRUMENT Cont.
 NEGOTIABLE INSTRUMENT
1. Written promise to pay money
a. Promissory Note and Certificate of Deposit
2. Order to pay money – Draft and Checks
3. Means of extending credit
 NEGOTIATION
1. Transfer of instrument where recipient becomes holder
 HOLDER
1. In possession
2. Has all necessary indorsements
NEGOTIABLE INSTRUMENT Cont.
 HOLDER IN DUE COURSE
1. Has good title to instrument
2. Paid value
3. Acquired in good faith
4. Takes instrument with no notice of its being overdue or
dishonored, and without notice of any claims or defenses
5. Remains subject to real defenses affecting validity
a. Minority, incapacity, duress, illegality, fraud, forgery,
material alteration
 PAPER
1. Order (payable to specific payee)
2. Bearer (payable to bearer or cash)
NEGOTIABLE INSTRUMENT Cont.
 INDORSEMENT – Signature of Holder
1. Special instructions transferring paper
(Order)
2. Blank (Bearer)
3. Restrictive – specific purpose
4. Qualified – disclaim or limit liability
CLASSIFICATION
 PROMISSORY NOTES
1. 2-Party instrument (Maker/Payee)
2. Unconditional promise to pay money at
particular time or on demand
 CERTIFICATE OF DEPOSIT
1. Acknowledgement of receipt of money
2. Promise to pay money plus interest
CLASSIFICATION Cont.
 DRAFTS
1. 3-Party instrument
2. Drawer – Party who writes order for Draft
3. Drawee – Party who must pay amount stated in draft
4. Payee – Party who receives money
 CHECKS
1. Type of Draft
2. Drawer – Checking account holder
3. Drawee – is always a bank
4. Payable on demand;
5. Include ordinary checks and special checks, such as
Certified, Cashier’s and Traveler’s Checks