Contracts 3

js5389's version from 2015-12-15 03:31

Implied terms (cont'd)

Question Answer
Locke v. Warner Bros. FactsAs part of a settlement agreement between Plaintiff Locke and movie star Clint Eastwood, Mr. Eastwood agreed to secure a production deal between Defendant Warner Brothers and Plaintiff. The deal was granted to Plaintiff giving her the opportunity to develop movies with Defendant movie studio. Plaintiff alleged Defendant violated the implied covenant of good faith in that they never intended to make any films with her.
Locke v. Warner Bros. TakeawayWhere a contract confers on one party a discretionary power affecting the rights of the other party, an implied covenant of good faith requires such party to exercise that discretion with good faith and in accordance with fair dealing. Also, if you’re going to act in bad faith, don’t be an idiot.
Locke v. Warner Bros. CodeImplied Terms, Good Faith
Bayliner v. Crow FactsPlaintiff brought suit against the seller and manufacturers of a fishing boat alleging that Defendants breached an express warranty and implied warranties of merchantability and fitness for a particular purpose. Plaintiff claimed that the boat he was sold was significantly slower than what was allegedly represented to him.
Bayliner v. Crow TakeawayAn express warranty for an item will exist where a seller makes an affirmation of fact or promise to the buyer which becomes part of the basis of the bargain. Mere opinions or puffery do not constitute express warranties. All goods that are sold also contain an implied warranty of merchantability, which means that such goods must pass without objection in the trade and as are fit for the ordinary purpose for which goods are used.
Bayliner v. Crow CodeImplied Terms, Warranties


Question Answer
Totem Marine v. Alyeska FactsPlaintiff Totem and its vice-president Robert Stair brought suit against Defendant Alyeska to rescind an agreement releasing Defendant from all claims in exchange for $97,500. Plaintiff argued that he was forced to sign such agreement to avoid being bankrupt and therefore seek to avoid the agreement on grounds of economic duress.
Totem Marine v. Alyeska HoldingThe Court of Appeals, in overturning the lower Court, held that economic duress exists where (1) one party involuntary accepts the conditions of the other party, (2) circumstances permitted no alternative, and (3) such circumstances were the result of coercive acts of the other party.
Totem Marine v. Alyeska TakeawayA party may rescind an agreement if they can show that they entered into such agreement under economic duress.
Totem Marine v. Alyeska CodeDuress
Odorizzi v. Bloomfield FactsPlaintiff Donald Odorizzi sought to rescind his written resignation as a school teacher on the grounds that it was made under duress, menace, fraud, mistake, and undue influence. Plaintiff, after being arrested on criminal charges of homosexuality, alleges that we was coerced into resigning by his school principle and district superintendent.
Odorizzi v. Bloomfield HoldingThe Court defined undue influence as “taking advantage of another’s weakness of mind; or taking grossly oppressive and unfair advantage of another’s necessities or distress.” The Court held that, like the case at hand, undue influence usually involves someone in a dominant position taking advantage of someone in a servient position. The Court held that Plaintiff had pleaded sufficient facts to show that Defendants had placed excessive pressure on Plaintiff at a time when Plaintiff was vulnerable and susceptible to over persuasion.
Odorizzi v. Bloomfield TakeawayA party may rescind an agreement if it can be shown that such agreement was not entered into under free will, but was a the product of excessive pressure being put on one who was at the time to be vulnerable and physically and/or emotionally weak.
Odorizzi v. Bloomfield CodeUndue Influence
Syester v. Banta FactsPlaintiff, a lonely and elderly widow, brought action against Defendant Arthur Murray Dance Studio, alleging fraud and misrepresentation for nearly $30,000 worth of dance instruction she bought from Defendant. Plaintiff sought damages and rescission of a previous release she signed which dismissed an earlier law suit against Defendant.
Syester v. Banta HoldingThe Court held that the Plaintiff had alleged sufficient facts to meet the required elements of a fraud claim. Those elements are: (1) that the defendants made one or more representations claimed by plaintiff, (2) that said statements, or one or more of them, were false, (3) that said false statements or representations were as to material matters with reference to the entering into the lesson contracts, (4) that the defendants knew the said representations, or one or more of them, were false, (5) that said representations were made with intent to deceive and defraud the plaintiff (6) that the plaintiff believed and relied upon said false representations and would not have entered into the lesson contracts, except for believing and relying upon said misrepresentations, and (7) that the plaintiff was damaged in some amount through relying on said representations.
Syester v. Banta TakeawayA release agreement that is procured from fraudulent misrepresentations or overreaching will not relinquish the rights of the party to such agreement.
Syester v. Banta CodeMisrepresentations, Fraud
Hill v. Jones FactsPlaintiffs purchased Defendants home for $72,000. Plaintiffs had, on several occasions, inspected the home and twice noticed potential termite damage to the home. Although Plaintiffs, who were both familiar with termite damage, noticed holes in the wood on the patio and a ripple in the floor in the living room they never followed up to determine the cause of such damages. On one such occasion, Plaintiffs asked Defendants about a ripple on the floor in the living, Defendants responded that the ripple was caused by water damage. The house eventually passed termite inspection, and Plaintiffs closed relying on the inspection. Defendant sellers never disclosed to Plaintiff, or to the termite inspector, the fact that in the past the house had been infested by termites and that the house received treatment for such infestations. Upon moving into the house, the wood in the living room began to crumble, it was determined that such damage was caused by termites.
Hill v. Jones HoldingThe Court held that where the seller of a home knows of facts materially affecting the value of the property which are not readily observable and are not known to the buyer, the seller is under a duty to disclose them to the buyer. The Court held that the existence of termite damage is sufficiently material to warrant disclosure. The Court held that the standard integration clause of the contract does not provide protection against non-disclosure.
Hill v. Jones TakeawayA seller has an affirmative duty to disclose material facts which adversely affect the value of the property.
Hill v. Jones CodeNon-Disclosure
Park 100 v. Kartes FactsIn order to cater for their expanding business, the Kartes (D) entered into a lease agreement with Park 100 (P) after concluding the negotiations for the lease space in 1984. The lease agreement signed was devoid of any provisions for a persona guaranty of the lease and a personal guaranty was not even mention during the deal. Later on, a lease agreement containing a provision for personal guaranty, which was unknown to the Kartes (D), was signed by the Kartes (D) after it was presented to them by one of Park (P) 100 representatives.
Park 100 v. Kartes HoldingThe court found Park 100 (P) culpable of procuring the signature of the Kartes (D) fraudulently. A material misrepresentation of past or existing fact by the party to be charged, which was false, was made with knowledge or in reckless ignorance of the falsity, was relied upon by the complaining party, and proximately caused the complaining party injury are elements of fraud.
Park 100 v. Kartes CodeMisrepresentation, Fraud
Williams v. Walker-Thomas FactsAppellee Walker-Thomas Furniture Co., a retailer of furniture, leased items to consumers pursuant to a contract that stated Appellee would retain title of the furniture until the total of the lease payments made equaled the stated value of the piece of furniture, at which time the consumer would own the furniture. Each contract inconspicuously contained a provision stating that if more than one item is purchased the monthly payments shall be applied pro rata among all the items purchased, thereby allowing Appellee to retain title on each piece of furniture longer.
Williams v. Walker-Thomas HoldingIf unconscionability is present at the time a contract is formed, the court can choose not to enforce the contract.
Williams v. Walker-Thomas TakeawayUnconscionability has generally been accepted to include an absence of meaningful choice on the part of one of the parties together with contract terms which are reasonably favorable to the other party.” In light of all the circumstances, it is important that meaningfulness of choice is determined, for instance, gross disparity of bargaining power. The ruling was remanded in other to determine whether the contract was unconscionable.
Williams v. Walker-Thomas CodeUnconscionability
Valley Medical v. Farber FactsThis case deals with the strong public policy against upholding non-compete clauses in employment contracts, particularly when they may inhibit the physician-patient relationship.
Valley Medical v. Farber HoldingIn reversing the judgment of the intermediate appellate court, the Arizona Supreme Court held that the public policy implications (i.e. restriction on the practice of medicine) outweighed the Plaintiff’s protectable interest the restrictive covenant. Particularly, any covenant restricting the practice of a physician also has a negative impact on a patient who is depending on that physician. Therefore, while a restrictive covenant may protect the interest of an employer, it will not be upheld to the extent that it prejudices the interest of a patient.
Valley Medical v. Farber CodePublic Policy
Poop House FactsShortly after purchaser bought property for the purpose of generating rental income, the property was condemned as unfit for human habitation.
Poop House HoldingThe court found that the mutual mistake affected the essence of the contractual consideration, as both parties thought they were contracting to purchase and sell income-generating property.
The court also found that rescission is not proper in this case because the parties did not equally share the blame. Instead, the “as is” clause in the purchase and sale agreement shifted the risk to the purchaser.
Poop House CodeMutual Mistake
Wil-Fred’s v. Metropolitan FactsA construction company submitted a bid on a contract and then attempted to withdraw the bid when it discovered its calculations were based on a subcontractor’s error.
Wil-Fred’s v. Metropolitan HoldingIn the instant case, the error was material, the consequences of the error were grave, and a substantial hardship would result if the contract were enforced, rendering it unconscionable to do so. The court made its decision based on the facts surrounding the error. It examined the trial court’s record to conclude that Plaintiff met the above standard for rescission with clear and positive evidence. The evidence showed that the error was grave since the subcontractor would lose $150,000. Also, the Defendant had not changed its position since Plaintiff promptly notified Defendant of the error and Defendant could still accept the next lowest bid. Furthermore, because the discrepancy between Plaintiff’s offer and the estimated cost in the advertisement and the offers made by other contractors, Defendant should have been put on notice of the error. In addition, the court reasoned that Plaintiff acted in good faith and was reasonable in relying on the subcontractor’s estimation based on their past business relationship. Finally, the amount of money that either the subcontractor or Plaintiff stood to lose if the contract was enforced was substantial, causing the unilateral mistake to be quite grave.
Wil-Fred’s v. Metropolitan CodeUnilateral Mistake
Karl Wendt v. International Harvester FactsThe Plaintiff, Karl Wendt Farm Equipment Co. (Plaintiff), entered into a franchise agreement with the Defendant, International Harvester (Defendant), establishing Plaintiff as a dealer of Defendant’s farm equipment. The agreement specified the terms under which the contract could be terminated. Thereafter, the farm equipment market suffered a recession and the Defendant suffered substantial losses. The Defendant decided to sell its farm equipment division to J.I. Case Co. (Case) and Tenneco Co. (Tenneco). Case and Tenneco did not acquire Defendant’s franchise network, but it did receive access to the dealers, most of whom received a franchise from Case. Plaintiff did not receive a franchise from Case and therefore sued Defendant, claiming breach of contract for loss of his franchise. Defendant argued impracticability and frustration of purpose. A directed verdict was found for Plaintiff.
Karl Wendt v. International Harvester HoldingAlthough the Michigan Supreme Court recognizes the defense of impracticability, as a matter of law, this defense does not excuse performance due to mere economic difficulties, as in the instant case.
Karl Wendt v. International Harvester TakeawayIn order for a supervening event to discharge a duty, the non-occurrence of such event must have been a basic assumption of the parties when they made the contract. The continuation of existing market conditions and changing financial situations are not such assumptions.
In order to use the doctrine of frustration of purpose to excuse performance, the purpose frustrated by the supervening event must have been the principal purpose of the contract, the frustration must have been substantial and the frustrating event must have been a basic assumption of the contract. The principal purpose in the instant case was to establish a dealership. It was not to provide mutual profitability.
Karl Wendt v. International Harvester CodeImpracticability, Frustration of Purpose
Mel Frank v. Di-Chem FactsThis is an action for breach of lease, instituted when Defendant, a chemical distributor, vacated Plaintiff/Lessor’s premises after city officials informed Defendant that it could not store all of its materials on the leased premises.
Mel Frank v. Di-Chem TakeawayThis case stands for the proposition that a contract can only be avoided under the idea of frustration of purpose, when an obligee’s entire purpose for entering into a contract is frustrated.
Mel Frank v. Di-Chem CodeFrustration of Purpose, Impossibility