LAW 201.001: BUSINESS, LAW, AND SOCIETY
FALL 2022 FINAL
Professor DiSanto
Indicate the answer choice that best completes the statement or answers the question.
1. Jewelry & Coin Company hires Kelly Ann to buy gems and precious metals from various sources on its
behalf. In this relationship, Jewelry & Coin is
a. an employee.
b. an independent contractor.
c. a principal.
d. an agent.
2. Private Security Service employs Olsen as an agent. Without Private Security’s knowledge but
otherwise acting within the scope of employment, Olsen commits a crime. The state can successfully
prosecute
a. none of the choices.
b. Private Security.
c. Private Security or Olsen.
d. Olsen.
3. Based on Oona’s conduct, Porcio reasonably believes that Qasim has the authority to act on Oona’s
behalf even though Qasim does not have the actual authority to do so. In this circumstance, Qasim has
a. apparent authority.
b. express authority.
c. implied authority.
d. no authority.
4. Lisa brings a successful suit against her employer Metal Mold Corporation for employment
discrimination. Lisa may be awarded
a. back pay, but not retroactive promotions.
b. retroactive promotions, but not back pay.
c. damages, but not back pay.
d. back pay, retroactive promotions, and damages.
5. The employees of Beverage Bottling Company designate Cola Cappers Union as their bargaining
representative. Beverage refuses to bargain with the union over wages and working conditions. This
violates
a. the National Labor Relations Act.
b. the Fair Labor Standards Act.
c. the Social Security Act.
d. no federal law.
Fact Pattern 35-2
Kyla replaces Lomax in his job at Motor Vehicle Manufacturing Corporation (MVMC).
6. Refer to Fact Pattern 35-2. Lomax believes that he has been discriminated against on the basis of his
age. For the Age Discrimination in Employment Act of 1967 to apply
a. Kyla must be forty years of age or younger.
b. Kyla must be forty years of age or older.
c. Lomax must be forty years of age or older.
d. Lomax must have been MVMC’s employee for at least forty years.
7. Eleanor offers Flossy the amount of an investment in Flossy’s start-up business venture if she marries
Eleanor’s son Glen. This promise is enforceable
a. only if it is in writing.
b. only if the amount of the investment is more than $500.
c. only if Glen agrees to marry Flossy.
d. under no circumstances.
8. High Plains Distribution Inc. hires Inez to work on its shipping dock, accepting deliveries, dispatching
trucks, and dealing with customers and other companies’ drivers. With respect to High Plains, Inez is
most likely
a. an agent.
b. an independent contractor.
c. a principal.
d. a work for hire.
Fact Pattern 30-1
General Leasing Company (GLC) buys equipment for use as inventory, borrowing $1 million from
Business Finance Corporation for a security interest in the equipment. The next day, GLC borrows
$500,000 from Commercial Bank, also for a security interest in the equipment. GLC defaults on the
loans.
9. Refer to Fact Pattern 30-1. Suppose that Business Finance perfects its security interest when GLC takes
possession of the equipment. In that circumstance, the party with priority to the collateral on GLC’s
default would be
a. GLC.
b. Business Finance and Commercial Bank proportionately.
c. Business Finance only.
d. Commercial Bank only.
10. Carly applies for a job at Data Applications LLC for which she is qualified, but for which she is
rejected. The employer continues to seek applicants and eventually fills the position. To succeed in a suit
against Data for discrimination under the Americans with Disabilities Act, Carly must show that she
a. was not hired solely because of a disability.
b. has a disability but can function with certain mitigating measures.
c. suffers from a disability that causes her undue hardship.
d. is willing to reasonably accommodate the employer’s needs.
11. Ridgeview Mining Inc. agrees to deliver a certain quantity of oil to Static Energy Corporation. The
agreement states that delivery is to be within “9” days, although the parties intend “90” days. Ridgeview
cannot convince Static to amend the contract. Ridgeview should seek
a. damages.
b. reformation.
c. rescission.
d. specific performance.
Fact Pattern 32-1
Nadine and Orin work at Pumps & Pipes Inc. Nadine is a sales representative who works with Pumps’s
customers, including contractors, government agencies, farmers, and others, as well as individual
consumers. Pumps closely supervises all of its sales reps, and dictates their schedules. Orin is an engineer
who works in Purified’s water treatment, but does not deal with third parties.
12. Refer to Fact Pattern 32-1. With respect to third parties, Nadine is Pumps’s
a. employee, agent, and independent contractor.
b. employee and agent.
c. employee but not agent.
d. independent contractor.
13. Isaac holds one ton of perishable fruit in storage for Juice Smoothies Corporation. Juice Smoothies
does not pay for the storage. Isaac sells the fruit to Kayo Beverage Company. This sale represents
a. a breach of contract.
b. a mitigation of damages.
c. liquidated damages.
d. a quasi contract.
14. Metalworkers Union represents the workers of National Fabrication Corporation. The employer
refuses to bargain with the union over workplace safety. This most likely violates
a. federal labor law.
b. state right-to-work laws.
c. federal wage-and-hour laws.
d. no federal or state law.
15. Cathy buys an exclusive territory in which she is authorized to set up a plant to make Delite Dairy
products. After receiving the recipes, Cathy begins making Evie’s-brand yogurt and other Delite products.
This is
a. a chain-style franchise.
b. a distributorship franchise.
c. a manufacturing franchise.
d. not a franchise.
Fact Pattern 35-3
Artur, who has a disability, is an employee of Banquet Services, Inc. After the installation of new doors
on the entrance to Banquet’s hall, Artur finds it nearly impossible to enter and exit. For repeatedly failing
to be on time, Banquet replaces Artur with Carter, who does not have a disability.
16. Refer to Fact Pattern 35-3. To successfully defend against Artur’s claim, Banquet will have to show
that
a. Artur consistently failed to meet the essential requirements of his job after the new doors were
installed.
b. Banquet cannot make changes to the doors without undue hardship.
c. Carter is qualified for Artur’s position.
d. the doors were not installed as an act of intentional discrimination.
17. Faye is interested in buying a franchise from Gas n’ Snax Stores Inc. This transaction, like other
franchise deals, is regulated to protect
a. certain types of anticompetitive agreements.
b. franchisors from dishonest prospective franchisees.
c. prospective franchisees from dishonest franchisors.
d. the government’s power to restrict freedom of contract.
Fact Pattern 18-2
Flora, who owns and operates Garden Fresh Organic Farms, agrees to sell Harvesters Grocery a minimum
quantity of uncommon fresh fruits and vegetables for the region every week for three months.
18. Refer to Fact Pattern 18-2. If bad weather destroys Flora’s crops, the obligation to deliver produce to
Harvesters is
a. breached.
b. discharged.
c. not affected.
d. suspended.
19. John contracts with Kelly to buy a certain number of cattle for Kelly’s Circle K ranch. John makes a
deal with Lawson, the owner of a local herd, and makes a down payment. Kelly fails to pay the rest of the
price. Lawson sues John for breach of contract. John’s right to hold Kelly liable for any damages that he
has to pay is the right of
a. compensation.
b. cooperation.
c. indemnification.
d. reimbursement.
20. Chord Guitars Inc. sells guitars to consumers. A Chord salesperson says to a potential customer, “This
Chord is the best guitar you’ll find anywhere.” This statement is
a. an implied warranty of fitness for a particular purpose.
b. an implied warranty of merchantability.
c. an express warranty.
d. puffery.
21. MotorCo Inc. makes and sells auto parts to retail repair services, vehicle sales outlets, and consumer
parts stores. On one MotorCo box is a label that reads “Contains one gross (144) sparkplugs, assorted
sizes.” This statement is
a. an implied warranty of fitness for a particular purpose.
b. an implied warranty of merchantability.
c. an express warranty.
d. none of the choices.
22. Ben manages a warehouse and its inventory for Coffee Shops, Inc. To operate this part of the
business, Ben’s authority can be inferred
a. from the position Ben occupies.
b. by a reasonable party with whom Coffee Shops does business.
c. to contradict Ben’s express authority.
d. under no circumstances.
23. Flynn buys a Greasy Burger, Inc., franchise. Greasy requires that its franchisees buy its products
exclusively for every phase of their operations. Because Flynn wishes to buy less expensive products, he
challenges the requirement. His best argument is probably that the requirement violates
a. the implied covenant of good faith and fair dealing.
b. the Federal Trade Commission’s Franchise Rule.
c. federal antitrust laws.
d. the franchisor’s marketing image.
Fact Pattern 15–2
Lewis, an employee of Silos, Inc., makes a substantial mathematical error in totaling the estimated costs
for a project for which AgriCo-op is seeking bids. Consequently, Silos’s bid is significantly low.
24. Refer to Fact Pattern 15–2. Any contract with AgriCo-op that includes the mistake may be rescinded
a. if AgriCo-op knew or should have known of the mistake.
b. if Lewis’s supervisor did not know of the mistake.
c. if Silos knew or should have known of the mistake.
d. under no circumstances.
25. Seiko works for TallTales Publishing, Inc. The basis for Seiko’s contribution under the Federal
Insurance Contribution Act to help pay for benefits that will partially make up for her loss of income on
retirement is her
a. seniority at TallTales.
b. annual wage base.
c. special job skills.
d. county of residence.
26. Eden Valley Ranch and Farm Supply Corporation enter into a contract for a sale of fencing materials.
Farm Supply, a merchant who deals in goods of the kind sold, makes implied and express warranties in
connection with the sale. Under the UCC, if these are inconsistent
a. all implied warranties displace all express warranties.
b. all express warranties displace all implied warranties.
c. the implied warranty of fitness for a particular purpose takes precedence.
d. the implied warranty of merchantability takes precedence.
27. Gene, an accountant, convinces his client Hazel to sign a contract to invest her savings in 2Gether, a
nonexistent social-networking Web site. There is clear and convincing evidence that Hazel did not act out
of her free will. This is
a. duress.
b. fraud.
c. mistake.
d. undue influence.
28. Water Pipe Company includes in its contracts a provision that reads, in large red letters, “There are no
warranties that extend beyond the description on the face hereof.” This disclaimer negates
a. the implied warranty of fitness for a particular purpose.
b. the implied warranty of merchantability.
c. the implied warranty of title.
d. none of the choices.
29. Steel Production Industries, Inc., employs five hundred workers. For the Occupational Safety and
Health Administration, Steel Production must do all of the following except
a. keep occupational injury and illness records for each employee.
b. report any work-related diseases.
c. report any work-related injuries.
d. pay employees higher wages for working in more dangerous areas.
30. The Family and Medical Leave Act requires employers to provide eligible employees with family or
medical leave for any of the following reasons except
a. to care for a newly adopted child.
b. to care for a newly placed foster child.
c. to go on an extended family vacation.
d. if the employee is unable to perform the essential functions of his or her job due to a serious
health condition.
31. Ann offers to buy Beth’s land only if an appraiser estimates that its current value is more than a
certain price. Later, the appraiser deems the worth of the land to be less than Beth’s price. Ann and Beth’s
obligations
a. must still be performed.
b. must now be renegotiated.
c. are on “hold.”
d. are discharged.
32. The payment of John’s debt to Kirsten is guaranteed by John’s personal property. Kirsten is most
likely to perfect her interest by
a. attaching a bright label to John’s property.
b. having a third party hold the personal property until the debt is paid.
c. asking the court to hold the personal property until the debt is paid.
d. filing a financing statement with the appropriate authority.
33. Craig, Donna, and Eve do business as FasTrak Career Consultants. Eve’s relationship to FasTrak
ends, but the firm continues to do business. The termination of Eve’s relationship to FasTrak is
a. dissociation.
b. dissolution.
c. disestablishment.
d. disrespectful.
34. Nell, a member of a protected class, applies for a job with Origami Paper Corporation, but fails the
company’s employment test and is not hired. Nell believes that the test has an unintentionally
discriminatory effect. If so, this is
a. a constructive discharge.
b. disparate-impact discrimination.
c. disparate-treatment discrimination.
d. not discrimination.
35. The payment of Valley Farm’s debt to County Bank is guaranteed by the farm’s personal property.
This property is
a. a future advance.
b. after-acquired property.
c. a floating lien.
d. collateral.
36. Builders, Inc., agrees to construct an office building for Champ Fitness Clubs, Inc. The project
proceeds according to plan, but before it is done, Champ tells Builders to quit. Builders may recover
a. the contract price less costs of materials and labor.
b. the contract price.
c. the costs needed to complete construction.
d. profits plus the costs incurred up to the time of the breach.
37. EZ Loans, Inc., issues a line of credit in Glade Electronics Corporation under a security agreement.
Later, Glade buys new HD-TVs to add to its inventory. EZ has a security interest in the new inventory
a. if the security agreement included an after-acquired property clause.
b. if EZ has not yet filed a financing statement.
c. if Glade bought the inventory with EZ funds.
d. under no circumstances.
38. Dante buys a new car from U-Drive-It Car Lot. In the first month, the car breaks down six times. Each
time, Dante takes the car to his local mechanic, without contacting the dealership. Finally, he gives up on
the mechanic being able to fix the car, and demands his money back from the deal. Dante will
a. be successful under his state’s lemon law.
b. not be successful because the lemon law only covers used vehicles.
c. not be successful because the vehicle’s condition has changed since it left the dealership.
d. not be successful because he did not notify the dealer and give it an opportunity to cure the
problem.
39. Handicrafts & Hobbies Store agrees to hire Iliana for one year at a salary of $600 per week. When
Handicrafts & Hobbies cancels the contract, Iliana spends $150 to obtain a similar job that pays $450 per
week for a year. Iliana is entitled to recover
a. the amount of the wages that Handicrafts & Hobbies promised only.
b. the difference between the wages at the two jobs only.
c. the difference between the wages at the two jobs plus $150.
d. $150 only.
40. Dimitri, a certified public accountant and an investor, and Elinor, an insurance salesperson and a
realtor, may create an agency relationship for
a. a business purpose only.
b. any legal purpose.
c. any legal or illegal purpose.
d. no purpose.
41. Excavate n’ Fill, Inc., enters into a contract with Fred to fill and landscape an abandoned quarry on
Fred’s land. Fred advances Excavate n’ Fill 10 percent of its cost. The parties rescind the contract.
Excavate n’ Fill’s refund of the payment is
a. a penalty.
b. liquidated damages.
c. restitution.
d. reformation.
42. Lighter Than Air, Inc., and Mario enter into a contract for a sale of a hang glider. Lighter Than Air, a
merchant who deals in goods of the kind sold, makes implied and express warranties in connection with
the sale. The Magnuson-Moss Warranty Act was designed to prevent deception in warranties by
a. displacing the UCC as the primary source of warranty rules.
b. making warranties easier to understand.
c. prohibiting disclaimers of warranties.
d. requiring sellers to give written warranties for consumer goods.
43. Ginger is an employee of Haz-Mat, Inc. She refuses a transfer to a Haz-Mat department in which
several employees suffered serious injuries from exposure to hazardous materials. Under the
Occupational Safety and Health Act, Ginger may be
a. entitled to higher wages for working in a hazardous department.
b. reported to the Occupational Safety and Health Administration.
c. entitled to protection from discharge.
d. subject to discharge.
44. Marketing, Inc., and Nature’s Foods Corporation (NFC) discuss a contract. They exchange “signed”
e-mails that summarize the terms on which they agree. Marketing begins to perform, but Nature’s refuses
to pay. Between Marketing and Nature’s, the e-mails are
a. a post-contract.
b. a pre-contract.
c. a written contract.
d. no contract.
Fact Pattern 32-2
Faye works as an administrator and receptionist for Garage Door Store. The store withholds federal taxes
from Faye’s pay, and controls the methods and details of the performance of her work. Faye is not
authorized to modify the prices or other terms of a sale at the store. Homer installs Garage Door products
at the buyers’ locations.
45. Refer to Fact Pattern 32-2. Garage Door authorizes Homer to sell garage door upgrades and
accessories at the buyers’ locations at prices that Homer negotiates with those buyers. With respect to
sales at those locations, Homer is
a. an independent contractor.
b. an employee only.
c. an employee and agent.
d. a principal.
46. Cow’s Milk Creamery, Inc., needs a certain part for its pasteurizing equipment to continue its
operations and orders one for $3,000 from Dairy Supplies Company. Cow’s Milk tells Dairy Supplies that
it must receive the part by Tuesday or it will lose $10,000. Dairy Supplies ships the part late. Cow’s Milk
can recover
a. $13,000.
b. $10,000.
c. $3,000.
d. $0.
47. Solar Panels Corporation requires its employees to have a high school diploma, claiming a connection
between a high school education and job performance. In a suit against Solar under Title VII of the Civil
Rights Act, this is shown to have a discriminatory effect. Solar has
a. a seniority system defense.
b. a bona fide occupational qualification defense.
c. a business necessity defense.
d. no defense.
48. Nora and Owen do business as Profit & Property, a real estate investment partnership. In acting on the
firm’s behalf in a deal with Village Mall, Nora takes advantage of an opportunity to make a secret profit
on her own behalf. To her firm, Nora is liable for
a. breach of the duty of care.
b. breach of contract.
c. breach of the duty of loyalty.
d. nothing.
49. Inez hires Josh to paint her portrait to her satisfaction for $4,000. When Josh finishes the portrait, Inez
announces that she is not satisfied with it. Inez
a. must pay Josh the contract price.
b. must pay Josh half of the contract price as a compromise.
c. must pay Josh only the cost of his materials.
d. does not have to pay Josh.
50. Mythic Games Company employs two hundred workers full-time. If Mythic Games plans to have a
mass layoff, it must provide its employees with notice of at least
a. thirty days.
b. sixty days.
c. ninety days.
d. one year.
Answer the following questions:
51. Name the different types of franchises?
52. What arises from an agreement between 2 or more persons to carry on a business for profit?
53. What is dissociation?
54. Tell me 3 events that may cause a dissociation?
55. What type of transaction is a transaction in which a debtor sworn payment or performance by
pledging collateral that she owns or in which she has a legal interest?
56. What is the party called who owes payment or other performance of a secured obligation?
57. What does perfection mean?
58. What federal act prohibits discrimination on the basis of race, sex, color, religion, and national
origin?
59. Explain what constructive discharge is?
60. What are the two forms of sexual harassment?
61. The Age Discrimination Act protects individuals over the age of what?
62. What does the ADA stand for?
63. What does FMLA stand for.
64. OSHA is the fundamental federal law aimed toward what?
65. What is COBRA?
66. Tell me 3 types of illegal strikes?
67. Name 3 express warranties at a sale.
68. What is the law called that typically applies to automobiles under warranty that are defective in any
way that significantly affects the vehicle’s value or use?
69. An action for breach of warranty must commence within how many years after the action accrues?
70. FMLA requires employers with over 50 employees to provide how much time of unpaid leave to
employees who need to care for a spouse with a serious medical condition?
71. What does OSHA stand for?
72. What is the Medicare tax rate?
73. What is a lockout?
74. What are the elements needed for a prima facie discrimination case?
75. What are the remedies available under Title VII?
76. What are the four basic types of defenses to justify a discriminatory practice?
77. What is the Doctrine of Respondeat Superior?
78. What is a detour?
79. What is a frolic?
80. Name three ways that an agency be terminated by act of parties?
81. When an innocent party is induced to enter into a contract by a misrepresentation of material fact is
called what?
82. What is it called when an action arises from relationships in which one party can greatly influence
another party and overcome that party’s free will?
83. What is the statute called that requires certain types of contracts be evidenced by a signed writing in
order to be enforceable?
84. To be enforceable, some types of contracts must be in writing and signed. Name three types.
85. Contracts for the sale of goods must be in writing if it is a contract for the sale of goods priced at
what?
86. What is parole evidence?
87. Name two exceptions to the parole evidence rule.
88. What are the two basic types of performance?
89. What is frustration of purpose?
90. What is the relief called that provides for an innocent party when the other party has breached the
contract?
91. What type of damages punished and deters wrongdoing?
92. The duty of innocent injured party to reduce the damages that he or she suffered is called what?
93. To be eligible for unemployment compensation, a worker must be willing and able to what?
94. What is the process called by which labor and management negotiate the terms and conditions of
employment?
95. An employer and a union must make a reasonable effort to come to an agreement and must
negotiate in what?
96. The right to strike is guaranteed by who? The NLRA
97. Name three categories of a protected class?
98. Disparate-impact discrimination occurs when a protected group of people is adversely affected by
what?
99. What is reverse discrimination?
100. What does Quid Pro Quo mean?
LAW 201.001: BUSINESS, LAW AND SOCIETY
FALL 2022 FINAL
Professor DiSanto
Answer Sheet
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Question #
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100
BUSINESS LAW
TEXT AND CASES
Fourteenth Edition
CLARKSON MILLER CROSS
◆
© 2018 Cengage. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
◆
◆ Statute of Frauds: A statute requiring that
certain types of contracts be evidenced by
a signed writing (or its electronic
equivalent) in order to be enforceable.
The statute denies enforceability to
certain contracts that do not comply
with its writing requirements. →
© 2018 Cengage. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
2
◆ Statute of Frauds: The primary
purpose of the statute is to prevent
harm to innocent parties by
requiring written evidence of
agreements concerning important
transactions.
© 2018 Cengage. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
3
◆ To be enforceable, the following types of
contracts must be in writing and signed:
Contracts involving interests in land.
Contracts that cannot (by their terms)
be performed within one year from the
day after the date of formation.
Collateral, or secondary, contracts.→
© 2018 Cengage. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
4
◆ To be enforceable, the following types of
contracts must be in writing and signed:
Promises made in consideration of
marriage.
Under the Uniform Commercial Code
(UCC), contracts for the sale of goods
priced at $500 or more.
© 2018 Cengage. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
5
◆ Contracts Involving Interests in Land:
A contract for the sale of land is not
enforceable unless it is in writing.
Land is real property and includes all
physical objects that are permanently
attached to the soil.
• SEE SALIM V. SOLAIMAN (2010).
© 2018 Cengage. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
6
◆ The One-Year Rule: A contract that
cannot, by its own terms, be performed
within one year from the date it was
formed must be in writing.
When performance of a contract is
objectively impossible during the oneyear period, the contract must be in
writing to be enforceable.
© 2018 Cengage. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
7
© 2018 Cengage. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
8
◆ Collateral Promises: A collateral promise
(or secondary promise) is one that is
ancillary (subsidiary) to a principal
transaction or primary contractual
relationship.
Collateral promises of this nature fall
under the Statute of Frauds and must
be in writing to be enforceable. →
© 2018 Cengage. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
9
◆ Collateral Promises:
A promise to pay another person’s debt
that is not conditioned on the person’s
failure to pay (or perform) is a primary
obligation.
A promise to pay another’s debt only if
that party fails to pay is a secondary
obligation.
© 2018 Cengage. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
10
◆ The “Main Purpose” Rule:
An oral promise to answer for the debt
of another is covered by the Statute of
Frauds unless the guarantor’s main
purpose is to secure a personal benefit.
This type of contract does not need to
be in writing.
© 2018 Cengage. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
11
© 2018 Cengage. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
12
◆ Promises Made in Consideration of
Marriage:
A unilateral promise to make a monetary
payment or give property in
consideration of a promise to marry must
be in writing.
Prenuptial agreements must be in writing
to be enforceable.
© 2018 Cengage. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
13
◆ Contracts for the Sale of Goods: The
Uniform Commercial Code (UCC) requires
written evidence or an electronic record
of a contract for the sale of goods priced
at $500 or more. →
© 2018 Cengage. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
14
◆ Contracts for the Sale of Goods:
A writing that satisfies the UCC
requirement only needs to state the
quantity term.
Other agreed-on terms can be omitted
or stated imprecisely in the writing—
as long as both parties’ intentions
adequately are reflected.
© 2018 Cengage. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
15
◆ Partial Performance: When the
contract has been partially performed,
a court may grant specific performance,
an equitable remedy that requires
performance of the contract according
to its precise terms.
CASE 16.2
NYKCOOL A.B. V. PACIFIC FRUIT, INC.
(2013).
© 2018 Cengage. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
16
◆ Admissions: If a party against whom
enforcement of an oral contract is
sought “admits” under oath that a
contract for sale was made, the contract
will be enforceable. →
© 2018 Cengage. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
17
◆ Promissory Estoppel: If a person
justifiably relies on another’s promise to
his or her detriment, a court may estop
(prevent) the promisor from denying
that a contract exists.
◆ Special Exceptions under the UCC: Oral
contracts for customized goods may be
enforced in certain circumstances.
© 2018 Cengage. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
18
© 2018 Cengage. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
19
◆ The writing requirement can be satisfied
by a written contract, a written
memorandum, or an electronic record
that evidences the agreement and is
signed by the party against whom
enforcement is sought.
◆ Signatures can be anywhere in the writing
and can consist of a typed name or even
just initials.
© 2018 Cengage. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
20
◆ What Constitutes a Writing?
A writing can consist of any order
confirmation, invoice, sales slip, check, fax,
or e-mail—or a combination of these items.
The written contract can consist of multiple
documents that are physically attached or
placed in the same envelope. →
© 2018 Cengage. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
21
◆ What Must Be Contained in the Writing?
A memorandum or note evidencing an
oral contract only needs the essential
terms of the contract, not every term.
There must also be some indication that
the parties voluntarily agreed to the
terms. →
© 2018 Cengage. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
22
◆ What Must Be Contained in the
Writing?
The essential terms: quantity, signed
by party to be charged, names of
parties, subject matter, consideration.
Sales of land must state the price and
description with sufficient clarity.
• SEE BENEFICIAL HOMEOWNER SERVICE CORP. V. STEELE
(2011).
© 2018 Cengage. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
23
◆ If a court finds that a written contract
represents the complete and final
statement of the parties’ agreement,
neither party is allowed to present parol
evidence (testimony or other evidence
of communications between the parties
that is not contained in the contract
itself). →
© 2018 Cengage. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
24
◆ A party normally cannot present any
evidence of the following if it contradicts
or varies the terms of the written contract:
Negotiations prior to contract formation.
Agreements prior to contract formation.
Oral agreements contemporaneous with
(at the same time as) contract
formation. →
© 2018 Cengage. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
25
◆ Exceptions to the Parol Evidence Rule:
Contracts subsequently modified.
Voidable or void contracts.
Contracts containing ambiguous terms.
Incomplete contracts.→
© 2018 Cengage. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
26
◆ Exceptions to the Parol Evidence Rule:
Prior dealing, course of performance,
usage of trade.
Contracts subject to orally agreed-on
conditions precedent.
Contracts with an obvious or gross
clerical error.
© 2018 Cengage. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
27
◆ Integrated Contracts: A contract that is
intended to be the complete and final
statement of the terms of the agreement.
Completely integrated: Contains all of
the terms of the parties’ agreement.
Partially integrated: Contains some of
the terms that the parties agreed on
but not others.
© 2018 Cengage. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
28
© 2018 Cengage. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
29
◆ The Convention on Contracts for the
International Sale of Goods (CISG) governs
international sales contracts between
citizens of countries that have ratified the
convention (agreement).
◆ Article 11 of the CISG does not incorporate
any Statute of Frauds provisions. This is in
accordance with the legal customs of most
nations.
© 2018 Cengage. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
30
BUSINESS LAW
TEXT AND CASES
Fourteenth Edition
CLARKSON MILLER CROSS
◆
© 2018 Cengage. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
◆
◆ Remedy is the relief provided for an
innocent party when the other party has
breached the contract.
◆ Most Common Remedies:
Damages.
Rescission and Restitution.
Specific Performance.
Reformation.
2
© 2018 Cengage. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
2
◆ Types of Damages: Four broad categories of
damages:
Compensatory (covers direct losses/costs).
Consequential (covers indirect and
foreseeable losses).
Punitive (punishes and deters wrongdoing).
Nominal (recognizes wrongdoing when no
monetary loss is shown).
© 2018 Cengage. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
33
◆ Compensatory Damages: Compensate
the nonbreaching party for the loss of the
bargain and replace what was lost
because of the wrong or damage.
SEE CASE IN POINT 19.1 HALLMARK CARDS, INC. V.
MURLEY (2013).
Standard Measure: Difference between
value of promised performance and
value of actual performance. →
© 2018 Cengage. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
44
◆ Compensatory Damages:
Standard Measure:
• Incidental Damages: Expenses cause
directly by breach of contract.
Sale of Goods: Difference between
contract and market price.
Sale of Land: Specific performance. →
© 2018 Cengage. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
55
◆ Compensatory Damages:
Construction Contracts:
• Breach by owner: Damages depend on
whether breach was before, during, or after
construction was completed.
• Breach by contractor: The measure of
damages is the cost of completion.
• Breach by both owner and contractor: the
courts attempt to strike a fair balance in
awarding damages. →
6
© 2018 Cengage. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
6
© 2018 Cengage. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
77
◆ Consequential (Special) Damages:
Foreseeable damages that result from a
party’s breach of contract.
Breaching party knew (or had reason to
know) that special circumstances would
cause the nonbreaching party to suffer
additional loss.
• SEE HADLEY V. BAXENDALE (1854).
© 2018 Cengage. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
88
◆ Punitive Damages: Punish or deter
future conduct.
Generally not available for mere
breach of contract.
Punitive damages may be available
when an action causes both a breach
of contract and a tort.
◆ Nominal Damages: No financial loss.
© 2018 Cengage. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
99
◆ Mitigation of Damages: Duty of innocent
injured party to reduce the damages that
he or she suffered.
Duty owed depends on the nature of
the contract. →
© 2018 Cengage. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
1010
◆ Mitigation of Damages:
Rental Agreements: Landlord must use
reasonable means to find a new tenant
if previous tenant defaults on rent and
abandons the premises.
Employment Contracts: A person who
was wrongfully terminated owes a duty
to take a similar job if one is available.
© 2018 Cengage. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
1111
◆ Liquidated Damages vs. Penalties:
Liquidated Damages: Specific amount
agreed to be paid as damages in the
event of future breach.
Penalties: Designed to penalize,
generally unenforceable.→
© 2018 Cengage. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
1212
◆ Liquidated Damages vs. Penalties:
Liquidated damages provisions usually are
enforceable. Courts asks two questions:
When the contract was formed, was it
apparent that damages would be difficult
to estimate in the event of a breach?
Was the amount set as liquidated damages
a reasonable estimate and not excessive?
© 2018 Cengage. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
1313
◆ Sometimes damages are an inadequate
remedy and the nonbreaching party
may ask for an equitable remedy.
◆ Equitable remedies include rescission
and restitution, specific performance,
and reformation.→
© 2018 Cengage. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
1414
◆ Rescission and Restitution:
Rescission is the cancellation of a
contract in order to return the parties
to their pre-contract position.
The failure of one party to perform
entitles the other party to rescind the
contract. →
© 2018 Cengage. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
1515
◆ Restitution: Generally, to rescind a
contract, both parties must make
restitution to each other by returning
goods, property, or funds previously
conveyed.
◆ Restitution is also used in some cases
not involving rescission.
© 2018 Cengage. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
1616
◆ Specific Performance: Equitable remedy
that calls for the performance of the act
promised in the contract.
Specific performance avoids some of the
problems inherent in a suit for damages.
Provides remedy in cases involving:
• Sale of land.
• Contracts for personal services.
© 2018 Cengage. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
1717
◆ Reformation: Equitable remedy allowing a
contract to be reformed (or rewritten) to
reflect the parties’ true intentions.
Fraud or Mutual Mistake Is Present:
Courts order reformation most often
when fraud or mutual mistake is
present. →
© 2018 Cengage. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
1818
◆ Reformation:
Written Contract Incorrectly States the
Parties’ Oral Agreement: A court will
reform a contract when two parties enter
into a binding oral contract but make an
error when attempting to put the terms
into writing. →
© 2018 Cengage. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
1919
◆ Reformation:
Covenants Not to Compete: Some courts
reform the terms by making them
reasonable and then enforcing the entire
contract as reformed. Other courts throw
out the entire restrictive covenant as
illegal.
• SEE CASE IN POINT 19.12 EMERICK V. CARDIAC STUDY
CENTER, INC. (2012).
© 2018 Cengage. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
2020
◆ Quasi contract is a legal theory under which
an obligation is imposed in the absence of
an agreement.
It is a remedy created by courts to obtain
justice and prevent unjust enrichment.
Party conferring benefit can recover in
quantum meruit (“as much as she
deserves”).→
© 2018 Cengage. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
2121
◆ When Quasi Contract Is Used:
When one party has partially performed
under a contract that is unenforceable.
As an alternative to suing for damages
and allows the party to recover the
reasonable value of the partial
performance.
© 2018 Cengage. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
2222
◆ Requirements of Quasi Contract:
Benefit was conferred to the other party.
Party conferring benefit reasonably
expected to be paid.
The benefit was not volunteered.
Receiving benefit without paying for it
would result in unjust enrichment.
© 2018 Cengage. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
2323
◆ Waiver: Knowing relinquishment of a legal
right to require satisfactory and full
performance.
◆ Consequences of a Waiver of Breach: When
a waiver occurs, the party waiving the
breach cannot take any later action on it.
The waiver extends only to the matter
waived and not to the whole contract. →
© 2018 Cengage. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
2424
◆ Reasons for Waiving a Breach: Breaches of
contract are often waived to obtain
whatever benefit is still possible out of the
contract.
◆ Waiver of Breach and Subsequent
Breaches: Generally, a single waiver will not
waive subsequent, additional, or future
breaches, especially if unrelated to initial
breach. →
25
© 2018 Cengage. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
25
◆ Waiver of Breach and Subsequent Breaches:
Pattern-of-Conduct Exception:
• Reasonable person standard.
• A pattern of conduct that waives successive
breaches can operate as a continued
waiver.
Effect on the Contract: Non-waiving party
remains liable for damages, but contract
continues.
26
© 2018 Cengage. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
26
◆ Exculpatory Clauses: Provisions stating that
no damages can be recovered.
◆ Limitation-of-Liability Clauses: Provisions
that affect the availability of certain
remedies.
◆ The UCC provides that remedies can be
limited in a contract for the sale of goods.→
© 2018 Cengage. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
2727
◆ Enforceability of Limitation-of-Liability
Clauses: Exclusion of liability for fraudulent
or intentional injury, illegal acts, acts that
are contrary to public policy, or violations of
law will not usually be enforced.
Exclusion of liability for negligence may be
enforced when the parties have roughly
equal bargaining positions.
© 2018 Cengage. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
2828
BUSINESS LAW
TEXT AND CASES
Fourteenth Edition
CLARKSON MILLER CROSS
◆
© 2018 Cengage. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
◆
◆ A lack of voluntary consent (assent) can
be used as a defense to the contract’s
enforceability. Consent may be lacking
due to:
Mistake.
Fraudulent Misrepresentation.
Undue Influence.
Duress.
© 2018 Cengage. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
22
◆ A mistake of fact occurs when the
parties entered into a contract with
different understandings of one or more
material facts relating to the contract’s
performance.
◆ Only a mistake of fact makes a contract
voidable.
© 2018 Cengage. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
33
◆ Unilateral Mistakes of Fact: A mistake
made by only one of the parties that
does not generally give the mistaken
party any right to relief from the
contract.
◆ The contract is usually enforceable with
two exceptions. (These still must involve
a mistake of some material fact.) →
© 2018 Cengage. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
44
◆ Unilateral Mistakes of Fact:
The other party to the contract knows
or should have known that a mistake
of fact was made.
The error was due to an inadvertent,
substantial mathematical mistake and
not gross (extreme) negligence.
© 2018 Cengage. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
5
◆ Bilateral (Mutual) Mistakes of Fact: A
mistake by both contracting parties
about one or more material facts
generally entitles (but does not compel)
either party to rescind. →
© 2018 Cengage. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
6
◆ Bilateral (Mutual) Mistakes of Fact:
Either party can rescind the contract
when both parties are mistaken about the
same material fact.
When the parties reasonably interpret a
term differently, a court may allow the
contract to be rescinded.
• SEE CASE IN POINT 15.3 L & H CONSTRUCTION CO. V. CIRCLE
REDMONT, INC. (2011).
© 2018 Cengage. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
7
© 2018 Cengage. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
8
◆ A mistake of value (or quality) is a mistake
about the future market value or quality of
the object of the contract.
◆ Contracts cannot be rescinded due to
mistakes of value. Each party is considered
to have assumed the risk that the value
will change in the future or prove to be
different from what she/he thought.
© 2018 Cengage. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
9
◆ Fraudulent Misrepresentation: When an
innocent party is induced to enter into a
contract by a misrepresentation of
material fact. The party may avoid the
contract because she/he did not genuinely
consent to its terms. →
© 2018 Cengage. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
1010
◆ Fraudulent Misrepresentation: Consists
of the following elements:
A misrepresentation of a material fact
must occur.
There must be an intent to deceive.→
© 2018 Cengage. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
1111
◆ Fraudulent Misrepresentation:
The innocent party must justifiably
rely on the misrepresentation.
To collect damages, a party must have
been harmed as a result of the
misrepresentation. →
© 2018 Cengage. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
1212
◆ Fraudulent Misrepresentation: To prove
fraud, the innocent party must show that
misrepresentation of a material fact has
occurred by words or actions.
Misrepresentation by Conduct: occurs
when a party takes specific action to
conceal a fact that is material to the
contract.→
© 2018 Cengage. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
13
Statements of opinion and predictions
(representations of future facts) generally
are not subject to claims of fraud.
• Exception: If a naïve purchaser relies on
an opinion from an expert, the innocent
party may be entitled to a rescission or
reformation.→
© 2018 Cengage. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
1414
Misrepresentation of Law: This will
usually not excuse the innocent party,
unless the speaker is a member of a
profession that requires greater
knowledge of the law than possessed by
the average citizen.
Misrepresentation by Silence: Ordinarily
neither party has duty to disclose facts. →
© 2018 Cengage. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
15
Misrepresentation by Silence: Common
and statutory law create a duty to speak
in certain situations (e.g., where one is
aware of a serious defect or serious risk
of injury). →
• SEE CASE 15.3 FAZIO V. CYPRESS/GR HOUSTON I, LP
(2012).
© 2018 Cengage. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
16
◆ Misrepresentation by Silence:
When parties are in a fiduciary
relationship, failure to disclose material
facts may be fraud.
© 2018 Cengage. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
17
◆ Intent to Deceive: Knowledge on the part
of the misrepresenting party that facts
have been falsely represented.
Scienter (“guilty knowledge”) is an intent
to deceive. →
© 2018 Cengage. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
18
◆ Intent to Deceive: Scienter exists if a party
knows that a fact is not as stated;
makes a statement that she/he believes
is not true;
makes a statement recklessly, without
regard to whether it is true or false; or
says (or implies) that a statement is
made on some basis when it is not.
19
© 2018 Cengage. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
◆ Innocent Misrepresentation: A person
makes statement she/he believes to be
true but actually misrepresents facts.
Innocent party can rescind contract,
but usually cannot seek damages.→
© 2018 Cengage. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
2020
◆ Negligent Misrepresentation: When a party
does not exercise reasonable care in
uncovering or disclosing facts—or use the
skill and competence required by his or her
business or profession.
◆ Negligent misrepresentation is equal to
scienter in nearly all states. Culpable
ignorance of the truth supplies the
intention to mislead.→
21
© 2018 Cengage. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
21
◆ Justifiable Reliance on Misrepresentation.
Deceived party must have justifiably
relied on representation.
Reliance is not justified if the innocent
party knows the true facts or relies on
extravagant statements.
• SEE CASE 15.2 CRONKELTON V. GUARANTEED
CONSTRUCTION SERVICES, LLC (2013).
© 2018 Cengage. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
22
◆ Injury to the Innocent Party:
No proof of injury is required when
the action is to rescind contract.
Proof of injury is universally required
to recover damages.
© 2018 Cengage. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
23
◆ Undue influence arises from
relationships in which one party can
greatly influence another party and
overcome that party’s free will.
◆ Contract lacks voluntary consent and is
voidable. →
© 2018 Cengage. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
2424
◆ One Party Dominates the Other: In
various types of relationships, one party
may have the opportunity to dominate
and unfairly influence another party.
◆ Undue influence can arise from a
number of fiduciary relationships such
as physician-patient or husband-wife. →
© 2018 Cengage. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
25
◆ Presumption of Undue Influence in
Certain Situations: When a contract
enriches the dominant party in a
fiduciary relationship, the court will
often presume that the contract was
made under undue influence.
© 2018 Cengage. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
26
◆ A party who enters into a contract under
fear or threat makes the contract
voidable.
◆ Threatened act must be wrongful or illegal
and render person incapable of exercising
free will.
◆ The threat of civil suit is not unlawful. →
© 2018 Cengage. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
2727
◆ Economic Duress: Economic need on its
own is usually not sufficient enough to
constitute duress.
But if a party creates a need for an
item and then exacts a very high price
for the item from another party,
economic duress may be found.
© 2018 Cengage. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
2828
◆ Adhesion contracts are written
exclusively by one party and presented
to the other party on a take-it-or-leaveit basis.
These are often standard form
contracts that are preprinted and give
the adhering party no opportunity to
negotiate the terms of the contract.→
© 2018 Cengage. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
2929
◆ Adhesion Contracts:
To avoid enforcement of the contract,
the plaintiff normally must show that
the contract or particular clause is
unconscionable (contains terms that
are unfairly burdensome and that
unfairly benefit the dominating party).
© 2018 Cengage. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
30
◆ Unconscionability and the Courts:
Under UCC, unconscionability
technically only applies to the sale of
goods.
However, its application has been
broadened and courts can invalidate a
contract (or clause) as being
unconscionable at their discretion.
© 2018 Cengage. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
3131
© 2018 Cengage. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
32