Chapter 1: Legal Ethics

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Learning Objectives 1.In what types of situations might voluntary consent to a contract’s terms be lacking? 2.What is the difference between a mistake of value or quality and a mistake of fact? 3.What are the elements of fraudulent misrepresentation?

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Learning Objectives 4.What contracts must be in writing to be enforceable? 5.What is parole evidence? When is it admissible to clarify the terms of a written contract?

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Voluntary Consent  A contract may be unenforceable if the parties have not genuinely assented to its terms by: – Mistake.  – Misrepresentation.  – Undue Influence.  – Duress. 

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  Mistakes. – Mistakes of Fact vs. Mistakes of Value (or Quality). Only a mistake of fact allows a contract to be voided.  Voluntary Consent

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  Mistakes. – Unilateral Mistakes of fact cannot be canceled unless: Other party to the contract knows or should have known, OR Mistake was due to an inadvertent mathematical mistake and was not gross negligence. Voluntary Consent

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  Mistakes. – Bilateral (Mutual) Mistakes: concerns the same material fact, and can be rescinded by either party. CASE 10.1 L&H C ONSTRUCTION C O. V. C IRCLE R EDMONT, I NC. (2011). CASE 10.1 L&H C ONSTRUCTION C O. V. C IRCLE R EDMONT, I NC. (2011). Do you agree the parties made a mutual mistake? Voluntary Consent

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Ex Mistake of Fact

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Voluntary Consent  Fraudulent Misrepresentation. – Contract is Voidable by Innocent Party. – Consists of the following Elements: Misrepresentation of Material Fact. Intent to Deceive. Reliance on Misrepresentation. Injury to the Innocent Party.

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Voluntary Consent  Undue Influence. – Contract lacks voluntary consent and is voidable. Confidentiality, Fiduciary, or Relationship of Dependence. Undue Influence or Persuasion is presumed if a weaker party talked into doing something not beneficial to him or herself.

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Voluntary Consent  Duress. – Forcing a party to enter 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. – Threat of civil suit is not duress.

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Statute of Frauds— Writing Requirement  Statute of Frauds requires certain contracts to be in writing and signed to be enforceable.  Contracts involving Interests in Land.  The One-Year Rule. – A contract that by its terms cannot be performed within 1 year of execution. 

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Ex One Year Rule

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Statute of Frauds— Writing Requirement  Collateral Promises. – Contracts to answer for the debt of another. – Primary vs. Secondary Obligations. – Exception: The “Main Purpose” Rule: Oral promise is covered by Statute of Frauds unless guarantor is seeking a personal benefit.

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Statute of Frauds— Writing Requirement  Promises Made in Consideration of Marriage. – Prenuptial agreements are “more” enforceable if consideration is involved.  Contracts for Sale of Goods over $500. – See Chapter 13, UCC Article 2.

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Contracts Subject to the Statute of Frauds

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Statute of Frauds— Writing Requirement  Exceptions to the Statute of Frauds. – Partial performance. Purchaser has paid part of purchase price, taken possession and made valuable improvements to property. – Admissions. Party admits in court records contract exists. – Promissory Estoppel/Detrimental Reliance. Promisee justifiably relies.

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Sufficiency of the Writing  What Must Be Contained. – “Writing” includes memorandum, invoice, fax, check, . – Essential terms sufficient. – Signed by party against whom enforcement is sought. CASE 10.2 B ENEFICIAL H OMEOWNER S ERVICE C ORP. V. S TEELE (2011). CASE 10.2 B ENEFICIAL H OMEOWNER S ERVICE C ORP. V. S TEELE (2011).

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Parol Evidence Rule

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Parol Evidence Rule  Prohibits the introduction at trial of evidence of the parties prior communications that contradicts the written contract.

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Parol Evidence  Exceptions (allow parol evidence): – Evidence of subsequent contract modifications – Oral evidence to show contract was void or voidable. – Show meaning of ambiguous Terms. – To “fill in the gaps.”

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Parol Evidence  Exceptions (allow parol evidence): – Prior Dealings, course of performance, usage in trade. – Obvious Clerical Error. CASE 10.3 W ATKINS V. S CHEXNIDER (2010). CASE 10.3 W ATKINS V. S CHEXNIDER (2010). What exception to the parol evidence rule applied in this case?

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Parol Evidence  Integrated Contracts. – Is the written contract intended to be a complete and final statement of the terms of the agreement? – If “yes”, then the contract is “integrated.” – Can be fully or partially integrated. – Courts exclude any parol evidence that contradicts the writing.