LSB 3213 1st Edition Lecture 13 Schedule Today Finish chapter 12 Apply chapter 13 Changes to the Syllabus Revised syllabus posted on D2L No quizzes exam dates stay the same Two EC assignments before Exams 2 and 3 Thursday March 26 no class at 12 30 Scott Meacham CEO of i2E at 2 00 in Engineering South 317 Recap of Last Lecture Offer Acceptance Agreement Agreement definite not vague meeting of minds Unjust enrichment benefit received opportunity to reject expectation of payment Acceptance mirror image rule counteroffers Revocation of an offer is not in place until the revocation is received by the other party Termination by Operation of Law Offers can terminate automatically before acceptance o Lapse of time o Destruction of property o Death incompetence of either party o Illegality Family Video Case Family Video wanted to open a new store and want to buy a restaurant Home Folks to put the new store The Home Folks owner receives an offer and sits on it for awhile while Family Video located in another state waits The Home Folks restaurant burns down and then the owner sends an acceptance to Family Video s offer but doesn t tell them that the restaurant burned down Family Video then finds out that the restaurant burns down and refuses to pay so Home Folks sues Family Video for breach of contract Is there a contract Court no contract even if Family Video didn t know of the fire o The contract was automatically terminated when the restaurant burned down These notes represent a detailed interpretation of the professor s lecture GradeBuddy is best used as a supplement to your own notes not as a substitute Mailbox Rule A family s auto insurance policy is up for renewal on March 15th The family mails a check on March 14th the check is received by the insurance company on March 17th and cashes the check on March 22nd On March 16th the family gets into a car accident but the insurance company will not provide coverage because they didn t receive their payment when it was due so they didn t have a renewed insurance policy The family sues the insurance company Court valid renewal if sent before expiration date What if check were lost in the mail o The Mailbox rule states that a contract agreement acceptance is valid when it is mailed or sent o Even if the check was lost the contract would still be accepted and valid Internet Agreements Reasonable person not whether you actually read it o Considered valid when you say you agree to the terms and conditions This is an example of legal realism practical approach Forum selection choice of law provisions E Signatures Valid in most business situations o Some exceptions e g UCC banking wills This class common law contracts not UCC Preliminary Negotiations Letter of Intent LOI or Term Sheet o It is often hard to prove that they are valid contracts Framework for future deal Or enforceable contract House Flipping Case Mr Davis approaches A E about a television show about house flipping finding run down homes fixing them up and then selling them They make an agreement and work through the show s details Mr Davis wants 50 of the revenue from the show A E believes that they should get 70 of the revenue from the show Mr Davis and the producers go back and forth to negotiate payment finally A E producer says ok ok I get it gets the board s approval and starts filming the show 13 episodes making 8 million Mr Davis asks for his 50 and A E says that they never agreed to that Is there a binding contract o In isolation ok ok I got it is vague not binding o In the context of the situation ok ok I got it sounds like an agreement and the producers never contacted him saying that they hadn t agreed Court yes enough context to show oral contract existed Davis wins 4 million Counter offers and Silence George McGurn is the Vice President of Sales Bell Micro Products is trying to recruit him to work for them McGurn does not want to leave Bell Micro Products says if you work for us if you get fired or laid off within the first 12 months you will get a 6 months severance package McGurn counteroffers and says he wants that protection for 24 months not 12 months Bell sends him an acceptance form McGurn crosses out 12 months writes in 24 months signs it then scans it and sends it as an attachment in an email back to Bell The Human Resources Manager does not read it just prints it out for their files McGurn starts working at Bell gets fired 13 months after he starts working there and asks for his severance package McGurn sues for his severance package should he get it Court reasonable person would understand acceptance of counteroffer due to silence CONSIDERATION How is it relevant to modern business o Easy to establish in most transactions Definition o bargained for exchange where each party gives something of legal value not a gift 3 Forms of Consideration Promise with no prior duty Action with no prior duty Refrain from action with legal right to act forbearance Market Value and Consideration Consideration usually obvious in business o Apple gives you an iPhone You pay money Even a peppercorn will suffice o As long as it has value in the transaction o Except for fraud undue influence duress Hamer v Sidway Famous case from 1891 Why relevant o Established the doctrine of consideration o Set a precedent that can still be applied today Promise A wealthy uncle promised his nephew that if he didn t smoke drink or gamble until he turned 18 he would give him 5 000 The uncle passes away before the nephew turns 18 but he still follows through on the promise and doesn t smoke drink or gamble and wants paid what his uncle promised him The uncle s estate refuses to pay the nephew for a gift that he was promised and the nephew sues Enforceable contract o This was not a gift the nephew had to do not do something forbearance o Court forbearance equals consideration to form binding contract o Example of a unilateral contract Consideration in Practice Pre existing duty example o A construction company agrees makes a contract to build a house for you for 100 000 later the construction says that they under bid you and it will now cost another 50 000 So you pay the extra 50 000 and they complete the house and then you sue to get the 50 000 back o Can you get the money back o Court need bargained for exchange Only valid if you get something in return for price increase pre existing duty The construction company is already doing a duty building the house for 100 000 but they aren t promising to