LSB 3213 1st Edition Lecture 13 Schedule Today- Finish chapter 12- Apply chapter 13Changes 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 317Recap 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 partyTermination by Operation of Law- Offers can terminate automatically, before acceptanceo Lapse of timeo Destruction of propertyo Death/incompetence of either partyo IllegalityFamily Video CaseFamily 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 downThese 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 RuleA 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 validInternet 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 provisionsE-Signatures- Valid in most business situationso Some exceptions (e.g., UCC, banking, wills)- This class: common law contracts, not UCCPreliminary Negotiations- Letter of Intent (LOI) or Term Sheeto It is often hard to prove that they are valid contracts- Framework for future deal?- Or enforceable contract?House Flipping CaseMr. 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 saysthat they never agreed to that- Is there a binding contract?o In isolation- “ok, ok I got it” is vague, not bindingo In the context of the situation, “ok, ok I got it” sounds like an agreement, and theproducers 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 SilenceGeorge 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 silenceCONSIDERATION- 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 businesso Apple gives you an iPhone. You pay money.- “Even a peppercorn will suffice”o As long as it has value in the transactiono Except for fraud, undue influence, duressHamer v. Sidway- Famous case from 1891. Why relevant?o Established the doctrine of considerationo 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 nephewturns 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 contracto Example of a unilateral contractConsideration in Practice- Pre-existing duty exampleo 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 costanother $50,000. So you pay the extra $50,000 and they complete the house andthen you sue to get the $50,000 back.o Can you get the money back?o Court: