LSB 3213 1st Edition Lecture 16 Schedule for Today Finish Chapter 15 Discuss Chapters 16 and 17 Discuss schedule for after Spring Break Misrepresentation Four elements to analyze o Material fact o Intent to deceive o Justifiable reliance on misrepresentation o Harm to collect damages but not for rescission Haunted House Example The Ackley family lives in a house for nine years and believe that they have seen ghosts in the house and so the house is included on a Victorian house river front tour and is advertised as a haunted house The Ackley family sells the house to the Stambovsky family that will be moving from out of state They go through the buying process but the seller does not tell the buyer about ghosts and the buyer didn t ask about ghosts in the house Later the Stambovksy family discovers that the house is haunted and want to get out of the contract claiming misrepresentation o Can they get out of the contract o Elements to analyze Material fact the family would want to know that there were ghosts in the house Intent yes the sellers did not tell the buyers Reliance the buyers relied on the assumption that they were buying a normal house o Court unreasonable for the buyer to discover on its own The seller told the public that the house was haunted so they must also tell the buyer Case of caveat emptor buyer beware principle vs obligation to disclose the seller has more information about what they are selling than the buyer does Review of Contract Mistakes Mutual mistake either party can rescind Unilateral mistake enforceable against the mistaken party except for three situations 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 o Not enforceable against mistaken party in three situations Knew or should have known Obvious Unconscionable Math calculation error or typo Unilateral Mistake Example A shoe store puts up a sale sign for shoes that says 9 but they meant to put 59 They sell a few pairs at the 9 price before they change the sign to say 59 Airline tickets mistake An airline posts a price of 24 98 instead of 1 500 online for a flight from San Francisco to Paris France 150 people bought the inexpensive tickets and the airline company lost 200 000 Can the airline get out of the contract for this price o Three elements of contract analysis Should have known Obvious If compared to other similar flights on other airlines maybe customers would have known that 24 98 couldn t be right but if the airline s website had advertised a sale on flights from San Francisco to Paris then customers wouldn t have known Unconscionable It was a 200 000 loss but for such a large airline this amount was not unconscionable Math error or typo Definitely a typo not an error o Also non legal factors It would be virtually impossible to try and sue every customer who bought the cheap tickets to make them pay the full price Adhesion Contracts Take it or leave it contracts No negotiation Can be challenged for unconscionability Example Bank v Elderly Widow o A widow takes out a 200 loan to buy a new microwave with a contract with the bank to pay back to the 200 over a year At the end of the year the widow only has to pay 20 more dollars on the loan she writes the check for the payment but forgets to send the check The contract with the bank states that if she doesn t pay by the deadline then collections agencies can call her which they do and interest on the 20 adds up to 100 Again the widow misses the deadline to pay the interest and another 50 in interest is added By the end the widow has paid back 500 and owes 2 000 more o The court says the bank did follow what the contract said but it is unconscionable to make her pay that much over a 200 loan so the contract ends o Context unconscionability thrives when one side is disadvantaged the widow Usury the maximum rate of interest that can be charged Chapter 16 Statute of Frauds Writing of contracts is interpreted broadly The state passes a statute saying that to prevent fraud contracts must be in writing not verbal in certain areas o Real estate o Cannot possibly be performed in one year o Collateral secondary guarantor contracts o Marriage as consideration prenups o UCC sale of goods over 500 banking Exceptions to the Statue of Frauds o Sometimes oral contracts are enforceable even though they are supposed to be in writing Partial Performance if the contract was supposed to be in writing but was made verbally instead and the other party already began performance on the contract o Promissory Estoppel promise to act or give someone something that should have been in writing but because it was promised such as parents giving land house etc to kids o Admission admit that there was a verbal contract but knew it should have been in writing can t get out of the contract on a technicality No Writing No Problem Oral contract partial performance can equal exception to writing requirement Example Stillwater Bicycle Store An old run down store front is purchased by someone who wants to put a nice bike shop in the space The property owner agrees and the shop owner agrees to pay the property owner 15 square foot in rent per month but have nothing in writing The shop starts to do very well and so the property owner says he is going to charge more for rent the shop owner doesn t agree but the property owner later evicts the shop owner o Usually a commercial lease agreement for property to be leased over one year should be in writing but in this case extenuating circumstances being a verbal contract and partial performance make it unjust for the property owner to get out of the original rent agreement of 15 per square foot just because it is verbal Also promissory estoppel and admission can also equal exceptions to writing Common Law Form over substance Flexibility to do justice More litigation Culture of lawsuits Chapter 17 3 Concepts Assignment Delegation Third Parties Assignment Assignor assigning rights assignee receivingof rights Business transactions M A example o A pipeline company has a contract with a pipeline service company which is being purchased by a larger company and after it is bought the original company will dissolve so what happens to the contract Lawyers will see if the contract can be assigned to the new company after buying the old company When the contract is assigned and forward the new company is responsible before the contract is