LSB 3213 1st Edition Lecture 16 Schedule for Today:- Finish Chapter 15- Discuss Chapters 16 and 17- Discuss schedule for after Spring BreakMisrepresentation- Four elements to analyzeo Material facto Intent to deceiveo Justifiable reliance on misrepresentationo 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 houseo 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 situationsThese 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 wasnot unconscionable Math error or typo?- Definitely a typo, not an erroro 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 priceAdhesion Contracts- Take-it-or-leave-it contracts- No negotiation- Can be challenged for unconscionability- Example: Bank v. Elderly Widowo 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 moreo 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 endso Context- unconscionability thrives when one side is disadvantaged (the widow)- Usury: the maximum rate of interest that can be chargedChapter 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 areaso Real estateo Cannot possibly be performed in one yearo Collateral (secondary, guarantor) contractso 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 wasmade verbally instead and the other party already began performance on the contracto 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 technicalityNo 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 shopowner 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 writingCommon Law: - Form over substance?- Flexibility to do justice?- More litigation? Culture of lawsuits?Chapter 17: 3 Concepts- Assignment- Delegation- Third PartiesAssignment:- Assignor: assigning rights, assignee: receivingof rights- Business transactions, M&A exampleo 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 companywill