Business Law Study Set 13

Business

Quiz 14 :

Capacity and Genuine Assent

Quiz 14 :

Capacity and Genuine Assent

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Office Supply Outlet, Inc., a single-store office equipment and supply retailer, ordered 100 model RVX-414 computers from Compuserve, Inc. A new staff member made a clerical error on the order form and ordered a quantity that was far in excess of what Office Supply could sell in a year. Office Supply realized the mistake when the delivery trucks arrived at its warehouse. Its manager called Compuserve and explained that it had intended to order just 10 computers. Compuserve declined to accept the return of the extra machines. Is the contract enforceable? What additional facts would allow the store to avoid the contract for the additional machines?
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Store OSO has ordered 100 units of R-414 model computers from Company C. However, there was a mistake in the order made by a new staff member at Store OSO. The store intended to order 100 units of the computer and the ordered quantity is far in excess of the annual sales of the company. The store realized its mistake when the delivery trucks were arrived at its warehouse. Store OSO tried to cancel the order, however it Company C declined to accept the return of extra machines.
A contract can be avoided on the basis of following possible grounds:
• Lack of contractual capacity
• Mistake
• Deception
• Pressure
In this case, there was a clerical mistake made in the order form by a new staff member. It constitutes a unilateral mistake from the perspective of Store OSO. Furthermore, there is high chance that Company C knows the mistake in the order given by Store OSO, because Store OSO is a small store having annual sales of computers far less than 100 units. Even though, Company C has not cross checked the actual quantity and delivered the order. Therefore, this would be considered as a unilateral mistake and hence the contract becomes void. Thus, the contract would not be enforceable.
Additional facts that Store OSO can present to avoid the contract for the additional machine is that it is a single-store office equipment and supply retailer. Thus, it won't be possible for them to store 100 computers at their warehouse.

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Blubaugh was a district manager of Schlumberger Well Services. Turner was an executive employee of Schlumberger. Blubaugh was told that he would be fired unless he chose to resign. He was also told that if he would resign and release the company and its employees from all claims for wrongful discharge, he would receive about $5,000 in addition to his regular severance pay of approximately $25,000 and would be given jobrelocation counseling. He resigned, signed the release, and received about $40,000 and job counseling. Some time thereafter, he brought an action claiming that he had been wrongfully discharged. He claimed that the release did not protect the defendants because the release had been obtained by economic duress. Were the defendants protected by the release? [Blubaugh v Turner, 842 P2d 1072 (Wyo)]
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Refer to the case Blubaugh v Turner (842 P2d 1072).
Facts:
1) Blubaugh (plaintiff) was an employee of company Schlumberger where Turner was an executive (defendants)
2) Blubaugh was given a contract to resign and release company and employees from wrongful discharge in return for a bonus upon his severance pay and job-relocation counseling. Blubaugh signed the contract and resigned and was given the stated items in contract.
3) Later on, Blubaugh sued for wrongful discharge and unenforceability of the contract due to signing under economic duress.
4) Trial court granted summary judgment in favor of Turner. Blubaugh appealed
The Wyoming Supreme court affirmed the decision.
Blubaugh claimed duress for lack of negotiating power, lost of bonus pay and counseling, being fired if he didn't sign, and his emotional state at the time. The court applied the test for economic duress "1) a party involuntarily accepts the terms of another, (2) circumstances permit no other alternative, and (3) such circumstances are the result of coercive acts of the other party." The court assumed for the sake of argument points 1 and 2 and looked at whether Turner's acts were coercive. It found no evidence of such, Blubaugh's claim of shock and not being informed to a right of attorney is not enough to satisfy the coercive act requirement. Hence, there is no claim for economic duress.

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Helen, age 17, wanted to buy a Harley-Davidson "Sportster" motorcycle. She did not have the funds to pay cash but persuaded the dealer to sell the cycle to her on credit. The dealer did so partly because Helen said that she was 22 and showed the dealer an identification card that falsely stated her age as 22. Helen drove the motorcycle away. A few days later, she damaged it and then returned it to the dealer and stated that she disaffirmed the contract because she was a minor. The dealer said that she could not because (1) she had misrepresented her age and (2) the motorcycle was damaged. Can she avoid the contract?
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Person H a minor can disaffirm the purchase of a non-necessity good, a motorcycle, regardless of whether she lied about her age. The fact that she was 17 (under age of majority) holds. However, most states have statutes that protect sellers from having to refund the whole amount. For example, if a minor return damaged goods the seller may only have to refund the amount it is worth. In fact, lying about her age may make H liable for fraud. Depending on the state law, H may be better off just keeping the damaged bike.

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Willingham proposed to obtain an investment property for the Tschiras at a "fair market price," lease it back from them, and pay the Tschiras a guaranteed return through a management contract. Using a shell corporation, The Wellingham Group bought a commercial property in Nashville for $774,000 on December 14, and the very same day sold the building to the Tschiras for $1,985,000. The title insurance policy purchased for the Tschiras property by Willingham was for just $774,000. Willingham believes that the deal was legitimate in that they "guaranteed" a return on the investment. The Tschiras disagree. In a lawsuit against Willingham, what theory will the Tschiras rely on? Decide. [ Tschiras v. Willingham , 133 F.3d 1077 (6th Cir.)]
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Westby inherited a "ticket" from Anna Sjoblom, a survivor of the sinking of the Titanic, which had been pinned to the inside of her coat. He also inherited an album of postcards, some of which related to the Titanic. The ticket was a one-of-a-kind item in good condition. Westby needed cash and went to the biggest antique dealer in Tacoma, operated by Alan Gorsuch and his family, doing business as Sanford and Sons, and asked about the value of these items. Westby testified that after Alan Gorsuch examined the ticket, he said, "It's not worth nothing." Westby then inquired about the value of the postcard album, and Gorsuch advised him to come back later. On Westby's return, Gorsuch told Westby, "It ain't worth nothing." Gorsuch added that he "couldn't fetch $500 for the ticket." Since he needed money, Westby asked if Gorsuch would give him $1,000 for both the ticket and the album, and Gorsuch did so. Six months later, Gorsuch sold the ticket at a nationally advertised auction for $110,000 and sold most of the postcards for $1,200. Westby sued Gorsuch for fraud. Testimony showed that Gorsuch was a major buyer in antiques and collectibles in the Puget Sound area and that he would have had an understanding of the value of the ticket. Gorsuch contends that all elements of fraud are not present since there was no evidence that Gorsuch intended that Westby rely on the alleged representations, nor did Westby rely on such. Rather, Gorsuch asserts, it was an arm'slength transaction and Westby had access to the same information as Gorsuch. Decide. [Westby v Gorsuch, 112 Wash App 558 (2002)]
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Pileggi owed Young money. Young threatened to bring suit against Pileggi for the amount due. Pileggi feared the embarrassment of being sued and the possibility that he might be thrown into bankruptcy. To avoid being sued, Pileggi executed a promissory note to pay Young the amount due. He later asserted that the note was not binding because he had executed it under duress. Is this defense valid? [Young v Pileggi, 455 A2d 1228 (Pa Super)]
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Printers International Union reached agreement for a new three-year contract with a large regional printing company. As was their practice, the union negotiators then met with Sullivan Brothers Printers, Inc., a small specialty shop employing 10 union printers, and Sullivan Brothers and the union agreed to follow the contractual pattern set by the union and the large printing company. That is, Sullivan Brothers agreed to give its workers all of the benefits negotiated for the employees of the large printing company. When the contract was typed, a new benefit of 75 percent employerpaid coverage for a dental plan was inadvertently omitted from the final contract the parties signed. The mistake was not discovered until six months after the contract took effect. Sullivan Brothers Printers, Inc. is reluctant to assume the additional expense. It contends that the printed copy, which does not cover dental benefits, must control. The union believes that clear and convincing evidence shows an inadvertent typing error. Decide.
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Sippy was thinking of buying Christich's house. He noticed watermarks on the ceiling, but the agent showing the house stated that the roof had been repaired and was in good condition. Sippy was not told that the roof still leaked and that the repairs had not been able to stop the leaking. Sippy bought the house. Some time later, heavy rains caused water to leak into the house, and Sippy claimed that Christich was liable for damages. What theory would he rely on? Decide. [Sippy v Christich, 609 P2d 204 (Kan App)]
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city of Salinas entered into a contract with Souza McCue Construction Co. to construct a sewer. City officials knew unusual subsoil conditions (including extensive quicksand) existed that would make performance of the contract unusually difficult. This information was not disclosed when city officials advertised for bids. The advertisement for bids directed bidders to examine carefully the site of the work and declared that the submission of a bid would constitute evidence that the bidder had made an examination. Souza McCue was awarded the contract, but because of the subsoil conditions, it could not complete on time and was sued by Salinas for breach of contract. Souza McCue counterclaimed on the basis that the city had not revealed its information on the subsoil conditions and was thus liable for the loss. Was the city liable? [City of Salinas v Souza McCue Construction Co., 424 P2d 921 (Cal App 3d)]
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Thomas Bell, a minor, went to work in the Pittsburgh beauty parlor of Sam Pankas and agreed that when he left the employment, he would not work in or run a beauty parlor business within a 10-mile radius of downtown Pittsburgh for a period of two years. Contrary to this provision, Bell and another employee of Pankas's opened a beauty shop three blocks from Pankas's shop and advertised themselves as Pankas's former employees. Pankas sued Bell to stop the breach of the noncompetition, or restrictive, covenant. Bell claimed that he was not bound because he was a minor when he had agreed to the covenant. Was he bound by the covenant? [Pankas v Bell, 198 A2d 312 (Pa)]
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Lester purchased a used automobile from MacKintosh Motors. He asked the seller if the car had ever been in a wreck. The MacKintosh salesperson had never seen the car before that morning and knew nothing of its history but quickly answered Lester's question by stating: "No. It has never been in a wreck." In fact, the auto had been seriously damaged in a wreck and, although repaired, was worth much less than the value it would have had if there had been no wreck. When Lester learned the truth, he sued MacKintosh Motors and the salesperson for damages for fraud. They raised the defense that the salesperson did not know the statement was false and had not intended to deceive Lester. Did the conduct of the salesperson constitute fraud?
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Paden signed an agreement dated May 28 to purchase the Murrays' home. The Murrays accepted Paden's offer the following day, and the sale closed on June 27. Paden and his family moved into the home on July 14, 1997. Paden had the home inspected prior to closing. The report listed four minor repairs needed by the home, the cost of which was less than $500. Although these repairs had not been completed at the time of closing, Paden decided to go through with the purchase. After moving into the home, Paden discovered a number of allegedly new defects, including a wooden foundation, electrical problems, and bat infestation. The sales agreement allowed extensive rights to inspect the property. The agreement provided: Buyer... shall have the right to enter the property at Buyer's expense and at reasonable times... to thoroughly inspect, examine, test, and survey the Property.... Buyer shall have the right to request that Seller repair defects in the Property by providing Seller within 12 days from Binding Agreement Date with a copy of inspection report(s) and a written amendment to this agreement setting forth the defects in the report which Buyer requests to be repaired and/or replaced.... If Buyer does not timely present the written amendment and inspection report, Buyer shall be deemed to have accepted the Property "as is." Paden sued the Murrays for fraudulent concealment and breach of the sales agreement. If Mr. Murray told Paden on May 26 that the house had a concrete foundation, would this be fraud? Decide. [Paden v Murray, 523 SE2d 75 (Ga App)]
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High-Tech Collieries borrowed money from Holland. High-Tech later refused to be bound by the loan contract, claiming the contract was not binding because it had been obtained by duress. The evidence showed that the offer to make the loan was made on a take-it-or-leave-it basis. Was the defense of duress valid? [Holland v High-Tech Collieries, Inc., 911 F Supp 1021 (DC WA)]
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Aldrich and Co. sold goods to Donovan on credit. The amount owed grew steadily, and finally Aldrich refused to sell any more to Donovan unless Donovan signed a promissory note for the amount due. Donovan did not want to but signed the note because he had no money and needed more goods. When Aldrich brought an action to enforce the note, Donovan claimed that the note was not binding because it had been obtained by economic duress. Was he correct? [Aldrich Co. v Donovan, 778 P2d 397 (Mont)]
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James Fitl purchased a 1952 Mickey Mantle Topps baseball card from baseball card dealer Mark Strek for $17,750 and placed it in a safe deposit box. Two years later, he had the card appraised, and he was told that the card had been refinished and trimmed, which rendered it valueless. Fitl sued Strek and testified that he had relied on Strek's position as a sports card dealer and on his representations that the baseball card was authentic. Strek contends that Fitl waited too long to give him notice of the defects that would have enabled Strek to contact the person who sold him the card and obtain relief. Strek asserts that he therefore is not liable. Advise Fitl concerning possible legal theories that apply to his case. How would you decide the case? [See Fitl v Strek, 690 NW2d 605 (Neb)]
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