Business Law Study Set 14

Business

Quiz 12 :

Consideration

Quiz 12 :

Consideration

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Settlement of Claims Shoreline Towers Condominium Owners Association in Gulf Shores, Alabama, authorized Resort Development, Inc. (RDI), to manage Shoreline's property. On Shoreline's behalf, RDI obtained a property insurance policy from Zurich American Insurance Co. In October 1995, Hurricane Opal struck Gulf Shores. RDI filed claims with Zurich regarding damage to Shoreline's property. Zurich determined that the cost of the damage was $334,901. Zurich then subtracted an applicable $40,000 deductible and sent checks to RDI totaling $294,901. RDI disputed the amount. Zurich eventually agreed to issue a check for an additional $86,000 in return for RDI's signing a "Release of All Claims." Later, contending that the deductible had been incorrectly applied and that this was a breach of contract, among other things, Shoreline filed a suit against Zurich in a federal district court. How, if at all, should the agreement reached by RDI and Zurich affect Shoreline's claim Explain. [ Shoreline Towers Condominium Owners Association, Inc. v. Zurich American Insurance Co., 196 F.Supp.2d 1210 (S.D.Ala. 2002)]
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Settlement of Claims:
In the case of S horeline Towers Condominium Owners Assoc. v Zurich American Ins. Co. , 196 F.Supp.2d 1210 (S.D.Ala. 2002) the court determined that RDI was an agent acting on behalf of Shoraline and that Shoraline benefited from that authorized representation and that summary judgment was granted to Zurech.
Shoraline had a management agreement with RDI to act as agent on behalf of Shoraline with the authority to adjust all claims arising under any insurance policies, to deliver releases upon payment of claims, to receive on behalf of Shoraline any insurance proceeds and to exercise all rights of the insured. After receiving payments from Zurech, RDI executed a Release of All Claims on behalf of Shoraline.
1. RDI was an authorized agent acting on behalf of Shoraline.
2. Pursuant to the management agreement, RDI had actual authority to sign the Release on behalf of Shoraline.
3. The Release signed by RDI was binding on Shoraline.
4. The Release was clear and unambiguous.
5. The Release releases Zurech from all the claims and causes of actions asserted by Shoraline in this action.
6. An accord and satisfaction occurred between Zurech and Shoraline.
Therefore, the decision to support a summary judgment on behalf of Zurech should be upheld based on the aforementioned.

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Illusory Promises Costello hired Sagan to drive his racing car in a race. Sagan's friend Gideon promised to pay Sagan $3,000 if she won the race. Sagan won the race, but Gideon refused to pay the $3,000. Gideon contended that no legally binding contract had been formed because he had received no consideration from Sagan in exchange for his promise to pay. Sagan sued Gideon for breach of contract, arguing that winning the race was the consideration given in exchange for Gideon's promise to pay. What rule of law discussed in this chapter supports Gideon's claim
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Promissory Estoppel : A promise is said to legally binding if binding in cases where both the parties reasonably and substantially relied on the promise.
Promissory Estoppel theory says that a promise in binding only if it contains,
1. A clear and definite promise
2. A reliance on the promisor for consideration
Illusory Promises : A promise can't be hold legally binding if it is made without consideration and involves uncertainty of promise.
A contract is a legally enforceable document or promise. A legally enforceable contract holds seven key characteristics as mentioned below:
1. Offer
2. Acceptance
3. Consideration
4. Legality
5. Capacity
6. Consent
7. Writing or oral
The current case is a case of illusory promises as promise made by G is made without consideration and the promise fails to bind the person G.
The absence of consideration is due to the fact that person G is not getting anything in exchange of the promise.
Problems with consideration may arise due to uncertainty of performance. The characteristics of uncertain performance are requirements and output contracts.
Hence, the law involve in this case is of " illusory promises " and the " requirement of consideration " to make a contract valid.

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Suppose that the plaintiff's costs in accommodating the defendant's request had been $5,000 instead of $ 1,350,000. Would the outcome of this case have been any different Why or why not
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Promissory Estoppel Consideration:
• In the  1861 Group ,  LLC v.  Wild Oats Markets ,  Inc., 728 F.Supp.2d. 1052, 1059 (E.D.Mo. 2010), if the amount of damages claimed by the plaintiff had been reduced to $5,000 instead of the alleged $1,350,000 the outcome would have been the same because the elements for promissory estoppel are still present. The reduced damages amount only impacts the amount of the award that could be granted.
• The defendant made a clear and definite promise that the plaintiff justifiably relied to their detriment and justice could only be served by enforcing the promise to the extent of the damages incurred. If the defendant would incur costs in excess of the $5,000 in damages to keep the promise, then promissory estoppel would not apply.
• The plaintiff would still be entitled to an award of damages; however the promise would not be enforced to the detriment of the defendant if it gives the defendant an undue burden.
• The court would decide an amount that would constitute and undue burden. If it cost the defendant more than twice the damages alleged by the plaintiff, then it is likely that the court will not enforce the promise.

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The defendant argued that the promise to renew the lease was not sufficiently definite to support a claim for promissory estoppel. How did the court respond to this argument
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Preexisting Duty Tabor is a buyer of file cabinets manufactured by Martin. Martin's contract with Tabor calls for delivery of fifty file cabinets at $40 per cabinet in five equal installments. After delivery of two installments (twenty cabinets), Martin informs Tabor that because of inflation, Martin is losing money and will promise to deliver the remaining thirty cabinets only if Tabor will pay $50 per cabinet. Tabor agrees in writing to do so. Discuss whether Martin can legally collect the additional $100 on delivery to Tabor of the next installment of ten cabinets.
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A QUESTION OF ETHICS: Promissory Estoppel. John Sasson and Emily Springer met in January 2002. John worked for the U.S. Army as an engineer. Emily was an attorney with a law firm. Six months later, John bought a townhouse in Randolph, New Jersey, and asked Emily to live with him. She agreed but retained the ownership of her home in Monmouth Beach. John paid the mortgage and the other expenses on the townhouse. He urged Emily to quit her job and work from "our house." In May 2003, Emily took John's advice and started her own law practice. In December, John made her the beneficiary of his $150,000 individual retirement account (IRA) and said that he would give her his 2002 BMW M3 car before the end of the next year. He proposed to her in September 2004, giving her a diamond engagement ring and promising to "take care of her" for the rest of her life. Less than a month later, John was critically injured by an accidental blow to his head during a basketball game and died. On behalf of John's estate, which was valued at $1.1 million, his brother Steven filed a complaint in a New Jersey state court to have Emily evicted from the townhouse. Given these facts, consider the following questions. [In re Estate of Sasson, 387 N.J.Super. 459, 904 A.2d 769 (App.Div. 2006)] (a) Based on John's promise to "take care of her" for the rest of her life, Emily claimed that she was entitled to the townhouse, the BMW, and an additional portion of John's estate. Under what circumstances would such a promise constitute a valid, enforceable contract Does John's promise meet these requirements Why or why not (b) Whether or not John's promise is legally binding, is there an ethical basis on which it should be enforced Is there an ethical basis for not enforcing it Are there any circumstances under which a promise of support should be-or should not be- enforced Discuss.
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QUESTION WITH SAMPLE ANSWER: Preexisting Duty. Bernstein owns a lot and wants to build a house according to a particular set of plans and specifications. She solicits bids from building contractors and receives three bids: one from Carlton for $160,000, one from Friend for $158,000, and one from Shade for $153,000. She accepts Shade's bid. One month after beginning construction of the house, Shade contacts Bernstein and informs her that because of inflation and a recent price hike for materials, he will not finish the house unless Bernstein agrees to pay an extra $13,000. Bernstein reluctantly agrees to pay the additional sum. After the house is finished, however, Bernstein refuses to pay the extra $13,000. Discuss whether Bernstein is legally required to pay this additional amount.
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Rescission In 2002, Farrokh and Scheherezade Sharabianlou were looking for a location for a printing business. They signed a purchase agreement to buy a building owned by Berenstein Associates for $2 million and deposited $115,000 in escrow until the time of the final purchase. The agreement contained a clause requiring an environmental assessment of the property. This study indicated the presence of tricholoroethene and other chemicals used in dry cleaning, and it recommended further study of the contamination. Because of this issue, the bank would not provide financing for the purchase. When the deal fell apart, the Berensteins sued for breach of contract. The Sharabianlous sought the return of their $115,000 deposit and rescission of the contract. The trial court awarded the Berensteins $428,660 in damages due to the reduced value of their property when it was later sold to another party at a lower price. The Sharabianlous appealed. Do they have a good argument for rescission Explain your answer. [ Sharabianlou v. Karp, 181 Cal.App.4th 1133, 105 Cal. Rptr.3d 300 (1st Dist. 2010)]
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Accord and Satisfaction Merrick grows and sells blueberries. Maine Wild Blueberry Co. agreed to buy all of Merrick's crop under a contract that left the price unliquidated. Merrick delivered the berries, but a dispute arose over the price. Maine Wild sent Merrick a check with a letter stating that the check was the "final settlement." Merrick cashed the check but filed a suit for breach of contract, claiming that he was owed more. What will the court likely decide in this case Why
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CASE PROBLEM WITH SAMPLE ANSWER: Adequacy of Consideration. As a child, Martha Carr once-visited her mother's 108-acre tract of unimproved land in Richland County, South Carolina. In 1968, Betty and Raymond Campbell leased the land. Carr, a resident of New York, was diagnosed as having schizophrenia and depression in 1986, was hospitalized five or six times, and subsequently took prescription drugs for the illnesses. In 1996, Carr inherited the Richland property and, two years later, contacted the Campbells about selling the land. Carr asked Betty about the value of the land, and Betty said that the county tax assessor had determined that the land's agricultural value was $54,000. The Campbells knew at the time that the county had assessed the total property value at $103,700 for tax purposes. A real estate appraiser found that the real market value of the property was $162,000. On August 6, Carr signed a contract to sell the land to the Campbells for $54,000. Believing the price to be unfair, however, Carr did not deliver the deed. The Campbells filed a suit in a South Carolina state court against Carr, seeking specific performance of the contract. At trial , an expert real estate appraiser testified that the real market value of the property was $162,000 at the time of the contract. Under what circumstances will a court examine the adequacy of consideration Are those circumstances present in this case Should the court enforce the contract between Carr and the Campbells Explain. [ Campbell v. Carr, 361 S.C. 258, 603 S.E.2d 625 (S.C.App. 2004)]
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Consideration In 1995, Helikon Furniture Co. appointed Tom Gaede as an independent sales agent for the sale of its products in parts of Texas. The parties signed a one-year contract that specified, among other things, the commissions that Gaede would receive. More than a year later, although the parties had not signed a new contract, Gaede was still representing Helikon when it was acquired by a third party. Helikon's new management allowed Gaede to continue to perform for the same commissions and sent him a letter stating that it would make no changes in its sales representatives "for at least the next year." Three months later, in December 1997, the new managers sent Gaede a letter proposing new terms for a contract. Gaede continued to sell Helikon products until May 1997, when he received a letter effectively reducing the amount of his commissions. Gaede filed a suit in a Texas state court against Helikon, alleging breach of contract. Helikon argued, in part, that there was no contract because there was no consideration. In whose favor should the court rule, and why [ Gaede v. SK investments, Inc., 38 S.W.3d 753 (Tex.App.-Houston [14 Dist.] 2001)]
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Consideration Daniel, a recent college graduate, is on his way home for the Christmas holidays from his new job. He gets caught in a snowstorm and is taken in by an elderly couple, who provide him with food and shelter. After the snowplows have cleared the road, Daniel proceeds home. Daniel's father, Fred, is most appreciative of the elderly couple's action and in a letter promises to pay them $500. The elderly couple, in need of funds, accept Fred's offer. Then, because of a dispute between Daniel and Fred, Fred refuses to pay the elderly couple the $500. Discuss whether the couple can hold Fred liable in contract for the services rendered to Daniel.
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