Business Law Study Set 14

Business

Quiz 15 :

The Statute of Fraudswriting Requirement and Electronic Records

Quiz 15 :

The Statute of Fraudswriting Requirement and Electronic Records

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The One-Year Rule On January 1, Damon, for consideration, orally promised to pay Gary $300 a month for as long as Gary lived, with the payments to be made on the first day of every month. Damon made the payments regularly for nine months and then made no further payments. Gary claimed that Damon had breached the oral contract and sued Damon for damages. Damon contended that the contract was unenforceable because, under the Statute of Frauds, contracts that cannot be performed within one year must be in writing. Discuss whether Damon will succeed in this defense.
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The One-Year Rule:
In the case of Gary v. Damon, a trial court would probably enforce the contract because although the Statute of Frauds requires contracts for longer than one year to be in writing to be enforceable, since it is possible that Gary may die within the year coupled with the showing by Damon of none months payments, the contract is enforceable.
Hence, the oral contract was possible to fulfill within the one-year rule and therefore enforceable under the Statute of Frauds.

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The Parol Evidence Rule When Hurricane Katrina hit the Gulf Coast in 2005, Evangel Temple Assembly of God in Wichita Falls, Texas, contacted Wood Care Centers, Inc., about leasing a facility it owned to house evacuees from the hurricane. Evangel and Wood Care reached an agreement and signed a twenty-year lease at $10,997 per month. One clause said that Evangel could terminate the lease at any time by giving Wood Care notice and paying 10 percent of the balance remaining on the lease. Another clause stated that if the facility was not given a property tax exemption, Evangel had the option to terminate the lease. Nine months later, the last of the evacuees left the facility, and Evangel notified Wood Care that it would end the lease. Wood Care demanded the 10 percent payment. Evangel claimed that it did not need to make the payment because if the facility converted back to a "non-church" use, it would lose its tax-exempt status and Evangel could simply terminate the lease. Evangel's pastor testified that the parties understood that this would be the scenario at the time the lease was signed. The trial court held that Evangel owed nothing. Wood Care appealed, contending that the trial court improperly allowed parol evidence to interpret the contract. Was the trial court's acceptance of parol evidence correct Why or why not [ Wood Care Centers, Inc. v. Evangel Temple Assembly of God of Wichita Falls, 307 S.W.3d 816303 (Tex.App.-Fort Worth 2010)]
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In the case of the Wood Care Centers, Inc. v. Evangel Temple Assembly of God of Wichita Falls, 307 S.W.3d 816303 (Tex. App. - Ft. Worth 2010) the trial court entered a take-nothing judgment against Wood Care when it applied the parol evidence in its interpretation of the Agreement between the parties. The Court of Appeals affirmed.
The Appellate court reviewed the contract from a utilitarian standpoint, stating that if a contract is ambiguous, it is a question of law that must be decided by examining the contract as a whole in light of the circumstances present when the contract was entered.
Wood Care contended that the trial court improperly considered parol evidence regarding a proposed conflict by Evangel that there was a conflict between specific clauses that created an ambiguity.
The Appellate Court determined that the conflict between the clauses did not create an ambiguity, and that the trial court erred by admitting parol evidence on this issue. They further stated that conclusions of law may not be challenged for factual sufficiency, but they may be reviewed to determine their correctness based upon the facts. Since the Court was making its determination based on a question of law, it upheld the decision of the lower court.
Here the Court stated that the parol evidence rule was not correctly applied, however the plaintiff did not establish a case to support a breach of contract against Evangel so their claim did not succeed.

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CASE PROBLEM WITH SAMPLE ANSWER: The Parol Evidence Rule. Novell, Inc., owned the source code for DR DOS, a computer operating system that Microsoft Corp. targeted with allegedly anticompetitive practices in the early 1990s. Novell worried that if it filed a suit, Microsoft would retaliate with further alleged unfair practices. Consequently, Novell sold DR DOS to Canopy Group, Inc., a Utah corporation. The purposes of the sale were to obligate Canopy to bring an action against Microsoft and to allow Novell to share in the recovery without revealing its role. Novell and Canopy signed two documents-a contract of sale, obligating Canopy to pay $400,000 for rights to the source code, and a temporary license, obligating Canopy to pay at least $600,000 in royalties, which included a percentage of any recovery from the suit. Canopy settled the dispute with Microsoft, deducted its expenses, and paid Novell the remainder of what was due. Novell filed a suit in a Utah state court against Canopy, alleging breach of contract for Canopy's deduction of expenses. Canopy responded that it could show that the parties had an oral agreement on this point. On what basis might the court refuse to consider this evidence Is that the appropriate course in this case Explain. [ Novell, Inc. v. Canopy Group, Inc., 2004 UT App. 162, 92 P.3d 768 (2004)]
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The Parol Evidence Rule:
In the case of the Novell, Inc. v. Canopy Group, Inc. , 2004 UT.App 162, 92 P.3d 768 (2004) the trial court granted a summary judgment to Novell. The State intermediate court affirmed the trial court's decision. The Appellate Court affirmed the determination by the trial court.
The Court of Appeals stated that the parol evidence rule operates in the absence of fraud to exclude prior and contemporaneous conversations, statements, or representations offered for the purpose of varying or adding to the terms of an integrated contract. An agreement is integrated where the parties adopt the agreement or meeting of minds in writing as the final and complete expression of the agreement.
Novell and Canopy's written agreement for a percentage of royalties is considered to be final agreement regarding the disbursement of monies to Novell. The written agreement quashes any verbal agreement made before the signing of the written agreement. To decide otherwise would invite all manner of oral addendums to written contracts.
Hence, the alleged oral contract was unenforceable.

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The One-Year Rule On May 1, by telephone, Yu offers to hire Benson to perform personal services. On May 5, Benson returns Yu's call and accepts the offer. Discuss fully whether this contract falls under the Statute of Frauds in the following circumstances: (a) The contract calls for Benson to be employed for one year, with the right to begin performance immediately. (b) The contract calls for Benson to be employed for nine months, with performance of services to begin on September 1. (c) The contract calls for Benson to submit a written research report, with a deadline of two years for submission.
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What might Salim have done to ensure that the sales contract would be enforceable
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Collateral Promises Jeremy took his mother on a special holiday to Mountain Air Resort. Jeremy was a frequent patron of the resort and was well known by its manager. The resort required each of its patrons to make a large deposit to ensure payment of the room rental. Jeremy asked the manager to waive the requirement for his mother and told the manager that if his mother for any reason failed to pay the resort for her stay there, he would cover the bill. Relying on Jeremy's promise, the manager waived the deposit requirement for Jeremy's mother. After she returned home from her holiday, Jeremy's mother refused to pay the resort bill. The resort manager tried to collect the sum from Jeremy, but Jeremy also refused to pay, stating that his promise was not enforceable under the Statute of Frauds. Is Jeremy correct Explain.
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Interests in Land Sierra Bravo, Inc., and Shelby's, Inc., entered into a written "Waste Disposal Agreement" under which Shelby's allowed Sierra to deposit on Shelby's land waste products, harmful materials, and debris removed by Sierra in the construction of a highway. Later, Shelby's asked Sierra why it had not constructed a waterway and a building pad suitable for a commercial building on the property, as they had orally agreed. Sierra denied any such agreement. Shelby's filed a suit in a Missouri state court against Sierra, alleging breach of contract. Sierra contended that any oral agreement was unenforceable under the Statute of Frauds. Sierra argued that because the right to remove minerals from land is considered a contract for the sale of an interest in land to which the Statute of Frauds applies, the Statute of Frauds should apply to the right to deposit soil on another person's property. How should the court rule, and why [ Shelby's, Inc. v. Sierra Bravo, Inc., 68 S.W.3d 604 (Mo.App.S.D. 2002)]
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Contract for a Sale of Goods Milton Blankenship agreed in writing to buy 15 acres of Ella Mae Henry's junkyard property for $15,000 per acre with a ten-year option to buy the remaining 28.32 acres. Blankenship orally agreed to (1) begin operating a car skeleton-processing plant within six to fifteen months; (2) buy as many car skeletons generated by the yard as Henry wanted to sell him, at a certain premium over the market price; and (3) allow all junk vehicles on the property to remain until they were processed at the new plant. Blankenship never operated such a plant, never bought any vehicles from the yard, and demanded that all vehicles be removed from the property. To obtain the remaining 28.32 acres, Blankenship filed a suit in a Georgia state court against Henry, who responded with a counterclaim for breach of contract. Under oath during discovery, Henry testified that their oral agreement allowed him to sell "as many of the car skeletons generated by the Henry junkyard" as he wished, and Blankenship testified that he had agreed to buy as many skeletons as Henry was willing to sell. Does the Statute of Frauds undercut or support Henry's counterclaim Explain. [ Henry v. Blankenship, 284 Ga.App. 578, 644 S.E.2d 419 (2007)]
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Oral Contracts Jason Knapp, doing business as Knapp Associates, hired Barbara Meade as an independent contractor in March 2009. The parties orally agreed on the terms of employment, including payment to Meade of a share of the company's income, but they did not put anything in writing. In March 2011, Meade quit. Knapp then told Meade that she was entitled to $9,602.17-25 percent of the difference between the accounts receivable and the accounts payable as of Meade's last day. Meade disagreed and demanded more than $63,500-25 percent of the revenue from all invoices, less the cost of materials and outside processing, for each of the years that she worked for Knapp. Knapp refused. Meade filed a lawsuit in a state court against Knapp, alleging breach of contract. In Knapp's response and at the trial, he testified that the parties had an oral contract under which Meade was entitled to 25 percent of the difference between accounts receivable and payable as of the date of Meade's termination. Did the parties have an enforceable contract How should the court rule, and why
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Why was Salim arguing that the contract should be deemed enforceable when he was being sued for breach of contract
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A QUESTION OF ETHICS: The Parol Evidence Rule. William Williams is an attorney in Birmingham, Alabama. In 1997, Robert Shelborne asked Williams to represent him in a deal in London, England, from which Shelborne expected to receive $31 million. Shelborne agreed to pay Williams a fee of $1 million. Their overseas contact was Robert Tundy, who said that he was with the "Presidency" in London. Tundy said that a tax of $100,010 would have to be paid for Shelborne to receive the $31 million. Shelborne asked James Parker, a former co-worker, to lend him $50,000. Shelborne signed a note agreeing to pay Parker $100,000 within seventy-two hours. Parker, Shelborne, and Williams wired the $50,000 to an account at Chase Manhattan Bank. They never heard from Tundy again. No $31 million was transferred to Shelborne, who soon disappeared. Williams then learned that io "Presidency" existed in London. Whenever Parker asked Williams about the note, Williams assured him that he would be paid. On Parker's behalf, Williams filed a suit in an Alabama state court against Shelborne, seeking the amount due on the note and damages. The court entered a judgment against the defendant for $200,000, but there were no assets from which to collect it. [ Parker v. Williams, 977 So.2d 476 (Ala. 2007)] (a) Parker filed a suit in an Alabama state court against Williams, alleging, among other things, breach of contract. Parker offered as evidence a tape recording of a phone conversation in which Williams guaranteed Shelborne's loan. Is the court likely to rule in Parker's favor on the contract claim Why or why not (b) In response to Parker's suit, Williams filed a counterclaim, seeking unpaid attorneys' fees relating to the suit that Williams filed against Shelborne on Parker's behalf. The court ruled against Williams on this claim. He appealed to the Alabama Supreme Court but failed to supply a transcript of the trial on his counterclaim, as it was his duty to do. Is the appellate court likely to rule in his favor Why or why not (c) The sham deal at the center of this case is known to law enforcement authorities as advance fee fraud, commonly referred to as a "419 scam." The victim is promised a transfer of funds from an overpaid contract, or some other suspect source, but is asked to pay a tax or other fee first. Among the parties attracted by the 419 scam in this case, who, if anyone, behaved ethically Discuss.
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QUESTION WITH SAMPLE ANSWER: Collateral Promises. Mallory promises a local hardware store that she will pay for a lawn mower that her brother is purchasing on credit if the brother fails to pay the debt. Must this promise be in writing to be enforceable Why or why not
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