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Quiz 13 :

Consideration

Quiz 13 :

Consideration

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Renee Beaver started racing go-karts competitively in 2007, when she was fourteen. Many of the races required her to sign an exculpatory clause to participate, which she or her parents regularly signed. In 2010, she participated in the annual Elkhart Grand Prix, a series of races in Elkhart, Indiana. During the event in which she drove, a piece of foam padding used as a course barrier was torn from its base and ended up on the track. A portion of the padding struck Beaver in the head, and another portion was thrown into oncoming traffic, causing a multikart collision during which she sustained severe injuries. Beaver fi led an action against the race organizers for negligence. The organizers could not locate the exculpatory clause that Beaver had supposedly signed. Race organizers argued that she must have signed one to enter the race, but even if she had not signed one, her actions showed her intent to be bound by its terms. Using the information presented in the chapter, answer the following questions. Assuming that Beaver did, in fact, sign the exculpatory clause, did she later disaffirm or ratify the contract? Explain. DEBATE THIS : After agreeing to an exculpatory clause or purchasing some item, such as a computer, minors often seek to avoid the contracts. Today's minors are far from naïve and should not be allowed to avoid their contractual obligations.
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Had Ms. B entered into the contract with an exculpatory clause, she would have disaffirm the contract later as she is a minor.
The primary requirement for contract to be enforceable is the capacity to enter into a contract. This means a contract can be questionable when dealing with minor because a minor has less capacity to understand or question about the contractual rights.
Ms. B can disaffirm a contract anytime by showing her intention not to be bound. She can file a suit against the race organizers which can indicate her intention not to be bound by the contract.

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Capacity Joanne is a seventy-five-year-old widow who survives on her husband's small pension. Joanne has become increasingly forgetful, and her family worries that she may have Alzheimer's disease (a brain disorder that seriously affects a person's ability to carry out daily activities). No physician has diagnosed her, however, and no court has ruled on Joanne's legal competence. One day while she is out shopping, Joanne stops by a store that is having a sale on pianos and enters into a fifteen-year installment contract to buy a grand piano. When the piano arrives the next day, Joanne seems confused and repeatedly asks the deliveryperson why a piano is being delivered. Joanne claims that she does not recall buying a piano. Explain whether this contract is void, voidable, or valid. Can Joanne avoid her contractual obligation to buy the piano? If so, how?
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Alzheimer's is a progressive illness that has the capacity to affect parts of brain where memories, thoughts etc., are stored. The dementia which results from this illness can make the person feel lost, unable to follow directions, neglect personal safety and hygiene, ask questions repeatedly etc. It is difficult for a person having Alzheimer's to keep a track of bills that are due or any payments and difficulty in knowing whom to trust.
Capacity to contract means the legal competency that a person should possess in order to enter a valid contract and to perform some act in furtherance of the contract. The basic element being that the person be of sound mind at the time of entering into contract.
Certain class of people shall be exempted from entering into any contract, they are:
• Minors
• Insane/ lunatics
• People under the influence of drugs
• People who are bankrupt, and
• Enemy aliens.
Although in present case, Mrs. J was suffering from a mental disease it could be difficult to show that she was suffering from its while entering into the contract. Patients
Capacity:
The contract to purchase a piano is voidable because Mrs. J was not previously judged by a court or diagnosed by a doctor to be incompetent. She can, however, show that she was incompetent at the time of the purchase because she was not aware of the nature, purpose and consequences. Alternately, she can return the piano within the grace period.
Hence the enforceability of the contract to purchase the piano can be voided by a claim on incompetence or lack of capacity. This can be proven in court by either having a doctor state his opinion to the court or simply by the Judge's own discretion.

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A QUESTION OF ETHICS: Covenants Not to Compete. Retina Consultants, P.C., is a medical practice that specializes in retina eye surgery. This company hired Brendan Coleman as a software engineer in 2000. Prior to his hiring at Retina Consultants, Coleman had created and marketed a software billing program called Clinex. During his stay with Retina Consultants, physicians worked with Coleman to modify his Clinex program to better suit the company's needs. The new program was called Clinex-RE. While employed, Coleman signed an agreement which stated ownership of Clinex remained with Coleman while that of Clinex-RE remained with Retina Consultants. Within the document was the following sentence: "Coleman will not distribute, vend or license to any ophthalmologist or optometrist the Clinex software or any computer application competitive with the Clinex-RE software without the written consent of Retina Consultants." In essence, Coleman agreed to a covenant not to compete (noncompete clause). After quitting his job with Retina Consultants, Coleman attempted to license Clinex and Clinex-RE to other ophthalmologists. He also refused to provide the necessary passwords for Retina Consultants to use Clinex and Clinex-RE. Furthermore, he used the company's trade secrets and withdrew funds from a company banking account, among other actions. At trial, the court entered a judgment enjoining Coleman from marketing the software that was in competition with the software he had developed for Retina Consultants. The court also obligated Coleman to return the funds taken from the company's bank account. Coleman appealed. [ Coleman v. Retina Consultants, P.C., 286 Ga. 317, 687 S.E.2d 457 (2009)] (a) Should the court uphold the noncompete clause? If so, why? If not, why not? (b) Should the court require Coleman to return the funds he withdrew from the company's accounts? Discuss fully. (c) Did Coleman's behavior after he left the company influence the court's decision? Explain your answer.
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a) The court should no uphold the non-compete clause because it is not reasonable. The clause here offers no geographic or time limits. Because it is so overly broad, it is contrary to public policy and the court will not uphold it.
b) The company is entitled to the amount the defendant withdrew from their accounts, but they should not receive a windfall - that is more money than they lost in this particular instance. Because the defendant presumably took the money without permission for reasons not related to furthering the interests of the company, he should pay it back.
c) Most likely, the defendant's actions after leaving the company would have some effect on the court's decision. Although the court could be more lenient on the actions related to the non-compete clause, i.e. attempts to license the software, the court will take the defendants' actions of exposing trade secrets and withdrawing company funds as separate, morally questionable actions. These latter actions indicate that the defendant was attempting to injure his former employer rather than just protect his own interests regarding the non-compete clause.

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Licensing Statutes PEMS Co. International, Inc., agreed to find a buyer for Rupp Industries, Inc. A commission of 2 percent of the purchase price was to be paid by the buyer. PEMS analyzed Rupp's operational and financial conditions, paid legal fees, carefully managed Rupp's confidential data, and screened more than a dozen potential buyers. Using PEMS's services, an investment group that became Rupp Industries Acquisition, Inc. (RIA), acquired key information about Rupp and bought the company for $20 million. RIA changed Rupp's name to Temp-Air, Inc. No one paid PEMS's commission. PEMS fi led a suit in a Minnesota state court against Temp-Air, alleging breach of contract. Temp- Air responded that PEMS had been acting as a broker in the transaction without having obtained a broker's license. Thus, because state law required a broker to have a license, PEMS was barred from maintaining this suit. PEMS argued that it had acted not as a broker but as a "finder." The applicable statute defines a broker as any person who deals with the sale of a business. What determines whether a contract with an unlicensed person is enforceable? Assuming that the statute in this case was intended to protect the public, can PEMS collect its commission? Explain. [PEMS Co. International, Inc. v. Temp- Air, Inc., __ N.W.2d __ (Minn.App. 2011)]
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Unconscionability Frank Rodziewicz was driving a Volvo tractor-trailer on Interstate 90 in Lake County, Indiana, when he struck a concrete barrier. His tractor-trailer became stuck on the barrier, and the Indiana State Police contacted Waffco Heavy Duty Towing, Inc., to assist in the recovery of the truck. Before beginning work, Waffco told Rodziewicz that it would cost $275 to tow the truck. There was no discussion of labor or any other costs. Rodziewicz told Waffco to take the truck to a local Volvo dealership. Within a few minutes, Waffco pulled the truck off the barrier and towed it to Waffco's nearby towing yard. Rodziewicz was soon notified that, in addition to the $275 towing fee, he would have to pay $4,070 in labor costs and that Waffco would not release the truck until payment was made. Rodziewicz paid the total amount. Disputing the labor charge, however, he filed a suit in an Indiana state court against Waffco, alleging, in part, breach of contract. Was the towing contract unconscionable? Would it make a difference if the parties had discussed the labor charge before the tow? Explain. [ Rodziewicz v. Waffco Heavy Duty Towing , Inc., 763 N.E.2d 491 (Ind.App. 2002)]
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Renee Beaver started racing go-karts competitively in 2007, when she was fourteen. Many of the races required her to sign an exculpatory clause to participate, which she or her parents regularly signed. In 2010, she participated in the annual Elkhart Grand Prix, a series of races in Elkhart, Indiana. During the event in which she drove, a piece of foam padding used as a course barrier was torn from its base and ended up on the track. A portion of the padding struck Beaver in the head, and another portion was thrown into oncoming traffic, causing a multikart collision during which she sustained severe injuries. Beaver fi led an action against the race organizers for negligence. The organizers could not locate the exculpatory clause that Beaver had supposedly signed. Race organizers argued that she must have signed one to enter the race, but even if she had not signed one, her actions showed her intent to be bound by its terms. Using the information presented in the chapter, answer the following questions. Now assume that Beaver stated that she was eighteen years old at the time that she signed the exculpatory clause. How might this affect Beaver's ability to disaffirm or ratify the contract? DEBATE THIS : After agreeing to an exculpatory clause or purchasing some item, such as a computer, minors often seek to avoid the contracts. Today's minors are far from naïve and should not be allowed to avoid their contractual obligations.
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Renee Beaver started racing go-karts competitively in 2007, when she was fourteen. Many of the races required her to sign an exculpatory clause to participate, which she or her parents regularly signed. In 2010, she participated in the annual Elkhart Grand Prix, a series of races in Elkhart, Indiana. During the event in which she drove, a piece of foam padding used as a course barrier was torn from its base and ended up on the track. A portion of the padding struck Beaver in the head, and another portion was thrown into oncoming traffic, causing a multikart collision during which she sustained severe injuries. Beaver fi led an action against the race organizers for negligence. The organizers could not locate the exculpatory clause that Beaver had supposedly signed. Race organizers argued that she must have signed one to enter the race, but even if she had not signed one, her actions showed her intent to be bound by its terms. Using the information presented in the chapter, answer the following questions. Did Beaver have the contractual capacity to enter a contract with an exculpatory clause? Why or why not? DEBATE THIS : After agreeing to an exculpatory clause or purchasing some item, such as a computer, minors often seek to avoid the contracts. Today's minors are far from naïve and should not be allowed to avoid their contractual obligations.
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Unconscionable Contracts or Clauses Roberto Basultoand Raquel Gonzalez, who did not speak English, responded to an ad on Spanish-language television sponsored by Hialeah Automotive, LLC, which does business as Potamkin Dodge. Potamkin's staff understood that Basulto and Gonzalez did not speak or read English and conducted the entire transaction in Spanish. They explained the English-language contract, but did not explain an accompanying arbitration agreement. This agreement limited the amount of damages that the buyers could seek in court to less than $5,000, but did not limit Potamkin's right to pursue greater damages. Basulto and Gonzalez bought a Dodge Caravan and signed the contract in blank (meaning that some parts were left blank). Potamkin later filled in a lower trade-in allowance than agreed and refused to change it. The buyers returned the van-having driven it a total of seven miles-and asked for a return of their trade-in vehicle, but it had been sold. The buyers filed a suit in a Florida state court against Potamkin. The dealer sought arbitration. Was the arbitration agreement unconscionable? Why or why not? [ Hialeah Automotive, LLC v. Basulto, 156 Fla. 92, 22 So.3d 586 (3 Dist. 2009)]
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Renee Beaver started racing go-karts competitively in 2007, when she was fourteen. Many of the races required her to sign an exculpatory clause to participate, which she or her parents regularly signed. In 2010, she participated in the annual Elkhart Grand Prix, a series of races in Elkhart, Indiana. During the event in which she drove, a piece of foam padding used as a course barrier was torn from its base and ended up on the track. A portion of the padding struck Beaver in the head, and another portion was thrown into oncoming traffic, causing a multikart collision during which she sustained severe injuries. Beaver fi led an action against the race organizers for negligence. The organizers could not locate the exculpatory clause that Beaver had supposedly signed. Race organizers argued that she must have signed one to enter the race, but even if she had not signed one, her actions showed her intent to be bound by its terms. Using the information presented in the chapter, answer the following questions. If Beaver did not actually sign the exculpatory clause, could a court conclude that she impliedly accepted its terms by participating in the race? Why or why not? DEBATE THIS : After agreeing to an exculpatory clause or purchasing some item, such as a computer, minors often seek to avoid the contracts. Today's minors are far from naïve and should not be allowed to avoid their contractual obligations.
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Substantive Unconscionability Erica Bishop lived in public housing with her children. Her lease stated that only she and her children, who were listed on the lease, could live in the apartment, and that she was responsible for the actions of all household members. Any violations of the lease by any household member, including criminal activity, would be grounds for eviction. Bishop's son Derek committed an armed robbery at a store next to the apartment building. Bishop was given thirty days to vacate the apartment due to breach of the lease. She sued, arguing that Derek had moved out of the apartment months before the robbery, but she admitted he had been in the apartment right before the robbery. The trial court held that since Derek had visited the apartment right before the robbery, he was a household member and Bishop had to vacate. She appealed, contending that the lease was invalid because it was substantively unconscionable. Does Erica have grounds for a reversal in her favor? Discuss. [ Bishop v. Housing Authority of South Bend, 920 N.E.2d 772 (Ind.App. 2010)]
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Licensing Statutes Under California law, a contract to manage a professional boxer must be in writing, and the manager must be licensed by the State Athletic Commission. Marco Antonio Barrera is a professional boxer and two-time world champion. In May 2003, José Castillo, who was not licensed by the state, orally agreed to assume Barrera's management. He "understood" that he would be paid in accord with the "practice in the professional boxing industry, but in no case less than ten percent (10%) of the gross revenue" that Barrera generated as a boxer and through endorsements. Among other accomplishments, Castillo negotiated an exclusive promotion contract for Barrera with Golden Boy Promotions, Inc., which is owned and operated by Oscar De La Hoya. Castillo also helped Barrera settle three lawsuits and resolve unrelated tax problems so that Barrera could continue boxing. Castillo did not train Barrera, pick his opponents, or arrange his fights, however. When Barrera abruptly stopped communicating with Castillo, Castillo filed a suit in a California state court against Barrera and others, alleging breach of contract. Under what circumstances is a contract with an unlicensed practitioner enforceable? Is the alleged contract in this case enforceable? Why or why not? [ Castillo v. Barrera, 146 Cal.App.4th 1317, 53 Cal.Rptr.3d 494 (2 Dist. 2007)]
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QUESTION WITH SAMPLE ANSWER: Covenants Not to Compete. A famous New York City hotel, Hotel Lux, is noted for its food as well as its luxury accommodations. Hotel Lux contracts with a famous chef, Chef Perlee, to become its head chef at 10,000 per month. The contract states that should Perlee leave the employment of Hotel Lux for any reason, he will not work as a chef for any hotel or restaurant in New York, New Jersey, or Pennsylvania for a period of one year. During the first six months of the contract, Hotel Lux heavily advertises Perlee as its head chef, and business at the hotel is excellent. Then a dispute arises between the hotel management and Perlee, and Perlee terminates his employment. One month later, he is hired by a famous New jersey restaurant just across the New York state line. Hotel Lux learns of Perlee's employment through a large advertisement in a New York City newspaper. It seeks to enjoin (prevent) Perlee from working in that restaurant as a chef for one year. Discuss how successful Hotel Lux will be in its action.
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Covenant Not to Compete Gary Forsee was an executive officer with responsibility for the U.S. operations of BellSouth Corp., a company providing global telecommunications services. Under a covenant not to compete, Forsee agreed that for a period of eighteen months after termination from employment, he would not "provide services … in competition with [BellSouth] … to any person or entity which provides products or services identical or similar to products and services provided by [BellSouth] … within the territory." Territory was defined to include the geographic area in which Forsee provided services to BellSouth. The services included "management, strategic planning, business planning, administration, or other participation in or providing advice with respect to the communications services business." Forsee announced his intent to resign and accept a position as chief executive officer of Sprint Corp., a competitor of BellSouth. BellSouth filed a suit in a Georgia state court against Forsee, claiming, in part, that his acceptance of employment with Sprint would violate the covenant not to compete. Is the covenant legal? Should it be enforced? Why or why not? [ BellSouth Corp. v. Forsee, 265 Ga.App. 589, 595 S.E.2d 99 (2004)]
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Intoxication After Kira had had several drinks one night, she sold Charlotte a diamond necklace worth thousands of dollars for just 5100. The next day, Kira offered the $100 to Charlotte and requested the return of her necklace. Charlotte refused to accept the $100 or return the necklace, claiming that there was a valid contract of sale. Kira explained that she had been intoxicated at the time the bargain was made and thus the contract was voidable at her option. Was Kira correct? Explain.
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