Fundamentals of Business Law

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Quiz 7 :

Nature and Classification

Quiz 7 :

Nature and Classification

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The five Learning Objectives below are designed to help improve your understanding of the chapter. After reading this chapter, you should be able to answer the following questions: How does a void contract differ from a voidable contract? What is an unenforceable contract?
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Contract: It is an agreement that is entered into by two or more parties voluntarily that can be enforced in court. It is made to perform a promise in the future.
A contract include two parties, i.e. promisor, party which binds the other party to do or not to do certain acts and promise , who accepts the offer of the promisor and promises to do or not to do certain act in return of some consideration.
Unenforceable contract, Void contract and voidable contract are some kind of contracts.
A Void Contract is the one which is not a contract at all; both the words void and contract are contrary to each other. In this type of contract, none of the parties to contract is liable for performance of the contract and have no legal obligations.
Whereas, Voidable Contract is the one which is a valid contract but avoidable at the option of one party. In this, the party with an option can either ratify the contract or refuse to perform his obligation or part of the promise.
Unenforceable Contract:
It refers to those kinds of contracts which are not capable of being enforced by law. When a valid contract loses its legality it becomes unenforceable.

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Question with Sample Answer-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 with Daniel, 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. (See page 218.)
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Case facts:
Ms. J was hospitalized with severe abdominal pain and the doctor suggested her with a round the clock nursing care. At the hospitals request nursing firm provided two weeks of care in the hospital, even after J was sent home nursing services provided additional service of two weeks and J know about the services that she is receiving. But later, nursing services billed an amount of 4000 for the nursing care, but J refused to pay on the grounds that she never contracted orally or in written form, for the nursing services.
Implied contract A contract formed only through the actions of two or more parties is termed as an implied contract. It is not a written or spoken type of contract. This agreement is created through the nature of the conduct of the parties.
The legal theory under which Nursing services can recover $4000 from Ms. J is the implied contract. It is plausible to enter into contracts with parties where the contract is implied by the conduct of the parties. This form is referred to as the implied-in-form contract or simply an implied contract. This is diverse from an express form of contract due to the reason that it is the conduct of the parties that makes and identifies the terms of the agreement.
In the present case Ms. J had not entered in to an oral or written form of contract however she was completely conscious that she was receiving the treatment and did not stop the treatment. This behavior itself implied her agreement to the contract, based on this she is liable to pay for the services.

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Joli signs and returns a letter from Kerin, in which he said that he had a book at a certain price. When Kerin delivers the book, Joli sends it back, claiming that they do not have a contract. Kerin claims they do. What standard determines whether these parties have a contract? (See Elements of a Contract.)
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Standards of contract:
Yes they do have a contract this can be concluded because both the parties in this case Joli and Kerin had made an agreement to carry out a particular act in the future.
The aspect of intention plays an imperative role for the determination of whether a contract has been formed or not. The determination of the intention is done by objective theory of contracts.
The contract in this case was formed; it can be said as various elements were fulfilled such as for the formation of a contract an agreement has to be made that includes an offer and an acceptance. Where the offer is made by one party and the second party accepts to the offer made by the first party.
Accomplishment of some of the objectives should be legal as this is also an important aspect for the formation of a contract which was there in the above case.

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Contract Classification. Jay's Flying Advertising, LLC, contracted with Big Bob's Burger restaurant to fly an advertisement above the Connecticut beaches. The advertisement offered $5,000 to any person who could swim from the Connecticut beaches to Long Island across the Long Island Sound in less than a day. Frank Dimitri saw the streamer and accepted the challenge. He started his marathon swim that same day at 10 A.M. After he had been swimming for four hours and was about halfway across the sound, Dimitri saw another plane pulling a streamer that read, "Big Bob's Burger revokes." Is there a contract between Dimitri and Big Bob's? If there is a contract, what type (types) of contract is (are) formed?
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Answers to the even-numbered questions in this For Review section can be found in Appendix F at the end of this text. What is a contract? What is the objective theory of contracts?
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Answers to the even-numbered questions in this For Review section can be found in Appendix F at the end of this text. What are the four basic elements necessary to the formation of a valid contract?
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What is the difference between an implied contract and a quasi contract?
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Interpretation of Contracts Lisa and Darrell Miller married in 1983 and had two children, Landon and Spencer. The Millers divorced in 2003 and entered into a joint custody implementation plan (JCIP). Under the JCIP, Darrell agreed to "begin setting funds aside for the minor children to attend post-secondary education necessary to pay tuition, books, supplies, and room and board not to exceed four (4) years." After Landon's eighteenth birthday, Darrell filed a petition to reduce the amount of the child support that he was paying to Lisa. In response, she asked the court to order Darrell to pay the boys' college expenses but offered no evidence to support the request.Darrell contended that the JCIP was not clear on this point. Do the rules of contract interpretation, applied to the phrasing of the Millers' JCIP, support Lisa's request or Darrell's contention? Explain. [ Miller v. Miller, 1 So.3d 815 (La.App. 2009)]
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Case Problem with Sample Answer Robert Gutkowski, a sports marketing expert, met numerous times with George Steinbrenner, the owner of the New York Yankees, and other Yankees executives over a ten-year period to discuss and help launch the Yankees Entertainment and Sports Network (YES Network). He was paid as a consultant for several years during that time. When the parties quit working together, Gutkowski sued, contending that he had been made promises to be given an ownership share in YES as part of the compensation for his work. While he was paid as a consultant, he was not given a share of YES or hired as a regular executive for YES. He contended that, by industry standards, a reasonable value for his services would be a 2 to 3 percent ownership share of YES. There was no written contract for such a share, but Gutkowski claimed that he was due this compensation to prevent unjust enrichment of the Yankees for exploiting his expertise. Does Gutkowski have a good claim for payment based on quantum meruit? Explain your answer. [ Gutkowski v. Steinbrenner, 680 F.Supp.2d 602 (S.D.N.Y. 2010)]
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Mitsui Bank hired Ross Duncan as a branch manager in one of its Southern California locations. At that time, Duncan received an employee handbook informing him that Mitsui would review his performance and salary level annually. In 2008, Mitsui decided to create a new lending program to help financially troubled businesses stay afloat. It hired Duncan as the credit development officer (CDO) and gave him a written compensation plan. Duncan's compensation was to be based on the new program's success and involved a bonus and commissions based on new loans and sales volume. The written plan also stated, "This compensation plan will be reviewed and potentially amended after one year and will be subject to such review and amendment annually thereafter." Duncan's efforts as CDO were successful, and the business-lending program he developed grew to represent 25 percent of Mitsui's business in 2009 and 40 percent by 2010. Nevertheless, Mitsui not only refused to give Duncan a raise in 2009 but also amended his compensation plan to significantly reduce his compensation and to change his performance evaluation schedule to every six months. When he had still not received a raise by 2010, Duncan retired as CDO and filed a lawsuit claiming breach of contract. Using the information presented in the chapter, answer the following question. What are the four requirements of a valid contract?
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How does a void contract di ffer from a voidable contract? What is an unenforceable contract?
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Dyna tells Ed that she will pay him $1,000 to set fire to her store so that she can collect under a fire insurance policy. Ed sets fire to the store, but Dyna refuses to pay. Can Ed recover? Why or why not? (See Types of Contracts.)
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What is the difference between an implied contract and a quasi contract?
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A Question of Ethics International Business Machines Corp. (IBM) hired Niels Jensen in 2000 as a software sales representative. In 2001, IBM presented a new "SoftwareSales Incentive Plan" (SIP) at a conference for its sales employees. A brochure given to the attendees stated, "[T]here are no caps to your earnings; the more you sell, * * * the more earnings for you." The brochure outlined how the plan worked and referred the employees to the "Sales Incentives" section of IBM's corporate intranet for more details. Jensen was given a "quota letter" that said he would be paid $75,000 as a base salary and, if he attained his quota, an additional $75,000 as incentive pay. In September, Jensen closed a deal with the U.S. Department of the Treasury's Internal Revenue Service worth more than $24 million to IBM. Relying on the SIP brochure, Jensen estimated his commission to be $2.6 million. IBM paid him less than $500,000, however. Jensen filed a suit in a federal district court against IBM, contending that the SIP brochure and quota letter constituted a unilateral offer that became a binding contract when Jensen closed the sale. In view of these facts, consider the following questions. [ Jensen v. International Business Machines Corp., 454 F.3d 382 (4th Cir. 2006)] 1 Would it be fair to the employer in this case to hold that the SIP brochure and the quota letter created a unilateral contract if IBM did not intend to create such a contract? Would it be fair to the employee to hold that no contract was created? Explain. 2 The "Sales Incentives" section of IBM's intranet included a clause providing that "[m]anagement will decide if an adjustment to the payment is appropriate" when an employee closes a large transaction. Jensen's quota letter stated, "[The SIP] program does not constitute a promise by IBM to make any distributions under it. IBM reserves the right to adjust the program terms or to cancel or otherwise modify the program at any time." How do these statements affect your answers to the above questions? From an ethical perspective, would it be fair to hold that a contract exists despite these statements?
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The five Learning Objectives below are designed to help improve your understanding of the chapter. After reading this chapter, you should be able to answer the following questions: What is a contract? What is the objective theory of contracts?
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The five Learning Objectives below are designed to help improve your understanding of the chapter. After reading this chapter, you should be able to answer the following questions: What rules guide the courts in interpreting contracts?
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What rules guide the courts in interpreting contracts?
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Types of Contracts. Kim Panenka asked to borrow $4,750 from her sister, Kris, so that Kim could make her mortgage payment. Kris deposited a check for that amount into Kim's bank account. Hours later, Kim asked to borrow another $1,100. Kris took a cash advance on her credit card and deposited this amount into Kim's account. About a week later, Kim asked Kris for $845.40 to pay a dental bill. Kris paid the bill by credit card. After Kris asked for repayment several times and did not receive payment, she filed a suit against her sister in a Wisconsin state court. At the trial, Kim admitted that she had asked for the funds and that it had not been a gift, but she testified that the sisters had a long history of paying for things for each other without expecting repayment. Kris countered that she had "loaned" Kim these amounts. Can the court impose a contract between the sisters? Explain. [ Panenka v. Panenka, 331 Wis.2d 731, 795 N.W.2d 493 (2011)]
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Critical Thinking Legal Question Review the basic requirements for a valid contract listed at the beginning of this chapter. In view of those requirements, analyze the relationship entered into when a student enrolls in a college or university. Has a contract been formed? If so, is it a bilateral contract or a unilateral contract? Discuss.
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The five Learning Objectives below are designed to help improve your understanding of the chapter. After reading this chapter, you should be able to answer the following questions: What are the four basic elements necessary to the formation of a valid contract?
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