Adhesion Contract Example - PowerPoint

							  Check Sound


  Check Mike




Time
            Today’s Lecture:




            Contracts


1. Formation, Defense & Excuse
2. Parole Evidence and Modification
        Lecture Organization:

        • Class Announcements

        • Review


       • Defenses

       • Excuses

       • Contracts by Operation of Law

       • The Primacy of the Writing

       • Remedies
Time
                Class Announcements

1. Midterm grading
   -- going well; hope to finish this weekend in New York City
2. No class on Tuesday (I’ll be in New York on my second job
talk)
3. Your paper
   -- find the phone number to the magistrate court here in
                                       Questions?
   state college and the trial court in Bellefonte.
   -- watch them before Thanksgiving break; write the paper
   during Thanksgiving break

                                                     Time
                        Review

1. Introduction to Contracts
   -- specifically, how to form them
   .. Take a look
                    Capacity
• Prerequisites
                    Subject Matter
                    Statute of Frauds

• “Assent”        Offer
                  Acceptance
                  Consideration
• No defense



• No excuse

                                        Time
                         Defenses

1. Things that, if true, will negate or nullify the contractual
formation
2. These things will be listed in a linear progression, so that
each one gets progressively worse (one exception)
3. Let’s take a look …
Mutual Mistake
                 Example:
                 “Fugazi” (Louie selling “diamels”)

                 (1) both parties are mistaken
                 (2) about a material assumption
Mutual Mistake   in the K
                     Example:
                     Used car was a wrecked police
                     car
                     (must be a       fact   not   an
                     assumption!)


                     (1) one party is mistaken about a
                     fact in the K
Unilateral Mistake   (2) which the other party knows
                     about and keeps quiet

Mutual Mistake
                     (1) reasonable reliance
                     (2) upon a material fact
Misrepresentation
                     (3) which has been innocently
                     misrepresented
Unilateral Mistake   Example:
                     Same facts as before, only the
Mutual Mistake       secretary explicitly says it has
                     never been wrecked
                     (1) any reliance
                     (2) upon a fact
                     (3) that is fraudulently
  Fraud in the       misrepresented
  Inducement
                     Example:

Misrepresentation    Running the odometer
                     backward.

Unilateral Mistake


Mutual Mistake
                     -- “switched document” fraud
 Fraud in factum
                     Example:
  Fraud in the
                     Tricking someone into signing
  Inducement
                     a document so they don’t
                     realize what it really is
Misrepresentation


Unilateral Mistake


Mutual Mistake
Personal Duress
                       … e.g., gun to the head
                     Note:
 Fraud in factum
                      Example:
                     difference between a K defense
                      Sign or I’ll break (torts, crimes)
                     and other causes your knuckles
  Fraud in the
  Inducement
                     Note:
                     Each defense becomes
Misrepresentation
                     progressively worse.

                     Note:
Unilateral Mistake
                     There is one defense left which
                     does not fit into this orderly
Mutual Mistake       progression …
Personal Duress      Example:
                     A landlord who employs you
 Fraud in factum


  Fraud in the               Economic Duress
  Inducement


Misrepresentation
                     -- extremely rare
                     1. a party takes advantage of
Unilateral Mistake   an economic situation
                     2. which he/she caused to
                     exist!
Mutual Mistake                           Time
                            Excuses

1. These are different from defenses
   -- Defenses negate assent (nullify assent)
   -- Excuses do not do this; they merely excuse performance
   even though valid assent still exists!
2. They also have an orderly structure to them
   -- let’s take a look …
Modification
               The parties agree to excuse the
               K performance

Modification   (another K takes away       the
               previous responsibility!)
                Example:
                -- prohibition
                -- painting the inside walls of the
                twin towers on 9/12


Impossibility   -- performance cannot literally
                occur


Modification
                   Example:
                   -- Painting the curb yellow or
                   installing a new traffic light at the
                   intersection of the World Trade
                   Centers after 9/11.

                   (1) an event that is unassumed,
Impracticability   severe and unforeseen
                   (2) makes it unreasonable for the
                   parties to perform
 Impossibility



 Modification
                   (1) an unforeseen event destroys
                   or eliminates the purpose of the
                   K
 Frustration
                   (2) both parties knew of the
                   purpose at the time of K

Impracticability
                   Example:
                   -- Planting trees to beautify the
 Impossibility     Trade Center entrances after
                   9/11.


 Modification
Putting it all together               Capacity
                                      Subject Matter
• Prerequisites
                                      Statute of Frauds

                          Offer
 • “Assent”               Acceptance             Mutual mistake

                          Consideration          Unilateral mistake
                                                 Misrepresentation
• No defense
                                                 Fraud (I) & (II)

                           Modification          Duress (I) & (II)

• No excuse                Impossibility
                           Impracticability                    Time
                           Frustration
             Contracts by Operation of Law

1. These are not real Ks; they are a fictitious contractual
arrangement imposed by courts to avoid unfairness
2. whenever a contract fails for some technical reason –-
excuses, defenses, prerequisites, etc., -- and you are “injured”
                         Example: a landlord’s oral promise
by the failure, you can ask the Court to impose a fictitious
                         to hold a lease for you. You
contractual relationship to repair the injury
                        terminate your other lease and put
                        two situations
3. generally imposed in money down on your U Haul. The
 Tricky Utterance       next day she changes her mind.
   -- Reasonably foreseeable reliance
   -- upon an utterance to your detriment
           Contracts by Operation of Law


Lost Money
  -- You lose money under the auspices of a K relationship,
  but find out that no enforceable K exists
  -- The Court will impose a fictitious K in order to award you
  restitution ONLY

 Example: prohibition.
  -- Also, there is something called “quantum meruit”
  -- The reasonable value of the services rendered when a
  contract is cancelled
 Example: firing an attorney the day before settlement
 or trial
               The Primacy of the Writing

-- Important question
-- There are two very important devices in K-law that make
lawyer services quite valuable
                                           Answer:
                                          Question:contract
-- These devices allow lawyers to defeat many of the
                                 A theoretical understanding
defenses and loopholes that we’ve been looking at.
                                    Why am I showing you
                               what law does (how it is used)
                                             this?
Parole Evidence Clause “Batman” lawyering consists of
                               and what
   -- a clause inserted into the document
   -- that makes prior/contemporaneous understandings about
   the K irrelevant
   -- the writing controls anything that was said prior to or even
   DURING its signing
               The Primacy of the Writing


No Oral Modification Clause      “Robin”
   --this clause makes oral understandings SUBSEQUENT to
   the writing irrelevant
   -- modifications are only allowed to be in writing
-- let’s take a look at how batman and robin work together in a
contract
                      timeline
  T-1



Expectation
  formed

  • I get my security deposit back
  • the walls are insulated well
  • no one lives above me (cool!)
  • The internet service makes the computer really fast
  • They won’t raise the rent next year
                    timeline
  T-1                 T-2



Expectation        Expectation
  formed             formed
              The date of the “execution”
                (The signing of the K)
                      timeline
   T-1                  T-2

                                    Caveat!
Expectation          Expectation    Some difficult maneuvers
  formed               formed       that can be attempted:
                                    Alleging fraud and so forth.
                                    But these are difficult.
Expectations formed here are The point is that these
irrelevant; only the writing controls doctrines make writings
                                           Note how powerful
the terms, not your expectations.     very powerful lawyer
                                           that makes
                                             draftsmanship
                                      It takes away many of the
 Your understanding at T-1 and T-2              services!
                                      defenses we talked about
 cannot vary the written terms that
                                      earlier
 you affix your signature to
                      timeline
  T-1                   T-2                       T-3



Expectation          Expectation               Expectation

  formed                formed                   formed

                                    This expectation arises out
                                    of communications with
        “Batman”                    the person AFTER the
                                    signing:
        Let’s look at “Robin” …
                                    Example: Landlord and
                                   1. Modification?
                                        paying rent late
                                   2. Reasonable reliance?
                     timeline
  T-1                  T-2                          T-3



Expectation         Expectation                  Expectation

  formed              formed                        formed



        “Batman”                               “Robin”

              No oral modifications allowed!
              Any modification must be in writing
              Once again, this makes lawyer
              draftsmanship a valuable service
               The Primacy of the Writing                Time


-- Note: if you are caught within the terms of an aggressive or
unfair writing, and there is no fraud involved, there are really
only two things you can do:

 Unconscionable?
   -- very tough: have to be oppressive and unfair at the time
   of the bargain
-- But there is something else, at least for SOME kinds of
contracts:

 Adhesion Contract?
   -- a contract where the idea of bargaining over terms is a
   fiction, even in theory
   -- example: an insurance contract