CA Essay Outlines

CA Essay Outlines CONTRACTS 1. DOES THE UCC APPLY? a. The UCC Governs all contracts for the sale of goods i. Does not apply to Real Estate or Service Contracts 1. EXCEPTION: Mixed Deal: If contract divides payment, then apply UCC to sale of goods part and common law to the rest. ii. Applies to leases of goods. b. The UCC also has special rules governing transactions between merchants. c. If UCC does not apply, e.g. service contracts –then apply common law IS THERE A VALID CONTRACT? MUTUAL ASSENT AND CONSIDERATION? a. Offer i. Manifestation of a present intent to contract demonstrated by a promise, undertaking or commitment. 1. Would a reasonable person in the position of the offeree believe that his or her assent creates a contract? a. Content: Offer is NOT required to contain all material terms. 2. Sales Contract: a. Real Estate: Common law - unless price and description required: not an offer. b. Sale of Goods: Art. 2 – NO price requirement, offer if parties so intent. ii. Definite and certain Terms, unless see above. 1. However, Offer is not required to contain all material terms. 2. Vague or ambiguous material terms not an offer under CL or UCC. 3. An advertisement is not an offer a. Unless: it is in the nature of a reward or specific as to quantity and expressly indicates who can accept. iii. Communicated to an identified offeree b. HAS THE OFFER BEEN TERMINATED? i. Lapse of time 1. Either lapse of time stated or reasonable time (30 days or fewer). ii. Death of Party Prior to Acceptance 1. Death or incapacity of either party after the offer but before acceptance terminates offer: a. Exceptions: Option or Part performance of offer to enter into Unilateral contract. iii. Revocation: words or conduct by the offeror terminating the offer 1. How? a. Clear statement by offeror to offeree of unwillingness or inability to contract. b. Clear conduct by offeror indicating an unwillingness or inability to contract that offeree was aware of. 2. Effective when received by offeree 3. Unless the offer is irrevocable. a. Option Contract i. Express promise to not revoke (or keep open) AND the promise is supported by payment or other consideration. b. Merchant‘s firm offer under UCC i. An offer cannot be revoked for up to three months if (1) offer to buy or sell goods, (2) signed written promise to keep the offer open and (3) part y is a merchant (person in business). c. Detrimental Reliance i. An offer cannot be revoked if there has been (1) reliance that is (2) reasonably foreseeable and (3) detrimental. d. Unilateral Performance i. The state of performance following an offer to enter into a unilateral contract makes that offer irrevocable for a reasonable time to complete performance. iv. Rejection: Words or conduct of the offeree rejecting the offer 1. Effective when received 2. Counteroffer acts as rejection a. Always terminates the offer and becomes a new offer. There is no contract unless counteroffer is accepted. b. Compare with Bargaining (does not term. offer): i. Counteroffer: I will only pay $9,000 ii. Bargaining: Will you take $9,000 3. Conditional Acceptance 2. 1 4. a. Operates the same way as a counter offer: it term. the offer and becomes a new offer. b. Look for ―if,‖ ―only if,‖ ―provided,‖ ―so long as,‖ ―but,‖ or ―on condition that.‖ Additional Terms a. Mirror Image Rule i. Under CL, an acceptance that adds new terms is treated like a counteroffer rather than an acceptance. b. Under UCC i. Is there a contract? 1. A response to an offer that adds new terms (but does not make new terms condition of acceptance) is treated as an ACCEPTANCE – a seasonable expression of acceptance. ii. Is the additional term a part of the contract? 1. Look to see whether both parties are merchants. a. If at least one is a merchant, the additional term is merely a proposal that is to be separately accepted or rejected. b. If both are merchants, the additional term is part of the contract i. Exceptions: (1) if term materially changes the offer, not a part of the contract; and (2) if offeror objects to change, not a part of the contract. c. v. Termination By Operation of Law 1. Death or insanity of either party 2. Destruction of the subject matter of the contract 3. Supervening illegality ACCEPTANCE i. Under CL, acceptance must mirror the offer ii. Under the UCC, an acceptance which adds terms to the offer is valid. 1. Btw merchants, the additional terms become part of the contract unless they materially alter the contract or where offeror objects or the offer is limited to its terms (battle of the forms). iii. Method of Accepting 1. Offeree Promise to Perform a. Only words. Words of offer, words of acceptance but no performance. As in bilateral contracts, most offers can be accepted by a promise to perform and offers that expressly require performance for acceptance and reward offers require performance for acceptance. Starting to Perform (offeree) a. Is an acceptance of an offer to enter into a bilateral contract but is NOT acceptance of an offer to enter into a unilateral contract. b. Complete performance is required. c. General Rule: start of performance is acceptance treated as an implied promise to perform and so there is a contract. 3. Complete Performance a. Ask whether notice of performance is required. i. What offer requires or ii. Whether offeree has reason to believe that offeror will not learn of the acceptance. b. Watch for a fact pattern in which there is (1) there is a verbal offer but (2) not words in response, but instead (3) only response is full performance. No question that full performance is acceptance. 4. Later Conduct by offeror implying contract notwithstanding improper response to an offer. Even though a response to offer that does not qualify as acceptance, the parties act as if there is a contract. 5. The seller of goods sends wrong goods a. Acceptance and Breach i. Exception: Accomodation (explantation as to reason for substitution of good) ; Counteroffer and no breach. iv. Mode of Acceptance 1. Who can accept offer? a. A person who knows about the offer. b. Who is the person to whom it was made. 2. Manner authorized by offer 3. Any reasonable manner 4. Offers cannot be assigned a. Options can be assigned unless the option agreement says otherwise. 2. 2 d. v. Effective upon Dispatch 1. Mailbox Rule a. The offeror and the offeree are at different places and there are conflicting communications. i. Acceptance is generally effective only when received. ii. All other communications are effective only when received. 2. Limits on Mailbox Rule a. If a rejection is mailed before an acceptance is mailed, then neither is effective until received. Consideration i. Bargained for Exchange 1. First identify the promise maker/promise breaker, second, ask whether that person asked for something in return for the promise, third ii. Legal detriment or legal benefit 1. Adequacy generally irrelevant 2. Past consideration 3. ―Pre-existing‖ duty rule 4. Part payment to settle existing debt 5. Payment to settle legal claim 6. Payment of debt barred by statute of limitations iii. Promissory Estoppel or detrimental reliance as a substitute for consideration 1. Bargained for promise can be consideration where there is legal detriment a. Promise b. Reliance that is reasonable, detrimental and foreseeable c. Enforcement necessary to avoid injustice. e. 2. Exception: Illusory Promise. iv. Performance 1. Full not part: doing something not legally obligated to do. 2. Promise to Perform. v. Forbearance 1. Not doing something legally entitled to do. 2. Promise to forbear vi. Part Payment as consideration for release 1. promise to forgive balance of debt. a. Key is whether debt is due and undisputed. If debt is due and undisputed, then part payment is not consideration for release. vii. Exceptions: 1. Illusory Promises 2. Past Consideration: CL General Rule not consideration. a. Unless expressly requested and expectation of payment. b. General Rule: Doing what you are already legally obligated to do is not new consideration for a new promise to pay you more to merely do that. Under CL, new consideration is required for contract modification. i. Exception: 1. Addition to or change in performance. 2. Unforeseen difficulty so severe as to excuse performance. 3. Third party promise to pay 3. Art. 2: UCC a. Article 2 does not have a pre-existing legal duty rule. b. New consideration is not required to modify sale of goods contract. c. Good faith is the test for changes in an existing sale of goods contract. viii. Consideration substitutes 1. A promise is legally enforceable even though there is no consideration if there is one of the following consideration substitutes. a. A written Promise to satisfy an obligation for which there is a legal defense is enforceable without consideration. b. Seals i. NOW: NOT A CONSIDERATION SUB. Defenses to Formation i. Statute of Frauds 1. Proof of either 3 2. 3. 4. 5. Performance or a writing SIGNED by the person who is asserting that there is no such agreement. Defense to enforcement of the agreement if the agreement is within the SOF, and the SOF is not satisfied, and def. asserts SOF defense, no contract. K within SOF a. Promises to Answer (guarantee) the debts of another (suretyship) – LOOK FOR GUARANTEE b. Promises by executor to ―answer for personally‖ (guarantee‖ personally) the debts of the decedent. c. Promise in Consideration of Marriage i. Only applies to promise to do something or refrain from doing something if we marry. d. Service K not capable of being performed within a year from the time of the K. (more than 1 year=SOF applies). i. A task without time limit = NO SOF. Assumes unlimited resources. ii. Work for life = NO SOF e. Transfers of Interest in Real Estate i. Exceptions for leases of a year or less). f. UCC: Sale of Goods for $500 or more Satisfaction of SOF a. Performance and Services K i. FULL performance by either party satisfies SOF. PART performance does not satisfy. b. Sale of Goods K i. Ordinary Goods 1. Part perf. Satisfies SOF but only to the extent of part perf. 2. Specifically manufact. Goods Exception. a. substantial beginning: seller has done enough that its clear that product is custom or made to order. c. Performance and transfers of interests in Real Estate i. Part perf. Can satisfy if 2 of 3 are met: full or part payment, possession, and/or improvements to land. ii. Full payment alone does not satisfy. d. Writing i. Must include all material terms. e. UCC SOF i. Writing must contain the QUANTITY term. Look to see that it was signed. Look at contents. Signed by person asserting the SOF defense. f. Judicial Admission i. Def. asserting SOF admits to entering agreement, the purpose of SOF is fulfilled, and is satisfied. NO SOF Def. Use of SOF on Bar other than is there and SOF Defense to Enforcement of Agreement a. Need written Auth. To enter K for someone else. b. If agreement req. that any all modif. Be in writing? i. Under CL, not effecteive. ii. Under UCC, provisions req. written mod. ARE EFFECTIVE unless waived. a. ii. Mistake 1. Distinguish from misunderstanding: focuses on words in contract or misrepresentation, which focuses on words B4 K. 2. Mutual Mistake of fact a. Mistake as to what it is, not what it‘s worth. b. No K if i. Both parties are mistaken & ii. Basic assumption of fact, & iii. Materially affects the agreed exchange, and iv. Not a risk that either party bears. 3. Unilateral Mistake of Fact a. Look for situations in which the other party had reason to know of the mistake. b. Courts reluctant to allow a party to avoid a K for unil. Mistake. iii. Illegality 1. If the subject matter is illegal, the K is not enforceable. 2. If the subject matter is legal, but the purpose is illegal, the K is enforceable only by person who did not know of illegal purpose. iv. Incapacity 1. Who lacks capacity? 4 3. 4. a. Infant – under 18 b. Mental incompetents – lacks ability to understand agreement. c. Intoxicated persons if other party has reason to know. 2. Consequences a. Right to disaffirm by person without capacity. b. Implied affirmation by retaining benefits after gaining capacity (ratification). v. Unconscionability 1. Empowers court to refuse to enforce all or part of an agreement a. Unfair surprise (procedural) AND Oppressive terms (substantive) are b. Tested as of the time the K was made. c. Under UCC, if there is unsconscionable conduct in inducing or enforcing a lease, court may grant relief. vi. Duress 1. Improper threat of physical or economic harm. 2. No reasonable alternative vii. Fraud, Misrepresentation, Nondisclosure 1. Look for false assertion of facts or concealment of material facts that INDUCES the contract. 2. No req. of fraud in actions to rescind a contract because of misrepresentation. 3. Nondisclosure may require fraud. viii. Misunderstanding/Ambiguity 1. No K if parties: a. Use a material term that is open to two diff. Reasonable interpretations. b. Each party attaches meaning to the term, & c. Neither party knows that the term is open to at leat 2 reasonable interpretations. TERMS OF THE CONTRACT a. Interpretation of terms i. What people agreed to 1. Custom and Usage in the industry 2. Course of dealing btw parties b. Mistake and ambiguous terms i. See SOF viii. c. Parol Evidence Rule i. Definition 1. Words of a party/parties before agreement was put in written form. 2. Oral or written a. Integration i. Written Agreement that court finds is the final agreement, triggers, triggers the PRE. b. Partial Integration i. Written and final, but not complete c. Complete Integration i. Written, final and complete d. Merger Clause i. Contract clause such as ―This is the complete and final agreement‖ e. Reformation i. Equitable action to modify written K to reflect actual agreement. ii. Triggering Facts 1. Written contract that court finds that the final agreement; AND 2. Oral statement made at the time the K was signed OR earlier oral or written statements by the parties to the K. 3. Watch for assertions that contradict the written deal. iii. Exception 1. Clerical Error Exception, then admissible. 2. Can admit toe resolve ambiguities. d. Modification i. Additional consideration needed under the CL. ii. Under UCC, no consideration needed so long as in good faith iii. Modification may need to satisfy SOF Third Party Rights Or Obligations a. Third Party Beneficiaries i. Intended or Incidental Third Parties 1. Look for two parties contracting with the intent of benefit to a third party 2. Def of TPB: 5 b. c. a. Not a party to the K. ABLE TO ENFORCE K others made for his benefit. Promisor a. Person who is making the promise that benefits the third party. 4. Promisee a. Person who obtains the promise that benefits the TP 5. Incidental a. Only intended beneficiaries have contract law rights. ii. Creditor or Donee TPB? 1. Usually tested on Donee: 2. Donee: Can not recover from promise. 3. Creditor benef. Can recover from promise BUT ONLY on preexisting debt. iii. Have rights vested? 1. Where rights have vested, K cannot be cancelled, modified without consent unless K otherwise provides. iv. Who can sue whom? 1. TPB v. Promisor 2. Promisee v. Promisor 3. TPB v. Promisee v. Defenses 1. If the TP sues the Promisor, the promisor can assert any defense that he would have had if sued by the promise. Assignment of Rights i. Def: Transfer of RIGHTS under a K in two separate steps: 1. Contract btw only two parties AND 2. One of the parties later transfers rights under that K to a TP ii. Assignor 1. Party to the contract who later transfers rights under the K to another. iii. Assignee 1. Not a party to the K. Able to enforce the K because of the assignment. iv. Obligor: 1. Other party to the K v. Assignments are generally valid unless they materially alter the obligor‘s duty or risk, or unless they are prohibited by law. 1. Limitations on Assignment a. Contract Provisions i. Court favors assignability of K rights and are reluctant read K lang. as preventing an assignment. b. Prohibition i. Lang. of prohib. Takes away the right to assign but not the power to assign which means that the assignor is liable for breach of K but an assignee c. Invalidation i. Lang. of invalid.takes away both the right to assign and the power to assign so that there is a breach by the assignor and no rights in the assignee. d. Common Law i. CL bars an assignment that substantially changes the duties of the obligor. ii. Assignment of right to payment (never substantial change) iii. Assignment of right to contract perf. Other than right to payment (usually substantial change on bar). vi. Does obligor have defenses against assignee? vii. What happens when there is more than one assignment of the same right? 1. Gratuitous Assignments a. Last Assignee generally wins 2. Assignments for Consideration a. First assignee for consideration wins 3. Limited Exception a. Subsequent assignee takes priority over earlier assignee for value if he both i. Does not know of the earlier assignment and ii. Is the first to obtain payment, a judgment, a novation, OR indicia of ownership. Delegation of Duties i. Def: Party to a contract transferring work under that K to a third party. 1. DELEGATION OF DUTIES ii. Delegation of duties is permitted except where prohibited by the contract, where the duties involved personal judgment and skill or where the delegation would change the obligee‘s obligations. 3. 6 5. 6. Limitations; a. K prohibits delegations or prohibits assignments or b. K calls for Very Special skills or c. Person to perform has VERY SPECIAL reputation. iii. Obligee may sue delegator and delegatee. PERFORMANCE a. Sale of Goods Performance Concepts i. Perfect Tender 1. Perfect tender only applies to sales of goods 2. Perfect tender means that the seller‘s performance must be perfect (perfect goods, perfect delivery). 3. A less than perfect tender by the seller generally gives the buyer the option of rejection of the delivered goods. ii. Rejection of Goods 1. Not the same as rejecting an offer. 2. If the seller does not meet the perfect tender standard, the buyer has the option to retain and sue for damages ore reject ―all or any commercial unit‖ and sue for damages a. This rejection alternative is limited by CURE or INSTALLMENT CONTRACT or ACCEPTANCE. iii. Cure 1. A seller who fails to make a perfect tender will be given a ―second chance,‖ an option of curing. 2. Every seller does not have the opportunity to ―cure,‖ and that the buyer cannot compel the seller to cure. iv. Installment Sales Contract 1. An installment sales contract REQUIRES or AUTHORIZES a. (i) delivery of the goods in separate lots b. (ii) to be separately accepted. 2. The buyer has the right to reject an installment only where there is a substantial impairment in that installment v. Acceptance of the Goods 1. Effect of acceptance of the goods: Again, if the buyer accepts the goods, it cannot later reject them. 2. Effect of Payment: Payment without opportunity for inspection not acceptance. vi. Revocation of Acceptance of the Goods 1. If buyer accepts the goods, it cannot later reject the goods. 2. In limited circumstances, a buyer can effect a cancellation of the contract by revoking its acceptance of the goods if a. Nonconformity substantially impairs the value of the goods, AND b. Excusable ignorance of grounds for revocation or reasonable reliance on seller‘s assurance of satisfaction, AND c. Revocation within a reasonable time after discovery of nonconformity. b. Common Law Performance Concepts i. CL‘s counterpart to perfect tender is substantial performance. 1. If one party substantially performs than the other party must pay or otherwise perform. Excuse of Non-Performance a. Conditions i. Def: A condition is . mutually agreed upon promise modifier. It is language in a contract that does not create a new obligation, but merely limits obligations created by other language in the contract. 1. Watch for if, only if, provided that, so long as, subject to, etc. a. Most bar exam fact patterns do not have EXPRESS CONDITIONS ii. Types of Conditions 1. Express, Implied, or constructive a. Standard for satisfying an express condition: Strict compliance with conditions. 2. Precedent, concurrent, subsequent iii. Satisfaction of Conditions 1. General rule: strict compliance with conditions iv. Excuse of Condition 1. Wrongful Prevention 2. Voluntary Disablement 3. Anticipatory Repudiation a. Unambiguous statement or conduct indicating that the i. Repudiating party will not perform ii. Made prior to the time that performance was due b. AR by one party excuses the other party‘s duty to perform c. It also generally gives rise to an immediate claim for damages for breach 1. 7 i. Not to an immediate claim of damages if the claimant has already finished her performance Waiver a. Identify the person who benefits from or is protected by the condition. Then look for a statement by that person giving up the benefits and protection of the condition. b. Based on a statement by the person protected by the condition AFTER the conditioning event was to occur and does not require reliance. 5. Estoppel a. Based on a statement by the person protected by the condition BEFORE the conditioning event was to occur and requires reliance b. Discharge of Duties i. Impossibility – Objective Test 1. Death or Physical incapacity 2. Illegality 3. Destruction of Subject Matter ii. Impracticability 1. Extreme and Unreasonable Difficulty that was unanticipated 2. Subjective Test iii. Frustration of Purpose 1. Rescission a. Cancellation i. The key is whether performance is still remaining from each of the contract parties (executory). 2. Novation a. An agreement between BOTH parties to an existing contract to the substitution of a new party, i.e., same performance, different party b. Who is liable after a novation? i. Excuses the contract for performance of the party who is substituted for or replaced. c. Contrast with Delegation i. Novation requires both parties to the original contract and excuses the person replaced from any liability for nonperformance. ii. Delegation does not require the agreement of both parties and does not excuse. 3. Accord and Satisfaction a. If the new agreement (the accord) is performed (satisfaction), then performance of the original obligation is excused. b. If the accord is not performed, then the other party can sue on either the original obligation or the accord. iv. Modification (substituted Agreement) 1. Agreement by parties to an existing obligation to accept a different agreement in satisfaction of the existing obligation. c. Breach i. Material 1. Damages can be recovered for any breach. 2. Only a material breach by one guy excuses the other guy from performing. 3. Whether a breach is material is a fact question (and so whether a breach is material is not likely to be a bar exam question.) 4. If there is substantial performance then the breach is not material. 5. If the breach is material, then the performance was not substantial. ii. Minor 1. If there is substantial performance, then the breach is not material. Remedies a. Damages i. Compensatory 1. Expectation damages (benefit of the bargain) a. Put Plaintiff in same economic position as if contract had been performed. 2. Consequential damages must be foreseeable ii. Liquidated Damages 1. Actual damages difficult to calculate at the time the contract was formed 2. Amount is a reasonable forecast of damages iii. Punitive Damages b. Duty to Mitigate c. Restitution – Quasi-Contractual Relief 4. 7. 8 d. e. f. g. i. Protection of reliance interest ii. Put plaintiff in same economic position as if contract had never happened. Specific Performance Rescission i. Cancellation Reformation Damages for SALE OF GOODS i. General contract damages policy of putting the innocent party where it would have been had the contract been performed (i.e., expectation) ii. Seller Breaches, buyer keeps the goods 1. Fair market value if perfect (-) fair market value as delivered. iii. Seller breaches, seller keeps the goods 1. Market price at time of discovery of the breach (-) contract price OR 2. Replacement price (-) contract price iv. Buyer Breaches, buyer has the goods 1. Contract price v. Buyer Breaches, seller has the goods 1. Contract price (-) market price at time and place of delivery OR 2. Contract price (-) resale price a. And in some situations, provable lost profits. vi. Additions and Limitations 1. Plus incidental damages a. Costs incurred in finding replacement performance – always recoverable. 2. Plus foreseeable Consequential (special) damages a. Damages arising from P‘s special circumstances; recoverable only if D had reason to know at time of contract. 3. Less AVOIDABLE damages a. No recovery for damages that could have been avoided without undue burden on plaintiff. Burdens of pleading and proof on defendant. vii. Liquidated Damages 1. Look for contract provision fixing amount of damages a. Issue will be validity. Concern is whether provision is too high – a penalty… i. Tests are (1) damages were difficult to forecast at time contract was made and (2) provision is a reasonable forecast. 9 Bar Breaker Big Picture: PROPERTY A. What is the Type of Ownership Interest? a. Presently owned/Possessed land i. Fee absolute ii. fee tail (abolished under modern law) iii. life estate iv. Fee simple defeasible v. Leashold land vi. Concurrently owned estates 1. Joint Tenancy 2. Tenancy by Entirety 3. Tenancy in Common b. Future Interests? i. Reversions ii. Possibility of Reverter iii. Right of re-entry iv. Remainders and executory interests c. Incorporeal Interests i. Give the holder the right to use land, and come in the form of: 1. Easements 2. Covenants 3. Equitable Servitudes 4. Implied reciprocal Servitudes 5. Profits and 6. Licenses d. Rights in Land/Fixtures i. Right to natural resources 1. Subjacent support of land and water 2. Party walls 3. Fixtures e. Adverse Possession i. Manner of taking title to land through adverse possession of that land for a period of time under statute. B. What Characteristics are inherent in such ownership and what rights and duties arise from such ownership? a. Here not only state property interest, but also what rights flow from such ownership. C. Are there any Limitations ON such Ownership? a. Concern issues of public land and use control i. Eminent Domain ii. Zoning Power D. Land Sale K‘s a. Requirements of land sale contracts i. Must be in writing ii. Signed by seller iii. Contain all essential terms iv. Must be subject to the implied covenant of marketability; and if v. If involves transfer of land, requires a deed which must be delivered. b. Deeds c. Covenants of title d. Recording acts e. Mortgages REAL PROPERTY – See the Conviser I. Possessory Interests: Estates In Land o Present Possessory Interests  Fee Simple Absolute  Absolute Ownership of potentially infinite duration  Transferability: Devisable, Decendible, alienable  No Future Interest  Example: ―To A and his heirs,‖ ― To A.‖ 10 o Defeasible Fees  Fee Simple Determinable o Potentially infinite, so long as event does not occur o Alienable, devisable, descendible, subject to condition. o Future Interest: Possibility of Reverter (held by grantor). o Ex: ―To A so long as…‖ ―To A until…‖ ―To A while…‖ (Lang. provid. That happening of event – land reverts to grantor).  Fee Simple Subject to Condition Subsequent o Potentially infinite, so long as the condition is not breached and, thereafter, until the holder of the right of entry timely exercises the power of termination. o Transferability: Same as FSD. o Future Interest: Right of Entry/Power of Termination (held by grantor). o Ex: ―To A, but if X event happens, grantor reserves the right to reenter and retake.‖  Grantor must carve out right of reentry.  Fee Simple subject to executory limitation o Potentially infinte so long as stated contingency does not occur. o Transferability: Same as FSD o Future Interest: Executory Interest (held by third parties). o Ex: ―To A, but if X event occurs, then to B.‖  Life Estates  Measured by Life of Transferee or by some other life (pur autre vie).,  Transfer: Alienable (capable of being sold or transferred), devisable (transferable) and descendible if pur autre vie and measuring life is still alive.  Future Interests: Reversion (if held by grantor); Remainder if held by third party.  Ex: To A for life, To A for life of B. Future Interests  In grantor  Possibility of Reverter o Goes back to grantor o It accompanies only fee simple determinable, when carved out.  Right of Entry o Also known as power of termination. o It accompanies only the fee simple subject to condition subsequent  Reversion o Arises in a grantor who transfers an estate of lesser quantum than she started with, other than a fee simple determinable or a fee simple subject to condition subsequent. o All reversionary interests are vested, and thus, not subject to RAP  In Grantee or Third Person  Executory Interests o Future interest held by someone other than the grantor. o Two Types  Shifting Executory Interest  Following a gap in possession  Cutting short some interest in another person  Springing Executory Interests  Cut short a grantor‘s estate.  Cuts short interest in grantor or his heirs  Remainders o A future interest created in a grantee that is capable of becoming possessory upon the expiration of prior possessory estate create in the same conveyance in which the remainder is created. o Remainderman never follows a defeasible fee. o Def: A remainder is a future interest in a third person that can become possessory on the natural expiration of the preceding estate. It cannot divest a prior estate, and it cannot follow a time gap after the preceding estate. o A remainder must be expressly created in the instrument creating the preceding possessory estate.  Attributes  Waste  Fixtures  Validity  Destructability  11 - At common law, a contingent remainder was destroyed if it was still contingent at the time the preceding estate ended. o Today, the destructibility rule has been abolished. Thus, if B is still under 21 when A dies, O or O‘s heirs holds the estate subject B‘s springing executory interest. Once B reaches 21, B takes. o Related Doctrine of Merger  When one person acquires all of the present and future interests in land except a contingent remainder, under the common law, the contingent remainder is destroyed. o Ex: ―To A for life, remainder to A‘s children who reach 21.‖  Shelly‘s Case o Rule against Remainders in Grantee‘s Heirs o At common law, if the same instrument created a life estate in A and gave the remainder only to A‘s heirs, the remainder was not recognized, and A took the life estate and the remainder. o A remainder in a life tenant-grantee‘s heirs is deemed to be in the life tenant herself.  This has been abolished in most states o Ex: ―To A for life, then to A‘s heirs.‖  Worthier Title o Rule against remainder in Grantor‘s Heirs o Under the DOWT, a remainder in the grantor‘s heirs is invalid and becomes a reversion to the grantor. o ―To A for life, then to my heirs at law.‖  Restraints on Alienation o Generally, any restriction on the transferability of legal (as opposed to equitable) interest is void. o Disabling restraints:  Under which attempted transfers are ineffective; o Forfeiture restraints  Under which an attempted transfer forfeits the interest; and o Promissory restraints  Under which an attempted transfer breaches a covenant.  Rule Against Perpetuties o NO interest in property is valid unless it must vest, if at all, not later than 21 years after some life in being (―measuring life‖) at the creation of the interest. o If there is ANY POSSIBLITY that the interest must vest more than 21 years after a life in being, the interest is void. o Rule applies to contingent remainders, executory interests, vested remainders subject to open (class gifts), options to purchase (not attached to a leasehold), rights of first refusal, and powers of appointment.  Class Gifts  Bad as to One, Bad as to All Rule o If the interest of any class member may vest too remotely, the whole class gift fails. For the class gift to vest, the class must be closed and all conditions precedent must be satisfied for every member. II. LANDLORD – TENANT o Nature of Leasehold  Tenancy for years  A lease for a fixed term of time (1 day or 500 years)  You know the termination date from the start  No notice is needed to terminate  Ex: L leases Blackacre to T ―from Jan 2007-July 2007.‖  A term of years greater than one year must be in writing to satisfy the SOF.  Periodic tenancy  This is a lease which continues for successive intervals endures until L or T gives proper notice of termination.  Can be created expressly o L conveys to T for month to month or year to year  Can also arise by implication o Land is leased with no mention of duration, but provision is made for the payment of rent at set intervals. o Ex: T rents an apartment from L, beginning June 1. Nothing is said about duration. T pays rent each month.  An oral term of years in violation of the statute of frauds creates an implied periodic tenancy measured by the way rent is tendered. o 12 o Tenancy at Will  No fixed Duration  ―To T for as long as L or T desires.‖  Unless the parties expressly agree to a tenancy at will, the payment of regular rent will cause a court to treat the tenancy as an implied periodic tenancy.  Tenancy at will may be terminated by either party at any time. However, a reasonable demand to vacate is typically required.  Tenancy at sufferance – hold-over doctrine  Created when T has wrongfully holdover past the expiration of the lease.  We give this wrongdoer a leasehold estate (the tenancy at sufferance), to permit L to recover rent.  The tenancy at sufferance lasts only until L either evicts T or elects to hold T to a new tenancy. Tenant‘s Duties  Duty to Repair  General Doctrine o Where the lease is silent as to T‘s duty to repair, T must maintain the premises & make ordinary repairs.  Affirmative Waste – Must Not o Overt, harmful effects  Permissive Waste – Must Not o Neglect  Ameliorative Waste: Alterations that increase the premises value. – Must Not  Law of Fixtures o When a tenant removes a fixture, he commits voluntary waste o A fixture is a once moveable chattel that, by virtue of its attachment (annexation) to reality, it objectively shows the intent to permanently improve the realty. o They pass with ownership of the land.  Defenses o Destruction of Premises without fault  If the leased premises are destroyed without the fault of either the landlord or the tenant, no waste is involved.  Lease Shifted burden of repair to tenant o CL, historically: T was liable for any loss to the property including loss due to force of nature. o Now: T may terminate the lease when the premises are destroyed w/out T‘s fault  Tenant must promptly report deficiencies to landlord  Duty to not use premises for illegal purpose  General Doctrine o If T uses the premises for any illegal purpose, the L may terminate the lease OR obtain damages and injunctive relief. Occasional unlawful conduct by the tenant does not breach this duty.  Occasional unlawful conduct exception  Landlord remedies  Duty to pay rent  If T breaches this duty and is in possession of the premises, the L‘s only options are to evict through the courts continue the relationship and sue for the rent.  If the L moves to evict, she is nonetheless entitled to rent from the T until the T, who is now a T at sufferance, vacates.  The L is not permitted to retain a security deposit beyond the damages actually suffered.  Landlord cannot self help to change the locks, etc.  If T breaches this duty but is out of possession: Ex: T wrongfully vacates with time left on a term of years lease o Surrender:  L could choose to treat T‘s abandonment as an implied offer of surrender, which L accepts.  If unexpired term is greater than one year, surrender must be in writing to meet the SOF. o Ignore the abandonment and hold T responsible for unpaid rent, just as if T were still there. (Minority states). o Re-let the premises on the wrongdoer tenant‘s behalf, and hold him or her liable for any deficiency.  Abandonment of premises by tenant  General doctrine  13 - If the tenant unjustifiably abandons the property, the majority view is that the landlord has a duty to mitigate damages by seeking to relet the premises. o If the landlord repossesses and or relets, the T‘s liability depends on whether the L has accepted the surrender.  Landlord remedies o If surrender is not found, the T is liable for the difference btw the promised rent and the rent received from reletting. o If surrender is found, the T is free from any liability accruing after abandonment. o Landlord‘s resumption of possession for himself constitutes acceptance of surrender.  Constructive eviction and tenant remedies o Substantial Interference  Due to L‘s actions or failure to act: chronic problem. o Notice  T must tell L about the problem and L must fail to act meaningfully (safeguard on behalf of L). o Goodbye  T must vacate.  Duty to Third Parties  T is responsible for keeping the premises in reasonably good repair.  T is liable for injuries sustained by third parties invited, even where L promised to make all repairs. o Landlord‘s Duties  Duty to deliver possession  Statutes in most states require the landlord to put the tenant in actual possession of the premises at the beginning of the leasehold term. (L in breach if he has not evicted a hold-over tenant at begin. Of lease term).  Quiet Enjoyment  Every lease has an implied covenant that neither the L nor a paramount title holder will interfere with the T‘s quiet enjoyment and possession of the premises.  Warranty of Habitability  Implied covenant of habitability into residential leases.  This is nonwaivable. o In event of breach, L may:  Terminate the lease;  Make repairs and offset the cost against future rent;  Abate the rent to an amount equal to the fair rental value in view of the defects; or  Remain in possession, pay full rent, and sue for damages.  Does not apply to commercial property. o Assignments and Subleases  Assignment  A complete transfer of the entire remaining term of a lease is an assignment.  If there is time reserved for the original tenant, it‘s treated as a sublease.  L can prohibit T from assigning or subletting without L‘s prior written approval.  Once L consents to one transfer by T, L waives the right to object to future transfers by that T, unless L expressly reserves the right  Assignee and L are in privity of estate and each is liable to the other with respects to their interests to the property.  Sublease  If the tenant retains any part of the remaining term (other than a right to reenter upon breach), the transfer is a sublease.  L and sublessee are in neither privity of estate nor privity of K. III. CONCURRENT ESTATES o Joint Tenancy  Distinguishing Feature is the right of survivorship.  When one joint tenant dies, the property is freed from her concurrent interest (her survivors do not succeed to it).  CL: Require four unitites: Time, Title, interest and possession to create a J.T. The interests of the JT‘s must be equal in every way.  Can sever the right of survivorship and a T.I.C. results if there is a Inter Vivos Conveyance, Foreclosure and property is sold.  Leases: States are split as to whether one JT‘s lease creates a severance. o Tenancy in Common  Each tenant has a distinct, proportionate undivided interest in the property. o 14 -  There is no right of survivorship.  May be terminated by partition.  See chart on 18. IV. EASEMENTS o General Doctrine  The grant of a nonpossessory property interest that entitles its holder to some form of use or enjoyment of another‘s land, called the servient tenenment.  i.e. the priv. to lay utility lines on another‘s land.  Can be affirmative or negative o Affirmative Easement  The right to do something on servient land  By Prescription, Implication, Necessity, Grant o Negative Easement  Entitles its holder to prevent the servient landowner from doing something that would otherwise be permissible.  Generally recognized in four categories:  Light: Don‘t build to obstruct light.  Air:  Support  Stream Water from artificial flow  CA: Scenic View  CAN ONLY BE CREATED EXPRESSLY, BY WRITING SIGNED BY THE GRANTOR. o Appurtenant or Gross  Easement is appurtenant when it benefits its holder in his physical use or enjoyment of his property.  Two parcesl involved.  Dominant land reaps the benefit  Servient land which bears the burden  Passes automatically with the dominant tenement, regardless of whether it is even mentioned in the conveyance.  Easement in Gross  Confers upon its holder only some personal or pecuniary advantage that is not related to his use or enjoyment of his land.  Servient land is burdened, however there is no benefit to dominant tenement.  Not transferable unless it is for commercial purposes. o Creation by Implication  Also known as the easement implied from existing use. o Enforcement o Termination  Release  A written release, given by the easement holder to the servient owner.  Merger  AKA: Unity of ownership o Easement extinguished when title to easement and title to servient land become vested in the same person.  Condemnation of the servient estates  By eminent domain, it will end the easement.  Destruction of the servient estate  Other than through the willful conduct of the servient owner will end the easement  End of Necessity  Expire as soon as the need ends unless created by express grant.  Prescription  The servient owner may extinguish the easement by interfering with it in accordance with the elements of adverse possession. o Continuous o Open and Notorious o Actual o Hostile to easement holder.  Abandonment  The easement holder must demonstrate by physical action the intent to never use the easement again.  Requires PHYSICAL action by the easement holder  Estoppel 15 - - Here, Servient owner materially changes his or her position in reasonable reliance on the easement holder‘s assurances that the easement will not be enforced o Easements by Prescription (see above—don‘t know why it‘s repeated)  General doctrine  Continuity requirement  Use must be exclusive V. LICENSES, PROFITS, COVENANTS & SERVITUDES o License – General Doctrine  Def: A license is a mere privilege to enter another‘s land for some delineated purpose.  Not subject to SOF  Freely revocable  Oral easement = a freely revocable license.  License estoppel theory  Estoppel will apply to bar revocation only when the licensee has invested: o Substantial $, labor or both.  License coupled with an interest  Invalid easement as a license o Profits – General Doctrine  Def: The profit entitles its holder to enter the servient land and take from it: The soil or some substance of the soil.  Exclusive v. Non-exclusive  Profits v. Ownership o Covenants – general doctrine  Requirements for Benefit to run: Where promisee‘s successor in interest may enforce:  Intent  Vertical Privity o Covenant runs to assignees of the original estate or any lesser estate, i.e., any succeeding possessory estate may enforce the benefit.  Touch and Concern o The benefit of the covenant must touch and concern the land if the promised performance benefits the covanantee and her successors in their use and enjoyment of the land.  Affirmative Covenant  A promise to do something related to the land  Negative Covenant  Restrictive Covenant  Promise to refrain from something related to the land. o Equitable servitude – General Doctrine  Def: Covenant that, regardless of whether it runs with the land at law, equity will enforce against the assignees of the burdened land who have notice of the covenant.  Remedy  Usually an enjunction  Enforcement  Enforceable by the promisee‘s successors, if : o The original parties so intended, and o The servitude touches and concerns the benefited property.  Defenses to enforcement o If person seeking enforcement is violating a similar restriction on his own land (unclean hands) o A benefited party acquiesced in violation of the servitude by one burdened party. o A benefited party acted in such a way that is a reasonable person who would believe the covenant was abandoned (estoppel). o Benefitted party fails to bring suit against the violator within a reasonable time (laches); or o The neighborhood has changed so significantly that enforcement would be inequitable. VI. SUPPORT o Lateral Support  Support of land in natural state by adjoining land  Support of land with buildings  An adjacent landowner is strictly liable for damage to buildings caused by excavation only if it is shown that the land would have collapsed in its natural state. Otherwise, he is liable for such damage if his excavation was done negligently. o Subjacent Support  An underground occupant of land (mining co.) must support the surface and buildings existing on the date the subjacent estate was created. Liability for subsequently erected buildings requires negligence.  16 - Interference with Underground waters  Riparian Doctrine o Water belongs to those who own the land bordering the water course. o Attach to all contingious tracts held by the same owner as on abuts the water. Can use water only in connection with the riparian parcel. o Natural Flow Doct:  Substantial or material diminution of the water‘s quantity, quality, or velocity is enjoinable. o Reasonable Use theory  One owner‘s use is not enjoinable unless it substantially interferes with the use of other riparian owners. o Natural vs. Artificial Use  Under either theory, natural prevail over artificial uses.  Prior Appropriation Doctrine o Individuals acquire rights by actual use. Appropriative rights are determined by priority of beneficial use. o If there is a decrease in flow, priority is accorded in terms of time of appropriation. Can be lost by abandonment. VII. CONVEYANCING o Land Sale Contract  SOF applicable  Doctrine of Equitable Conversion  Once a contract is signed, equity regards the buyer as the owner of the real property. The seller‘s interest is considered personal property (rights of proceeds from sale).  Risk of Loss  If property is destroyed (without fault of either party) before closing, the majority rule places the risk on the buyer.  Passage of Title on Death  If a party to a land sale K dies before the K is completed, the seller‘s interest passes as personal property and the buyer‘s interest passes as real property.  Marketable title  Implied warranty that seller will provide marketable title at closing: Must be free of questions that present an unreasonable risk of litigation. o Defects in Record Chain of Title  Title may be unmarketable because of a defect; e.g., variation in land description in deeds, defectively executed deeds, etc.  On MBE, title acquired by Adverse Possession is unmarketable. o Deeds  Wild Deeds:  A recorded deed that is not connected to the chain of title. It does not impart constructive notice because a subsequent purchaser could not feasibly find it.  Covenants in General Warranty Deed  Statutory Special Warranty Deed  Quitclaim Deed  Releases whatever interest the grantor has. No covenants of title are included or implied.  Estoppel by Deed  If grantor purports to convey property that she does not own, her subsequent acquisition of the estate will automatically insure to the benefit of the grantee. This doctrine applies where the conveyance was by warranty deed, or where the deed purported to convey a particular estate. It is usually applicable to quitclaim deeds. o Covenants of Title  General Warranty Deed  Covenant of Seisen  Covenant of Right to Convey  Covenant Against Encumbrances  Covenant for Quiet Enjoyment  Covenant of Warranty  The special warranty deed  Grant in a deed creates by implication two limited assurances against the acts of the grantor: o That the grantor has not conveyed the same estate or any interest therein to anyone other than the grantee; and  17 - o That the estate is free from encumbrances made by the grantor.   Quitclaim Deed  Difference among all these: the scope of title assurance.  Releases whatever interest the grantor has. No covenants of title are included or implied. o Recording  If B is a Bona Fide Purchaser, and thus has no notice, and we are in a notice jurisdiction, B wins, regardless of whether or not she records before.  If B is a Bona Fide Purchaser, and we are in a race-notice jurisdiction, B wins if she records properly before A does.  Notice:  Actual o Prior to B‘s closing, B sets literal knowledge of A‘s existence.  Inquiry o Whether he looks or not, B is on inquiry notice of whether an exam of the land would show.  Record Notice o B is on record notice of A‘s deed if at the time B takes, A‘s deed was recorded properly.  The Shelter Rule: o Mortgages  Effect of Foreclosure  Under which the property is sold to satisfy the debt in whole or in part  Redemption in Equity o At any time prior to the foreclosure sale, the mortgagor may redeem the property by paying the amount due. If the note or mortgage contains an acceleration clause, the full balance of the note or mortgage must be paid to redeem. Cannot be waived in mortgage itself.  Land Records – Unrecorded Transactions VIII. ADVERSE POSSESSION o General Doctrine  Title by adverse possession results from the operation of the statute of limitations for trespass. If the owner does not, within the statutory period, take action to eject the possessor who claims adversely to the owner, the title vests in the possessor. o Requirements  Open and Notorious possession  Actual and Exclusive Possession  Continuous Possession  Hostile while under claim of right. 18 TORTS Example of a structure for an answer: [State the Issue] ―Plaintiff is suing Def. for a battery.‖ [State the Prima Facie] ―To establish a prima facie case for battery, Plaintiff must prove…‖ [Apply the law to facts] ―Here, Plaintiff will show…‖ (make sure your discussion analyzes each element of the causes of action) [State your conclusion] [Raise applicable defenses] ―Defendant may assert privilege of self-defense. Defendant must show…‖ [If applicable, raise General Consideration] ―Defendants may be vicariously liable under respondeat superior. To establish this, Plaintiff must show…‖ 1. Intentional Torts a. Prima Facie Cases i. Battery 1. Harmful or offensive contact with plaintiff‘s person ii. Assault (I.T.) 1. A reasonable apprehension (knowledge) by plaintiff of an immediate harmful or offensive contact with his/her person 2. Words Alone lack immediacy 3. Doctrine of Apparent Ability a. Unloaded gun: If P doesn‘t know, he will win if he lacks info as to unloaded gun. iii. False Imprisonment 1. An act confining the plaintiff to a bounded area. 2. Omission can be an act of restraint a. This will happen when there is a preexisting duty on part of def. to help plaintiff move about. i. E.g.: Person will the disability needs a wheelchair: airlines don‘t do anything = F.I. 3. Need to be aware of F.I. or be harmed by F.I. iv. Intentional Infliction of Emotional Distress 1. Outrageous conduct causing severe emotional distress 2. Outrageous conduct: If it exceeds all bounds of decency tolerated in a civilized society. 3. Mere insults not outrageous. Cussing is not outrageous. 4. Look for plus factors 5. Conduct can be continuous and repetitive 6. If Def. is common carrier or innkeeper; marginal outrageous behavior could be IIED. 7. Plaint. Is a member of a fragile class of persons: Young Children, Elderly People, Pregnant Women: Def. has to know she is pregnant. 8. Exploit. Of someone‘s phobias or sensitivity is outrageous. 9. Plaintiff must suffer severe distress a. Presupposes a defendant who intends to upset the P. b. Just needs to be severe distress. c. If P is described as mildly upset, then denied relief. v. Trespass To Chattels/Conversion 1. Both torts deal with interference with personal property 2. TTC: Some damage to plaintiff‘s personal property interest a. Entitled to recover cost of repair. 3. Conversion: Great damage to plaintiff‘s personal property interest a. Recover full value of item in question. b. Forced sale, really. vi. Trespass to Land 1. A physical invasion of plaintiff‘s land. 2. Can be on foot or in vehicle 3. Penetration of land must be physical. vii. Nuisance 1. Unreasonable interference with use and enjoyment of property 2. Public 3. Private b. Defenses i. Consent 1. Was the privilege available on these facts? a. Did plaintiff have capacity? i. Must have capacity ii. Children can‘t consent to inappropriate, Adult things. 19 2. iii. Mentally disable and drunkards cannot consent. Was the consent expressly given? a. Words spoken or written that grant def. permission to behave in what would otherwise be a tortious manner. i. Exception: 1. Express consent is disregarded if there was fraud or duress involved. 2. Must be informed consent. 3. Implied by custom and usage or plaintiff‘s conduct? a. Agreement to engage in an activity where certain contacts are routine, there is implied consent. (sports). ii. If Yes, did defendant stay within the scope? 1. If Def. exceeds it, they will be liable for the tort. 2. Consent isn‘t all or nothing. 3. Medical Procedures: a. Go in for knee and given a nose job: Battery. Doctor exceeded scope. c. Defense Privileges i. Self-Defense 1. Force must be responsive and symmetrical to the attack. 2. May use deadly force 3. Involving the bodily security or someone else‘s bodily security. 4. If invasion is over with, there is no right to the protective privileges. 5. No revenge 6. Reasonable belief that tort is being or about to be committed on defendant. ii. Defense of Others 1. Force must be responsive and symmetrical to the attack. 2. Same as above. 3. Tort is in fact being committed or about to be committed on third person. iii. Defense of Property 1. May not use deadly force to protect property. 2. Reasonable belief that tort is being or about to be committed on property. iv. If yes, did defendant use reasonable force? d. Necessity (Applicable only to property Torts): i. If private necessity, defendant pays for actual damages. 1. Private Necessity: Only a limited defense. 2. Liable for damages. e. Miscellaneous Intentional Torts i. Wrongful Institution of legal proceedings and Abuse of process 1. Prof. Resp. Crossover. ii. Business Torts 1. Interference with contractual relationships. 2. Interference with prospective advantage a. Problem: Damages are Speculative. 3. Trade Libel a. Special damages required. b. Modernly, courts will grant injunction. DEFAMATION/PRIVACY (WATCH FOR CON LAW CROSSOVER) a. Defamation i. Common Law Prima Facie Case 1. Defamatory Statement 2. Of and Concerning Plaintiff 3. Publication 4. Damages a. Injury to reputation – presumed if libel or slander within four slander per se categories: i. A statement about a plaintiff‘s business or profession is per se. ii. A statement that the plaintiff committed a crime of moral turpitude. 1. Ex: Accusing one of molesting a kid, etc. iii. A Statement imputing unchastity to a woman. ONLY APPLIES TO WOMEN. 1. Ex. Suzi is a slut. iv. A statement that a plaintiff suffers from a Loathsome disease. ii. Constitutional Issues 1. Plaintiff Must Prove Falsity 2. Fault 2. 20 3. Status of Plaintiff Status of Subject Matter Standards of Fault i. New York Times – Malice ii. Gertz v. Welch – Negligence 3. Defenses a. Truth (if the matter is not one of public concern) b. Absolute or qualified privilege 4. Absolute Privileges a. Based on the status of the speaker, who the def. is: Privileg. i. Spouses 1. If a married man says someone defamatory about a third person to his wife, it is not defamatory because he has an absolute privilege to say or write anything to his wife. 2. Marriage is an important notion. ii. Officers to branches of the government in course of their duties. 1. Judicial branch: Extends to lawyers, witnesses and judge. 2. Also applies to Exec. And Legis. 5. Qualified Privilege a. Based on the occasion or purpose of the speech. i. Arises in cases where there is a public interest in promoting candor/truthfulness. 1. Ex: a. Letters of recommendation and forms of references for employment. b. Credit reporting. c. Info to investigating police officers. ii. Reasonable belief that what you are saying was accurate. iii. Defendant must confine themselves to the matter at hand. If extraneous info is brought up, you lose the privilege. b. If the utterance that the def. made is a matter of public concern, then the PLAINTIFF is obligated to prove two ADDITIONAL elements. i. Plaintiff has to prove the falsity of the statement as part of his case and chief. 1. Truth, here, is no longer an affirmative defense. We are asking plaintiff to prove the affirmative. ii. In a public concern case, Plaintiff must show fault on the part of the defendant. 1. Plaintiff must show that Def. did not have a reasonable or good faith basis for the statement. 2. If the plaintiff is a public figure, a. Plaintiff must show that def. knew it was false and spoke it anyway or spread a lie recklessly (reckless disregard). 3. If Plaintiff was a private figure, a. Plaintiff only has to show that Def. was negligent. b. Invasion of Privacy i. Appropriation by defendant of Plaintiff‘s name or picture for defendant‘s commercial advantage ii. Intrusion into plaintiff‘s privacy or seclusion iii. Publication of facts placing plaintiff in a false light iv. Publication of private facts about plaintiff NEGLIGENCE a. Prima Facie Case i. Duty of Care 1. Foreseeable Plaintiff 2. Standard of Care ii. Breach 1. Fact discussion as to whether defendant met adopted standard of care 2. Violation of statute 3. Res Ipsa Loquitur – ―But for‖ iii. Causation 1. Actual (causation in fact – ―but for‖) 2. Proximate (based on lack of foreseeability) a. Direct cause case b. Indirect cause case iv. Damages b. Defenses a. b. c. 21 4. 5. 6. i. Contributory Negligence 1. Handful of states a. All recovery is barred where P is contributorily liable unless Def. had the last clear change to avoid the risk. ii. Assumption of the risk 1. Risk has to be known Strict Liability a. Strict Liability for dangerous and trespassing animals b. Strict Liability for Abnormally Dangerous Activities i. Activity involves serious risk of harm ii. Activity cannot be performed without risk of serious harm regardless of due care, and iii. Activity is not common in particular community c. Still have to prove proximate cause and damages. Products Liabilities a. Theories i. Strict products liability ii. Negligence iii. Implied warranties iv. Express warranty/misrepresentation b. Strict Products liability i. Defective products: Three types 1. product is defectively manufactured 2. product is defectively designed a. Product was not safe for its intended use, or b. Product could have been made safe without serious impact on its price or utility 3. Failure to adequately warn a. Causation i. Actual ii. Proximate b. Damages i. Same as negligence – many courts will deny recovery if only economic loss is involved. c. Negligence (same as any negligence action) i. Duty 1. standard of care 2. foreseeable plaintiff ii. Breach (note: unlike strict products liability, defendant‘s fault must be established) iii. Causation 1. Actual 2. Proximate iv. Damages d. Implied Warranty i. Implied warranty of merchantability or fitness for ordinary purpose ii. Implied warranty of fitness for a particular purpose e. Express Warranty/Misrepresentation General Considerations a. Are there two or more defendants? i. If so, think about: 1. Vicarious liability (liability for someone else‘s tortious conduct) a. Respondeat superior (common) i. Employer/employee relationship ii. Tort committed within the scope of employment b. Independent Contractor – generally, principal not liable except: i. Inherently dangerous activity or ii. Nondelegable duty c. Also, partner or joint venturer, driver of automobile, bailees, children and patron of tavern 2. Joint and Several Liability a. Releases b. Contribution c. Indemnification b. Did someone die? i. If so, think about survival acts/wrongful death acts c. Is defendant an immediate family member, government or charity? 22 7. 8. i. If so, think about tort immunities. Anticipated Tresspassor (put under duty for negligence analysis) a. Where a landowner foresees trespassors, the landowner has a duty to warn of known artificial conditions that present serious risk of bodily harm/ Attractive Nuisance a. Where a landowner has an attractive nuisance on his land, the landowner may have the duty to make the artificial condition safe or have a greater duty than to just warn the trespassor. 23 Bar Breaker Outline: Big Picture Questions: o A lawyer‘s Duty to the Client  A lawyer must:  Communicate with the client  Act competent in representing the client  Not reveal or use client‘s confidences  Avoid Conflicts of Interest  Render Honest and Candid Advice  Safeguard a Client‘s Money and Property  Withdraw from a case properly  Not Charge Unreasonable Fees  Act with Reasonable Diligence. o A Lawyer‘s Duty as an Advocate  A lawyer must:  Avoid Frivolous claims and contentions  Be candid with the court  Be fair to the opposing party and counsel  Preserve the impartiality and decorum of the court  In addition: o Special responsibilities are owed by prosecutors o Is any lawyer Advertising Issue Present? Bar Bri: Professional Responsibility I. The Attorney‘s Duty to the Client o The duty of loyalty o The duty of silence/Confidentiality  Gen. Rule: You can‘t reveal anything related to the representation of a client without her consent  The duty of confidentiality applies regardless whether the client requested it be kept ―confidential‖ or whether its revelation might harm or embarrass the client.  Duty of confidentiality can attach before a lawyer-client relationship is formed, or even if none is formed.  Distinguish attorney-client privilege  Narrower evidentiary rule 24 - - - A/C priv. allows a client and his lawyer to refuse to testify about confidential communications between them or their agents.  Covers only communications pertaining to legal services, not other subjects like business tactics or political consequences.  Under CA evidence code, duty of confidentiality continues indefinitely, even after formal representation has ended.  Exceptions  Client consents after consultation  Crimes o Prevent or Mitigate death or substantial bodily harm.  ABA does not require a criminal act  In CA: must first, if reasonable under the circumstances:  Makes a good faith effort to persuade the client not to commit the act, and  Inform the client of your decision to reveal his confidences.  Fraud or Financial Crimes o CA: No financial exception. o ABA: Yes, if used or is using your services to commit the crime, and the disclosure would prevent or mitigate substantial financial loss. o The duty of Competence o The duty of financial integrity II. The Attorney‘s Duty to Third Parties o The duty to opposing parties in litigation o The duty to accept representations o The special duty of prosecutors III. The Attorney‘s Duty to the Court o The duty of Candor o The duty of honesty o The duty to witnesses and jurors IV. The Attorney‘s Duty to the Profession o The duty to avoid unauthorized practice of law o The duty to avoid false or misleading advertisements o The duty to not improperly solicit clients  25 Civil Procedure Does the Court Have the Authority to Decide the Dispute o Does the court have authority over the parties?  Personal Jurisdiction  Traditional Ways of asserting jurisdiction o Domicile o Presence in state when served o Consent  Appearing in action  By Contract  Appointment of agent for service  Implied consent, e.g. 26 AGENCY AND PARTNERSHIP Bar/Bri Agency o Three Agency Problems  Liability of Principal to Third-Parties for torts of an agent  Liability of Principal to third-parties for contracts entered by an agent  Duties which agents owe to principals o Liability of Principal for Torts of Agent – Respondeat Superior or Vicarious Liability  Issue: Whether the principal will be vicarious liable for torts committed by agent.  Two-Part Test: Principal will be liable for torts committed by agent if:  (1) a principal-agent relationship, AND  (2) the tort was committed by the agent within the scope of that relationship. o The Principal-Agent Relationship  Principal-agent relationship requires (ABC‘s)  Assent o There must be an informal agreement btw a principal who has capacity and the agent  Voluntary arrangement  Benefit o Agent‘s conduct must be for the principal‘s benefit.  And CONTROL o The principal must have the right to control the agent, by having the power to super use the manner of the agent‘s performance.  Sub-Agents:  There can be no vicarious liability for a sub-agent‘s tort unless there is assent, benefit and the right to control the subagent tort feasor.  Borrowed Agents:  There can be no vicarious liability for a borrowed agent‘s tort unless there is assent, benefit, and the right to control the borrowed agent tortfeasor.  Contrast Agent with Independent Contractor  Factors: o There is no right to control an independent contractor b/c there is no power to supervise the mannder of an I.C‘s performance. 27  - Without any right to control, I.C., there can be no vicarious liability for an independent contractor‘s tort.  Exceptions o Ultra-hazerdous activities:  If I.C. engages in tort during ultra hazardous tort o Estoppel:  If you hold out your I.C. with the appearance of agency, you will be prevented from denying vicarious liability.  Scope of Principal – Agent Relation Factors:  Three part multiple-factor test o Was conduct of the kind agent was hired to perform?  Was the conduct in the job description?  If so, it‘s likely to be w/in the scope o Did the tort occur ―on the job‖? Froluv v. Detour  Frolic: A new and Independent journey. If agent is on frolic, acting outside of scope.  Detour: A mere departure from an assigned task. Therefore, still within scope of employment. o Did the agent intend to benefit the principal?  If the agent, even in part, intended to benefit the principal, that‘s enough to call that conduct inside the scope of employement, and thus inside agency.  Intentional Torts  Rule: o Intentional torts are generally outside the scope of agency o Exceptions  Intentional torts are within the scope if the conduct was: (Each one of three can trump the rule)  Intentional conduct is still in scope if specifically authorized by the principal, or  Natural from the nature of employment  Motivated by desire to serve the principal II. Liability of Principal for Contracts Entered by Agent o Issue:  Whether principal is liable for contracts entered into by its agent.  One Test: Principal is liable for contract entered into by its agent if the principal authorized the agent to enter into the contract  There are four types of authority:  Actual express  Actual implied  Apparent or  Ratification  Actual Express Authority:  Principal used words to express authority to agent. o Rule: Oral, Private, Narrowly construed/tailored o Except:  Great Equal Dignities Doctrine:  If the contract itself, though, must be in writing then Express authority must also be in writing.  (Governed by SOF – Always in valves a land contract on the bar). o Express authority will be revoked by:  Unilateral act of either party, or  Death or incapacity of the principal  Except: Express authority cannot be revoked if:  The P gives the agent a durable power of attorney.  A durable power of attorney: Power of attorney is a written expression of authority to enter a K.  Conspicuous survival language makes power durable.  Actual Implied Authority  Authority which agent reasonably believes the principal has given, because: Rule: o 28 - - Necessity: There is implied authority to do all tasks:  Which are necessary to accomplish an expressly authorized task. o Custom: There is implied authority to do all tasks:  Which are customary performed by persons with agents title or position. o Prior Dealings:  Between the principal and the agent.  There is implied authority to do all tasks:  Which the agent believes to have been authorized to do from prior acquires and by the principal.  Apparent Authority o Two-part test  1. Principla ―Cloaked‖ agent with the appearance of authority, and  2. third party reasonably relies on appearance of authority  Secret Limiting Instruction: o Agent has actual authority, but principal has secretly limited that authority. o Agent acts beyond the scope of the limitation  Lingering Authority o Actual authority has been terminated. Afterwards, agent continues to act on principal‘s behalf.  Ratification o Authority can be granted after the contract has been entered, if:  Principal has knowledge of all material facts regarding the contract, and  Principal accepts its benefits/Complete K  Exception: Ratification cannot alter the terms of the contract o The Rules of Liability on the Contract  General Rules:  If no authority, principal is not liable on the contract. If no authority, agent is liable on the contract.  If authority, principal is liable on the contract. If authority, agent is not liable on the contract.  Exception:  If Principal is partially disclosed (only the identiy of principal concealed) or undisclosed (fact of principal concealed), authorized agent may nonetheless be liable at the election of the third-party. III. Duties Agent Owes to Principal o Duty to exercise reasonable care. o Duty to obey reasonable instructions (i.e., not lie or break the law). o Duty of Loyalty  Self-Dealing  Agent cannot receive a benefit to the detriment of the principal.  Usurping the principal‘s opportunity, or  Secret profits Partnership o Four Issue Areas:  Partnership Formation  Liabilities of Partners of Third-Parties  Rights and Liabilities Between Partners  Partnership Dissolution o I. General Partnership Formation  Formalities:  No formalities to becoming a general partnership.  Definitions  A general partnership is an association of two or more persons who are carrying on as co-owners of a business for profit.  Sharing of profits o The contribution of $ (capital or money) or services in return for the SHARE OF PROFITS creates a presumption that a general partnership exists. o II. Liabilities of General Partners to Third-Parties  Agency Principles Apply  Partners are agents of the partnership for carrying on usual partnership business. o 29 o  Partnership is bound by torts committed by partners in scope of partnership business.  Partnership is bound by contracts entered by partners with authority.  General Partners are Personally Liable for Debts of the Partnership  Incoming partner‘s liability for pre-existing debts? o Generally, incoming partners are not liable for prior debts, but any money paid in by the incoming partner to partnership can be used to satisfy those debts.  Dissociating (withdrawing) partner‘s liability for subsequent debts? o A dissociating partner retains liability on future debts until actual notice of dissociation is given to creditors OR o Until 90 days after filing a notice of dissociation with the state.  General Partnership Liability by Estoppel – ON BAR  One who represents to a third-party that a general partnership exists will be liable as if a general partnership exists.  Contrast Formation and Liability Within other Unincorporated Business Organizations  Limited Partnerships o Def: A Limited partnership is a partnership in which there is at least on general partner and at least one limited partner. Two different kind of parties o Formation:  You must file a limited partnership certificate that includes the names of all general partners o Liability and Control  General Partners:  Still personally liable for all limited partnership obligations.  General partners have a right to manage/control limited partnership.  Limited Partners  Have limited liability.  They are not liable for the obligations of the limited partnership itself.  They have limited control, and may not manage the business without forefeiting their limited liability status.  Registered Limited Liability Partnerships (RLLP) o Formation:  Must register by filing a statement of qualification PLUS  Annual reports. o Liabilities  For registered L.P., no partner is liable for the obligations of the partnership itself, even general partners, but you can also sue personally for wrongdoing.  Limited Liability Companies o Original Purposes:  It was to give its owners (members) the same limited liability of shareholders in a corporation and also, the benefits of partnership tax treatment. o Formation:  You must file the Articles of ORGANIZATION plus an  OPERATING AGREEMENT o Liabilities  Therefore, the members who are owners, are not liable for the debts and obligations of the company itself, like shareholders. o Partnership Characteristics:  Members Control, but articles may delegate control to managers.  Limited Liquidity  Member interests are not freely transferable.  Limited Life  Events of Dissolution  Therefore, LLC=  Limited Liability + limited liquidity + Limited life + Limited Tax III. Rights and Liabilities Between Partners  General Partners are Fiduciaries of each other and the partnership  Duty of Loyalty o Same as Agents o Must not  Engage in self-dealing  Usurp partnership opportunities 30      May not make a secret-undisclosed profit at the partnership expense. Action for Accounting/Remedies o The partnership may recover losses cause by the breach & o Also may disgorge profits made by the breaching partners. Partner‘s Rights in partnership property  Specific Partnership Assets o Watch for land, leases, or equipment, owned only by the partnership as specific partnership assets. o Therefore, no individual partner may transfer these assets without partnership authority.  Share of Profits and Surplus o Share is personal property owned as such individual partners.  Therefore, individual partners may transfer their share of profits and surplus to some third-party.  Share in Management o General Partners have a right to share in management. o Share is an asset owned by the partnership itself. o Therefore, no individual partner may transfer their share in management to some third party. o General Partnership Interest:  Relatively ill-liquid – difficult to transfer. Only 1/3 (share of profits) is liquid personal property.  Therefore, make sure you have an awareness of whether you have personal property or a specific partnership asset.  On Bar, it will be a close call. See Conflict.  Conflict between specific partnership assets and personal property. o Whose money was used to buy the property. o If partnership money was used to buy the property, it becomes partnership property. o If personal money was used, it becomes personal property. Management  Absent an agreement, each partner to EQUAL control (vote)  On Bar, probably.  Without an agreement on control, one partner, one rule. o Equal Control is the default rule. Salary  Absent an agreement, partners get NO SALARY.  Exception: o Partners do receive compensation for helping to wind up the partnership‘s business. Partner‘s share of profits and losses  Absent an agreement, profits are shared equally.  Absent an agreement, losses shared like profits. o If Agreement – silent on profits and losses:  Absent an agreement on profits, profits are shared equally.  Secondly, without an agreement on losses, they are shared just like profits, which would be equally, as well. o If Agreement – Profits shared 60/40.‖ Losses Shared?  Agreement will govern profits: 60/40  Without an agreement on losses, they are shared just like profits, which is here 60/40 as well. o If Agreement – ―Losses shared 60/40.‖ Profits shared?  Without an agreement on profits, they are shared equally. o Partner A puts up all of the money. Partner B does all of the work. Partner ship C gives the partnership its fine name. Partner D does nothing.  Profits shared  Without an agreement, Partnership profits are shared equally.  - IV. Dissolution o Key Definitions:  Dissolution:  Two different Kinds of partnership: RUPA o Happening of Agreement: First in a partnership at will, where there is no agreement, dissolution occurs automatically upon notice of express will of any single general partner to associate. 31 o - o Termination  Def: Real end of partnership.  Winding Up  Period between dissolution and termination in which the remaining partners must liquidate the partnership‘s assets to satisfy the partnership‘s creditors.  All action is here.  Partners are trying hard to sell-off assets to satisfy creditors. o Compensation and liability for winding up  Comensation for wind up  Partners do receive compensation for helping to winding up the business.  Partnership Liability for Winding up?  Does a partnership retain liability after its dissolution o Old Business:  The partnership, and therefore, its individual General partners retain liability on all transactions entered into to wind up old business with existing creditors. o New Business entered into during winding up  The partnership, and therefore, its individual Gen. Partners still retain liability on brand new transactions until actual notice of dissolution is given to creditors OR until 90 days after filing a statement of dissolution with the state.  Priority of distribution  Each level of priority must be fully satisfied (paid) before beginning the next level in this order: o First, creditors must be paid  All outside non-partner classic trade creditors must be paid and also all inside partners who have loaned money to the partnership must also be paid. o Second, capital contributions by partners must be paid  Paid in for partners for share of partnership.  Partnership owes the full repayment to its partners under full contributions.  Partnership is liable to repay its own partners for their capital contributions. o Profits and Surplus, and any  If paid creditors and partners for cap. Contributions,  Profits if any are shared equally without an agreement.  Rule: Each partner must be repaid his or her loans and capital contributions, plus that partner‘s share of the profits or minus that partner‘s share of the losses. MINI-REVIEW o Agency  Principal‘s Liability for Agent‘s Torts:  Assent, Benefit, Control plus Scope  No Vicarious Liability for independent contractor‘s torts  Intentional Torts, generally outside the scope.  Principal‘s Liability for Agent‘s Contracts  Express authority  Rule: Oral, except equal dignities, revocable, unless durable.  Implied authority  Necessity, custom or prior dealings  Apparent Authority  Principal Coaxed, plus 3rd party relies.  Ratification  Knowledge, plus acceptance of benefits  Nuances: Authorized agents are not liable unless undisclosed principal.  Duties Agent Owes Principal  Duty of Care  Duty of Obedience  Loyalty (Disgorge profits)  o Partnership  Formation  No General Partnership formalities  Association, two or more persons carrying on co-owners business association, for PROFIT.  Liabilities to Third Parties  General Partners are liable for all partnership obligations  Estoppel  representers are liable as if general partners. Upon Majority Vote: Secondly, in a partnership not at will, where there is an agreement, dissolution occurs only upon the happening of an event specified in the agreement, OR upon the majority vote of the partners to dissolve within 90 days of the dissociation of any single partner. Only begins the process of ending. 32 o Compare and contrast  Limited partners + registered limited liability partners + LLC members have limited liability.  Relations between partners  Fiduciaries  accounting for profits  Only the share of profits is liquid, transferable, personal property: nothing else is.  Without an agreement, Equal control, no salary, equal profits, and losses like profits. Dissolution  Definition:  Without an agreement, notice of express will of any single partner to associate  Priority  All outside + inside creditors  All capital Contributions  Profits, if any, shared equally without an agreement.  Distribution Rule  Each partner must be repaid their loans and capital contributions + their share of profits, but minus their share of losses.  REMEDIES OUTLINE Bar/Bri 1. Always look first to legal remedies then look to equitable remedies. a. First Evaluate the adequacy of legal remedies i. Legal Remedies Are: 1. Damages: Money 2. Restitution: Based on the theory that the Def. should not be unjustly enriched. Based on Benefit to Def. a. Money b. Replevin i. Recovery of specific personal property c. Ejectment: i. Recovery of specific real property b. After you have determined what legal remedies are, or may be inadequate, you can move on i. Equitable remedies are: 1. Restitution a. Constructive Trust i. Court imposed obligation on the defendant to convey specific property to the plaintiff. b. Equitable Lien i. Court-imposed security interest in specific property owned by the defendant c. Injunction i. Negative or mandatory order (in contract, a specific performance decree). Order of progression in analyzing Tort Problems a. Damages: Injury to the plaintiff arising out of the tort i. Actual damages: 1. Compensatory damages that seek to the put plaintiff back where he was before the tort. 2. Actual damages in tort, look to the past. ii. Nominal Damages: 1. A small, or nominal, amount of money available when no actual damages can be proved. iii. Punitive damages: 1. Punitive damages punish and deter. 2. They do not compensate for actual injury suffered by the plaintiff. 3. Remember that there must be some proportionality between actual or nominal damages AND punitive damages. 2. 33 3. 4. Further, Wealthy defendants pay more than poor defendants. Restitution i. Benefit unjustly retained by the defendant. There does not need to be any injury to the plaintiff. 1. Legal Remedies: a. Money: i. Look for benefit to the defendant. Sometimes called ―waive the tort and sue in assumpsit‖ b. Replevin: i. Recovery of specific personal property c. Ejectment: i. Recovery of specific real property. 2. Equitable Remedies a. Constructive Trust: i. Obligation to convey specific property to the plaintiff. b. Equitable Lien: i. Security interest in specific property. c. Injunction i. Order to the defendant to refrain from doing something (negative injunction), or to do something (mandatory or affirmative injunction). Order of Progression in Analyzing Contract Problems a. Damages: i. Injury to the plaintiff arising out of a breach of contract by the defendant. 1. Expectation damages: a. This is the benefit plaintiff expected to get out of the contract. b. Expectation damages look to the future. 2. Consequential Damages: a. There are damages to plaintiff in addition to the lost expectation. b. They must be foreseeable at the time the contract was entered into. 3. Liquidated Damages: a. These are damages specified in the contract. For liquidated damages clause to be valid, actual damages must be difficult to calculate, and the amount specified in the clause must be a reasonable approximation. b. If the clause is invalid, it is called a penalty. c. If the parties‘ intent is clearly expressed, liquidated damages may serve as a true alternative to performance. b. Restitation i. Money restitution: 1. Benefits unjustly retained by the defendant when there is a void or unenforceable contract, or where the plaintiff chooses not to sue on the contract, permitting recovery in quasi-contract or quantum meruit. 2. Remember that a breaching party may sometimes recover in restitution even though he or she has breached. c. Specific Performance i. Order to the defendant to specifically perform the contract. d. Special Remedies sometimes available i. Rescission: 1. In rescission, the contract is void or voidable, and the deal is called off. 2. Grounds for rescission a. Mistake i. Mutual 1. Rescission Granted 2. As to collateral fact, rescission denied ii. Unilateral 1. Rescission denied a. Exceptions: i. The non-mistaken knows or should know of the mistake. ii. Modern Trend: The mistakedn party would suffer undue hardship if there is no rescission. b. Misrepresentation i. Innocent 1. Rescission granted ii. Fraudulent 1. Rescission Granted c. Defenses i. Unclean Hands b. 34 ii. Laches iii. Election of Remedies iv. Estoppel ii. Reformation 1. Three steps: a. Determine if there is a valid contract b. Determine if there are grounds for reformation c. Determine if there are valid defenses 2. In reformation, the contract is valid and enforceable, but the written form of the contract is wrong. 3. The contract is rewritten correctly and is then enforced. 4. Grounds for reformation a. Mistake i. Mutual 1. Allowed ii. Unilateral 1. Denied b. Misrepresentation i. Reformation granted. ii. This is available in both innocent and intentional representation. iii. Rewriting reflects expressed intent of the parties. c. Defenses i. Laches ii. Sale to BFP 1. Reformation is NOT allowed where it would adversely affect the rights of a subsequent bona fide purchaser. iii. Parol Evidence Rule, Statute of Frauds and Negligence are not good defenses. Checklist for Granting Injunctive Relief In Tort a. IPFBD – I Put Five Bucks Down i. Look first for a breach of legal obligation. Has the defendant committed a tort, or is he or she about to? 1. Are the legal remedies INADEQUATE? a. Damages and money restitution: Damages may be inadequate because they are too speculative or too small to compensate fully for the actual injury. b. There may be a multiplicity of suits. c. The injury may be irreparable. d. There may be injury to the land. i. Replevin 1. Replevin may be inadequate if the defendant can keep the property by posting a bond. OR 2. The sheriff may be unable to find the property ii. Ejectment 1. Ejectment (Plus mesne? Damages) – Profits derived from unlawful possession. 2. Ejectment is an adequate remedy if the plaintiff only wants a trespassing defendant off his or her land. 3. Ejectment is an inadequate remedy if the plaintiff want removal of an encroaching structure. 2. Is a PROPERTY RIGHT Involved? a. Point out that most courts today protect both property and personal rights by injunction. 3. Is an Injunctive Decree FEASIBLE? a. Must the court exercise too much supervision? b. Is a negative or a mandatory injunction appropriate? 4. Should the hardships be BALANCED? a. Balancing may be required in two situations: i. Encroachment: If the encroachment is intentional, there will be no balancing. ii. Plaintiff will always win on this issue. iii. If the encroachment is innocent (including negligent), the court will balance, but will lean strongly in favor of the plaintiff seeking removal of the encroachment. b. Nuisance i. Always balance the hardships in a private nuisance case. 5. DEFENSES: a. Laches: i. The effect of the passing of time. ii. Has the P‘s inaction encouraged or allowed the Def. to act to his detriment? 4. 35 5. Unclean Hands: i. P must come into equity with ―clean hands.‖ ii. Must be related to the transaction in the suit. c. Freedom of speech i. First Amendment rule against prior restraint. ii. See exceptions for national security, and for trade libel, particularly in conjunction with another business tort. d. Criminal Act: i. Equity Maxim: 1. ―Equity will not enjoin a crime.‖ 2. See exceptions for nuisance and public nuisance, and partial exception for crime that also constitutes a tort. Checklist for Granting Specific Performance Relief in Contract a. IDFMD – ―I‘m Doing Fine Mom and Dad.‖ i. Look for a breach of a legal obligation. Is there a valid contract? Has the defendant breached the contract or is he or she about to? 1. Are the legal remedies INADEQUATE? a. Damages and money restitution: i. Damages may be too speculative or too small to compensate fully for the injury. ii. There may be a multiplicity of suits. iii. There may be irreparable injury. iv. Plaintiff may seek to recover unique chattel. v. A contract for purchase or sale of land may be involved. b. Replevin i. Defendant can post a bond. ii. The sheriff may be unable to find the property. c. Ejectment i. Typically not involved in an action on a contract 2. Are the terms of the contract sufficiently DEFINITE AND CERTAIN? a. Remember that the terms of a contract may be sufficiently certain to constitute a valid contract, but an equity court may still be unwilling to grant specific performance of that contract if it cannot tell exactly what the parties intended. 3. Is a specific performance decree FEASIBLE? a. Is there jurisdiction over the parties or the property? i. Watch for land outside the state. b. Is there too much supervision by the court? c. Is a negative injunction appropriate? i. Watch for personal service contracts where the employee tries to breach and to work for a competitor. 4. Is there MUTUALITY of obligation? a. Remember that the old test was whether the remedy of specific performance was mutually available (i.e., to both parties) at the time of contracting. b. The new test is the security of performance test. i. Under the new test, ask whether the performance of the plaintiff‘s obligations can be secured to the satisfaction of the court. 5. DEFENSES a. Laches: i. The Effect of the passing of time. ii. Has the plaintiff‘s inaction encouraged or allowed the defendant to act to her detriment? b. Unclean Hands i. Plaintiff must come into equity with ―clean hands.‖ ii. Must be related to the transaction in the suit. c. Freedom of Speech i. First Amendment rule against prior restraint. d. Hardship: i. IN a suit to specifically enforce a contract, a court of equity may refuse to enforce a contract in which there is inadequate consideration (low price) and there are onerous terms. b. 36 CONSTITUTIONAL LAW – OUTLINE BAR/BRI 1. a. Justiciable Case or Constroversy (RAMPSE) Ripeness (tested most) i. Ripeness is the question of whether a federal court may grant pre-enforcement review of statute regulation. 1. The hardship that will be suffered without preenforcement review 2. The fitness of the issues and the record for judicial review a. Does Fed. Court have before it all they need to decide the case? Abstention i. Federal Courts may not enjoin pending state court proceedings. Mootness i. If events after the filing of a lawsuit end the plaintiff‘s injury, the case must be dismissed as moot. 1. Plaintiff must have a live controversy. 2. Exception a. Wrong capable of repetition but evading review. i. Like Roe v. Wade b. Voluntary Cessation i. If D haults practice but is free to resume it at any time, case will not be dismissed as moot. c. Class Action Suits i. Least Tested ii. Will not be dismissed so that one member of a class has an ongoing injury. Political Question i. The political question doctrine refers to constitutional violations that the federal courts will not adjudicate. 1. Left to political/Elective brances 2. The Republican form of government clause a. Where people elect Reps and Rep‘s make the law b. Challenges to the President‘s conduct of foreign policy i. Tested on MBE c. Challenges to impeachment and removal process d. Challenges to partisan gerrymandering i. Where political party controls legis. Draw election district areas to maximize safe seats. Standing (tested most) i. Whether the P is the proper party to bring a matter to the court for adjudication. b. c. d. e. 37 f. 2. ii. Injury: P must allege that he or she has been injured or imminently will be injured. 1. Plaintiffs only may assert injuries that they have personally suffered. 2. Plaintiffs seeking injunctive or declaratory relief must show a likelihood of future harm. iii. Causation and redressability 1. The P must allege and prove that the D caused the injury so that a favorable court decision is likely to remedy the injury iv. No third Party Standing 1. A P cannot assert a claim of others, of third parties, who are not before the court. a. Exceptions: i. Third party standing is allowed if there is a close relationship between the P and the injured third party (parent and child, ex.; Phys./patient). ii. Third party standing is allowed if the injured third party is unlikely to be able to assert his or her own rights iii. An organization must sue for its members, if 1. the members would have standing to sue; 2. the interests are germane to the organization‘s purpose 3. neither the claim nor relief requires participation of individual members. v. No Generalized Grievances 1. The P must not be suing solely as a ―citizen‖ or as a ―taxpayer‖ interested in having the government follow the law. a. Exception: i. Taxpayers having standing to challenge government expenditures as pursuant to federal statutes as violating the establishment clause 1. Does not apply to fed. Grants of property. 2. General expenditures can‘t give financial aid to parochial schools. 3. Money given to churches is a popular topic. Eleventh Amendment i. Principle of Sovereign Immunity 1. The Eleventh Amendment bars suits against state in federal court 2. Sovereign immunity bars suits against states in state courts or federal agencies. a. Exceptions i. States may be sued under the following circumstances 1. Waiver is Permitted a. Must be expressed not implied 2. States may be sued pursuant to federal laws adopted under Section 5 of the 14 th Amendment. a. Congress cannot authorize suits against states under other constitutional provisions. 3. The federal government may sue state governments 4. Bankruptcy Proceedings a. Sov. Immun. Does not apply here ii. Suits against state officers are allowed 1. State officers may be sued for injunctive relief 2. State officers may be sued for money damages to be paid out of their own pockets – if personally liable. 3. State officers may not be sued if it is the state treasure that will be paying retroactive damages. What Kind of Constitutional Issue (Who is action and under what power?) ii. Separation of Powers – Branches of Government 1. Judicial (see above under Justiciability) a. Supreme Court Review i. Occasionally tested for MBE, but never in Essay ii. Virtually all cases come to the Supreme Court by writ of certiorari 1. All cases from United States courts of appeals come to the Supreme Court by the Writ of Certiorari 2. Discretionary Review 3. Appeals exist for decisions of three-judge federal district courts 4. The Supreme Court has original and exclusive jurisdiction for suits between state governments. a. Only court that can hear this type of dispute. b. Generally, the Supreme court may hear cases only after there has been a final judgment i. of the highest state court, ii. of a United State Court of Appeals OR iii. Of a three-judge federal district court 38 For the Supreme Court to review a state court decision, there must not be an independent and adequate state law ground of decision. If a state court decision rests on two grounds, one state law and one federal law, if the Supreme Court‘s reversal of the federal law ground will not change the result in the case, the SC cannot hear it. 2. Lower Federal Court Review a. Federal Courts (and state courts) may not hear suits against state governments iii. Executive (foreign and Domestic Powers and limitations, especially executive privilege) 1. Foreign Policy a. Treaties i. Treaties are agreements between the US and a foreign country that are negotiated by the President and are effective when ratified by the Senate. ii. Prevail over conflicting state laws iii. Treaty v. Federal Statute  The one adopted last in time controls. iv. Treaty v. US Constitution  Treaty is invalid. b. Executive agreements i. An executive agreement is an agreement between the US and a foreign country that is effective when signed by the Pres and the head of foreign nation. 1. No senate approval required. ii. EA‘s can be used for any purpose. iii. EA‘s prevail over conflicting state laws, but never over conflicting fed. Laws or the Constitution. Is Senate Approval Req.? Conflicts with State Law Conflicts w/ Fed. Statute Conflicts with Const. Treaties Yes Treaty Controls Whichever Was adopted Constitution Controls last in time controls Executive Agreement No Executive Agreement Federal Statute Controls Constitution Controls. Controls c. Powers As Commander-In-Chief i. The president has broad powers as Commander-In-Chief to use American troops in foreign countries. ii. Never deemed unconstitutional 2. Domestic Affairs a. The appointment and Removal power i. The appointment power 1. The president appoints ambassador‘s, federal judges, and officers of the United States. a. (i.e., Attorney Gen., Secretary of State 2. Congress may vest the appointment of inferior officers in the President, the heads of departments or the lower federal courts. a. In other words, Congress has discretion over inferior officers. 3. Congress MAY NOT give itself or its officers the appointment power. ii. The Removal Power 1. Unless removal is limited by statute, the President may fire any executive branch officer. a. For Congress to limit removal, it must be an office where independence from President is desirable and can only limit removal where there is good cause. 2. Impeachment and Removal a. The President, Vice President, federal judges and officers of the United States can be impeached and removed from the office for treason, bribery, or for high crimes and misdemeanors. b. Impeachment does not remove persons from office c. Impeachment by the house of representatives requires a majority vote; conviction in the Senate requires a 2/3 vote. 3. Immunity a. The president has absolute immunity to civil suits for money damages for any actions while in office. However, the President does not have immunity for actions that occurred prior to taking office. 4. Executive Privilege a. The President has executive privilege for presidential papers and conversations, but such privilege must yield to other important government interests. 5. Pardon a. The President has the power to pardon those accused or convicted of federal crimes, not state crimes. i. Exception: If there has been an impeachemtn there can never be a pardon for the offenses that lead to impeachment. ii. President may pardon only for criminal, not civil liability. iv. Legislative (source of power and limitation) c. 39 g. h. Congress a. Federalism i. Preemption 1. The Supremacy Clause of Article VI provides that the Constitution, and laws and treaties made pursuant to it, are the supreme law of the land. 2. Express Preemption a. If a fed. Statute explicitly says that fed. Law is exclusive, state law is preempted. 3. Implied Preemption a. Even if fed. Statute is silent, preemption may still exist. i. If federal and state laws are mutually exclusive, federal law preempts state law. b. If state law impedes the achievement of a federal objective, federal law preempts state law. c. If Congress evidences a clear intent to preempt state law, federal law preempts state law. 4. States may not tax or regulate federal government activity (Inter-governmental immunity) b. Dormant Commerce Clause i. The dormant commerce clause (Negative implications of the commerce clause) 1. State and local laws are unconstitutional if they place an undue burden on interstate commerce. Federal Legislative Powers i. Source of Power: Congress‘ authority to act: There must be express or implied Congressional power: No general federal police power exception: D.C. State government has Police Power. 1. Commerce Clause a. Congress may regulate the channels of interstate commerce i. Places where commerce occurs: internet, highways, etx. b. Congress may regulate the instrumentalities of interstate commerce and persons or things in interstate commerce i. Instrumentalities: things that facilitate commerce: trucks, planes, telephones, etc. c. Congress may regulate economic activities that have a substantial effect on interstate commerce. i. In the area of non-economic activity, a substantial effect cannot be based on cumulative impact 1. Wheat for home consumption ruled against farmer for substantial effect. 2. Spending a. Congress may spend for the general welfare b. Spending for common defense and general welfare. 3. Taxing a. Congress may tax and spend for the general welfare b. May tax to raise revenue 4. Taking Property 5. Citizenship 6. Civil Rights 7. Foreign Affairs 8. War 9. Elections ii. Necessary and Proper Clause 1. Congress may adopt all laws to carry out its enumerated powers, its authority. iii. Limitations on Power of 10th Amendment State Interference with Federal System i. Preemption (By enumerated power) ii. Dormant Commerce Clause 1. Discrimination against out-of-state interests 2. Undue burden on interstate commerce iii. Privileges & Immunities Clauses, Art. IV and 14th Amendment 1. Not state may deny citizens of other states of privileges and immunities it accords it own citizens 2. It is always a wrong answer on the MBE unless the question involves the right to travel. 3. Does the state law discriminate against out of staters? iv. Analysis if the law does not discriminate under P&I 1. The privileges and immunities clause of Article IV does not apply 2. If the law burdens interstate commerce, it violates the dormant commerce clause if its burdens exceed its benefits. v. Analysis if the law discriminates against out of staters 1. If the law burdens interstate commerce, it violates the dormant commerce clause unless it is necessary to achieve an important government purpose 1. 40 Exception: i. Congressional Approval ii. The market participant excetion 1. A state or local government may prefer its own citizens in receiving benefits from government programs or in dealing with government-owned business. 2. If the law discriminates against out-of-staters with regard to their ability to earn their livelihood, it violates the privileges and immunities clause of Article IV unless it is necessary to achieve an important government purpose. a. The law must discriminate against out-of-staters b. The discrimination must be with regard to civil liberties or important economic activities (ability to earn a living). c. Corporations and aliens cannot use the P&I clause d. The discrimination must be necessary to achieve an important government purpose 3. CONSTITUTIONAL LAW CHART: Comparison of DCC and P&I Dormant Commerce Clause P&I Clause Does not require discrimination against out-of-staters in order to Requires discrimination against out-of-staters in order to apply. apply. Requires Burden on interstate commerce Requires discrimination with regard to civil liberties or important economic activities. Corporations and aliens can sue under it. Corporations and aliens cannot sue under it. Exceptions: Congressional approval and the market participant No Exceptions exception. vi. State taxation of interstate commerce 1. Rarely tested a. States cannot use their tax systems to help in-state business b. A state may only tax activities if there is a substantial nexus to the state c. State taxation of interstate businesses must be fairly appoirtioned. vii. Full faith and Credit 1. Courts in one state must give full faith and credit to judgments of courts in another states, so long as: a. The court that rendered the judgment had jurisdiction over the parties and the subject matter. b. The judgment was on the merits. c. The judgment is final. III. INDIVIDUAL RIGHTS – SSTRREPS a. State Action – Analyze First i. Is there government Action? 1. No protection for private conduct unless it viol. The 13 th Amendment (involuntary servitude/vestiges of slavery). a. Private conduct need not comply with the constitution. 2. Congress, by statute, may apply constitutional norms to private conduct a. The Thirteenth Amendment can be used to prohibit private race discrimination i. Slavery and involuntary servitude are prohibited. ii. Congress is authorized to enforce the law, and has broad power to prohibit private race discrimination. b. The commerce power can be used to apply constitutional norms to private conduct i. Fed. Statutes: 1964 Civil Rights Acts: Under commerce 1. Hotels and Restaurants can‘t discriminate c. Congress cannot use Section 5 of the 14th Amendment to regulate private behavior i. Congress can only regulate state and local governments 3. Exceptions a. Situations where private conduct must comply with the Constitution i. The public Function Exception 1. The Constitution applies if a private entity is performing a task traditionally, exclusively done by the government a. i.e., Co. virtually owned the town ii. The Entanglement Exception 1. The Constitution applies if the government affirmatively authorizes, encourages or facilitates unconstitutional activity. a. Courts cannot enforce racially restrictive covenants b. There is state action when the government leases premises to a restaurant that racially discriminates. iii. There is state action when a state provides books to schools that racially discriminate 1. Private schools aren‘t covered, here. a. 3. 41 iv. There is no state action when a private school that is over 99% funded by the government who fires a teacher because of her speech. v. There is no state action when the NCAA orders the suspension of a basketball coach at a state university. vi. There is state action when a private entity regulates interscholastic sports within a state. vii. There is not state action when a private club with a liquor license from the state racially discriminates. ii. Application of the Bill of Rights 1. The Bill of Rights applies directly only to the federal government 2. The Bill of Rights is applied to state and local governments through its incorporation into the due process clause of the Fourteenth Amendment. a. Exceptions i. The Second Amendment Right to Bear Arms ii. The Third Amendment right to not have soldier quartered in a person‘s home. iii. The Fifth Amendment right to grand jury indictment in criminal cases 1. States don‘t have to use grand jurys. iv. The Seventh Amendment right to jury trial in civil cases. v. The Eighth Amendment right against excessive fines 1. Not yet ruled yet iii. Levels of Scrutiny 1. Rational Basis Test a. Law is upheld if rationally related to a legitimate government purpose. b. Conceivable legitimate purpose is good enough c. Deference to government d. Challenger has burden of proof 2. Intermediate Scrutiny a. A law is upheld if it is substantially related to an important government purpose. b. Objective is important. c. Means must be narrowly tailored to achieve objective. d. Government has burden of proof. 3. Strict Scrutiny a. Law is upheld if necessary to achieve a compelling government interests b. Government‘s goal must be vital. c. Court will look at gov‘ts actual objective. d. Least restrictive alternative must be used. e. Government has burden of proof. Means? Ends? Least Restrictive Burden of Proof Alternative Analysis? Rational Basis Test Rationally related Legitimate Conceivable No Challenger Purpose Intermediate Scrutiny Substantially related Important Actual Purpose No Government Strict Scrutiny Necessary Compelling Actual Yes Government Purpose 3. The First Amendment [OFTEN TESTED] a. Speech i. Free Speech Methodology 1. Content-based v. Content-neutral restrictions * a. Content-based restrictions on speech generally must meet strict scrutiny. Two types of content based laws. i. Subject matter restrictions (application of the law depends on the TOPIC of the message). ii. Viewpoint restrictions (application of the law depends on the IDEOLOGY of the message): b. Content-neutral laws burdening speech generally need only meet intermediate scrutiny. ii. Prior Restraint 1. Judicial order or an administrative system that stops speech before it occurs. 2. Court ordered suppressing speech must meet strict scrutiny. Procedurally proper court orders must be complied with until they are vacated or overturned. 3. Gov‘t can require a license for speech only if there is an important reason for licensing and clear criteria leaving almost no discretion to the licensing authority. iii. Vagueness or Overbreadth 1. Vagueness: a. A law is unconstitutionally vague if a reasonable person cannot tell what speech is prohibited and what is allowed. 42 Overbreadth a. A law is unconstitutionally overbroad if it regulates substantially more speech than the constitutional allows to be regulated 3. Symbolic Speech a. The government can regulate conduct that communicates if it has an important interest unrelated to suppression of the message and if the impact on communication is no greater than necessary to achieve the government‘s purpose. i. Flag burning- Protected ii. Draft Card Burning – Not Protected iii. Nude Dancing - Not Protected iv. Burning a cross – Protected unless its to threaten someone. 4. Anonymous speech is protected iv. Content Regulation or Content Neutral (Know Test for each) 1. Content Regulations – a. See above * 2. Advocacy of Unlawful Conduct 3. Defamation a. If the P is a PUBLIC OFFICIAL or running for public office, the P can recover for defamation by proving FALSITY of the statement and ACTUAL malice. b. If the P is a PUBLIC FIGURE, the P can recover for defamation by proving falsity of the statement and ACTUAL MALICE. c. If P is a PRIVATE figure, and the matter is of PUBLIC CONCERN, the state may allow the P to recover for defamation by proving falsity and negligence by the Defendant. However, P may recover presumed or punitive damages only by showing actual malice. d. If P is a private figure, and the matter is not of NON-PUBLIC CONCERN the P can recover presumed or punitive damages without showing actual malice 2. PLAINTIFF Public Official Public Figure Private Figure – Matter of Public Concern Private Figure – Matter of Private Concern LIABILITY STANDARD Actual Malice Actual Malice Negligence and Actual Injury Unclear – Negligence DAMAGES Compensatory Presumed/Punitive Compensatory Presumed/Punitive Compensatory for Actual Injury; Presumed or Punitive Damages Require Actual Malice Compensatory for Actual Injury; Presumed or Punitive Damages Do not require actual malice BURDEN OF PROOF Plaintiff must prove falsity. Plaintiff must prove falsity Plaintiff must prove falsity Unclear – Burden on Def. to Prove Truth. 4. Obscenity a. Test i. Material must appeal to the prurient interest ii. The material must be patently offensive under the law prohibiting obscenity iii. Taken as a whole, the material must lack serious redeeming value (National Standard) b. Government may use zoning ordinances to regulate the location of adult bookstores and movie theaters. i. Important interest to protect community. c. Child pornography may be completely banned, even if not obscene d. Although the government may not punish private possession of obscene materials; but the government may punish private possession of child pornography. i. Government may seize assets. Fighting words, a. Fighting Words laws are always unconstitutionally vague and broad. Commercial Speech a. Advertising for illegal activity, and false and deceptive ads are not protected by the first amendment b. True commercial speech that inherently risks deception can be prohibited. i. The government may prevent professionals from advertising or practicing under a trade name. ii. The government may prohibit attorney, in-person solicitation of clients for profit iii. Other commercial speech can be regulated if intermediate scrutiny is met. 5. 6. 43 Public Forums (sidewalks, parks) Limited Public Forums (i.e., non-public forums that the government opens to speech. Non-Public Forums (e.g., military bases, airports) Private Property Government regulation of commercial speech must be narrowly tailored, but it does not need to be the least restrictive alternative. v. Content Neutral (Know test for each) – Generally: Actions must be necessary to a compelling state interest. 1. Time, Place & Manner a. Public Forums i. Government properties that the government is constitutionally required to make available for speech. 1. Regulations must be subject matter and viewpoint neutral, or if not, strict scrutiny must be met. 2. Regulations must be a time, place, or manner regulation that serves an important government purpose and leaves open adequate alternative places for communication. 3. Government regulation of public forums need not use the least restrictive means. 4. City officials cannot have discretion to set permit fees for public demonstrations b. Limited Public Forums i. Designated ii. Government properties that the government could close to speech, but chooses to open to speech. The same rules apply as for public forums. c. Non-public forums i. Government properties that the government constitutionally can and does close to speech. The government can regulate speech in non-public forums so long as the regulation is reasonable and viewpoint neutral. d. There is no First Amendment right of access to private property for speech purchases. Subject Matter Neutral Viewpoint Neutral Method of Regulation Interest Required? Allowed Yes Yes Time, Place, Manner Important Yes Yes Time, Place, or Manner Important c. No NO FIRST AMENDMENT RIGHT TO USE PRIVATE PROPERTY FOR SPEECH PURPOSES e. f. Yes Reasonable Legitimate Symbolic Expression Freedom of Association i. Fundamental Right under 1st Amendment 1. Laws that prohibit or punish group membership must meet strict scrutiny 2. To punish membership in a group, it must be proven that the person: a. Actively affiliated with the group. b. Knowing of its illegal activities; and c. With the specific intent of furthering those illegal activities 3. Laws that prohibit a group from discriminating are constitutional unless they interfere with intimate association or expressive activity. b. vi. Privacy 1. Government may not create liability for the truthful reporting of information that was lawfully obtained from the government. 2. Liability is not allowed if the media broadcasts a tape of an illegally intercepted call, if the media did not participate in the illegality and it involves a matter of public importance. 3. The government may limit its dissemination of information to protect privacy. vii. Speech by government employees on the job in the performance of their duties is not protected by the first amendment. viii. Other government restrictions based on the content of speech must meet strict scrutiny. Taking (5th Amendment) i. Taking must be for public use ii. Taking requiring just compensation v. a regulation under police power not requiring just compensation. iii. Just Compensation? 1. Usually fair market value. 44 c. d. e. f. First Amendment: Freedom of Religion (Address Exercise & Establishment) i. Establishment clause 1. Test a. Secular purpose i. There must be a secular purpose for the law. b. Secular effect i. The effect must be neither to advance or inhibit religion c. No undue entanglement i. There must not be excessive entanglement with religion 2. The government cannot discriminate against religious speech or among religions unless strict scrutiny is met. 3. Government sponsored religious activity in public schools is unconstitutional. However, religious student and community groups must have the same access to school facilities as non-religious groups. 4. The government may not give assistance to parochial schools, so long as it is not used for religious instruction. The government may provide parents vouchers which they use in parochial schools. ii. Free exercise clause 1. The free exercise clause cannot be used to challenge a neutral law of general applicability a. If it is not neutral, apply strict scrutiny. 2. The government may not deny benefits to individuals who quit their jobs for religious reasons. Retroactive Legislation i. Impairment of Contract ii. Ex Post Facto Laws iii. Bills of Attainder Equal Protection (Protected Class Needed) i. Classification or Fundamental Interest 1. Fundamental Interest a. (e.g., 1st Amendment, Travel, Voting -- Requires Strict Scrutiny) 2. Classification a. Suspect (Requiring Strict Scrutiny) i. Race ii. Alienage b. Quasi-Suspect (Requires Middle Tier Analysis) i. Gender ii. Illegitimacy c. Other Classes (Requires Rational Basis) i. Wealth ii. Age iii. And others 3. Scrutiny a. Strict Scrutiny i. Compelling State Interest and means necessary to achieve state interest b. Middle Tier – Intermediate Scrutiny i. Important state interest and means substantially related c. Rational Basis i. Legitimate state interest and means rationally related Procedural Due Process i. Life, Liberty or Property Interest 1. Has there been a deprivation of life, liberty or property? a. A deprivation of liberty occurs if there is the loss of a significant freedom provided by the Constitution or a statute. i. Harm to reputation is not a loss of liberty b. A deprivation of property occurs if there is an entitlement and that entitlement is not fulfilled. i. Reasonable expectation to continue to receive a benefit (entitlement) 2. Government Negligence a. Government is not sufficient for a deprivation of due process i. Generally, there must be intentional government action OR ii. At least reckless action for liability to exist. iii. However, in emergency situations (e.g., high speed chase), the government is liable under due process only if its conduct shocks the conscience. 3. Generally, the government‘s failure to protect people from privately inflicted harm does not deny due process. a. Only if the government holds someone in custody or creates the danger are they liable. ii. What process is due? (Or what procedures are required?) 1. The test 45 g. Balance i. The importance of the interest to the individual ii. The ability of additional procedures to increase the accuracy of the fact-finding. iii. The government‘s interest. b. Examples of when procedures are required i. Before welfare benefits are terminated, there must be NOTICE & HEARING ii. When Soc. Sec. disability benefits are terminated, only post-termination hearing. iii. Student disciplined by public school: Notice of charges and an opportunity to explain to the administration. No need for trial. iv. Before a parent‘s rights to a child are terminated permanently, there must be a notice and a hearing. v. Punitive damage awards must require instructions to jury and judicial review of grossly excessive punitive damages. vi. American Citizen apprehended in Foreign country held as enemy combatant is owed due process: Notice of charges, attorney and hearing. vii. Except in exigent circumstances, gov‘t seizures of assets or prejudgment attachment must be preceded by notice and hearing. 1. Exception: exigent circumstances. 2. Chart: Has the government deprived a person of life liberty (a significant freedom secured by the Constitution or by statute), or property (an entitlement to a continued receipt of a benefit)? a. Yes: What procedures must government supply? i. Balance: 1. Importance of interest to the individual 2. Ability of additional procedures to increase the accuracy of the fact finding; and 3. The government‘s interest b. No: i. Government need not provide procedural due process. Substantive Due Process i. Def: 1. SDP asks whether government has an adequate reason to take away someone‘s life, liberty or property. 2. Looks to substantive justification. ii. The Constitution provides only minimal protection for economic liberties 1. Only rational basis test is used for laws affecting economic rights 2. Challenges usually fail – No more Lochner. 3. The Takings Clause a. The government may take private property for public use if it provides compensation. i. Is there a taking? 1. Possessory taking: a. Government confiscation or physical occupation of property is a taking. 2. Regulatory Taking a. Government regulation is a taking if it leaves no reasonable economically viable use of the property. ii. Notes: 1. Government conditions on development must be justified by a benefit that is roughly proportionate to the burden imposed; otherwise it is a taking. 2. A property owner may bring a takings challenge to regulations that existed at the time the property was acquired. 3. Temporarily denying an owner use of property is not a taking so long as the government‘s action is reasonable. a. Is it for public use? i. Gov‘t may take the prop. For public use if not for public use, they need to give it back. ii. SC: Broad view: Plaintiffs usually lose. b. Is just compensation paid i. Measures as to loss of owner; gain to taker is irrelevant: Fair Market value. iii. The Contracts Clause 1. No state shall impair the obligations of contracts a. Applies only to state or local interference with already existing contracts i. Never applies to Fed. Gov‘t. b. State or local interference with private contracts must meet intermediate scrutiny: i. Does the legislation substantially impair a party‘s rights under an existing contract? a. 46 If so, is the law a reasonable and narrowly tailored means of promoting an important and legitimate public interest? c. State or local interference with government contracts must meet strict scrutiny d. The Ex Post facto clause does not apply in civil cases. i. Def: law that criminally punishes conduct that was lawful when it was done or that increases punishment for a crime after it was committed. ii. Retroactive civil liability only need meet a rational basis test iii. A bill of attainder is a law that directs the punishment of a specific person or persons without trial. iv. Right to Privacy – Requires Strict Scrutiny: Fundamental Right Protected Under Substantive Due Process. 1. Marriage a. State can only prevent if it meets strict scrutiny 2. Procreation a. Strict Scrutiny 3. Child Rearing a. Strict Scrutiny b. However, state may create a irrebuttable presumption that a man is the father of a child. 4. The Rights to Keep the family together a. Includes extended family. 5. The right to control the upbringing of one‘s children a. Gov‘t can interfere with parenting under strict scrutiny only. 6. The right to purchase contraceptives a. S.S. 7. The right to abortion a. No Longer strict scrutiny. b. Undue Burden Test: i. Prior to viability, states may not prohibit abortions, but may regulate abortions so long as they do not create an undue burden on the ability to obtain abortions. ii. After viability, states may prohibit abortions unless necessary to protect the woman‘s life or health. c. The government has no duty to subsidize abortions or provide abortions in public hospitals. d. Both Spousal consent and notification laws are unconstitutional. 8. Right to privacy protects a right to engage in private consensual homosexual activity. a. Court did not articulate the scrutiny level, however. 9. The right to refuse medical treatment. CONSTITUTIONAL LAW – AN APPROACH TO CONSTITUTIONAL LAW QUESTIONS Ask: WHO IS THE ACTOR IN THE QUESTION? CONGRESS PRESIDENT OR FEDERAL COURTS STATE/LOCAL FEDERAL EXECUTIVE GOVERNMENT - The issue is either or BRANCH - The issue is: both: - The issue is: - The issue is 1.) Does the federal court 1.) Does Congress have either or both: have the authority to hear Has the state/local the authority to act? the case? government violated a 1.) Has the limit on its power? And/or President/Execut ive Branch 2.) Has Congress violated exceeded the a limit on its power? scope of executive powers? And/or 2.) Has the President/Execut ive branch violated a limit on government power? 1. PRIVATE – NONGOVERNMENTAL ACTOR The issues are: 1.) Is there state action? AND IF SO, 2.) Does it violate the Constitution? 47 48 CORPORATIONS – OUTLINE CORPORATE FORMATION o Six Test Issues:  Corporate formation  Issuance of Stock  Action by and liability of directors and officers  Rights of shareholders  Fundamental corporate changes  Federal securities laws o Corporate Formation - Pre-Incorporation Contracts – Promoters and Subscribers  Promoters  Promoters are persons acting on behalf of a corporation not yet formed. o The corporation becomes liable on a promoter‘s preincorporation contract when the corporation adopts the contract by  Implied adoptions and acceptance.  Promoters remains liable on pre-incorporation contracts until there has been a novation; i.e., an agreement between the promoter, the corporation, and the other contracting party that the corporation will replace the promoter under the contract.  Promoter fiduciaries of each other and the corporation  Therefore, promoters cannot make a secret profit on their dealings with the corporation o Sale to corporation of property acquired by promoter before becoming a promoter:  Profit recoverable by corporation only if sold for more than fair market value o Sale to corporation of property acquired by promoter after becoming a promoter  Ex: Paula works as a promoter for Vegan. She buys a ton…see page 2  Subscriber  Persons who make written offers to buy stock from a corporation not yet formed o A pre-incorp. Offer to buy stock in a corp. not yet formed is irrevocable for 6 mos. o Formation Requirements – De Jure Corporation Status – ―A PAIN‖  Incorporators  Incorporators merely sign and file the articles of incorporation with the state.  Pure De Jure Corporation  Articles MUST include  Number of authorized shares. o It is the maximum number of shares the corporation is authorized to issue, therefore the corporation may always sell less than the maximum number.  Can‘t increase number without amending the articles to increase the number of authorized shares.  Purpose Clause o General Purpose and Perpetual duration – presumed o Unlike a partnership, a corporation can last in perpetuity. o Can you have a general purpose clause for unlimited duration?  Yes. A general purpose and a perpetual duration are valid and will be presumed unless there is a specific purpose or limited duration stated. o Specific Statement of purpose and ultra vires rules  If included in the articles – Narrow specific clause  Ultra virus activity – beyond power and purpose of activities o Consequences of ultra virus activity:  State can enjoin ultra virus activity 49    Corporation may sue its own directors and officers for losses caused by the ultra vires activity. Officers and Board Members activities are affected and may be liable personally for ultra vires activities. o o Agent o Every corp. must recognize an authorized agent‘s name and address of registered officer  Incorporators o name and address must be there as well.  Name of corporation o The name of corporation must contain some indicia of corporate statuts  Incorporated, or Corporation, or Corp. or Inc.  By-Laws  The corporation nee not adopt By-laws. Therefore they need not be in the articles to comply with formation rules.  The Board has the power to adopt and amend the by-laws, unless the articles give the power to the shareholders De Facto Corporation Doctrine  Although you didn‘t comply with the formation rule  You made a good faith, colorable attempt and no knowledge of the corporation rules.  A business failing to achieve de jure corporation statuts nonetheless is teeated as a corporation, if the organizers have made a good faith, colorable attempt to comply with corporate formalities and have no knowledge of the lack of corporate status. Legal Significance of Formation of Corp.  A Corporation is a separate legal person  Genreally, shareholders are not personally liable for debts of corporation.  - This is the principle of limited liability, which means that the shareholder is liable only for the price of their stock. o Exception: Piercing the Corporate Veil  General rule: a shareholder is not liable for the debts of a corporation  Exception: ―Piercing the Corporate Veil‖ o The corps will allow the piercing of the corporate veil to render the officer liable for the third party victim to avoid fraud or unfairness.  Alter Ego o Person will treat corp. as alter ego. She will fail to observe sufficient corporate formalities  Undercapitalization o Failure to maintain sufficient funds to cover foreseeable liabilities  Watch examples of co-mingling funds.  Can third-party sue shareholder for a corporate obligation question? o Start with general rule: As a rule, shareholders are not liable for corporate obligations. o Exception: Except courts will pierce the corporate veil to avoid fraud or unfairness. o In this case, X has failed to observe sufficient corporate formalities by commingling funds. Moreover, Loco is also undercapitalized because it operates in a dangerous business, has no insurance, and minimal capitalization of $1,000. Therefore, the court will pierce the corporate veil to render X liable to V.  Piercing is a doctrine in equity o Owner of share of stock is not going to be a passive investor (not going to hold them liable), will pierce for controlling shareholder. o Third – party tort victim are more willing to pierce for a tort than for a contract problem o Ex: Courts are generally more willing to PCV for a tort victim than for a contract. o Foreign Corporation  A corporation incorporated outside the state that wishes to engage in regular intrastate business must qualify by filing a CERTIFICATE OF AUTHORITY with the secretary of state that includes all the information required in the articles (―A PAIN‖). ISSUANCE OF STOCK – WHEN A CORPORATION SELLS ITS OWN STOCK o Consideration  What must the corporation receive when it issues stock?  Issuance occurs only when the corp. is about to sell its own stock. o Watch for Consideration and Preemptive Rights.  Par Value – must issue this o All but obsolete in the real world 50 - But, minimum issuance price.  Price at a minimum must receive on par value shares.  Never less than par value.  Ex: C Corp. is selling 10,000 Shares of $3 dollar stock. It must receive $30,000.  No par means ―no minimum issuance price.‖  Any valid consideration, therefore, can be deemed adequate by the board. – No min. par.  Treasury Stock  Stock that in th past was previously issued and has been reacquired by the corporation. It can then be resold.  It is like no-par stock, thus no par value.  It must receive any valid consideration deemed adequate by the board.  Can you issue par value shares for property not cash?  Yes. Any valid consideration may be received if the board values the consideration in good faith to be worth at least par value.  Consequences of issuing par stock for less than par value  Can C Corp. recover $8,000 from its directors to equal par? o Directors are liable for authorizing a below par issuance. They are authorized agents, but are not authorized to issue below par issuance.  Can Corp. recover the $8,000 from buyer of shares o Shareholder is liable for one thing only: to pay full consideration for shares. o Full consideration: at least par value.  Both possible liability: Directors OR BUYER of Shares for missing/below par value amount.  Par Value: minimum issuance rights o Preemptive Rights  Preemptive rights is a right of an existing shareholder to maintain her percentage of ownership by buying stock whenever there is a new issuance of stock for cash.  If there are preemptive rights, S has the right to maintain its existing percentage ownership interest by buying up to her percentage if she wants to of the newly issued shares for cash.  What if the articles of incorp. Are silent or the bar exam question does not indicate whether the articles of C Corp. provide for preemptive rights?  No preemptive rights unless expressly in the articles.  Maintain ownership percentage Directors and Officers o Statutory Requirements- Directors  Corporations must have a Board with at least ONE member.  Shareholders elect directors, and maintain indirect control.  Shareholders can remove a director before her term expires.  On what basis? o With or without cause. o How should directors act?  Valid Meeting  Notice is required for meeting, and Board Members must vote in person or by conference call – no proxy voting.  Shareholders can vote by proxy.  Unless all directors consent in writing to act without a meeting, a meeting is required.  Notice  Notice of directors‘ meeting can be set in bylaws.  Proxies  Proxies are not allowed. Also, no voting agreements, but Conference calls now generally valid.  Quorum  Must have a majority of all directors to take action (unless a different percentage is required by bylaws)  Vote  To pass a resolution, however, all that is required is a majority vote of those present o So if there are 9 directors, at least 5 directors must attend the meeting to constitute a quorum. If 5 directors attend, at least 3 must vote for a resolution in order for it to pass.  Each director is presumed to have concurred in Board action unless her dissent or abstention is recorded in writing (i.e. minutes or letter to corporate secretary). o Liability of Directors to Their Own Corporation and Shareholders  Liab. To their own corp. and their own shares.  Liable for some breach of duty, or could a corp. sue direct. For action, or derive. Suit: ON BAR.  Directors have a DUTY TO MANAGE the corporation. o 51   Directors may delegate management functions to a committee of one or more directors that recommends action to the Board in doing so.  In managing the corporation, the directors are protected from liability by the Business Judgment Rule o The BJR is a presumption that the directors manage the corporation in good faith and in the best interests of the corporation and its shareholders. As such, directors will not be liable for innocent mistakes of business judgment rule.  Directectors, however, are fiduciaries who owe the corp. duties of care and loyalty. Duty of Care  A director owes the corporation a duty of care.  She must act…see page 8.  Unless the articles have in fact limited liability of the duty of care  Essay Answer: Directors have a duty to manage. They are protected from liability by the BJR. But they are fiduciaries who owe duties of care and loyalty. Directors must act with the care that a prudent person would use in managing their own business unless, the articles have limited liability for a breach of the duty of care. In this case, the director, after studying the matter thoroughly, made an innocent mistake of business judgment. And therefore, will not be liable for a breach of the duty of care. A director who fails to go to board meetings, sleep through them or are clueless at board meetings will breach the duty of care. Duty of Loyalty  A director owes the corporation a duty of loyalty. A director may not receive an unfair benefit to the detriment of the corporation or its shareholders, unlesss hter has been material disclosure and independent ratification. o Self-dealing:  Director who receives an unfair benefit to herself (or her relative, or another one of her businesses) in a transaction with her own corporation. o Usurping Corporate Opportunities  A director receives an unfair benefit by usurping for herself an opportunity which the corporation would have pursued. o Ratification  Directors may defend a claim by obtaining independent ratification through:  A majority vote of independent directors;  Majority vote of a committee of at least 2 independent directs or  Majority vote of shares held by independent shareholders. o Answer of Essay:  Directors have a duty to manage. They are protected by the BJR, but they are fiduciaries who have duties of care and loyalty. For loyalty questions:  Directors may not receive an unfair benefit to the detriment of their corporation unless, there is disclosure plus independent ratification.  In this case, Alice did receive an unfair benefit by profiting in a transaction with her own corporation. Moreover, Alice usurped the corporation‘s opportunity to buy those choice diamonds, and therefore, Alice would be liable for a breach of liability and would have to disgorge her profits. o Nonetheless, Alice will not be liable because she disclosed her conduct and received independent ratification through majority vote of the independent directors. Accordingly, there is no liability here.  o Officers     o Owe same duties of care and loyalties as directors Are agents of the corporation and bind the corporation by their authorized activities Corporations must have a President, Secretary, and Treasurer Directors have virtually unlimited power to select officers, and may remove them from officer at any time, but the corporation will be liable for breach of contract damages. Indemnification of Directors and Officers  Director has incurred costs, attorney;s fees, fines, a judgment or settlement in the course of corporate business; she seeks reimbursement from the corporation.  The corporation may never indemnify a director who is held liable to their own corporation.  The corporation MUST ALWAYS indemnify if you win a lawsuit, and are successful in a lawsuit against any party.  The Corporation May indemnify if:  Liability to third-parties or settlement with the corporation.  Director or officer shows that she acted in good faith and that she believed her conduct was in the corporation‘s best interest. 52 - Who may determine whether to grant permissive indemnity? o If a majority of independent directors approves it, you will get it OR o IF a committee of at least two independent directors approves it, you will get it as well OR o If a majority of shares held by independent shareholders could vote for it OR o A special legal counsel‘s opinion could recommend it, and you could get it as well. IV. RIGHTS OF SHAREHOLDERS o Shareholder Derivative Suits  In a derivative suit, a shareholder is suing to enforce the corporation‘s cause of action.  Corporations own cause of action.  Always ask: Could the corporation have brought this suit? If so, it‘s a derivative suit.  What are the requirements for bringing a shareholder derivative suit?  Contemporaneous stock ownership o You must own at least one share of stock when the claim arose and throughout the entire litigation. Standing to have a derive. suit  Must generally make demand on directors that they cause their own corporation to bring suit. o Still honor the role of the board. Still that owner of the share of stock to make a demand on the board. Demand must be made and rejected by the board, OR at least 90 days have passed since demand was made. o Voting  Who has the right to vote at an upcoming meeting where voting occurs?  Only the record date owner votes.  The record date owner is the owner on the record date, which is the voter eligibility cut-off date set by the board up to 70 days before the meeting date.  Shareholder voting by Proxies  A proxy is a: o Writing (fax or e-mail generally valid) o Signed by record shareholder o Directed to secretary of corporation o Authorizing another to vote the shares o Valid for only 11 months.  On June 2, S, who is the record owner on the record, date, sends a signed letter to secretary of C Corp. authorizing Ari Gold to vote her shares. Can Ari vote S‘s shares at the annual meeting in July? o Yes, this is valid because  It is in writing  It‘s signed by record owner  Sent to the corp. secretary  It authorizes another  Within 11 mos.  What if prior to the meeting, S writes the Secretary of C Corp. that she now wants turtle to vote her shares at the meeting? o Yes. Proxies are freely revocable unless two things are BOTH true:  They must say on them, Irrevocable on them AND ALSO  They must be coupled with an interest.  Can S revoke her proxy even though it states that it is irrevocable? o Yes, it is still revocable because it is not also coupled with an interest. Saying irrevocable does not yet mean it is so. It must be coupled with the interest. S is the record owner and has the right to vote those shares, and retains that right to vote those shares. o See page 12  Where do Shareholders vote?  Properly Noticed Annual Meeting o Every corporation must have an annual meeting at which at least one director slot is open for election. o Requires time and place of that meeting.  Specially noticed special meeting (called by the board, the pres. Or the holders of 10% of voting shares). o It‘s the vote only on a proposal or more likely a fundamental corporate change. o The notice must contain the meeting‘s special purpose.  Noting other than that purpose can take place than that meeting, or else it will be void.  Quorum  There must be a quorum represented at the meeting. Determination of a quorum focuses on the o Number of shares represented, not the number of shareholders.  53    Vote  A quorum requires a majority of outstanding shares when the meeting begins, unless otherwise provided in Articles. A majority of all shares must be represented at the meeting, in person or by proxy, for any purpose. Ex: A quorum is a majority of all shares which must be represented at the beginning.  o If quorum is present, action is approved if the votes cast in favor of the proposal exceed the votes cast against the proposal  Pooled or Block Voting Methods  Shareholders who own relatively few voting shares decide that they can increase their influence by agreeing to vote alike. How can they do so? o There are two ways: Voting Trusts or agreement. o Voting Trusts:  Formal delegation of voting power to a voting trustee enforceable for up to ten years. o Written Trust Agreement  Agreement in writing to vote shares as required in that agreement, and now it is binding and enforceable on all signers with no time limit and no filing required. o Typically filed with corporation o Transfer shares to voting trustee o Shareholders get trust certificates; and o Shareholders retain all other rights except voting o Duration – Generally 10 years, unless extended by the agreement. o Shareholder Voting Agreements  Cumulative Voting For Directors  You own 1,000 shares of stack in C Corp. C Corp has nine directorships open for election. o Traditional straight voting – 1,000 shares, if there are 9 open slots  Under cumulative voting, you can multiply the number of shares times the open slots: 9,000 votes to cast under Martha Stewart. o If in fact you engage in cumulative voting, you don‘t have 9 sep. elections, you get 1 election and the top 9 owners will likely win. Majority owners effectuate power.  If you can‘t tell: Articles are silent? o Presumption: As a rule, there is no right to cumulative voting unless the right is granted in the articles. If so, there is a right to multiply shares times slots.  Right of Shareholder to Examine the books and records of the corporation – Any shareholder shall have access upon notice and at proper times.  Owner of a share of stock owns its owns books and records and has the right to examine their own shares given proper times and notice. Dividends  To be declared in Board‘s discreation unless the corporation is insolvent or would be rendered insolvent by the dividend.  Board members are liable personally for unlawful distributions, but have a defense of good faith reliance on financial officer‘s representations regarding solvency.  The priority of distribution  CAL Ex: The board of directors of C Corp. decides to declare dividends totaling $400,000. Who receives dividends if the outstanding stock is: o 100,000 shares of common stock  Common Stock: Pay them last and pay them equally.  $4.00 for common shares o 100,000 shares of common and 20,000 shares of preferred with $2.00 dividend preference  Preferred: Pay them first , $2.00 each.  Common gets $3.60/share o 100,000 shares of common and 20,000 of $2.00 preferred that are participating  Participating: these shares get paid twice. Get paid as preferred and paid again as if they are also common shares.  20,000 of participating.  120,000 shares to worry about: $3.00 per share at stage two for common shares.  Common shares get $3.00.  Shares preferred at 2.00 and 3.00 at common: $5.00 per share for participating. o 100,000 shares of common and 20,000 shares of $2.00 preferred that are CUMULATIVE (and no dividends in the three prior years)  Right to receive three prior years and current year‘s worth of dividends.  Four years time $2.00 each is $8.00 per share.  $160,000 dollars paid first to these guys. 54 - -  Common stock gets paid last and equally. $2.40 per share. Shareholder Agreements to Eliminate Corporate Formalities (Closely-held Corporations)  It‘s now an agreement between shareholder to eliminate corp. form.  Must be unanimous shareholder election choice in the articles, by-laws or in a filed written agreement.  It unanimous election:  Must be a reasonable share transfer restriction. Plus  Ex: No public trading  = no piercing the corporate veil even if you fail to maintain formalities.  An also possible sub-chapter S corporation status. You can become and S corp. and be treated like a partnership for tax purposes. o If there are no more than 100 shareholders who are individuals in American residence, and no more than one class of stock. o Professional Corporations  Licensed Professionals (lawyers, accountants, medical professionals) may incorporate as Professional Corporation.  Requirements o Organizers file Articles with name designated ―Professional Corporation.‖ Or ‗PC‖ o The shareholders must be licensed professionals o The corporation may practice only one designated profession. o The professionals are liable personally for their own malpractice o But, the professionals are not liable personally for each other‘s malpractice or the obligations of the corporation itself. V. Fundamental Corporate Changes o Recognized Fundamental Corporate Change  Merger (A becomes B)  Consolidation (A and B becomes C)  Dissolution (A dissolves)  Fundamental (not ministerial) Amendment of the Articles;  Sale (not purchase) of substantially all of the Corporation‘s assets o Procedural Steps  Resolution by Board at a Valid Meeting  Resolves to Change  Notice of Special Meeting  Special Notice required  Vote of Shareholders  Requires  Approval by a majority of all shares entitled to vote, a super majority requirement, and also by a majority of any voting group adversely affected by the change.  Two steps. Unless there is a short form merger o Exception:  NO shareholder approval required for ―short-form‖ merger where a parent corporation that owns 90% or more of the stock in its subsidiary merges with the subsidiary.  Dissenters Rights: o A shareholder who does not vote for a change, the corp. can buy back that right at  Possibility of dissenting shareholder right of appraisal  A shareholder who does not vote in favor of a fundamental change has the right to force the corporation to buy her shares at fair value…pg. 18.  The court has the power to appoint an expert appraiser to value the shares AND that appraisal will be binding on the parties.  File notice with the State (i.e. Articles of Merger) VI. Federal Securities Law Considerations o Anti-Fraud – Section 10(B) of the Securities Exchange Act of 1934  Scienter – intent to deceive  Deception – Material misrepresentation or misappropriation of material non-public information (i.e. trading on or tipping inside information). Look for lie.  IN connection with the actual purchase or sale of securities  For there to be fraud, must have number 3. The victim must have bought or sold stock in reliance upon that fraud.  Although there is scienter, an intentional act, and deception, a misleading press release, nonetheless, there is no liability here because victim did not actually purchase or sell any securities. o Section 16(b) - Short Swing Trading Profits o 55 - When does 16(b) apply?  Big Corporations: o Reporting consideration – (1) listed on a national exchange or (2) at least 500 shareholders and $10 million in assets.  Big Shot Defendant o Officer, director, more than ten percent shareholder  Type of Transaction o Buying and selling stock within a single six-month period (short-swing trading) [Fraud is not required. No requirement of inside information].  What happens when 16b applies?  All profits from such short-swing trading are recoverable by the corporation. If, within six-months before or after any sale, there was a purchase at a lower price than the sale price, there is a profit.  Work backwards. o Sarbanes-Oxley Act of 2002  Governs Reporting Corporations  CEO and CFO must certify that based on the Officer‘s knowledge reports filed with the SEC  Do not contain material misrepresentations or omissions, and  Fairly present the financial position of the co.  Willfully certifying a false report could bring 5 millin fine and 20 years in prison  If false reports have been restated, the Corp. (directly or derivatively) may recover Officer‘s profits made form trading the company‘s securities within 12 mos. after the false reports were files and may recover incentive-based compensation received during that period.  Corporations (directly or derivatively) may also recover any profits made by officers from trading a corporation‘s stock during black out periods of at least 3 days when at least 50% of the employees are prohibited from trading… MINI-REVIEW o Formation:  Promoters are liable until Novation  Subscribers irrevocable for six months.  Articles = A PAIN  Authorized shares  Purpose  Agent  Incorporators  Name  Exception: Shareholders not liable, unless pierce veil. o Issuance  Par value = minimum issuance price  Preemptive rights = Maintain ownership percentage o Dir./Off Liability  Duty to manage  BJR  Fiduciaries:  Duty of Care (Prudence, unless limited in articles)  Duty of Loyalty (No unfair benefits unless disclosure + independent ratification) o Shareholder Rights  Derivative Suits  Contempt or erroneous ownership + demand.  Voting:  Only record date owner votes.  Proxies  Are recoverable unless o They say irrevocable o And coupled with an interest  Quorum  Majority of all shares for the vote  Vote:  , votes in favor must exceed votes against.  Cumulative Voting:  Shares times slots  Dividends:  56 o o Discretionary unless insolvency o Common pay last o Preferred pay first o Participating again o Cummulative – Up and up.  Eliminating Formalities (closely held)  Unanimous election PLUS  Share transfer restriction = no piercing plus S corp. status.  PC  A designated profession PLUS  Limited liability Fundamental Changes  Board resolves  Special notice  Majority of all shares  Dissenters rights  Notice to state Federal Securties Laws  10(b)  Scienter plus deception plus actual purchase of sale  16(b)  No trading profits within 6 mos.  SOA:  No knowingly false filings plus no benefits during falsehoods or blackout periods.  . 57 COMMUNITY PROPERTY – OUTLINE – BAR/BRI BAR BREAKER OUTLINE Preliminary Question: Does California Community Property Law Apply to the item of property? What is the Source of the Item? Have any actions by the parties altered the character of the property? Do Any Presumptions Apply? Are any issues raised as to management and control of community property during marriage? Based on the above, how should the item be divided? BAR/BRI – Community Property Checklist Basic Presumptions of California Community Property (―CP‖) Law o Start your essay by explaining the basic presumptions that govern the law of community property:  ―In California, all property acquired during marriage is community property, while property acquired before marriage or after permanent separation, or by gift, bequest, devise or descent, is separate property. Quasicommunity property is property acquired by either spouse while domiciled in a non-community property state that would have been CP if the couple had lived in California at the time of acquisition.‖  ―The characterization of an asset depends upon:  (1) the source of the asset,  (2) any actions taken by the parties that may alter the character of the asset, and  (3) any statutory presumption that might affect the asset.‖ Threshold Issues o Discuss any threshold issues that might affect all items of property in the question:  Premarital agreements  A valid premarital agreement must be in writing and voluntarily signed (represented by legal counsel), but oral agreements are still enforceable if the promise was carried out by the promisor, or the promise detrimentally relied on the oral contract.  Parties can o limit or waive property and death rights, o Agree that each spouse‘s salary remains his own SP after marriage, o Not claim family allowance from other spouse‘s estate o Dispose of property upon divorce or death, and o Limit personal rights and obligations  Parties cannot o Limit or waive spousal support if burdened party not represented by legal counsel when K was signed, and provisions was unconscionable at the time of enfocement, or o Promote divorce in K.  Transmutation of any other agreement affecting all assets acquired during marriage  Oral transmutations o Express or implied in fact made before 1/1/1985, are enforceable, but o Any oral transmutations made after the above date must be  In writing  Signed by the spouse whose interest is adversely affected, and expressly state that a change in ownership is being made o This applies to SP  CP, CPSP, or gifting one spouse‘s SP to the other spouse as SP o No writing is required for tangible gifts of a personal nature that are insubstantial value.  Basic rules regarding divorce or death - 58  - Property distributed by testamentary transfer  A spouse can transfer all SP and one-half of the CP by will.  If an intervivos gift was made without the other spouse‘s consent, the nonconsenting spouse can void the gift in its entirety during donor‘s lifetime, or recover her one-half CP interest upon donor‘s death. o Widow‘s election clause in a will  If the testator tries to devise all of the CP by will, or has included an explicit widow‘s election clause in the will, then the surviving spouse must make an election between her CP rights or her rights under the will.  If the widow takes under the will, she accepts her testamentary gift, but allows her onehalf CP interest to be disposed of according to the will,  And if she takes against the will, she can assert her one-half CP interest, but must relinquish her gift under the will.  If no clause, and testator only attempts to pass his one-half CP interest, widow can assert both her CP rights and her rights under the will. o Property Distributed by Intestacy  If a spouse dies intestate, his one-half interest in the CP passes to the surviving spouse, and the surviving spouse‘s share of the decedent‘s SP depends upon the number of decedent‘s heirs.  Creditor‘s rights (to property)  Property that is liable for debts o Creditor can reach debtor spouse‘s SP and all CP to satisfy debts incurred before/during marriage. o After divorce, creditor can‘t reach CP awarded to spouse unless that spouse incurred debt or was assigned debt by the court. o Creditor can reach non-debtor spouse‘s SP for debts incurred by other spouse during marriage for necessaries, but can be reimbursed if CP funds were available at the time.  Personal liability for debt upon divorce o If not personally liable, SP owned at the time of division or any other property awarded to her is not subject to debt.  Right to reimbursement for payment of certain debts o Non-debtor spouse can seek reimbursement for  CP funds used to pay child/spousal support from a previous relationship, but only if debtor spouse had SP funds available at the time to pay the debt, and  SP funds used to pay for debtor spouse‘s necessaries, but only if debtor had SP/CP funds available at the time.  Tort Liability o CP is subject to Tort liability of either spouse. o If the tortfeasor was acting for the benefit of the community, liability is first satisfied from CP and then from the tortfeasor‘s SP. o If the tortfeasor was not acting for the benefit of the community, then liability is first satisfied from the tortfeasor‘s SP and then from CP.  Putative spouses or unmarried cohabitants  To qualify as a putative spouse, a person must have good faith belief based upon objectively reasonable grounds that she is lawfully married, but once that person discovers that the marriage is not valid, her QMP rights no longer accrue.  All property that would be CP had the couple been legally married at the time of acquisition is QMP.  A bad faith putative spouse may still have a claim to QMP rights, but putative spouse status fails if the claimant knew marriage was invalid. Analyze The Character of Each Item of Property o Analyze the character of each asset or liability in the same order as it is itemized in the interrogatory under separate headings:  When was the asset acquired?  Before Marriage o Property acquired before the marriage by either spouse is separate property.  During Marriage o Separate property exists during marriage by gift, bequest, devise or descent.  Applies to wages received during the marriage but earned before marriage.  After marriage but before legal separation  After legal separation but before a final divorce decree Death o 59 o After divorce o Upon divorce, all CP assets are divided equally between the spouses based upon an item theory of distribution. o Under the item theory, each spouse is entitled to one-half of each item of CP, not one-half of aggregate CP. Where was the asset acquired?  California  Any other community property state  Non-community property state  60 REMEDIES Remedies DAMAGES=1)Actual Cause. 2)Proximate (T: Zone of danger); (K: consequentials must be rsbly frsbl at time of K). 3)Certainty: Speculative=no. {bus profits: old/new). 4)Duty to Mitigate. *Tortious Interference of K: get benefit of bargain or status quo ante. T: Actuals=make P whole w/$.(T: Look back). Nominal=can‘t prove actuals so small to get punitives. Punitives= >NEG. W/Damages/Restitution. Factors: 1)Degree Fault; 2)Proportional Increase w/Actuals; 3)Wealth of D. DP Limit=BMW=paint. Remittitur. K: Expectations=Look to future. Benefit of Bargain. Consequentials=rsbly frsbl at time of K(Hadley). Liquidated Damages Clause=Valid: 1)uncertain at K; 2)good estimate. Invalid: Penalty(too hi, not lo) Preclude SpecPerform if express(―sole/exclusive‖). No Punitives=Except: bad faith by insuror co. RESTITUTION=Split: Unjust Enrich only damages inadequate. Legal: Money: Damage/Money restitution=not both. T: Quasi-K: Get D‘s Benefit-$(Rental Value). Punis too. K: Quasi-K=not w/K, rather benefit conferred. Builder spend more than K&buyer breach! Repelevin: Recovery specific personal prop.(not BFP). Prelim Writ: hold during trial=DP: 1)hearing(can be after); 2)Affidavits; 3)Decided by judge. Ejectment: Recovery of Real prop. Can kick out some Trespasser who is effecting ouster. Sheriff goes out. Equtable: (T&K) Constructive Trust: Value goes up: 1)D has title; 2)Acquisition traceable to wrongdoing. BROAD&flexible Equitable Lien: Value goes down: 1)D has title; 2)Title/improvement/addition traceable to wrongdoing. Bankruptcy=Trust&Lien=Secured Creditors. Equitable beats judgment lien b/c attach w/wrong not judgment. Tracing Rules=wrongfully gained $ commingled. 4 way Split: 1)Lowest Intermediate Balance rule: only up to lowest amount in account. 2)Replenishment=Intent(constructive) replace your money then can get equitable lien against current amount. 61 3)Follow Where You Want=steal 10 & put in account to 20. Buys 10 in stock & blows 10 in Vegas. 4)Proportional Gain Rule=Gain Proportional gain in whatever he buys, your choice. INJUNCTION= I Put Five Bucks Down ; I‘m Doing Fine Mom Dad Parties&Privies w/notice=bound(any close relationship); Enforce w/Contempt(Must Comply w/Injunction even if invalid); Tort InjunctionsTROs=Ex Parte(if tried): Maintain Status Quo. Preliminary Injunction=Not Ex Parte: 1)Status Quo; 2)Likely success on merits; 3)Relative party hardship. T: Injunction= Inadequate Legal Remedy=Damage Speculative; Multiplicity of suits, Irreparable Injury; Unique-land. K: Specific Performance= Not for breacher!! Inadequate Legal Remedy=Damage Speculative; Multiplicity of suits, Irreparable Injury; Unique-land. Definite&Certain=Higher than for Damages. Property right(maj let anything satisfy); Feasible=Enforce? Negative is easier; Mandatory=supervise&hard; PersJx. Balancing=Maj. If D not intentional then balance relative hardships for encroachment & nuisance; Defenses=1)1stAmd=No prior restraint.(Content=SS. Neutral=necessary for imp %{nat‘l sec; trade libel competitor}; 2)Laches=inaction by P to D‘s detriment. Still damages; 3)Unclean hands=dishonorably in relation to this trxn; 4)Criminal Act=NO. Except: nuisance/public nuisance). Feasible=Enforce? Employment=no(except: neg w/competitor); SP land out of state if PersJx. Mutual=both performance right; Incapacity(Insane/kid)= Security of Performance test(pragmatic). Defenses=1)1st Amd=gov may enforce for national security. Private Parties can use non-disclosure w/specific performance; 2)Laches; 3)Unclean hands=dishonorably in relation to this trxn; 4)Hardship=1)Onerous Terms & 2)Inad consideration. Still damages, not SP{Campbell Soup); 5)Mistake&Misrepresentation=if hardship/rescission. Rescission=Eliminate K&damages. Still Quasi-K. Reformation=redo K terms. Only if scriveners error.. 62 Torts Special Eg: Real Property= Conversion=Damages(value at conversion / fluctuate in value then highest until rsbl to replace / when D disposes chattel / P asks D, get value at refusal); Trespass= K Special Eg Output/Requirements K=Specific Performence=Yes. inadequate damages b/c unsure number & multiplicity. Real Prop K=Abatement in purchase price=if promised 10 acres(not say more/less) & only have 9 acres then if still wants it can get reduction in price). Construction Ks= T causing Severance=(taking trees or coal so can get conversion too) Damages=diminution of value as result of severance(probably equal to conversion)[vs value of severed in T effecting Conversion(value of severed prop by conversion rules above)]; Restitution=get benefit to other side as in improved view by cutting down my trees; Injunction=land, feasible if catch in time; no balancing. T effecting Ouster=squater/A/P/holdover tenant/co tenant: Restitution: ejectment+rental value. Physical Injury to Real Property=cost to repair/diminution of value. Injury to attachment then cost of repair, if to real estate then cost diminution of value. Defamation: prior restraintsno injunction just damage. Trade Libel=can get injunction here b/c it is an exception to no prior restraint rule. Owner/Buyer breach: builder can sue in restitution for FMV for work done ie. even if more than K price. Personal Service Ks(employment) Restitution= Employer Breach=ee can gets amount fmv of work already performed even if more than K price. Employee Breach=er can recover payment made in advance & can recover $ paid.(unlikely) Specific Performance/Injunction=I: usually others can do job unless very specialized work; D: must be more definite; F: no specific performance ee/er(injunction preventing from fulfilling threat of working w/another competitor its not specific performance its an Injunction!); M: Incapacity; D: usual. Nuisance=Defenses: coming to nuisance is not a good defense(unless isolated factory)! Zoning Ordinance compliance not a good defense to Nuisance. Private Nuisance= Temporary= Damages=dimunition in rental value or diminution of value during nuisance + cost of abate. Restitution=no. Injunction=Inadequate b/c land is unique & $ damages per se inadequate & also multiplicty of suits, prop, feasible to just shut it down or conditional order: close down or change your operation to reduce pollution; Balance: always balance all interests of society&D vs P&non-parties who are similarly situated(its about origins of land use planning); Defenses=laches, unclean hands, Exception for crimes here Equity will work. Permanent=Damage=dimunition in FMV + cost to abate. Restitution=no. Injunction=just above. Public Nuisance=Activity injurious/potentially injurious 63 to public health or welfare=Lewd show; unlicensed Dr., Polluter, rock concerts, seller of impure foodpublic welfare at large is put in risk & sometimes violation of criminal stt. Private person enforce if has/threatened injury. Damages=Diminution of value + abatement. Generally no Restitution. Injunction=Inadequate legal remedy b/c of irreparable injury or real property *but Must also show that public legal remedy is inadequate: (1)public not enforcing{DA not}; or 2)Fine is not enough; Propety(sometimes personal); Feasible, Balancing(generally no b/c gets so much benefit can‘t really balance); Defenses. 64