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Business Law

Principles and Practices

Goldman, A., & Sigismond, W. (2014). Business Law: Principles and Practices (9th ed.). ·"' "-~-­ Western Cengage Learning.

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PRINCIPLES AND PRACTICES

Contract Law: A Beginning

CHAPTER PREVIEW

What Is a Contract?

The Elements of a Valid Contract

Contract Terminology Bilateral and Unilateral Contracts Valid, Void, Voidable, and Unenforceable

Contracts Formal and Informal Contracts Express and Implied Contracts Executory and Executed Contracts

Sources of Contract Law Common Law Uniform Commercial Code Restatement of Contracts

126

CHAPTER

HIGHLIGHTS

Suppose You're the

JUDGE

t Is a Contract?

NING OBJECTIVE ~ Define a contract.

Written and unwritten (oral) contracts form the basis of many of our personal and

business transactions. The law of contracts is concerned in part with the

obligations that people incur with each other resulting from transactions in which

they become involved. A contract will be more formally defined in the next

section. There are two sets of contract rules to learn. The next nine chapters

devoted to contract law deal with common law contracts, the first set of contract

rules. In general, they deal with contracts that do not involve the sale of goods.

The second set is the contract rules contained in Article 2 of the Uniform

Commercial Code (UCC). Contract law under Article 2 governs transactions

involving the sale of goods (i.e., tangible personal property). You will find that

many of the laws governing contracts under the two sets of rules are the same,

but you will also find that the UCC relaxes the rules of the common law and

takes a slightly different approach. Contracts under the UCC will be discussed in

Chapters 15 through 18. This chapter defines a contract, identifies the essential

elements necessary to form a contract, and then briefly discusses each element.

The remainder of the chapter is devoted to terminology associated with contract

law. A sample contract is presented to show what a typical written contract looks

like. The chapter concludes by identifying the sources of contract law.

Facts Betrum, a sports marketing specialist, entered into an oral agreement with Marowski, the owner of a major league footba ll team, to help launch a sports TV network . Marowski stated to Betrum that he would be compensated as a consul- tant in the amount of $5,000, and when the deal was completed would be com- pensated fairly for his "efforts and his ideas ." The oral agreement was vague as to exactly what had to be done to successfully launch the network. Nevertheless, Betrum went ahead and met with all the officials necessary to establish the new network. Once the network was launched , Betrum received the $5 ,000 as his consultant fee, but did not receive compensation for his "efforts and his ideas." Betrum then brought a lawsu it against Marowski for breach of contract and the case went to trial.

At Trial The court heard evidence by Marowski's attorney that the part of the agreement deal ing with payment for "efforts and ideas" was vague and indefinite and that compensation was not warranted. Betrum's attorney responded that compensa- tion should be paid on the basis of unjust enrichment.

Questions 1. What is meant by the term "unjust enrichment"? 2. In this case, was Betrum's attorney correct? Why or why not?

A contract is any voluntary legally binding agreement between t wo or m ore peo- ple or busin esses th at sets forth w h at the par ties w ill or w ill not do. W h ether you rea lize it or n ot , you enter into contracts on ma ny occas ions: wh en you take your ca r to a garage fo r rep airs, enroll in a college, rent an ap a rtment, purchase a

contract: legally binding agreement between two or more competent persons

DVD, buy something at a garage sale, take your clothes to the cleaners, use credit card, or join a health club. Each person, or "party," obtains certa in·- - and assumes certain obligations that will be enforced in a court of law.

You promise in writing to buy your friend's used motorcycle. Under the terms of the contract, you have the right to the motorcycle and an obligation to pay your friend the agreed-upon price. Your friend has right to collect the price you agreed to pay and an obligation to delive" motorcycle to you.

Contracts are often simple and easy to understand, such as when you - clothing in a store or order food in a restaurant. Other contracts, such as bu. a car or a house, are more complicated. In some cases, you do not sign your n to a fo rmal document, but that does not make the contract any less signific because an informal written contract-or even an oral contract- may be b;- ing. Often, people fail to realize that a contract has been made and therefo re fail to live up to the agreement. If the contract is trivial, no one really suffers !.: : is broken. If the contract is important, however, it causes a hardship if the I'-- ties fail to live up to its terms .

People form many agreements that at first glance appear to be contracts are not because no legally binding obligations between the parties are crear Such agreements will not be enforced by the courts. A strictly social agreement- generally considered to be one that does not create legally binding economic ligations for the parties or one in which the failure by one party to carry our • or her part of the agreement would not cause the other party to suffer damaz, recognizable by courts-is an example of an agreement that a court wi ll n -- enforce.

Marlo, president of a small-town bank, agreed to drive you, a large depositor at the bank, to the golf course. Marlo forgets and you have to take a taxi. Cohen, a close friend, agreed to sell her 2000 car for $2,00C and you agreed to buy it.

The courts would hold that the first example, the invitation to drive you r the golf course , is admittedly an agreement, but it is a social agreement and there- fore legally unenforceable. Marlo will not be required to pay your taxi fare. Th~ second ex ample, the sale of the used car, created binding economic obligatio on both sides and is enforceable in court. Therefore, Cohen must sell you the ca:- and you must buy it.

The Elements of a Valid Contract

LEARNING OBJECTIVE~ List the four essential elements of

a contract.

Four essential elements must be present for an agreement to have the status of a contract: agreement, consideration, competent parties, and legal purpose (see Figure 6.1). These elements are introduced briefly here, but each element is cO\-- ered in detail in Chapters 7 through 10.

Agreement is the initial step toward forming a contract. It is accomplished by a process called offer and acceptance. The person who makes the offer is called t he offeror. The person to whom the offer is made is called the offeree. When the of- feree accepts an offer, the first requirement of a valid contract has been satisfied.

Hudek (the offeror) offered to sell Hopkins (the offeree) some camera equipment for $300. Hopkins accepted the offer. This was offer and acceptance, one of the elements of a binding contract.

Consideration is something of value exchanged by each party to bind the agreement. Consideration m ay be money or it may be property, such as a watch or a car.

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FIGURE 6.1 The Elements of a Valid Contract

Consideration may also consist of doing something you are not legally bound to do, refraining from doing something you have a legal right to do, or promis- ing to do or not do something .

At a garage sale, O'Grady agreed to buy a set of used encyclopedias from Moran for $100. The $100 and the set of encyclopedias are the consideration for this contract.

A seriously ill uncle offered Ling, a pharmacy student at a local college, $10,000 to leave school and run the uncle's business. Ling agreed. Because Ling had a legal right to continue in pharmacy school, this act of

legality: the point that a contract must not be against the law

breach of contract: failure to perform the obligations requ ired by a contract

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Contract Terminology

LEARNING OBJECTIVE ~ Acknowledge that there are a

variety of contracts and be able to distinguish among

the various types.

refraining (not continuing in pharmacy school) was consideration fo. uncle's promise to pay Ling $10,000.

Capacity means having the legal and mental ability to enter into bindin~ _ tracts. In the eyes of the law, however, some parties lack the ability to enter contracts freely. These people may legally avoid (cancel) contracts made wi ers and demand the return of the consideration paid. Among those not ca- ered competent are minors (in most states, persons under the age of 18 ), pe: under the influence of alcohol and other drugs, and people who are mental:

Harris, age 16, lives in a state where the legal age for making contract_ 18. She entered into a contract with Michaels, an adult, to buy softw for her computer but then changed her mind. Because Harris is a min she can legally avoid the contract.

Legality means that the contract must not be against the law. The court not enforce a contract if the parties knowingly enter into an illegal agree and then demand performance. This is true even if all the other elements - - contract are present. A contract that interferes with the proper administrat io- justice is one example of an illegal contract .

You were an eyewitness to an automobile accident caused by a neglige driver. The driver who caused the accident promised you $1,000 if yo,. would not testify at the upcoming trial. You agreed not to testify. Beca this contract interferes with the proper administration of justice, it is illegal and would not be enforced by a court.

If offer and acceptance, considerations, competent parties, and legalit y ~ ­ present, a contract has been created. If any one element is missing, a com r- does not exist, and the agreement will not be enforced against either party b. court of law. If one of the parties does not carry out her or his part of the co:; - tract, that person may be sued for breach of contract. Breach of contract is ~ fa ilure to carry out one's part of the agreement. Breach of contract is discu sc"'- in detail in Chapter 14.

For certain types of contracts, there is another requirement: The agreem --- must be in writing. This requirement is discussed in Chapter 11.

Answer True (T) or False (F) .

1. A contract is a mere promise between two or more persons who have the capacity to contract. T ::::

2. Each party to a contract obtains both rights and obligations . T ::::

3. Legally, all contracts are agreement, but not all agreements are contracts. T

4. The initial step toward forming a contract is to decide on the amount of consideration. T F

5. A person can enter a contract at any age. T F

All contracts may be classified in the following ways: (1) bilateral or unilater al; (2) valid, void, voidable, or unenforceable; (3) formal or informal; (4) express or implied; and (5) executory or executed . These classifications are not mutually ex- clusive and may apply to the sa me contract. Consequently, a contract could be express, valid, bilateral, and informal.

- ral contract: contract in which -: ::arty makes a promise in return ::. :Jromise made by another party

eral contract: contract in which - :arty makes a promise in return

: performance of an act by -=·p arty

ntract: contract containing all -s.e.,tial elements

t ract: contract that has no :c and cannot be enforced

Contract Formation

Offer

Bilateral (· =p :;:J by one romu5e ___..,. · Contract party

In Return for

by another party

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of a specific .§ actbythe I

other party ~

FIGURE 6.2 Ways in Which Parties Reach Agreement

Bilateral and Unilateral Contracts A contract is either bilateral or unilateral (see Figure 6.2). An offer for a bilateral contract (the most common type) is one in which a promise (offer) is made by one party in return for a promise made by another party. In other words, both the of- feror and the offeree make promises, and these promises form the basis of the contract.

Oliver promised to pay Douglas $500 if Douglas promised to drive Oliver's car from Los Angeles to Boston. As soon as Douglas promises to perform the act required, a bilateral contract will be formed (a promise for a promise).

An offer for a unilateral contract is one in which a promise (offer) is made by one party in return for the performance of a specific act by the other party. In other words, the contract does not become effective until the act is performed.

Archie promised to pay Milligan $100 to repair Archie's garage door. The contract is not effective until Milligan actually performs the act of repairing Archie's garage door (a promise for an act).

Sometimes the offeror's promise is ambiguous as to whether a bilateral or unilateral contract is intended. If there is ambiguity as to which it is, it is pre- sumed to be a bilateral contract.

Valid, Void, Voidable, and Unenforceable Contracts Contracts may be classified in terms of their enforceability. A valid contract is one that contains all the essential elements of a contract: offer and acceptance, consideration, competent parties, and legal purpose. It is legally binding on all parties to the agreement.

Colt, a competent party, offered to sell some fence posts to Craft, also a competent party, for $100. Craft accepted. This agreement is a valid contract because it has all the essential elements of a contract.

Technically, a void contract is not a contract at all. A void contract has no le - gal effect, and neither party can enforce the contract against the other in a court of law. A void contract usually is an agreement that lacks any one of the essential elements of a contract or that has a subject matter that, unknown to the parties, does not exist at the time the agreement is made, thus making performance impossible.

voidable contract: contract enforceable against all parties until the party legally entitled to avoid the contract decides to do so

unenforceable contract: contract that is legal but fails to meet some requirement of the law

formal contract: written contract prepared with certain formalities, including a seal

informal contract: contract prepared without formalities

express contract: contract in which the agreement is specifically stated

You purchased a CD player that you knew was stolen. Because se. stolen property is illegal, the essential element of legal purpose is The contract is void and therefore unenforceable by either party f , agreement.

A voidable contract is a contract that is completely valid and enic - against all parties unless and until a party legally entitled to avoid t he - decides to do so by claiming some defect in the creation of the agreemen- nor, for example, may avoid some contracts.

Miller, a minor, purchased some sports equipment for $200 from D an adult who owned Darby Sporting Goods. Two days later, Miller returned the merchandise and asked for a refund, claiming the equi was no longer needed. Because he is a minor, Miller has the right to the contract and get his money back. Until it is canceled, however, t , contract is enforceable against both parties.

An unenforceable contract is one that is legal in all respects but fai ls tc some requirement of the law. As a result, a court will not enforce the co against either party. For example, the law requires that some contracts, contracts for the sale of land, be in writing. If they are not, the contra--~ unenforceable, even though they are legal in all other respects.

Formal and Informal Contracts A formal contract is a written contract prepared with certain forma litie-s check is one example of a formal contract because it must use a particular : or style of language. In early common law times, a formal contract was one was under seal-that is, closed with wax and imprinted with one's insigm~ special mark. Most jurisdictions today have abolished the use of the seal .1 means of validating a contract.

An informal contract does not require any particular formalities. T he ;- ties are free to use any style of language they wish. Informal contracts ma:- oral or implied; they do not have to be written unless required by stat'..:. Although the language used in an informal written contract may be as ela bor or as sketchy as the parties desire, it should include the date, the name and .-:. dress of each party, the consideration of one party, the consideration of the or party, and the signature of each party to the agreement. These elements .-:.- shown in the example of an informal written contract in Figure 6.3.

Express and Implied Contracts An express contract is one in which the agreement is specifically stated . . ""\. example of an express contract is an insurance policy, in which all the term s the contract are written as part of the policy. Express contracts may be eirh~­ oral or written.

Many contracts are made orally. When you buy gasoline for your car, grv ceries for your dinner, or film for your camera, you make an oral contract . . ""\._ simple as these transactions seem, all the necessary elements of a contract are present. Oral contracts should be limited to simple transactions that can be car- ried out quickly.

Written contracts should be used whenever important matters are involvec or the agreement is complicated. Written terms cannot be easily changed. If a misunderstanding arises later, it is easy to establish the terms actually agree upon. For example, you orally agree with Innes, a friend, to buy her used bicycle for $300. If Innes changes her mind, you could sue her for breach of contract, bur you might lose the suit because you lack p roof. A written contract of Innes's orig- inal intention to sell you the bicycle would make it easier for you to win in cou rt.

A word of caution. Even though an agreement is put in writing, that does nor make it legal and/or binding. For example , a written contract regarding a bet on

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contract: contract formed _ -· ons of the parties

CO N TRA C T

THE COLONIAL HOME IMPROVEMENT COMPANY 18 Brickstone Drive

Washington, D .C. 22182

April 22 , 2012

The Colonial Home Improvement Company agrees for the sum of ten thousand dollars ($10,000) to construct a deck at the rear of the premises at 12 Harris Street, Washington , D.C ., owned by Ruth Boyd . said porch shall be constructed of redwood and shall be seven (7) feet in width and ten 1101 feet in length, and shall stand five (51 feet off the ground . The expected date of completion is May 13, 2012 .

TERMS : Consideration from Ruth Boyd shall be the sum of two thousand

dollars ($2 , 000) as down payment immediately upon signing the con- tract . The balance of seven thousand dollars 1$7 , 000) shall be paid as follows :

'l'Wo thousand dollars l$2, 0001 upon commencement of construction

Eight thousand dollars l$8 , 000) upon completion of construction

Upon conunencernent of construction , any payment two days in default shall ren der the entire balance due and owing .

The Colonial Home Improvement Company agrees to fu rnish quality building materials, experienced workers, and top-quality service . Any dispute arising from the terms of this contract including an interpretati o n of the terms 11 quality 11 and 11 experienced 11 shall be settled by arbitration consisting of t"'o 121 arbitrators, one of whom must be a member of the Building Trades Association .

This writing constitutes the full agreement and understanding of the parties ~igned herein.

'I'he Colonial Home

Improvement Company

FIGURE 6.3 Informal Written Contract

/(u!h} ¥ Customer I Homeowner

a sporting event such as a baseball game wo uld generally be illegal and thus non - enforceable regardless of any writing.

It m ay be harder to prove the existence of oral contracts, but from a practi- cal standpoint , if all contracts had to be in w riting, our daily lives would be very complicated.

An implied contract (a contract implied in fact) is one in which the parties form a contract from their actions rather than from a specific oral or written agreement.

You wanted to visit a friend who lives across town. The bus fare was $1.25. You got on the bus and dropped $1.25 into the coin box. The resulting contract is implied because neither you nor the bus driver agreed either orally or in writing to form a contract. Rather, your actions and those of the bus driver created the contract.

In some instances, a contract may be partially ex press and partially implied.

quasi contract: contract implied in law to prevent one from benefiting at another's expense

executory contract: contract that has not been fully performed by one or all parties

executed contract: contract that has been completely carried out

RYou t eac

Johnson was enrolled in the auto technology program at a local colleg~ A classmate asked her to make some repairs to his car but did not mention paying Johnson for the work. Johnson agreed to do the work, expecting to be paid. When the job is completed, the classmate has a legal obligation to pay the "going price" (the price generally charged ~ mechanics in business for doing the same work). Although the agreeme between Johnson and her classmate to make the repairs was express, tl, agreement by the classmate to pay the going price was implied.

In certain cases, the courts create a fictional contract, called a quasi c tract, despite the wishes and intentions of the parties so as to promote jusri.:-_ A quasi contract (a contract implied in law) means "as if there were a contrac. Actually, no real promises have been made by the parties, and none of the or elements of a true contract is present. The courts create the quasi contract so r one party will not be unjustly enriched (i.e., receive a benefit) at the expense the other party. An implied-law contract is just as legally binding as an expres contract. For example, Dr. Restov comes upon the scene of an accident and re::- ders the necessary medical aid to Claire, who is injured and unconscious. Rest has a claim in quasi contract against Claire for the reasonable value of service. rendered. The explanation for allowing Restov to collect is that Claire, if able would have promised to pay for the services rendered, and therefore, the cour: will impose that promise on Claire . Sometimes it might appear that an individua is entitled to a quasi contractual award for unjust enrichment but really is no- Consider this example:

Johnson, owner of Mystic Sea Manufacturing Company, claims that he had discussions with his boss about a $1,000 a month pay raise to begin within one month. At the end of that month, no pay increase was given to Johnson so he sued to recover in quasi contract for unjust enrichment- money lost for not receiving the promotion. Johnson would not be successful. There is no proof that the raise was justified. The least proof that Johnson may offer in court is that he had a discussion about a pay raise. Consequently, this type of claim cannot be the basis for a monetary loss based on unjust enrichment. Johnson actually suffered no loss.

Executory and Executed Contracts With regard to performance, a contract is either executory or executed. An executory contract is one that has not been fully performed by one or all of t he parties. An executed contract refers to a contract in which all parties have com- pletely carried out their parts of the contract.

You hire a friend to install a stereo system in your new car. At this time, the contract is executory because neither party has performed. When your friend completes the job satisfactorily and presents the bill to you, the contract is still executory because you have not yet paid for the work. When you pay your friend, the contract will be executed because it has been completely performed by both parties.

On January 7, Harry Owens, owner of Custom Cleaners, offered to clean the carpets in Jane Harrington's law office for $500 . Harrington agreed to this offer on January 9. On January 20, Owneres cleaned the carpets and was paid $500 .

Questions 1. In this example, who would be the offeror and who would be the offeree? 2. When was the offer accepted? 3. What did each party give as consideration to bind the agreement? 4. Was the contract executed?

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urces of Contract Law

..EARNING OBJECTIVE ~ e the sources of contract law.

Common Law - One source of contract law is the common law-that is, court decisions that have been rendered by judges since earlier times. Obviously, judges from different states will render different decisions based on customs and traditions. The results of their decisions, called precedents (described in Chapter 1), therefore vary from state to state.

Uniform Commercial Code Some areas of contract law are governed by modern statutes. A good example of modern statute law is the Uniform Commercial Code (UCC) that, as stated ear- lier in the chapter, deals with the sale of goods. The UCC is a "model statute," which means that each state legislature makes its own decision about whether and when to adopt revisions of the various UCC articles. It is uniform in the sense that the same laws could apply to each and every state that adopts it. Com- mon law will continue to govern those contracts that have not been modified or replaced by statutory law such as the UCC.

Restatement of Contracts The Restatement of Contracts is an organized summary of the American com- mon law of contracts. It has enormous importance and is frequently cited in de- ciding contract law cases .

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Fill in the blanks to complete each statement.

= c.:» 1. Agreements formed for an illegal purpose are ___ _ 2. A contract whose terms are expressed orally or in writing is legally referred to as ..... .... 1.1.1 rn

a(an) contract. 3. A void contract has no legal ___ _ 4. A voidable contract is completely against all parties unless and until

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the party legally entitled to avoid it does so.

• 5. An insurance policy is a good example of a(n) contract.

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Points in Chapter • • • • ... ::uoductory chapter about contracts lays the foun- - ior the study of common law contracts (other than ~..:rs, dealing with the sale of goods) . A contract, as =d in this chapter, is any voluntary, legally binding ~ent between two or more people or businesses ~:s forth what the parties will or will not do. Some

=-ems appear to be contracts but are not. They are -ia l in nature and therefore legally unenforceable

.:our ts. - alid contract must fulfill the following four re-

rs : (1) agreement-reached through a process · ·er and acceptance; (2) consideration-something

~ given up by each party; (3) capacity-having the - mental ability to enter into binding contracts; and

: -an agreement not against the law. - racts may be classified as bilateral and unilat-

d, void, voidable, and unenforceable; formal and

informal; express and implied; and executory and executed. These classifications are not mutually exclusive and in fact may apply to the same contract.

In certain cases, the law considers it unjust that a person should receive a benefit (called unjust enrich- ment) at the expense of another person. Under these circumstances, a court-created contract (called a quasi contract) allows the person who conferred the benefit to recover its value from the benefited person, even though there is no contract between the two parties requiring any payment.

Some contracts are governed by common law prece- dents, whereas others are ruled by modern statutes, one of which is the Uniform Commercial Code (UCC). The Restatement of Contracts, a summary of American com- mon law, has enormous importance in deciding common law contract cases.

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lme_ortant Legal Terms ___ _ ---- ------ bilateral contract executory contract informal contract unilateral contract

breach of contract express contract legality valid contract

contract formal contract quasi contract void contract

executed contract implied contract unenforceable contract voidable contract

Questions and Problems for Discussion -~ - .,._

1. Is it correct to say that a void contract and an unenforceable contract both refer to an agreement that has no legal existence?

2. "All contracts are agreements, but not all agreements are contracts." What does this statement mean?

3. Yates, a vice president of the Washington Irving Bank, met with Morrow. They reached an agreement whereby the bank promised to loan Morrow money at 7.5 percent interest per year for ten years if Morrow would bring all his personal and corporate banking business to Washington Irving Bank. The bank made loans to Morrow at this rate for five years until Yates resigned from the bank. Morrow was then notified by the bank that because of economic conditions, it would need to charge a higher rate of interest on any new loans that were made. Morrow sued the bank for breach of contract, claiming that the bank had to continue the 7.5 percent rate of interest because of the agreement. Should Morrow win this case?

4 . Jane Ives lived in Linwood, New Jersey, with her three school-age children. All three students went to Cosgrove High School, which covered grades 9 through 12. By law, the school district had to furnish transportation for her children because they lived more than 2 miles from school. They were, however, wrongfully refused transportation by the district. Consequently, Jane drove the three children to school every day for a year. At the end of the school year, she asked the school district to reimburse her for the expense incurred in using her car to drive the children to school. The school district refused to pay her, and so she brought suit to recover the money. Does she have a case?

5. The Isaac Heating Company randomly sent out a letter to residents of the town where it did business. The letter read: "Special- We offer to clean your furnace for 50 percent off our regular price." Martell received the letter. Did a contract result between Isaac Heating Company and Martell when Martell received the letter?

6. Dante offered to pay Heckter $5,000 to burn down Dante's restaurant so that he could collect money

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from the insurance company on a fire insura nce policy he had acquired when he first opened t he restaurant. Since opening the business, Dante ha.:: been losing money and now needed funds to pay long -standing obligations. Heckter burned dow the restaurant as requested. Is Heckter entitled t , the $5,000?

7. Tanke! started a lawn-cutting service business. He randomly selected names from the phone book a-- sent notices to these individuals stating that he agreed to cut their lawns based on lawn size plus a 15 percent profit. He sent such a letter to Gibb s. a contract been formed between Tanke! and Gibbs-

8. Berger fainted at a shopping mall. A security gu arc arranged with police to have her taken to a hospita for emergency treatment. When she regained consciousness and was about to be discharged, the business office asked her to sign papers arranging f::.- her insurance company to pay the bill. Berger refus.:- to sign, claiming she had not made an agreement with the hospital for treatment. The hospital sued Burger. Would a court require Berger to pay the bh:-

9. Mason who has a degree in business administratio- interviewed for two positions, one as a credit manager for a large bank and the other as a fina n-- planner. He received a phone call offering him the credit manager's position, which he accepted. Two days later he was offered the financial planner's job. his first choice. He also accepted this position and then called the bank to say he had changed his min ... about taking the credit manager's position. Has Mason breached a contract with the bank?

10. Carver took his car to Dorschel Motors to have work done on the engine. He specifically told the head mechanic to repair, not replace, the engine. Instead of repairing the engine, the head mechanic instructed the mechanic who worked on the car to replace the engine with a rebuilt motor. Carver d id not know of this work until he was handed the bill. When Carver asked why his instructions were not followed, the head mechanic stated that replacing the engine was the most economical thing to do. Was Carver liable for the bill, which included the cost of the engine and labor?

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:..isa and Darrell Miller were married with two .::hildren. They divorced and entered into a joint .::ustody agreement. Under this agreement, Darrell .1greed to set funds away to cover their minor .::hildren's college expenses. The agreement was .::lea r as to what college expenses were covered but ·ag ue on such issues as how much was to be paid, ·hen Darrell was to start paying, for how long,

an d-as a matter of fact-whether he had to pay at all. Lisa, the ex-wife, insisted that he must pay the .::hildren's college ex penses, but could not back up

er request with any real evidence other than what ·as stated in the contract that was under dispute.

- Darrell legally obligated to pay? (Miller v. Miller, ~ So. 3d 815) .Jobos was admitted to a hospital with a serious .::ondition that required around-the -clock nursing .::are . The hospital, on orders from Dobos's doctor, :-equested Nursing Care Services, Inc. to care for .Jobos while she was in the hospital and for a " \·o -week period while she was at home. When _ ·ursing Care Services sent a bill, Dobos cla imed :he was not liable because she had not signed a

·ritten contract or personally made an oral a reement for their services, although she was well --,·a re of what her doctor had requested and had :-ead ily accepted the care provided. Under what :. eor y can Nursing Care Services collect? (Nursing ~are Services, Inc. v. Dobos, 380 So.2d 516) ~onnenburg and Hartnett were patients at an :ndiana state mental hospital. Even though they

·ere patients, they helped out with various duties at - e institution, such as mowing the lawn, washing - -hes, preparing meals, and performing office .:~.l[ies . They performed these duties on an ongoing a is even though they were repeatedly told by

spit al personnel that they would not be paid for ~ eir services. Later, Sonnenburg and Hartnett _ange d their mind and decided to sue for services

rformed, claiming unjust enrichment on the part : -he state. They claimed that it was only fair that

- ey re ceived compensation for their work. Should nnenburg and Hartnett be successful in a 1awsuit ·ed on unjust enrichment? (Bayh v. Sonnenburg, ~ .E. 398)

dsberg wrote a manual for winning at Scra bble. e rhen contacted the owners of the Scrabble game

-- ·ing for permission to sell this manual under the ·:-abble trademark. Instead, owners of the Scrabble

_ ·::ne re quested a copy of the manual. Later, the -ners published their own strategy manual. Since

no express contract was entered into between Landsberg and the Scrabble owners, Landsberg received no compensation for his manual. Landsberg sued the Scrabble owners, contending that the disclosure of his manual was confidential and for the limited purpose of obtaining permission for the use of the Scrabble tradema rk . Landsberg further contended that if the Scrabble owners intended to use his manual commercially, although there was no formal contract to do so, he should by implication have received adequate payment after some sort of negotiation. The Scrabble owners should not have assumed that the manual was given to them by Landsberg for free. Was Landsberg correct? (Landsberg v. Scrabble Crossword Game Players, Inc., 802 F.2d 1193)

5. Swetman and others were college teachers whose contracts ex pired at the end of the school year. They had been teaching for a number of years , and all had tenure (permanent status) , but they had no specific contract for the coming year. They applied for unemployment compensation for the summer months. C ompensation was denied because the teachers had tenure, and both the teachers and the college ex pected that the teachers would be teaching nex t year. Was it implied that the te achers wou ld have a teaching job for another year? (Swetman v. Gerace, Fla., 349 So.2d 977)

6. Brown entered a 7-Eleven store (in the state of California) to purchase a lottery ticket on a giveaway of over $7 million . He handed the salesperson a list of numbers he wished to play but was informed that the terminal had malfunctioned and could only give out tickets with terminal- generated numbers. Brown refused and then sued the state of California and the 7-Eleven for breach of a unilateral contract. H e argued that the state's advertising of the lottery constituted an offer and that he had accepted by tendering his own numbers to play and the appropriate amount of money but was refused the opportunity to play on this basis. He further argued that had the salesperson at the 7-Eleven allowed him to buy the lottery tickets using his own numbers, he would have won. Did a unilateral contract exist between Brown, the state of California (which ran the lottery), and the 7-Eleven store (which was unable to sell him the tickets) based on Brown's arguments? (Brown v. Califo rnia State Lottery Commission , 284 Cal. Rptr. 108)