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Lecture 8

MCS 3040 Lecture 8: MCS3040_ W8

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Department
Marketing and Consumer Studies
Course
MCS 3040
Professor
Joe Radocchia
Semester
Fall

Description
1 th November 7 Contract Law  What would happen in this situation? o Middle of the night – hear an awful sound in the basement  Rush to the basement and see that a pipe has burst and flooding the basement o Call trusted plumber – there in 10 minutes – shuts of the fixing pipe? o Plumber says no problem – 5000$  Was there a contract?  Do you get plumbing services for free?  If no price discussed, no offer made, what shall be done?  Quantum Meruit o Quantum – meaning amount o Meruit – meaning what is deserves o Being paid a fair market value for the service that had been conducted o A Latin phrase meaning “What one has earned”. In the context of contract law, it means something along the lines of “reasonable value of services” Enforcing Terms of a Contract  Sometimes there may be limiting terms – one’s exposure under a contract; limiting one’s liability under a contract  Limitation of Liability o Example. Moving furniture from one city to another  When moving your furniture, moving companies say, they’ll pay you 50 cents for every pound for that furniture that is moved  Limiting their exposure of liability  Why? What’s the business rationale?  There has to be a sharing of the risk  Exemption Clauses o Example. Going skiing or snowboarding – ski at your own risk  Regardless if your fault of their fault, you are exempting them form all responsibly; you can’t come back and sue them o Purpose is trying to limit absolutely. 100%, of all responsibility o Courts interpret exemption clauses quite strictly against the parties you are relying on it 2 o You have to bring the exemption to the attention of the other party – if not, it would have any benefit; Court will not apply it  Liquidated Damages Clause o Liquid – meaning money that is payable quickly o Parties to a contract agree to limit the maximum amount they can be liable for  The actually fix the amount – what is the most; what is the maximum exposure?  Whether the damage exceeded more, it still relates to be the maximum established  If lower, one party may get the bonus  If damages are more [$30,000 for example] – only get $10,000 that was established o Try to know your risk ahead of time Chapter 8 – The Non-Enforcement of Contracts  What happens when a contract may not be enforceable, because of some legal reason that may arise, or a legal rational as to what this contract should not be enforceable Terms  Void o Not enforceable because it doesn’t exist o Example.  If two spouses separate, entering into a separation Contract, and one of the clauses within the separation clause states that neither spouse will make a claim on the other in regards to Canada pension  Would be claimed as void of law, because you cannot do that in regards to Canada Pension Plan – law prohibits it o Example.  Buy your horse for 10,000$, if its lucky  Void, how? – too vague  Voidable o Means the contract is in place, there is a valid contract that is enforceable, but it maybe set aside and deemed not enforceable because some legal reason has rise  Such as: Undue Influence; unconscionability; or duress o As long the party acts promptly, because of the circumstances that have a risen because of the contract, then the contract can be set aside o But if a party signs a contract, under duress [or other] and let it carry on, and take the benefits of the contract, and take it to be fine, and then take an extended period to claim duress, it may be too late to make that claim because you didn’t act promptly, and that you went on to state that it was fine 3  Illegal o Means the law prohibits this kind of contract to exist o Considered to be ‘void’ – all contracts that are illegal, are considered to be void  But not all contracts that are deemed as void, are illegal  Example. o A has a car, and decides to sell the car to B o B uses a personal cheque to A to buy the car o Same day, B sells the car to C for 30,000$  Insists on a ‘certified cheque’ o C pays B; B gives the car to C o A in the mean time goes to the bank to cash in cheque o B is a scam artist – takes off with money  WHO OWNS THE CAR?  A, because the contract was not fulfilled – contract between A and B is void, because it lacks consideration o Under common law, contract between A and B is considered void  C has to give back the car to A, because B never had ownership to give to C  What happens is C, is a ‘innocent purchaser for good value’  Under the law of Equity, C may be considered an innocent purchaser for good value o If that’s the case, that C didn’t know B’s stunt; Was not gifted the vehicle; payed market value o C will decide on whether the contract between B was enforceable 4 Legal Reasons for Contract to be Voidable  Undue Influence o Defined – unfair manipulation of someone’s free will or choice  Putting pressure on someone; one of the parties didn’t have free will or choice into entering into this contract o Example.  Joe lawyer – family lawyer for 25 years; spouse that died took care of all the money issues  Client – says that they trust lawyer implicitly, what should they do with the money?  Says to invest in real-estate investment o Don’t tell client that the investment it isn’t doing well, have shares within that investment;  Using undue influence to get client into contract  Unconscionability o Defined – unfair manipulation of someone’s weakness o Example. Lloyds Bank vs. Bundy  Individual wants to get loan from Bank for business idea, but doesn’t have good credit  Says, no worries itll get someone who does  Gets Bundy – uncle – to sign on; Contract of Guarantee – that bank can go after Bundy if the nephew doesn’t pay back the loan  Bank didn’t tell Bundy that he should get legal advice on what to do  Nephew fails – bank goes after Bundy  Court said this is shocking – Unconscionability  Ruled that the circumstances that arose were not fully disclosed to him  Duress o Defined – threat of economic harm – someone tries coerce the will of the other party  Threaten someone with potential harm, or afraid if they wont enter into the contract o If you sign a contract under duress and can prove it, it is voidable o Example.  Tony Soprano – tells you that you will buying Olive Oil from him from 15$, even though you can buy that same under 4$, you sign it under duress  But once out from under duress, you can set it aside Contract may not be enforceable due to: Misrepresentation 5  Making a false statement  If you can establish misrepresentation, there are different remedies you can seek  What are the types of misrepresentation in Contract Law? o Innocent  Rescission – rescind – put back into original position, as if the contract never existed, never signed in the first place  Example.  Owner of property informed potential purchaser that he is selling ‘his square’ o Purchaser – perfect, that’s as much land as I need  Purchased occurred  After wards, purchaser found out that the original owner actually only owned part of the square – owner believed he owned the whole property  The purchaser said that since its only part of the land, he doesn’t want it, and wants to court to have the owner take it back and give back his money;  Argued – caveat emptor – ‘buyer beware’ o Have to be aware of what you’re buying [argued by owner]  Court agreed with purchaser; rescission of contract – owner take back land o Negligent  Recession and/or damages  Can ask Court to set contract aside, but as well as getting payed any damages that you occurred when entering this contract o Fraudulent  Gives you recession and/or damages  Have to prove that the other party intentionally made the misinterpretation  Example. Selling house, says it has no termites – but you know that there are; you purposely don’t tell the new buyer, so that they buy the house o You can get the owner to take back the house, and can get money for additional damages of wanting to buy a house  Contract can come to an end also due to Mistake – considered void o Rare remedy – rare circumstance where you can have a contract no enforceable o Arises where parties don’t have a ‘meeting of the minds’ o May have mistaken terms of the contract or assumptions of the contract o If it can be proven – then it can be argued that it wont be enforced 6 o Often considered void – if mistake can be established o Example  Where there is an inadvertent error  Said it would take 10 hours, and will charge HST for the work – claim 3000$ plus HST - agreed  However, when done and sent to client, it comes out as $300 o Can claim an inadvertent error  Common Mistake o Example. Buyer and seller selling commodities  Corn – from ship that was sailing from Africa to England  Corn spoiled – had been dumbed the weak before – therefore didn’t exist – can’t buy something that doesn’t exist  Considered void  Certain Contracts have to be in writing o Statute of Frauds Writing  Requires certain types of contracts are required to be in writing – if not, they are not enforceable  Very old statue  Purpose was to prove fraud – trying to avoid those situations  Governments and courts recognized that sometimes the statue created more problems, therefore trying to limit it  BC got rid of it  ON still has it o Contract of Guarantee  Where a pa
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