The US Contract Law: The Objective Standard of Agreement - Case Study Example

PART I The Objective Standard of Agreement is a stand that makes it impossible for a defendant to plead mistake as an excuse for non-performance. Discuss. A contract could be said to be against individual intents of the parties. A contract could be an obligation made by the ordinary parties to the contract, or it could be a representation of the known intent. Contracts have been upheld when people have spoken one thing while actually not meaning what they did (Ian Ayers, Richard E. Speidel). Court views apply both the subjective as well as the objective theories of contract law. It has been described as an agreement that has been entered into by two willing parties, who consider the agreement as binding on both sides. If it appears after a breach that the injured party would have shown total failure to perform the intended promise, then the party’s duty to pay for total breach of the contract by repudiation is discharged. It is also discharged if it is felt that if it had not been breached the duty would even then be discharged due to impracticality or frustration. In such a scenario the breach would be unavoidable. There has also been illustrated by law that if due to an occurrence or event one is unable to discharge his duty he is free from repudiation, if the non- occurrence of the event is an assumption in the contract, unless it has been specified otherwise. Also, in case of death or of incapacity of the person to perform and fulfill the contract the breach is considered repudiated, when the non-occurrence of the event was a basic assumption in the contract. If the duty has been prevented by a government order, then that would mean that the performance of the duty is illegal and thus impractical. The regulation would be thus, the event that has occurred, the non-occurrence of which was a basic assumption in the contract. The Discharge by Supervening Frustration occurs when there are experienced frustrations in the execution of the contract after it has been formulated. This frustration may occur due to various reasons such as the happening of an incident which had not been foreseen, and in the contract the non-occurrence of which was a basic requirement for its execution. This is thus not repudiated unless it has been specified in the contract. If such as case has occurred where the party has no control over the circumstances, the effect that it has on the other party’s performance is known as a Prospective Failure Justified by Impracticality or Frustration. The party's prospective failure of performance would lead to the discharging of the other party's duties or allowing them to suspend performance under the rules stated under section 251(1) and 253(2) and though the failure would be justified under the rules. The rule as stated in Subsection (1) would be sort of defunct if the risk involved is assumed by the other party with an understanding that performance has to exist despite these failures. The obligator’s duty to perform will only be temporarily suspended, till the impracticality of performance or frustration of purpose is present. Once it has been removed he is obliged to fulfill his duty unless it would be materially more cumbersome than before there had been any impracticality or frustration. Partial Impracticability has been only part of an obligor's performance is impracticable, and duty to render the remaining part is unaffected if: • it is realized that it is better for the party to render any services which are practical rather than undertake any of the substitutional duty which one might be undertake under obligation to the contract; or • the one under obligation, within a reasonable period, would agree to render any remaining duty in the whole and to permit the obligator to retain any services that he has already undertaken. There has been a case about job employment also and that would be discussed here: Embry vs. Hargadine, McKittrick, Dry Goods Co. Court of Appeals, Missouri, 1907. 127 Mo.App. 383, 105 S.W. 777. Dawson, pp. 325-328 Facts: The defendant was the employer while the plaintiff was the employee. The employment contract made between either party was set to expire. The employee went to the employer and said that if his contract was not renewed then he would quit. The employer said something which the employee believed was an agreement that his contract will be renewed, and will be extended for another year. The employee was fired in less than a year. He believed that this was against what had been agreed upon and he went to court. The employer won the trail, and the employee then appealed to a higher court. Question: Did the words of the employer form a contract? Rule: The contract would be enforceable if a reasonable person reached the same conclusion. Analysis: the court finds that law would prevail as to whether or not what employer said was understandable reasonably or ready for the contract formation. Court said if plaintiff’s version was found correct, what boss said would be taken as as a natural assent leading to a contract of re-employment that is very much valid. Another case scenario is as follows: Krell v. Henry, 2 K.B. 740 (1903). Facts: the flat of Krell (P) is undertaken by Henry (D) with the help of a contract so as to ensure that D is able to view the procession of King Edward VII from the flat in London. The terms of the contract specified that the flat was to be sublet to D by P in the exchange for 75 pounds, but in the contract there was no mention made of what was the purpose for which the flat was sublet to D. the coronation and the procession was postponed by the royal chambers after the king fell ill. Henry took a U-turn on the contract. Both the parties sued each other; P wanted the remaining of the deposit, while D wanted the rest of the deposit returned to him. The lower court cited Taylor v. Caldwell and the final verdict that was reached that was in favor of D based on the fact that the postponement of the coronation. P appealed. Issue: In case of the occurrence of an unforeseen event what are the circumstances under which the party will be excused? Holding and Rule: the final verdict was reached that duty that had to be performed will be excused when the basic purpose or aim of the contract has been frustrated due to the occurrence of an event which was not contemplated at the time of the construction of the contract. A contract’s purpose may be inferred from surrounding circumstances. If the contract has been so executed where it has been implied that the continuation of certain events and circumstances are must, and must be fulfilled in order for the continual of the contract, the non occurrence or discontinuation of the events would lead to the discontinuation and nullification of the contract as either one or both parties would be unable to execute their duties as had been previously decided upon by then contract. In such a case the contract ceases to exist due to no fault of either party (Taylor v. Caldwell). There have been cases like that would be impracticability, like: Taylor v Caldwell (p 868) US v Wegematic Corp (p 863) Dills v Town of Enfield (p 877) Bolin Farms v American Cotton Shippers Ass’n (p 18) Dills v Town of Enfield (p 877) The two conditions that were imposed were that the project and finances be submitted to D and that D’s approval was required. P was unable to get a mortgage and thus was unable to submit construction plans. D considered this a breach and keeps the deposit. P sued to recover the deposit. D got favor of the trial. It was a case of false advertisement. Generally under the false advertising laws, advertisers are not required to state affirmatively or publicize things about product and services and that has been the case (American Bar Association). The advertiser may remain silent and that can imply false representation. The advertiser has failed to disclose issues that the consumer may be finding misleading. The material fact that has been omitted in the advertisement or that can be said as misleading. The example of misunderstanding can be clearly understood through this case where there is a party who can be referred to as owning a bus that could be around $50,000. Let us assume that a friend had asked the price of the automobile. The owner had playfully replied that the automobile would be sold at 1000 dollar, but in his mind the intention of selling the automobile was not present. The friend who had been serious had agreed with the deal. The first party said that it had not been serious and it never intended to sell the bus. The court would believe that the first party had been serious because a small big amount of 1000 dollar has been quoted, which is believable. If the amount that had been quoted had been unbelievable such as dollar 5, then there would have been no belief. PART II The doctrine of the insufficiency of existing obligations is a poor way of distinguishing between enforceable and unenforceable modifications of contracts. Discuss. In contemporary American law four types of enforceable contracts or promises are recognized. Each type is governed by a transaction that adds something up to the promise in order to make it binding in a legal way: i. There would be usage of promise and consideration ii. There has been promise and antecedent benefit iii. There has been promise and unbar gained response iv. There has been promise and form 1. Consideration could be a benefit to the promised or would be detriment to promise, that would be showing as both a benefit to the promised and a detriment to the promise. 2. This dual notion has been present in the present era, where a valuable consideration would be right, interest, profit, or benefit accruing to one party or some forbearance, detriment, loss, or responsibility given, suffered or undertaken by the other. The promise that had incurred a specific, bargained-for legal detriment may enforce a promise against the promised notwithstanding the fact that the latter would have realized no concrete benefit as a result of the bargain. Consideration has been bargained-for exchange and implies that something happened The Second Restatement says: 1) There has been consideration, a performance or a return promise must be bargained for 2) There has to be performance or return promise is bargained for if it is sought by the promised in exchange for his promise and is given by the promise in exchange for that promise 3) Performance would be consisting of: a) an act other than a promise b) a forbearance c) The creation, modification, or destruction of legal relation 4) The performance or return promise would be given to the promise or some other person. It would be given by the promise or by some other person Cases: Bolin Farms v. American Cotton Shippers Association (Western District of Louisiana, 1974) p. 18 Facts: Plaintiffs, which comprises of 11 cotton farmers, are wanted on account of their commitment of the contracts stating that they would sell and as well deliver cotton produced by them. It was agreed by the defendant that he would purchase everything that was planted on a specific price despite the variation in the price, whatever that was, at the time of actual harvest. This could be called as forward sale contract. Price of cotton unexpectedly skyrocketed to at least double the price agreed upon. 13 similar cases has been upheld federal and state courts Issue: Enforceability and validity of the aforementioned contract regarding cotton Ruling: Contracts valid. Rationale: It would have no impact on contract s validity if the market goes either up or down. Kirksey v. Kirksey (Supreme Court of Alabama, 1845) Plaintiff was a widow with several children. Her brother-in-law has been living 60-70 miles away writes letter stating, “If you will come down and see me, I will let you have a place to raise your family”. Plaintiff would be leaving the land after receiving letter and goes to live with defendant. For two years she has been living in “plain comfortable houses” and land to cultivate; then defendant would be asking her to leave; he the placed her in uncomfortable house in the woods; and later goes on to throw her out of that house. Issue: Was brother-in-law’s promise “mere gratuity?” Will that be termed as unenforceable? Ruling: Terms the promise as “mere gratuity,” and states actions not in compliance to the promise do not constitute what can be said as breach of contract The Court: The reason for that it has been found out that there has not been any bargaining or evidence that these exchanges, promises, or acts were bargained for. The doctrine of the insufficiency of existing obligations has been a poor way of distinguishing between enforceable and unenforceable modifications of contracts and the law has been unable to distinguish between the moral and ethical rights or wrongs. The case study WARNER v. KAPLAN, 2009 NY Slip Op 09169, TRACY ALTMAN WARNER, ET AL., Plaintiffs-Appellants Vs. KENNETH R. KAPLAN, ET AL., Defendants-Respondents, ROSENBLUTH & ROSENBLUTH, ETC., Defendant Appellate Division of the Supreme Court of New York, First Department. Decided December 10, 2009 Richard A. Kraslow, P.C., Melville (Richard A. Kraslow of counsel), for appellants. Victor & Bernstein, P.C., New York (Donald M. Bernstein of counsel), for respondents. Before: Gonzalez, P.J., Saxe, McGuire, Acosta, Roman, JJ.SAXE, and J On May 11, 2005, defendants K. F. Kaplan and D. F. Kaplan, both sellers, and Glen Altman, who was the purchaser, had agreed on a contract which stated sale of cooperative apartment 2A located at Manhattan’s 1150 Park Avenue. The sale was agreed upon at a price of $2.3 million in cash. Subsequent to this a deposit of $230,000 was placed in escrow. On July 27, 2005, an application was submitted by Altman to the board of directors of the cooperative seeking approval in favor of the sale. On August 11, 2005, board of directors interviewed her, subsequent to which approval was granted for sale on 18 August, 2005. ( Plaintiffs stood to their stance that board’s notification was not received by Altman before her death; but cooperative’s broker was sticking to the stand that Atman did have the knowledge of the approval. This was followed by Atman accompanied by stepdaughter visit to the apartment to think again whether or not Atman should purchase the property. On September 1, 2005, Altman had died after suffering a stroke. On 28 September, 2005, plaintiffs Alan G. Kraut and Tracy Altman Warner, co-executors of Glen Altman's estate, demanded deposit of $230,000 be returned to them by the sellers, who, on the other hand, stood firm on their stance that the contract entered by them previously was legal and binding on Atman’s heirs. They further stated that if the deal, Handed this way, would amount to default. There was a buyer of a $2,300,000 Manhattan co-op apartment .He had died after getting into contract of sale and the deed has been approved by the cooperative board of directors and that has been done before closing. The buyer’s estate does not want to consummate the deal and the big question was whether the sellers should be having the $230,000 deposit. The New York appellate division said or ruled that the sellers have been entitled to keep the deposit amount. The main thing that had been in support of the rule is that contract would be binding on the parties and the possibility of either party’s death before closing regarding which there has been a clause that death would not terminate the contract and the contract would survive. The contract would be binding on the buyer’s estate. There is thus one contract for personal service that had been terminated by the death of servant and the case has been Minevitch v. Puleo, 9 AD2d 285, 287 [1959].There is also another contract of sale that had not been terminated by the death of purchaser. That means if the proposed purchaser has died before the closing of the title and paid the balance of the purchase price and there has been taking of deed in the own name and it is the duty of the fiduciary that has been used for purchase of real property. (4-35 Warren's Weed New York Real Property §35.24 [2009] Di Scipio v. Sullivan, 30 AD3d 660 [2006]). There has been rejected by law of the estate contention that the buyers death would lead to the closing and that it would justify to non performance and that would be under the defense of impossibility or frustration of contract. The term impossibility would lead to the excusing of the party’s performance and that would be destruction of the subject matter. There has been means of performance that would be objectively impossible to achieve or realize. The situation of the impossibility would be produced due to the occurrence of the unanticipated event which could not be foreseen or guarded against in the contract. (Kel Kim Corp. v. Central Mkts., 70 NY2d 900, 902 [1987]). Looking at the case of Stewart v. Stone, 127 NY 500 [1891]) the performance and actualization of the contract would be impossible... On availability of the performance, what becomes unavailable is the impossibility excuse, legally. (407 E. 61st Garage v. Savoy Fifth Ave. Corp., 23 NY2d 275, 282 [1968]). There have been steps taken to invoke the doctrine of purpose. It would be invoked in such a manner that the parties involved would realize that the carrying out of the contract would make no sense and thus the repudiation of the contract was the best possible solution (22A NY Jury 2d, Contracts §375). The buying of the house was solely for her own residence and her death would frustrate the contract and the doctrine of frustration of purpose that had prevented performance and provision could have been made for occurrence and the contract actually made explicit provision for the death of both the party and the doctrine has not been made available. One of the most important aspects of any law is the method by which it is enforced. Laws may be enforced through public enforcement, for example by a government agency, or through private enforcement, such as a private lawsuit filed by a consumer. The company may be entering into contracts with others. There has to be addressed the position of answering of authority of organ or a specific agent. These can be addressed by the doctrine of actual authority, the doctrine of ostensible authority, the indoor management rule and sections 128-129 of the Corporations Act 2001.The law state that company may either enter the contract directly or the company can authorize persons to enter the contract on its behalf. There can be problems when the persons who are assigned for the job has entered into contract, but has done it for personal benefits rather than the benefit of corporation and when an unauthorized person can execute the contract document. There have been a large numbers of companies in America including both major organizations as well as small companies. Fundamental company accounting has been same for all companies but small companies are not required to publish their financial accounting. The company form of organization will see that specialist managers to administer day to day operations. Smaller companies are usually managed by few persons and it can be easily done. The case differs when there is large number of companies as there will be share holders and they will be from different parts of the world. It is in these back ground that there will be strict laws that will help in the regulation of the company. Since agent process would be unknown to the third party, it would be sort of forced to believe the authority that is vested in an agent. The agent would be having no real authority in certain transactions while in some transaction will be exceeding the authority. Apparent authority has been designated to the agent. The authority that the agent has been said to possess is apparent but that has not been granted by the principal expressly or impliedly. There are varieties of circumstances where agent has measure of actual authority. There could be circumstance in which an agent will not be given the authority and the principal would make it clear to the third party that the person is his or her agent. This would be stated by an extreme example like a junior employee who has been left in charge of the company may be sending or committing the company into contract. The employee would not be having actual authority while the actions of the junior employee will be binding because of granted authority. There is a concept that is termed as Force Majeure and that has been defined as an event that could be neither anticipated nor controlled. The contract claims that it would be termed as an unexpected act of god and that could be termed as earthquake, flood, tsunami, and that could be termed as war. It would be pertaining to the day to day commercial activities. Such is the case of that which can be in support of it, Corp. v. Power Pact, LLC, 41 A.D.3d 939, 943 (N.Y. App. Div. 2007) and Kel Kim Corp. vs. Central Mkts., Inc., 70 N.Y.2d 900, 903 (1987). KEL KIM CORPORATION v. CENTRAL MARKETS, INC., 70 N.Y.2d 900 (1987) 524 N.Y.S.2d 384, 519 N.E.2d 295 KEL KIM CORPORATION et al., Appellants, v. CENTRAL MARKETS, INC., et al. Respondents. Court of Appeals of the State of New York. Argued November 18, 1987 The proposed purchaser that had died before the closing of title and the balance of the price that would be paid by the executor and administrator and the balance of the purchase price and take the deed in the own name and would be holding trust and there has been heirs at law and devises. There has been duty of fiduciary and there would be complete payments for contract entered into such vendee for the purchase of real property (4-35 Warren's Weed New York Real Property § 35.24 [2009] and Di Scipio v Sullivan, 30 AD3d 660 [2006]). The impossibility would be saying that a party's performance and the destruction of the subject matter of the contract and there has been performance that has been applied. Impossibility would be produced at an event that would not be foreseen and guarded against the contract. The plaintiff’s predicament has not been within the embrace of the doctrine of impossibility. Kel Kim's inability to procure and maintain requisite coverage and as that could have been foreseen and the obligation would not be excused on the basis. Contractual force Majeure clauses — or clauses that have been excusing non-performance due to circumstances beyond the control of the parties and under the common law that would provide a similar narrow defense. The two-party agreement was specifically and strictly bound by a defense of force majeure. That has been present in the case study between U.S. Bancorp Equip. Fin., Inc. vs. Ameriquest Holdings LLC, No. 03-5447, 2004 WL 2801601.There has been application for force Majeure that has been applied for New York Law and there has been a clause that has been present in the contract and that would be covering the event in question. References Rules of Contract Law, 2009-2010,by Charles L. Knapp, Nathan M. Crystal, Harry G. Prince, Aspen Publishers, Published: 7/27/2009,ISBN: 780735579385,Paperback: 200-250 American Bar Association, 2004, Consumer protection handbook, Section of Antitrust Law, American Bar Association, 29-50 “Objective theory of contract”,http://law.jrank.org/pages/8883/Objective-Theory-Contract.html Chapter 5,http://chestofbooks.com/business/law/American-Commercial-Law-Series/Chapter-5-Consideration.html "Studies in contract law",http://www.ilrg.com/students/outlines/download/contracts-yale-brooks-03.doc STUDIES IN CONTRACT LAW, IAN AYRES, RICHARD E. SPEIDEL, pp600-650 “Objective theory of contract”, viewed and retrieved from http://legal-dictionary.thefreedictionary.com/Objective+Theory+of+Cont Read More