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Contracts: The Legal Duty Rule

There’s an important rule in contract law and that’s the legal duty rule. The legal duty rule says that a promise to perform what is already a legal duty isn’t consideration. For example, in Slattery v. Wells Fargo Armored Service Corp. an armored car was robbed. The plaintiff was a polygraph operator and discovered that a man he was testing for a matter unrelated to the robbery was the guilty party. He tried to recover the reward, but the court said that since he was working for the Sheriff’s Department at the time, he had a duty to report his findings.

An important case that illustrates the legal duty rule with contracts is Lingenfelder v. Wainwright Brewery. Here, an architect (the plaintiff was the plaintiff’s executor) was supposed to design a brewery for the defendant, but stopped work when another company was awarded a freezer contract that he wanted for his own company. The defendant offered to pay him commission in exchange for his continued work and the architect agreed. Wainwright, however, didn’t pay and the plaintiff sued. The court held that the architect was already under contract to design and build the brewery so Wainwright’s promise to pay for what he was already supposed to do was not consideration.  

January 30, 2007 Posted by | Contracts | Leave a comment

Contracts: Mutuality

An important part of a contract is mutuality, that is, both parties must be bound or neither is. This principle doesn’t apply to unilateral contracts where only one party is bound or to cases where both parties make promises but one party isn’t bound (such as fraud). It does, however, apply to bilateral contracts. An example of mutuality is seen in Scott v. Moragues Lumber Co. Here, Scott told the lumber company that if he bought a ship, he’d ship their lumber. This created an express condition. Neither party was bound until the condition was fulfilled. Indeed, Scott did buy a ship, but he chartered it to someone else. The lumber company was understandably upset. The court held that Scott was bound to the contract as soon as he bought the ship.

This is pretty straight-forward, but what about illusory promises? An illusory promise has the form of a promise, but not the substance of one. We have an example of such a promise in Wickham & Burton Coal. v. Farmers Lumber. The coal company agreed to fill any orders from the lumber company at a certain price. The lumber company, however, didn’t actually promise to buy any coal. The court held that the contract wasn’t mutual because the quantity to be delivered (even if it’s none) is conditioned entirely on the buyer. Because Farmers Lumber could have decided not to purchase coal, they weren’t bound. So if both aren’t bound, neither are. For more on illusory promises, check out section 77 of the Restatement Second on Contracts.

January 30, 2007 Posted by | Contracts | 2 Comments

Constitutional Law: Judicial Review

We spent some time talking about judicial review, though I think we’ll get into it more later. Most people probably heard about the big case in this area at some point during high school: Marbury v. Madison. There had been elections and the Federalists were dealt serious losses. Before leaving office, the lame-duck Congress passed the “Midnight Judges Act” which added new judgeships and they confirmed new judges (all of whom were Federalists). Because the confirmations had been done so late, many commissions hadn’t gone out, and Madison wasn’t about to send them. Marbury, one of those confirmed judges, brought a mandamus action to compel Madison to deliver the commissions. There were several issues in this opinion:

1. Does Marbury have a right to the commission?

2. Does Marbury have a remedy to obtain the commission?

3. Can a writ of mandamus be enforced against the executive branch?

4. Does the Supreme Court have the power to issue the writ?

4a. Is § 12 of the Judiciary Act (which allowed the court to issue such writs) a valid exercise of congressional power?

4b. Is the court empowered to make this determination?

The court answered in the affirmative to the first three questions, thus placating the Federalists. The court said, however, that Congress didn’t have the power to enlarge the original jurisdiction of the Supreme Court because that wasn’t one of the enumerated powers so the Judiciary Act was unconstitutional. The Court further said that it had the power to review the constitutionality of Congress’s grant.

We now have the question of whether judicial review means judicial supremacy or judicial finality. Before Marbury, judicial review went on and in a way that showed judicial supremacy (in that the Court invalidated legislative actions. Judicial review was a response to legislative abuse (as was bicameralism). Some argue that the majority should rule and the courts are counter-majoritarian. While this is true, there are other examples of counter-majoritarianism: the filibuster, equal voting power for the States in the Senante, and one state/one vote when presidential elections are thrown to the House to name a few. Judicial review plays an important part in our system of government by preventing abuses by those we elect.

January 30, 2007 Posted by | Constitutional Law | Leave a comment

Constitutional Law: Implied and Inherent Powers

Our next topic was inherent and implied powers. “Implied” powers are linked to the textually assigned powers and serve as means to the ends spelled out in the text. The text doesn’t specifically grant the power, but the text does suggest it. “Inherent” powers don’t depend on the existence of any textual assignment. As an example, we can use a contemporary problem and ask how the government has power to control immigration. An implied power could be taken from the sovereignty given the government. You could use a natural reason argument to ask what is a nation if it’s not sovereign and doesn’t have the power to control its area and borders? If a nation is sovereign, it controls entry. This is an argument that shows the power to control immigration is inherent in the Constitution. An implied argument would be that Congress has the power to provide for the common defense and you can’t do that if your enemies can enter at will. Or you could say that Article I section 9 says that Congress can’t restrict migration or importation until 1808, showing that Congress would have the power after 1808. These arguments imply that Congress does have the power by pointing to places in the text that supports the argument. With any power not expressly enumerated, you can have both implied and inherent powers so it’s sometimes hard to classify a power as solely implied or inherent.  

 

January 16, 2007 Posted by | Constitutional Law | 1 Comment

Constitutional Law: Methods of Interpretation

I haven’t posted much on constitutional law because it’s a pretty convoluted subject and we’re using a pretty convoluted book. (I recommend the constitutional law outline in the Emanuel series. It helps a lot). After talking about McCulloch regarding the enumerated powers, we talked about methods of interpretation. These methods blend together too; it’s not always clear when one interpretation is strictly one method or another. We’ve talked about six methods: textual, structural, prudential, historical, precedential, and national ethos.

The buzz words of textual interpretation are “plain meaning.” This is where you look up the words in the dictionary, use contemporary sources, and look at the location of the words in the text (like when Marshall said the Necessary and Proper Clause was in the section granting powers to Congress and not the section which limits Congress).

With structural interpretation, you can make inferences from the structure and relationships set up by the Constitution. An example is the division of powers within the branches of the federal government and between the government and the states.

In prudential interpretations, you ask what the consequences of the decision are and what the consequences of who decides are (this means you ask who’s best suited to decide; it may be the legislature or it may be the judiciary).

The historical method of interpretation is often paired with Originalism (it ties both textual and historical interpretation together). You look at the purposes for various clauses in the Constitution and uses sources to get into the “brain of Madison” as some say, meaning you try to ascertain the Framers’ intent.

We didn’t spend much time on the last two. Precedent is self-explanatory and we glossed over national ethos. (I’ll try to edit this and include more on it when I learn it on my own).

January 16, 2007 Posted by | Constitutional Law | Leave a comment

Contracts: Unconscionability

Unconscionability is one of those limits to the bargain principle. In Schnell v. Nell we can see parts of it when the court says that 1¢ for $600 is too uneven. In Williams v. Walker-Thomas Furniture Co. the plaintiff had purchased several items from the defendant’s store, the most recent being a stereo for over $500. The plaintiff had a limited income and really couldn’t afford the stereo. The financing agreement the plaintiff signed had a cross-collateral clause that said the defendant retained title in the property until it was paid off, and it combined all the debt into one. At the time of the suit, there were several items that had less than $10 left to pay, but because of the structure, payment on those items was minimal because most went to the stereo.

The court held that where the element of unconscionability is present at the time a contract is made, the contract shouldn’t be enforced. Unconscionability includes an absence of meaningful choice on the part of one of the parties together with contract terms which are unreasonably favorable to the other party.

The remedies for an unconscionable contract are put forth in section 208 of the Restatement Second which says that if a contract or term thereof is unconscionable at the time the contract is made a court may refuse to enforce the contract, or may enforce the remainder of the contract without the unconscionable term, or may so limit the application of any unconscionable term as to avoid any unconscionable result.

 

Maxwell v. Fidelity Financial Services, Inc. says that there are two kinds of unconscionability: procedural and substantive. Procedural unconscionability is concerned with things that mean the bargaining didn’t proceed as it should. Factors to look at are age, education, intelligence, business acumen, relative bargaining power, who drafted the contract, whether the terms were explained to the weaker party, whether alterations were possible, and whether there were alternative sources. Substantive unconscionability is an unjust or “one-sided” contract where the contract terms are so one-sided as to oppress or unfairly surprise an innocent party, and an overall imbalance in the obligations and rights imposed by the bargain. A claim of unconscionability can be established by showing substantive unconscionability alone; both types aren’t needed, though some courts do require both types.

Unfortunately, there aren’t a lot of guidelines on how to define “unconscionability,” but the contracts that are clearly unconscionable should be easy to spot.

January 16, 2007 Posted by | Contracts | Leave a comment

Criminal Law: Proof Beyond a Reasonable Doubt

The standard that we use is the Winship standard which is that the Due Process Clause protects the accused against conviction except upon proof beyond a reasonable doubt of every fact necessary to constitute the crime charged. We use this standard because there’s a lot for the defendant to lose so we need to be sure he’s the guilty party, and because in a civil case, the mistaken judgment isn’t any worse for either party, but in a criminal case, it’s worse for an innocent man to be convicted than for a guilty man to go free. The traditional reasonable doubt definition is that reasonable doubt is not a mere possible doubt. Reasonable doubt is the that state of the case which, after the entire comparison and consideration of all the evidence, leaves the minds of the jurors in that condition that they can’t say they feel an abiding conviction, to a moral certainty, of the truth of the charge. This definition is a bit vague, so there are many courts that don’t give instruction on what “beyond a reasonable doubt” is.

There’s also allocating the burden of proof in a case. In Patterson v. New York, the defendant wanted to use the affirmative defense of extreme emotional disturbance in his murder trial. New York’s murder statute didn’t include an element that went to state of mind. The court held that due process doesn’t require that every conceivable step be taken, at whatever cost, to eliminate the possibility of convicting an innocent person. To recognize at all a mitigating circumstance doesn’t require the State to prove its nonexistence in each case in which the fact is put in issue, if in its judgment this would be too cumbersome, too expensive, and too inaccurate. Thus, the entire burden isn’t on the prosecution. The prosecution only has to prove the elements of the crime. If the defendant can prove his defense to the applicable standard (usually reasonable doubt or by a preponderance of the evidence), then the prosecutor would have to disprove the defendant’s arguments.

January 11, 2007 Posted by | Criminal Law | Leave a comment

Contracts: The Bargain Principle

Consideration is one of the necessary elements of the contract, and for a long time, the only form of consideration was the bargain. Restatement Second of Contracts § 71 says that a performance or a return promise must be bargained for, and a performance or a return promise is bargained for if it is sought by the promisor in exchange for his promise and is given by the promisee in exchange for that promise. A case that illustrates this is Hamer v. Sidway in which an uncle told his nephew that he’d give him $5,000 if the nephew didn’t smoke, drink, or gamble until he was 21. The nephew did this and requested the money. The uncle said that he’d give it to the nephew, but that he thought it would be better if he kept it until his nephew could use it responsibly. The nephew thought this was a good idea. When the uncle died, he sued to collect his money. The court said that consideration means not so much that one party is profiting as that the other abandons some legal right in the present, or limits his legal freedom of action in the future, as an inducement for the promise of the first. Here the uncle bargained for his nephew’s abstinence from cigarettes, alcohol, and gambling. The nephew, as promisor, received something of value, the $5,000, for his promise to his uncle, the promisee. This fulfilled the consideration requirement. It may seem as if the consideration involved here was a bit unbalanced. Hancock Bank v. Shell Oil Co. talks about this.

In Hancock Bank, a lessor lease property to Shell Oil for 15 years with an option to extend for another 15 years, and a clause that Shell could terminate the lease with 90 days notice. The bank bought the property at auction after the property was foreclosed. It sued Shell, claiming that Shell had such a good lease that the consideration paid for the lease was uneven. Courts have traditionally declined to relieve a party from the terms of a contract merely because he made what he regards as a bad or uneven bargain.

Thus, Shell kept the lease as it was. You can compare this to Schnell v. Nell when the court said 1¢ didn’t constitute consideration for $600 because the two cases both deal with uneven consideration. The difference is that in Schnell, there wasn’t really an exchange, only the form of one, whereas in Hancock Bank there was an exchange because both parties got something of value. Further, according to Restatement Second of Contract § 79, if the requirement of consideration is met, there is no additional requirement of a gain, advantage, or benefit to the promisor or a loss, disadvantage, or detriment to the promisee.

 The bargain principle does have limits, however. Sections 175 and 176 of the Restatement talk about using duress and threats to get the bargain. If a party’s manifestation of assent is induced by an improper threat by the other party that leaves the victim no reasonable alternative, the contract is voidable by the victim.

January 11, 2007 Posted by | Contracts | Leave a comment

Constitutional Law: Congressional Power Beyond the Enumerated Powers

We’ve started Constitutional law by reading McCulloch v. Maryland. Essentially, Congress chartered a bank and Maryland passed a law taxing banks which weren’t chartered by the state legislature (the National Bank). The local cashier refused to pay so Maryland sued. The case was taken up by the Supreme Court, and the first issue (which is the only one we’ll deal with now) Justice Marshall took up was whether Congress had the power to incorporate a bank. Marshall held that the government is supreme in its sphere of action. That sphere is limited by the enumerated powers granted to Congress by the Constitution. One of the arguments against Congress having the authority was the “Necessary and Proper” clause (Art. 1, Sec. 8, Clause 18). The bank’s opponents said that the bank wasn’t necessary (meaning absolute necessity) to laying taxes, borrowing money, and providing for an army. The bank’s supporters argued for a more liberal interpretation of “necessary” and said that absolute necessity would unreasonably constrict the government’s ability to engage in its authorized powers. This is the line that Marshall took. He said that the normal use of “necessary” is that a means is calculated to reach an end, and as long as that end is one of the enumerated powers, the means is allowed (as long as it’s plainly adapted to meet the end). This is the two-step McCulloch test for determining if the government has the power to do something.

January 9, 2007 Posted by | Constitutional Law | Leave a comment

Contracts: Reliance

The next topic is reliance. The first case is Kirksey v. Kirksey. Here, a man invited his widowed sister-in-law and her family to his property and said he’d provide a home and land for them. Initially he did this, but he moved them twice; they eventually ended up in a place slightly better than a shack that was located in the woods. The court said that there wasn’t consideration, but one judge, in his dissent, said that the sister-in-law’s reliance on the brother-in-law’s promise should be sufficient consideration. Because courts started thinking this way, they found ways to get around the question of reliance as consideration.

The first way is estoppel in pais or equitable estoppel. Here, if A makes a statement of fact to B and B has foreseeably relied on the statement, A is prevented from denying the truth of the statement. So, using Kirksey as an example, the brother-in-law said he’d take care of his sister-in-law, and since the sister relied on that statement, the brother couldn’t deny he’d made the statement.

The second way is promissory estoppel, also known as detrimental reliance. Promissory estoppel occurs when a promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a third person and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise. (Res. 2d. § 90). Basically, if someone makes you a promise and you act on that promise, then the promise is binding. Thus, reliance is a form of consideration.

January 9, 2007 Posted by | Contracts | 1 Comment