[FIFTH EDITION] ESSENTIALS of BUSINESS LAW By Jeffrey F. Beatty and Susan S. Samuelson
CHAPTER 13 - CAPACITY AND CONSENT
ESSAY QUESTIONS
1. Raymond Barrows owned a 17-acre parcel of undeveloped land in Seaford, Delaware. For most of his life, Mr. Barrows had been an astute and successful businessman, but by the time he was 85 years old, he had been diagnosed as “very senile and confused 90 percent of the time.” Glenn Bowen offered to buy the land.
Barrows had no idea of its value, so Bowen had it appraised by a friend, who said it was worth $50,000. Bowen drew up a contract, which Barrows signed. In the contract, Barrows agreed to sell the land for $45,000, of which Bowen would pay $100 at the time of closing; the remaining $44,900 was due whenever Bowen developed the land and sold it. There was no time
limit on Bowen’s right to develop the land nor any interest due on the second payment. Comment.
2. On television and in magazines, Maurine and Mamie Mason saw numerous advertisements for Chrysler Fifth Avenue automobiles. The ads described the car as “luxurious,”“quality-engineered,” and “reliable.” When they went to inspect the car, the salesman told them the warranty was “the best … comparable to Cadillacs and Lincolns.”
After theMasons bought a Fifth Avenue, they began to have many problems with it. Even after numerous repairs, the car was unsatisfactory and required more work. The Masons sued, seeking to rescind the contract based on the ads and the dealer’s statement. Will they win?
4. Roy Newburn borrowed money and bought a $49,000 truck from Treadwell Ford. A few months later, the truck developed transmission problems. Newburn learned that the truck had 170,000 more miles on it than the odometer indicated. The company admitted the mileage error and promised to install a new transmission for free.
Treadwell did install the new transmission, but when Newburn came to pick up the truck, Treadwell demanded that he sign a general release absolving the dealership of any claims based on the inaccurate mileage. Treadwell refused to turn over the truck until Newburn finally signed. The truck broke down again, and delays cost Newburn so much income that he fell behind on his loan payments and lost the truck. He sued Treadwell, which defended based on the release. Is the release valid?
5. Morell bought a security guard business from Conley, including the property on which the business was located. Neither party knew that underground storage tanks were leaking and contaminating the property. After the sale, Morell discovered the tanks and sought to rescind the contract. Should he be allowed to do so?
CHAPTER 15 - THIRD PARTIES
ESSAY QUESTIONS
2. Woodson Walker and Associates leased computer equipment from Park Ryan Leasing. The lease said nothing about assignment. Park Ryan then assigned the lease to TCB as security for a loan. Park Ryan defaulted on its loan, and Walker failed to make several payments on the lease.
TCB sued Walker for the lease payments. Was the assignment valid, given the fact that the original lease made no mention of it? If the assignment was valid, may Walker raise defenses against TCB that it could have raised against Park Ryan?
3. C. Gaston Whiddon owned Gaston’s LP Gas Co., Inc. Curtis Dufour purchased the company. Since Whiddon had personally operated the company for many years, Dufour was worried about competition from him and insisted on a noncompetition clause in the sales contract.
The clause stated that Whiddon would not “compete with Gaston’s LP Gas Co. anywhere south of Interstate Highway 20 for nine years.” Three years later, the Herring Gas Co. offered to buy all of Dufour’s gas business, assuming that Whiddon would not be a competitor for six more years. Dufour sold all of the assets to Herring, keeping the actual corporation “Gaston’s LP Gas Co.” for himself. What mistake in drafting have Dufour and Herring made?
4. YOU BE THE JUDGE WRITING PROBLEM David Ricupero suspected his wife Polly of having an affair, so he taped her phone conversations and, based on what he heard, sued for divorce. David’s lawyer, William Wuliger, had the recorded conversations transcribed for use at trial. The parties settled the divorce out of court and signed an agreement that included this clause:
Except as herein otherwise provided, each party hereto completely and forever releases the other and his attorneys from any and all rights each has or may have … to any property, privileges, or benefits accruing to either by virtue of their marriage, or conferred by the Statutory or Common Law of Ohio or the United States of America.
After the divorce was final, Polly sued William Wuliger for invasion of privacy and violation of federal wiretapping law. Wuliger moved to dismiss the case based on the clause quoted. Polly argued that Wuliger was not a party to the divorce settlement and had no right to enforce it.
May Wuliger enforce the waiver clause from the Ricuperos’ divorce settlement? Argument for Wuliger: The contract language demonstrates that the parties intended to release one another and their attorneys from any claims. That makes Wuliger an intended third party beneficiary, and he is entitled to enforce the agreement.
If Polly did not want to release Wuliger from such claims, she was free not
to sign the agreement. Argument for Polly Ricupero: A divorce agreement settles the affairs between the couple. That is all it is ever intended to do, and the parties here never intended to benefit a lawyer. Wuliger is only an incidental beneficiary and cannot use this contract to paper over his violation of federal wiretapping law.
5. Judith and John Brooks hired Wayne Hayes to build a house. The contract required Hayes to “provide all necessary labor and materials and perform all work of every nature whatsoever to be done in the erection of the residence.” Hayes hired subcontractors to do all of the work.
One of Hayes’s employees checked on the work site daily, but neither Hayes nor any of his employees actively supervised the building. The Brookses were aware of this working arrangement and consented to it. The mason negligently installed the fireplace, ultimately leading to a serious fire. The Brookses sued Hayes for breach of contract. Hayes contended that when the Brookses approved of his hiring of subcontractors to do all work, that created a novation relieving him of any liability. Discuss.