Lesson 11 Part I & II Samuel

Lee 9254 In January Marcus , a CEO of a large corporation located in Canada, contacted Samuel to secure a condo in Hawaii , for July 1, 2, 3, 4 and 5 th (offer) for his corporate annual meeting with the board of directors. The meeting generally is two half days , and on the last day there is a party to thank all for attending the annual meeting. Marcus wanted to continue his stay throughout the holiday weekend. As in the past, Marcus wants to have the party in the condo . Marcus called Samuel and was advised that for the specific dates he is requesting, there is only a 5 bedroom ( quantity) home available at $2,000 per day instead of the condo which was a rate of $1,000 per day . Marcus responded, "I don't need a five-bedroom house .(rejection) What if I only use one of the bedrooms ?" .(counter) Samuel replied, " That would be O. K (acceptance)Since we want to do everything possible to satisfy you since you have been such a good customer , we'll let you have the house under the condition that you are using only one bedroom . We can honor a special price for $ 1,500 per day ."(accept but rate is different) Marcus said, "Thanks, and instructed Samuel to send the bill to his office." In late March Marcus was offered a new job and decided to take it, knowing he booked the house in Hawaii for his corporate meeting, and due to his new job, he is unable to attend the meeting. He offered the house to his friend, Thomas , who has always wanted to take a vacation to Hawaii. Thomas accepted . Marcus told Thomas: "It's $1,500 a day . After your stay, tell Samuel to send you the bill." Marcus neglected to tell Thomas about the condition that he could only use one bedroom . Thomas arrived and stayed in the house for the 5 days . At the end of his stay, Samuel sent a bill for $10,000, $2,000 per day to Marcus . Marcus has refused to pay the bill , and Thomas claims that he is only responsible for $1,500 per day . What rights, if any, does Samuel have against Marcus and/or Thomas? Samuel vs. Marcus Offer The outward manifestation of intent to be bound by contractual agreement requiring definite and certain terms communicated to the offeree. Seven months prior to Marcus’s annual meeting with the board of directors he contacted Samuel to secure a condo in Hawaii for July 1-5. When Marcus called Samuel, he advised him that he only had a 5-bedroom home for the dates requested and the cost would be $2,000.00 per day instead of $1,000 for condo rate. Samuel responded to Marcus’s request and offered a 5- bedroom home which was an outward manifestation of intent to be bound by contractual agreement. Samuel described the terms as, the quantity, one 5-bedroom home and the time frame July 1-5; the parties are Samuel and Marcus and the price per day $2,000; the home is the subject matter. Samuel provided definite and certain terms. Marcus contacted Samuel and he provided the requested information, thus, communication to the offeree. Therefore, there was a valid offer. 1

Counter Offer Rejection of original offer and creation of new offer. Samuel only had a 5-bedroom at a rate of $2,000.00 and when he offered that to Marcus, he stated he did not need 5-bedrooms and asked to use only one of the bedrooms. Marcus’s rejection of all 5-bedrooms and request to only use one of the rooms in the 5-bedroom home created a new offer. Therefore, there was a valid counter offer. Acceptance Acceptance is an unequivocal (mirror image) assent to the terms of the offer. Marcus had been a valued and good customer in the past so Samuel responded OK since they wanted to satisfy him. Samuel agreed to Marcus’s use of only one room at a rate of $1500.00 per day and it was an unequivocal assent to the terms of Marcus’s offer. Consideration Consideration is that which is bargained for and given in exchange for a return promise requiring benefit or detriment. “Bargained for exchange” Marcus and Samuel bargained for usage of a 5-bedroom home in Hawaii July 1-5 th . In exchange Samuel bargained to allow Marcus to use the 5-bedroom home and pay $1500 per day for only one room. Marcus agreed to use the 5-bedroom and pay $1500 to only use one bedroom. In exchange for a legal benefit, Samuel incurred legal detriment when he obligated the use of a 5-bedroom home in Hawaii at a rate of $1500 per day. Not previously obligated to do so, Marcus agreed to pay $1500 per day. Marcus will benefit from using the home and incur legal detriment in exchange for paying $1500 per day. Therefore, there is valid consideration. Breach A breach is an unjust failure to perform which goes to the essence of the contract. Because Marcus was a good customer and Samuel wanted to satisfy him, he honored his requested dates and agreed to contract his stay in a five-bedroom home in Hawaii. Prior to July, Marcus received a job offer and accepted it and he knew he had contracted to use the 5-bedroom in Hawaii. Marcus knew Thomas wanted to vacation in Hawaii and assigned his contractual agreement to Thomas. Marcus told Thomas the rate was $1500 per day and Thomas agreed. Marcus also told Thomas to ask Samuel to send him (Thomas) the bill, after his stay. Marcus did not tell Thomas about the condition of the contract and that he bargained to stay in only one of the 5-bedrooms at the rate of $1500.00. Samuel honored a rate of 1500.00 only for one bedroom, but the 5-bedroom rate was $2000.00. After Thomas’s stay July 1-5, Samuel sent Marcus a bill in the amount of $10,000, $2,000.00 per day. When Marcus failed to disclose the conditions to Thomas, he became liable and in breach of the bargain in exchange discussed supra.

Transfer of an obligation under the contract. The duty may be delegated if it is not too personal in nature, prohibited by contract, or prohibited by law. Marcus had a delegated duty to perform by paying $1500.00 per day to stay in the vacation home in Hawaii and it was not too personal in nature to delegate. The delegation of a duty to perform transferred to Thomas by Marcus was not prohibited by the contract and it was prohibited by law. Therefore, there is a valid delegation. Assumption A duty of assumption is a promise to perform obligation under the contract. Discussed supra. Thomas accepted the duty to perform when Marcus transferred his assigned contract. Thomas went to Hawaii during the requested dates Marcus contracted for. Thomas stayed in the rental for the contracted time period, and he promised to perform the obligations under the contract. Therefore, the duty was assumed by Thomas. Third Party Beneficiary A contract entered for the benefit of a 3 rd party. Samuel became a third-party beneficiary when Marcus transferred his assigned duty of performance to Thomas. Thomas payment for staying in the vacation home for the same time period was intended to satisfy Marcus’s contractual agreement with Samuel. The rental property still having an occupant would be a benefit to Samuel. Therefore, this may be sufficient argument for Samuel. Not sure if it supports the court’s decision as in Lawrence vs. Fox which established 3 rd party beneficiaries. Privity of Contract The relationship between two or more parties who have entered into a contract. Pursuant to Lawerence vs. Fox , privity is not required for 3 rd party beneficiaries. Samuel became a third-party beneficiary when Marcus assigned and delegated his duty to Thomas. Thomas can argue that his promise was to Marcus, but Marcus instructed Thomas to have Samuel send him the bill. Therefore, privity is not required under Lawrence vs. Fox and Samuel may be able to argue this defense. Intent to Benefit At the time of formation of contract parties must have had the intent to extract a promise from the promisor to the promisee. When Marcus accepted the job offer and knew that he had contracted to rent the home in Hawaii, he immediately thought of Thomas. Marcus extracted Thomas to perform his duty to Samuel

Lee - 9254 and pay the promised daily rental rate for the time period contracted. Marcus intended for Samuel to benefit from the contract he made with Thomas. Thus, Marcus showed intent to extract a promise from Thomas to pay Samuel the promisee. Classify: Creditor Beneficiary “A third party is a creditor beneficiary, if the promisee’s primary intent was to discharge an obligation, they owed to the third party.” Marcus will argue that the rental agreement would be satisfied by Thomas because he stayed in the vacation home for the time period. Because Marcus entered into a contract with Thomas to rent the home in Hawaii for the time period. Marcus was obligated and had intent at the time of his contract with Thomas to discharge his obligation with Samuel, discussed supra. Therefore, creditor beneficiary is valid. Step Inside Shoes The transfer of rights and obligations from one party to another. Same rights and defenses as original parties. When Thomas accepted the transfer offer from Marcus to use the vacation home in Hawaii July 1-5, he became obligated to the contract. Marcus had a binding contract with Samuel, and he assigned and delegated that duty to Thomas. Thomas became obligated to perform and assumed the rights assigned to Marcus by his agreement with Samuel. Thus, Thomas stepped inside Marcus’ shoes and is obligated to Samuel. Breach Defined supra. Thomas accepted Marcus’ offer to rent the vacation home for five days as promised to Samuel. Thomas was told that he could not use all the rooms and the daily rate was $1500. Thomas stayed at the rental home for 5 days and used all 5 bedrooms. When he failed to pay Samuel at least the $1500 per day rate he agreed with Marcus, it established an unjustified failure to perform which goes to the essence of the contract. Therefore, Thomas is in breach of the contract. General Damages Damages that flow from a breach. The non-breaching party is entitled to expectancy damages under the contract. Discussed supra, Thomas and Marcus breached the contract with Samuel, and he is the non- breaching party. Therefore, he has a right to sue for the daily rate of $1500.00 per day. In addition, Samuel can sue Marcus for the $500.00 difference which was the rental agreement for 5-bedrooms. The offer he made to Marcus was because he was a good customer and Samuel 5

Lee - 9254 hospital. Ted's family was billed for the ambulance service. Ted's estate refuses to pay the ambulance bill and a lawsuit is filed. Who will succeed? (A) Ted's estate, because Ted was unconscious and did not knowingly accept the ambulance services. (B) Ted's estate, because Ted did not receive any unjust enrichment. (C) The Ambulance company, because Ted was legally obligated to pay because of its claim. (D) The Ambulance company, based on an implied-in-law contract between the ambulance company and Ted . 4. Carl agreed to replace the radiator on Tim's classic 1975 Trans Am. He gave an estimate of $1,800 and told Tim the car would be done by Friday afternoon. Carl hired Carter to perform the work. He told Carter it was his own personal automobile and that he needed it back by Friday morning. Carter said he would do the work for $1,200 and have the car done by Friday morning. When Carl went to pick up the car Friday morning he was told that the car was not done because of some complications. Tim finds out about the agreement between Carl and Carter, and got an estimate from another mechanic and was told the job could be done for $2,000. Tim files an action against Carter. Who will prevail? (A) Carter is liable to Tim as a third-party beneficiary of the contract assignment. (B) Carter is the only party liable to Tim because he breached the contract. (C) Carter is not liable to Tim. ( D) Carter and Carl are both liable to Tim and he should sue them both . 5. Orlando Resort and Spa had a contract with Disney World. It paid Disney World $5,000 a month and in return Resort guests could get tickets to Disney World at a discount price. Tom booked a room for his family at Resort by Internet without knowledge of this arrangement. He only learned of it when he arrived and checked in. When Tom took his family to Disney World the next day he was denied entrance for the discount price and told he had to pay the regular admission price because Resort had defaulted on its monthly payments. If Tom sues Resort: (A)Tom will win because he did detrimentally rely on the Resort-Disney contract when he booked his room. (B) Tom will lose because Resort had a right to rescind the Resort-Disney contract. (C) Tom will lose because the hotel guests were donee beneficiaries of the Resort-Disney contract. (D) Tom will win because he was an intended third-party beneficiary of the Resort- Disney contract. 7

6. Sam decided to buy a new car and emailed his friend. The email stated, "I am going to get a new car. I will sell my Mustang to you for $10,000. This is a special deal just because you are my friend." Dean emailed back, "Your car is a piece of junk. But it's a deal if you have it detailed and throw in a tank of gas. Deal?" Sam was hurt and replied, "Maybe I'll talk to you about it tomorrow." The next day Dean came to Sam with a check for $10,000 and said, "Hey man, I wasn't serious. I had a few beers and was just kidding." If Sam refuses to take Dean's check: (A) Sam will prevail because Dean made a counteroffer . (B) Sam will not prevail because he is in breach of contract since the UCC allows acceptance with varying terms. (C) Sam will not prevail since he is in breach because he never revoked his offer to Dean. (D) Sam will not prevail because he is in breach. 7. On October 1 April's Guitar Center sent Guitar Export an email that said, "Please send '5 Model 2B Base guitars' with black onyx inlays on the frets and shoulder straps in assorted colors, $225.00 each, F.O.B. California net 30." At the bottom of the email it was stated "THIS OFFER WILL BE HELD OPEN FOR FOUR MONTHS". On November 1 Guitar Export emailed April's Guitar Center the following: "We will sell you the guitars you ordered on 10/1 except they will have to be model 2C guitars with abalone shell inlays on the frets instead of black onyx and black shoulder straps. Please notify you accept these terms by November 15 ." On November 15 April's Guitar Center replied to the email stating, "Your terms of 11/1 are accepted." Was a contract formed between April's Guitar Center and Guitar Export on 11/1 ? (A) Yes, because April's Guitar Center accepted Guitar Export's terms on 11/1. (B) Yes, because Guitar Export's offer was a firm offer between merchants. ( C) No, because April's Guitar Center 10/1 offer has not been accepted by Guitar Exports . (D) No, because Guitar Export's 11/1 email stated additional or different terms. 8. Tom told Willy that Harvey's Art Gallery was offering an oil painting called "Mister" by Vanberg for $30,000 , which was worth far more because Vanberg had recently died in very scandalous circumstances in a convent. Willy sent Harvey a telegram saying, "I WILL BUY MISTER BY VANBERG FOR $30,000. PAYMENT ENCLOSED. SHIP IMMEDIATELY TO MY ADDRESS - Willy." Willy did not realize Harvey was also offering a series of watercolor prints by Vanberg in various states of undress for $30,000 each. Harvey, acting in good faith , packed up a set of the watercolor prints and sent them to Willy . Then he sold the oil painting to another customer. In response to an action by Willy, Harvey denies they had an enforceable contract. Did Willy's telegram satisfy the Statute of Frauds? signature (A) No, because Harvey did not sign the telegram .