Contracts II Outline

Spring 2013
Contracts II
Professor Easton
 
 
        I.            UNJUST ENRICHMENT
·         Unjust enrichment is not based on a promise;  it is a cause of action where the claimant has conferred a benefit on the recipient under circumstances that make it unjust for the recipient to keep the benefit w/o paying for it
·         Elements:
·         One party must have been enriched by obtaining property, services or some other economic benefit from the other, &
·         Circumstances must be such that it would be unjust for the beneficiary to keep the benefit of the enrichment w/o paying or compensating the other party for it
o   Intent to charge: enrichment is not unjust if the benefit was conferred w/ gratuitous intent
o   Imposition:
§  Officious intermeddlers: ex. – when you drive up to an intersection & all of a sudden 3 guys come out of nowhere & start washing your car & then they as you for money.  These people are officious intermeddlers.  They have conferred a benefit on you w/o you asking for it or wanting it w/ the expectation that they will get paid for it.  Under the law, they are not entitled to anything for the benefit they have conferred.
·         It is not unfair to allow a donee to keep a gift
·         Enrichment is an economic benefit & occurs whenever something of value is received even if it does not enlarge the recipient’s net worth
o   Enrichment is not unjust if the benefit is conferred with gratuitous intent
·         Volunteer:  person who confers a benefit w/ gratuitous intent
·         In a cause of action is unjust enrichment, the remedy is restitution & the measure of restituionary remedy is market value:
o   Quantum meruit: value of services
o   Quantum valebant: value of the goods 
·         Martin v. Little, Brown & Co.: Martin wrote a ltr to Bantam books informing them that one of their titles was plagiarized in another book & he offered to provide Bantam w/ his copy of the book that had the plagiarized passages highlighted.  Martin sent his copy in & when he found out that LBC was pursuing a copyright infringement, he demanded compensation for his services.  Holding: there was no K between the parties, implied or otherwise. Martin was purely a volunteer here & therefore cannot be reimbursed for unjust enrichment.
·         Feingold v. Pucello: Pucello was involved in a car accident.  Feingold, a personal injury attorney, called Pucello to get more info on what happened & they discussed the possibility of ∏ representing the Pucello.  They nvr discussed fees but Feingold got started on the case & then mailed a contingency fee agreement to Feingold which called for a 50/50 split of the recovery.  Since Pucello didn’t like the fee, he found another attorney & Feingold sued quantum meruit.  Holding:  There was nvr a meeting of the minds & therefore no K & no obligation to reimburse attorney for his work.  The attorney didn’t do anything of value b/c the client said he didn’t want whatever the attorney had done – therefore there was no benefit conferred by client.
·         Estate of Cleveland v. Gordon: Mrs. Cleveland became very ill & her niece, Gordon, went to take care of her since there was no one else to do so.  She looked after her aunt for about 3 weeks & was told but she would be able to obtain full reimbursement for any expenditures she made obo her aunt if she opened a different account and kept detailed expense records.  Once her aunt passed, she filed a claim seeking reimbursement for what she spent obo her aunt.  Holding: Gordon was entitled to reimbursement b/c caring for her aunt was thrust upon her since there was no one else to do it.  + she showed her desire to be reimbursed by opening the separate acct & maintaining records like she was told – she wouldn’t have done this if she didn’t think she was getting something back.
                                                                                               
      II.            MISREPRESENTATION
·         Misrepresentation: an assertion not in accordance w/ the facts (Restatement 2d § 159)
o   Factual assertion: a representation that the present fact exists
o   Promise: a commitment to do something in the future
·         Fraudulent misrepresentation: make take the form of (1) an express statement; (2) might be a deliberate concealment of fact; or (3) could be a failure to disclose a fact
o   Express statement: ex.  Seller’s assertion that a vinyl sofa is made of leather.  This is an affirmative false statement
o   Deliberate concealment: this is also an affirmative act.
§  Ex. A seller of a house actively conceals the presence of cockroaches by leaving all of the lights on
o   Failure to disclose: a person can commit fraud by keeping silent & failing to disclose a fact
§  This is the most difficult basis for claiming fraud b/c it is only fraudulent if the circumstances impose a duty on the party to disclose information b/c parties are allowed to act out of self-interest.
§  Ex.  A buyer of a property does not have to tell the seller that the price of the property is underpriced
·         Restatement 2d § 164.  When a misrepresentation makes a contract voidable
(1) If a party’s manifestation of assent is induced by either a fraudulent or a material misrepresentation by the other party upon which the recipient is justified in relying, the contract is voidable by the recipient
·         Restatement 2d § 162.  When a misrepresentation is fraudulent or material
(1) A misrepresentation is fraudulent if the maker intends his assertion to induce a party to manifest his assent and the maker
                (a) knows or believes that the assertion is not in accord with the facts, or
(b) does not have the confidence that he states or implies in the truth of the assertion, or
(c) knows that he does not have the basis that he states or implies for the assertion.
(2) A misrepresentation is material if it would be likely to induce a reasonable person to manifest his assent, or if the maker knows that it would be likely to induce the recipient to do so.
·         Restatement 2d § 160.  When action is equivalent to an assertion (concealment)
Action intended or known to be likely to prevent another from learning a fact is equivalent to an assertion that the fact does not exist
o   Ex.  Covering up a crack in the ceiling = not saying anything about it
Affirmative fraud cases:
·         Sarvis v. Vermont State Colleges: ∏ was convicted of fraud & after being released from prison, he applied for positions @ Community College of Vermont & on the application indicated that he was either retired or semi-retired or that he was Pres.  & Chairman of the Board of CMI International, but there was no mention of his incarceration. ∆ entered into employment agreements based on the info ∏ provided but terminated him after learning of his criminal history, so ∏ filed for wrongful termination. Holding: if the employer knew about the previous incarceration, he might never have hired ∏. Further, ∏ actively mislead ∆ by saying that he spent time working at some made up company.
·         Psenicska v. Twentieth Century Fox Film Corp.: ∏s all signed an agreement that prevented them from bringing suit & now each ∏ wishes to avoid the waiver clause in the agreement b/c he/she was fraudulently induced to enter into the agreement (this is the Borat film case).  Holding: B/c the ∏s agreed to & signed the K, the misrepresentation that might have occurred was nullified by the merger clause w/in the K
Silence as Fraud
·         Restatement 2d § 161.  When non-disclosure is equivalent to an assertion
A person’s non-disclosure of a fact known to him is equivalent to an assertion that the fact does not exist in the following cases only:
(a) where he knows that disclosure of the fact is necessary to prevent some previous assertion from being a misrepresentation or from being fraudulent or material.
(b) where he knows that disclosure of the fact would correct a mistake of the other party as to a basic assumption on which that party is making the contract and if non-disclosure of the fact amounts to a failure to act in good faith and in accordance with reasonable standards of fair dealing.
(c) where he knows that disclosure of the fact would correct a mistake of the other party as to the contents or effect of a writing, evidencing or embodying an agreement in whole or in part.
(d) where the other person is entitled to know the fact because of a relation of trust and confidence between them
·         Kaloti Enterprises, Inc. v. Kellogg Sales Company: Kaloti alleged that Kellogg & Geraci (Kellogg’s agent) had a duty to disclose the fact that Kellogg has changed to direct sales as opposed to selling through Kaloti, the wholesaler, & b/c they didn’t disclose, they intentionally misrepresented Kaloti.  Holding: The allegations made were enough to state that ∆s had a duty to disclosure that they failed to meet.  There was a duty b/c the fact was material to the transaction – Kaloti wouldn’t have placed a large order if it had known that Kellogg would be switching to direct sales; & party w/ knowledge of that fact knows that the other party is abt to enter into the transaction under a mistake of fact – ∆s knew that ∏ was buying products to resell them to the same stores that Kellog would not be selling directly to; fact is exclusively w/in the knowledge of 1 party & mistaken party could not have be expected to discover it – the decision was not publically announced, how could ∏ have known?; & the mistaken party wou