LVC – Fall 2005

Business Law
Chapter 9 Case Studies
Yahn & West Text
9-1A. (The answer below was drafted from your text in Chapter 9—Pages 199–
204)

The facts presented here indicate the presence of all the elements necessary for a
valid contract. We have a offer and acceptance, consideration is exchanged (a
candy bar for $1), and both parties have capacity (no issue of diabetic coma), the
selling of the candy is legal, and there is no particular form required for this type of
contract. Thus, a contract exists and for the reasons given here is classified as
valid, enforceable, and informal. In addition, this is a classic case of an
implied-in-fact contract. There is no explicit agreement between the parties, but
rather an agreement is implied by McCleskey’s action of waving the candy bar and
by his past conduct (his course of performance). By his conduct and actions
McCleskey is telling Miller that because the store is crowded, he will pay for the
candy bar later (and this is understood). The contract is also bilateral (as opposed
to unilateral), because Miller impliedly promises to sell the candy bar to McCleskey
in exchange for McCleskey’s implied promise to pay. The contract is partially
executory, as McCleskey has engaged to pay for the candy bar in the future.
Because the contract is for a legal purpose, both parties have capacity, and reality
of consent is not an issue, the contract is neither voidable nor void.

9-2A. ((The answer below was drafted from your text in Chapter 9—Pages
202–204)

Janine in the Hospital – Implied in Law

If Janine were unconscious or otherwise incapable of agreeing to a contract while

she was in the hospital, as presumably she was in the situation described in this
problem, she would not have been able to contract for the nursing services that she
received. She did obtain a substantial benefit from the provision of those services,
however, in this situation, to prevent Nursing Services from recovering from Janine
for the services it provided would, in effect, unjustly enrich Janine at the expense of
Nursing Services. To prevent injustice, in this and similar cases the law may impose
a “fictitious” or implied-in-law contract on the parties. Under this implied contract
(called a quasi contract), Nursing Services would be able to recover the value of the
services that it provided (much like the scenario we discussed in class addressing
the Doctor rendering services to the unconscious person of the roadside).

53
 CHAPTER 9: NATURE AND TERMINOLOGY 54

Janine is sent Home – Implied In Fact

If Janine were aware of the provision of services after she was sent home and could
reasonably have refused those services, Nursing Services could recover for those
services under an implied-in-fact contract. Under this type of contract, the conduct
of the parties creates and defines the terms. Thus, in Janine’s case, Nursing Services
should be able to recover the value of its in-hospital (emergency) services to Janine,
as well as for the value of the at-home care. Most of your answers focused on the
implied-in-fact argument and very few addressed the issue of unjust enrichment of
Janine’s care at the hospital, but overall those that answered this question, did very
well We will discuss it in further detail in class on Thursday, 9/15.

9-3A. (The answer below was drafted from Chapter 9—Page 200)

A bilateral contract is formed. To be accepted, Atencio’s offer required only a

promise of payment, not actual payment. His neighbor’s acceptance was the
act of placing a red piece of paper in her front window. In a unilateral contract, a
promise is made, on the condition that the other party do a particular act. The
performance of the act in question constitutes an acceptance if such performance
results in the contract becoming executed (fully performed by the offeree). But
here, the actual performance of payment is to take place at a later date. There is
no unilateral contract. With that being said, we will go over various illustrations in
class on Thursday, 9/15, so each of you understand the distinguishing features
between a bilateral and a unilateral contract..

9-4A. (I have included Answer 4 so each of you could appreciate the

difference between bilateral and unilateral contracts – the answer was drafted from
Chapter 9—Page 200)

In the modern view, most courts would hold that there was a contract between
Davison and Burger Baby, and that Burger Baby could not revoke once Davison
started to perform. This case is an example of a unilateral contract. Burger
Baby promised to pay $1,000 as a unilateral promise under which it would
not be bound unless somebody completely performed the act that Burger
Baby requested.

Davison could not accept Burger Baby’s offer merely by promising to swim across
Long Island Sound; Burger Baby’s offer could be accepted only by full performance.
The contract between Davison and Burger Baby was an express contract, because
the terms of the agreement were fully and explicitly stated in the banner that Air
Advertising flew over the beach. The contract was also executory, because it called
for future performance; it would be considered executed only when Davison
had fully performed. The contract could also be classified as valid, enforceable,
and informal.
 CHAPTER 9: NATURE AND TERMINOLOGY 55

9-5A. (Chapter 9—Page 200)

This is a unilateral offer and to be accepted, Zdanis’s offer requires more than Joe’s
promise to perform; it requires his actual performance. Therefore, until Joe
completes the mowing of Zdanis’s yard, no contract has been formed. The legal
significance of the unilateral offer is as follows: (a) Even though Joe promised to
mow Zdanis’s yard, Joe’s failure to mow the yard would not constitute a breach,
because no contract has been formed. (b) At any time prior to Joe’s performance,
Zdanis can withdraw her offer without liability. (c) Should Joe begin to mow the
yard at the time of Zdanis’s withdrawal, courts differ as to legal results. Some
courts would view the offer as now irrevocable; others would rule such performance
as equivalent to or better than a promise, resulting in a bilateral contract; still
others would allow Zdanis to withdraw her offer but would reward Joe for the
reasonable value of his partial performance under the theory of quasi contract; and,
finally, some courts would consider the offer revocable because the requested act
was not completely performed. The breadth of this answer illustrates how far
reaching you thinking should take you.

9-6A. Interpretation of contracts

(Chapter 9—Pages 205–207)

The Utah Supreme Court held in part that the attorney’s oral statement capped the
amount of the fees to which the firm was entitled and reduced the award to
$18,000. The court stated the general rule that contracts between attorneys and
clients are construed in favor of clients, when there are ambiguities. Much like our
discussions in class, who carries the burden to provide the details to the terms? The
general contract rule is that ambiguous wording is interpreted against the
drafter of the contract. Here, the written contract did not say whether the
parties intended the fees to be capped. “If a cap was agreed to, it was by virtue of
a subsequent oral agreement.” This, the court said, was “Shaw’s statement to his
client that she could ‘count on’ not more than $18,000.” Construed against the
lawyer, this limit was binding.

9-7A. Implied contract

(Chapter 9—Pages 201–202)

The court held that Wrench submitted sufficient evidence of an implied contract to
survive Taco Bell’s motion for summary judgment on the issue (but ultimately ruled
against Wrench on other grounds). “Implied in fact contracts often arise where one
accepts a benefit from another for which compensation is customarily expected.
Thus, where evidence shows that the parties understood that compensation would
be paid for services rendered, a promise to pay fair value may be implied, even if no
agreement was reached as to price, duration, or other terms of the contract.” Here,
“Taco Bell concedes that there is sufficient evidence in the record to support
Plaintiff’s allegation that the parties had a basic understanding that if Taco Bell used
 CHAPTER 9: NATURE AND TERMINOLOGY 56

the Psycho Chihuahua idea, concept, or image, that Taco Bell would compensate
Plaintiffs for the fair value of such use.” Furthermore, “[t] he cases establish that a
plaintiff may support a claim of implied in fact contract by showing that the plaintiff
disclosed an idea to the defendant at the defendant’s request and the defendant
understood that the plaintiff expected compensation for use of his ideas. Because
Taco Bell concedes that there is sufficient evidence to support such an
understanding in this case, Taco Bell’s assertion that Plaintiffs cannot establish an
implied in fact contract must be rejected.”

9-8A. Types of contracts

(Chapter 9—Pages 200–205)

The trial court ruled in favor of TCC, and on Dixon’s appeal, a state intermediate
appellate court upheld the ruling. Dixon appealed to the Oklahoma Supreme Court,
which affirmed the trial court’s decision. The state supreme court concluded that
“the employment relationship between Dixon and TCC for the fall . . . semester is
impliedly contractual.” The court explained, “When determining whether an implied
contract exists, the Court will consider . . . the parties’ acts, conduct and
statements as a whole,” among other factors. As evidence of the contract in this
case, the court pointed out that in the spring, TCC told Dixon the classes he would
teach in the fall and later told him that he had to clear up the Bhuiyan grade-dispute
as a condition. The court also reasoned that “there would have been no need to
terminate Dixon’s employment if he had not been hired in the first place.” But TCC
did not breach the contract when it fired Dixon because every contract between the
parties gave either of them “the right to terminate their contract for any reason
before the first class of the fall semester . . . . There is no rationale offered nor can
any be implied from the record that Dixon’s hiring for the . . . fall semester would
have been on a different basis.”

9-9A. Bilateral versus unilateral contracts

(Chapter 9—Page 200)

The court held that the employment agreement was a unilateral contract that could
be formed only by Hawley’s performance in Missouri, and thus that the accident
causing Hawley’s death was not compensable under Florida law. Arguing that its
agreement with Hawley was a bilateral contract executed in Florida, D.L. appealed
to a state intermediate appellate court, which reversed the judgment of the lower
court and held that the agreement was a bilateral contract. The appellate court
stated, “To form a bilateral contract, there must be mutuality of obligation. Here,
Hawley and Appellant clearly made mutual promises. Thus, the agreement is a
bilateral contract. . . . A contract is created where the last act necessary to make a
binding agreement takes place. Where one contracting party signs the contract, and
the other party accepts and signs the contract, a binding contract results. It is
undisputed that Hawley signed the agreement then sent it to [D.L.] in . . . Florida,
where it was signed and executed by [D.L.’s] President. Because the last act
 CHAPTER 9: NATURE AND TERMINOLOGY 57

necessary to complete the agreement, . . . was performed in Florida, the contract

was made in Florida.” The consequence of this decision is that, as noted in the
problem, if a contract is formed in Florida, the accident is compensable under
Florida workers’ compensation law.

9-10A. IN YOUR COURT

(a) In cases where no valid contract exists, quasi-contractual remedies may be

allowed to prevent the unjust enrichment of one person at the expense of another.
This problem is based on the case of Artukovich & Sons, Inc. v. Reliance Truck Co.,
126 Ariz. 246, 614 P.2d 327 (1980). In that case, the court held that to allow
Reliance to use Artukovich’s crane without compensating Artukovich would be
inequitable because it would unjustly enrich Reliance at Artukovich’s expense.
Thus, a quasi contract was imposed on the parties so that Allied could recover
damages from Crosstown.

(b) In the actual case, under the equitable doctrine of quasi contract, Reliance
was held liable to Artukovich for the reasonable rental value of Reliance’s use of the
crane.

(c) The most significant difference between the two cases is that in Industrial
Lift Truck Service Corp. v. Mitsubishi International Corp., the parties had a contract,
which, as the court in the case noted, “defined the entire relationship of the parties
with respect to all matters related to [the] products” that were at the center of the
controversy. In the Allied problem, there was no contract between Allied and
Crosstown. Other differences between the cases include the presence, in the Allied
problem, of a third party, Borman, who leased the crane from Allied and contracted
with Crosstown. In the Industrial Lift Truck case, the only third parties were
anonymous buyers. In the Allied problem, Crosstown used the crane for its own
purposes, which were contrary to Allied’s ownership. In the Industrial Lift Truck
case, the buyer “used” the products by altering them to further the buyer’s and the
seller’s purpose (to sell more trucks).