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Chapter 06 – Contracts

Stambovsky v. Ackley et al., 169 A.D.2d 254 (S.Ct.N.Y., App. Div., 1st Dept. 1991)

(p. 249)

Syllabus

Stambovsky sought to rescind the contract under which he bought a house from Adler, after learning

that the house had a reputation for being haunted by poltergiests, a reputation promoted by Adler’s

publicizing of alleged hauntings. Stambovsky’s complaint to rescind the contract was dismissed by the

trial court but the appellate court reversed. First, Adler was estopped from denying her belief that the

house was haunted due to her publicizing of such hauntings, which made the house haunted as a

matter of law. While the doctrine of caveat emptor bars an action for damages, the equitable remedy of

rescission could still be sought as an appropriate relief, as Adler took advantage of Stambovsky’s lack

of awareness of the house’s reputation which Adler had promoted.

Answers to ‘Stambovsky v. Ackley et al.’ Questions (p 250)

a. No. New York law follows the caveat emptor standard thus precluding an action for

b. Seller took unfair advantage of the buyer’s ignorance of the house’s reputation and helped

c. This is an opinion-based question. An equity decision introduces subjectivity and

d. No. The real estate broker, as agent for the seller, is under no duty to disclose to a potential

a. The doctrine of caveat emptor imposes no duty upon the vendor to disclose any information

b. Fairness required an exception to the caveat emptor rule. The seller promoted the ghost

c. Those remarks probably would have been regarded as an “affirmative representation,” thus

d. Yes. Seller “created and perpetuated” the haunted house claim. She informed the public at

3. Caveat emptor is settled real estate law in New York. Silence does not constitute concealment.

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Chapter 06 – Contracts

4. The issue here is whether the failure to disclose the apparent murder/suicide of Koumboulis and

Hanson v. America West Airlines, 544 F. Supp. 2d 1038 (U.S. Dist. Ct. Central

Dist. Cal. 2008) (p.254)

Syllabus

Hanks lost a robotic head valued at around $ 750,000 which he stored in the overhead bin on an

airline flight and then forgot it when he left the plane to board a connecting flight. An airline employee

later called him with the good news that the head had been found and would be returned, but it never

arrived and was never found again. The airline provided Hanson with reasonable notice of limited

liability and a fair opportunity to buy higher liability. Since Hanson chose to carry the valuable item onto

the plane without additional protection, the contract of carriage barred his recovery. The contract

declaimed any responsibility for carry-on baggage. Further, nothing in the original contract provided for

items left on the airplane. Thus, the airline did not breach a separate, risk-related promise in the

original contract. The airline employee who promised the item’s return did not have the authority to

alter or create a contract.

Answers to ‘Hanson v. America West Airlines’ Questions (p. 256)

1. America West won the case because:

The Contract of Carriage barred Hanson’s recovery.

2. The contract was not unconscionably one-sided or unfair because Hanson had received

3. A material deviation did not occur because the law limits material deviations to situations where

4. It’s clear that Gay’s fitness centre had Ning Yan sign a contract that made them free of any

Jimenez v. Gilbane Building Company, et al., 693 S.E.2d 126 (Ga. Ct. App. 2010)

(p.262)

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Chapter 06 – Contracts

Syllabus

Gilbane Building Company built a dormitory for Georgia Southern University. Gilbane contracted with

Gill Plumbing which subcontracted the plumbing installation work to Jimenez. The installer had signed

a three-page document that contained an indemnification clause. A pipe in the dormitory failed,

causing extensive water damage to the dormitory and to some students’ personal belongings. The

remediating contractor repaired the damage; its $ 990,060 bill for the services was not paid. The court

held that the trial court erred in granting summary judgment to Gill Plumbing because the

indemnification clause in the document was not clear as to who was required to indemnify whom. The

indefiniteness of other terms of the contract was not cured by performance because the installer did

not perform some of the work listed in the document. The installer was identified as the “subcontractor”

in the indemnification clause, which provided that he was to identify the “contractor” and others. Yet,

the first page of the document identified the installer as the “contractor,” suggesting that he should

indemnify himself. Further, there were other contractors on the project.

Answers to ‘Jimenez v. Gilbane Building Company, et al.’ Questions (p. 264)

1. The trial court found clear evidence of an enforceable agreement for Jimenez to indemnify

2. The court found conflicting factual evidence. Some evidence of performance was consistent with

3. The summary judgment was reversed because the facts were not clear. Summary judgment is

Castillo v. Tyson, 701 N.Y.S. 2d 423 (N.Y.S Ct. App. Div. 2000) (p. 268)

Syllabus

Following the 1997 fight between Mike Tyson and Evander Holyfield, which ended by

disqualification of Tyson after biting Holyfield’s ears, pay-per-view customers sued Tyson, the

fight promoters and fight telecasters. The customers claimed that they had paid to see a

“legitimate heavyweight title fight” and are entitled to their money back. They claim they are

third-party beneficiaries to contracts defendants entered into among themselves. Held for

defendants. “Nothing in these contracts can be understood as promising a fight that did not

end in a disqualification.” “[P]laintiffs received what they paid for, namely, ‘the right to view

whatever event transpired.’”

Answers to ‘Castillo v. Tyson’ Questions (p.268)

1. The court rejected the plaintiffs’ breach of contract claim because plaintiffs were not in contractual

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Chapter 06 – Contracts

2. Unjust enrichment is an unearned benefit knowingly accepted. The plaintiffs got what they paid

3. No breach of contract took place in this case. A regulation race ran as promised. No rules were

violated in doing so. The racing body did not promise a spectacle, only to allow fans to enter to

4. Echols won at trial with the court finding that the agreement following Echols’ loss was essentially

a contract to enter into a future contract. Each purse was negotiated bout-by-bout. Price was not

settled. The agreement was unenforceable.

Answers to Chapter Questions (p. 273)

1. The deadline in the real estate contract was a condition subsequent. The condition was not met.

2. Students’ answers will vary. However, students should mention that the appeal court ruled that it

had limited authority to disrupt arbitration awards. On the basis of Armstrong’s 2013 admission,

SCA wanted to reopen its 2006 settlement with him. The arbitration panel that took care of the

3. Campbell is making a promissory estoppel claim. Virginia Metal responds that there is an

absence of consideration. Campbell wins. The court found justifiable reliance and a change of

4. Sometimes genuine assent is not secured and a contract may be rescinded because one of the

parties is forced to agree. Fear lies at the heart of a duress claim. Here the Rowleys have clearly

5. Blette was not in breach of contract as her agreement with ANC had taken the form of accord and

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Chapter 06 – Contracts

6. This is a case of mutual mistake. “The mistake affected the substance of the whole consideration,

7. The Indiana Supreme Court declined to enforce the contract. In effect, the court found the

transaction unconscionable. The court cited American Oil’s superior bargaining power, the fine

8. Yes, there is a contract between Republic Bank and West Penn for the purchase of the medical

9. Yes, the brewery was correct. It was excused from further performance of its promise to pay rent.

The purpose of the contract was frustrated. “It was the purpose of both lessor and lessee, as

clearly expressed in the instrument, that it should be used as a saloon, and, this being made

10. The court found that the agreement met all the elements of a contract. Plaintiff’s evidence proves

11. The court affirmed the trial court’s dismissal of the lawsuit as the agreement was unenforceable.

As an employment agency, Preference Personnel is required under state law to have a license

12. The court held in favor of White City Shopping Center. The court determined that the term

“sandwiches” is not ambiguous, and as per common understanding, does not include burritos,

Selected Bibliography

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any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.

Chapter 06 – Contracts

Richard A. Posner, “The Law and Economics of Contract Interpretation,” Texas Law Review, May

2005, p. 1581.

Deborah Zalesne, “Enforcing the Contract at All (Social) Costs: The Boundary Between Private

Contract Law and The Public Interest”, Texas Wesleyan Law Review, Spring 2005, p. 579.

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any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.