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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)
1.
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
2.
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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© 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in
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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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© 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in
any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
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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© 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in
any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
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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© 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in
any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
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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© 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in
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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© 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in
any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
