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CHAPTER 11
NATURE AND TERMINOLOGY
ANSWERS TO QUESTIONS
AT THE ENDS OF THE CASES
CASE 11.1—LEGAL REASONING QUESTIONS
1. What did the plaintiff seek in this action? What was the legal ground for her claim?
What was her principal contention regarding the offers and acceptances at the center of
this case? In this action, filed in a New York state court by one-time Associate Professor Leslie
Weston against Cornell University, Weston sought tenure—permanent status among the faculty
2. Why did the trial court deny the defendant’s motion for summary judgment to dismiss
the plaintiff’s claim? In this case, Weston was the plaintiff and Cornell was the defendant.
The trial court denied the defendant’s motion for summary judgment to dismiss the plain-
3. Why did the appellate court modify the trial court’s denial of the defendant’s motion?
From the trial court’s denial of Cornell’s motion for summary judgment on Weston’s claim for
breach of contract, the university appealed to a state intermediate appellate court. The appellate
2 UNIT THREE: CONTRACTS AND E-CONTRACTS
CASE 11.2—CRITICAL THINKING
ECONOMIC
What did the amount of the jury’s award of $686,000 in damages represent? Explain. The
CASE 11.3—CRITICAL THINKING
WHAT IF THE FACTS WERE DIFFERENT?
How might the result in this case have been different if the court had admitted Wagner’s
evidence of the Love Song contract? In this circumstances, the court might have construed
the language of the Charlie’s Angels contract to the same effect. But because Columbia ac-
LEGAL ENVIRONMENT
Under what circumstances would Wagner have been entitled to a share of the profits
from the Charlie’s Angels movies even though the evidence of the Love Song contract
was irrelevant? The court explained that “if SGP held the motion picture rights to ‘Charlie’s An-
gels’ from the beginning or if it acquired them by exercising its [five–year] right . . . as producer
ANSWERS TO QUESTIONS IN THE REVIEWING FEATURE
AT THE END OF THE CHAPTER
1A. Requirements of a contract
The four requirements for any contract to be valid are agreement, consideration, capacity, and
legality.
CHAPTER 11: NATURE AND TERMINOLOGY 3
2A. Type of contract
Yes, Duncan had a valid contract with Mitsui for employment as credit development officer. The
contract was bilateral because it was a promise for a promise—to work in exchange for com-
3A. Implied contract
Implied contracts are contracts formed by the parties’ conduct rather than by their words. For an
implied-in-fact contract to exist, the plaintiff must furnish some property or service to the defend-
4A. Employment manual and written compensation plan
To establish an implied-in-fact contract in these circumstances, the plaintiff must have furnished
a service to the defendant expecting to be paid, the defendant must have known that the plaintiff
expected to be paid, and the defendant must have had a chance to reject the service. Here,
Duncan provided service as a credit development officer to Mitsui, who hired and agreed to pay
ANSWER TO DEBATE THIS QUESTION IN THE REVIEWING FEATURE
AT THE END OF THE CHAPTER
Companies should be able to make or break employment contracts whenever and
however they wish. Companies, especially large corporations, hold all of the cards with respect
to their actual and future employees. Absent statutes and case law that limits their abilities to
break employment contracts on a whim, employees would have no protections. Employees
would face increased uncertainty about the longevity of their jobs, which ultimately would reduce
4 UNIT THREE: CONTRACTS AND E-CONTRACTS
ANSWERS TO ISSUE SPOTTERS
AT THE END OF THE CHAPTER
1A. Dyna tells Ed that she will pay him $1,000 to set fire to her store, so that she can
collect under a fire insurance policy. Ed sets fire to the store but Dyna refuses to pay.
2A. Alison receives a notice of property taxes due from the local tax collector. The no-
tice is for tax on Jerry’s property, but Alison believes that the tax is hers and pays it. Can
ANSWERS TO BUSINESS SCENARIOS
AT THE END OF THE CHAPTER
11-1A. Unilateral contract
Yes, these parties had a contract. Contests, lotteries, and other competitions for prizes are of-
fers for contracts. Here, the offer is phrased so that each competitor can accept only by com-
11-2A. Implied contract
According to the question, Janine was apparently unconscious or otherwise unable to agree to a
contract for the nursing services she received while she was in the hospital. As you read in the
chapter, however, sometimes the law will create a fictional contract in order to prevent one party
CHAPTER 11: NATURE AND TERMINOLOGY 5
ANSWERS TO BUSINESS CASE PROBLEMS
AT THE END OF THE CHAPTER
11–3A. SPOTLIGHT ON TACO BELL—Implied contract
The court held that Wrench submitted sufficient evidence of an implied contract to survive Taco
Bell’s motion for summary judgment on the issue. “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
11–4A . BUSINESS CASE PROBLEM WITH SAMPLE ANSWER—Quasi contract
Gutkowski does not have a valid claim for payment, nor should he recover on the basis of a
quasi contract. Quasi contracts are imposed by courts on parties in the interest of fairness and
justice. Usually, a quasi contract is imposed to avoid the unjust enrichment of one party at the
11–5A . Quasi contract
The court in this case could impose a quasi contract to avoid the unjust enrichment of Kim at
Kris’s expense. To recover on this basis, one party must confer a benefit on another party, the
other party must appreciate or know of the benefit, and the other party must retain the benefit
under circumstances that would make it inequitable to do this without paying for it.
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11–6A. Implied contracts
Yes, Allstate was liable under the homeowner’s policy. A contract that is implied from the con-
duct of the parties. This type of contract differs from an express contract in that the conduct of
the parties, rather than their words, creates and defines the terms of the contract. For an implied
contract to exist, a party must furnish a service or property (which includes money), the party
must expect to receive something in return for that property or service, and the other party must
know or should know of that expectation and had a chance to reject the property or service but
did not. Of course, a contract may be a mix of express and implied terms.
In this problem, the homeowner’s policy was a mix of express and implied terms. As for
11–7A. Quasi contracts
The appellate court reversed the lower court’s award to Clarke of $900,000 in damages on a
quasi contract theory because the dispute fell under Draeger’s contract with Clarke. The doc-
trine of quasi contract generally does not apply when an existing contract covers the area in
controversy. In that circumstance, the nonbreaching party can sue the breaching party for
breach of the contract.
Here, Lawrence M. Clarke, Inc. was the general contractor for the construction of a por-
tion of a sanitary sewer system. Kim Draeger proposed to do the work for a certain price, and
CHAPTER 11: NATURE AND TERMINOLOGY 7
11–8A. Interpretation of contracts
No, extrinsic evidence is not admissible to interpret the meaning of the bonus term in this prob-
lem. When a dispute arises over the meaning of a term in a contract, a court will enforce it ac-
cording to its obvious terms if the contract’s writing is clear. Under the plain meaning rule, the
meaning of the term is determined from the written document alone. If a term is ambiguous, a
court can consider extrinsic evidence.
In this problem, Lehman Brothers, Inc., (LBI) offered Mary Ortegón a job. The offer in-
cluded an annual “minimum bonus” of $350,000. The bonus was to be paid unless Ortegón quit
or was terminated for certain causes. The bonus was clearly tied to Ortegón’s performance on
11-9A. A QUESTION OF ETHICS—Unilateral contracts
(a) The court issued a summary judgment in favor of IBM, holding that there was no
contract between the parties because they had not agreed on the commission arrangement.
Jensen appealed to the U.S. Court of Appeals for the Fourth Circuit, which affirmed the judg-
ment of the lower court. The appellate court acknowledged that “[a]n employer can make a uni-
lateral offer to its employees, and the offer becomes a contract when its conditions are fulfilled.”
be paid a bonus if the company does well, without being promised specific amounts.”
(b) Citing the quota letter, the court concluded that “IBM did not invite a bargain or
manifest a willingness to enter into a bargain. To the contrary, it manifested its clear intent to
preclude the formation of a contract.” Under the terms displayed on the intranet and stated in
the letter, IBM indicated that Jensen could not rely on the description of potential commissions
in the SIP brochure because “IBM could modify or cancel the Sales Incentive Plan at any time.
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ANSWERS TO LEGAL REASONING GROUP ACTIVITY QUESTIONS
AT THE END OF THE CHAPTER
11–10A. Contracts
(a) The relationship between a college or university and its students is contractual.
Under this contract, the University agrees to provide the students with a worthwhile education
(b) Under a unilateral contract, once performance has occurred, the contract is
formed. Students might argue, for example, that their contract with their school is unilateral—
once their tuition is paid at the beginning of a semester, their obligation under the contract is