4.7.11 Business Law

Elements of a crime
-Mens rea
-&-
-Bad act
Business owners form intent.

Criminal Law
Businesses as offenders and as victims

Victim- Theft, retail theft (shoplifting), fraud, embezzlement, arson.

How does a business commit a crime?
Who forms the intent?
Who commits the act?

RICO
Prohibits two or more "racketeering acts"
-Investing in or acquiring a legitimate business with criminal money
-Maintaining or acquiring a business through criminal activity
-Operating a business through criminal activity

-Used against tobacco companies

Honest Fraud Theory
No crime if done not for own benefit but for companies benefit? Thrown out.

Contracts
Formation and Legality

Eventual Assignment (due week AFTER next) -Draft a contract term

Damages from breach of contract are dissimilar from tort damages.
-Only damages under the breach are considered in remedy.
"The whole duty of government is to prevent crime and to preserve contracts."

Sources of Contract Law
Constitution
-Fundamental right recognized in both state and federal constitutions
Common Law- Most contract law
-Importance of the Restatement
- Treatises give detailed explanation of minute details
- Look for Restatement in Westlaw to see if state has adopted a particular section
-To research contract law issues start with Washington Digest
Uniform Commercial Code
- ARticle 2 RCW 62A
-For ease of commerce across states
What is a contract?
A contract is a promise that the law will enforce.
-Contract is "private law" between parties

Questions in a contract case
-Is there an agreement?
--Is there consideration?
--Is it legal?
--Did the parties have the capacity to contract?
-What are the terms?
-What does those terms mean?

Four Essential Elements
1. Agreement
Meeting of minds/bargain?
Valid offer- promise to do or not do something
-intent to make offer, not a joke, must be definite
-must state: 1. parties, 2. subject matter, 3. consideration and 4. time for performance
-Communication to offeree- may be oral, but much more difficult to enforce.

Termination of an Offer
-An offer may be terminated before it is accepted
--By action of either party
--By operation of law- if it becomes illegal, etc.

Acceptance
And offer invites the offeree to
-Accept
-Reject or
-Make a counteroffer (in which case the offeree becomes offeror)

-Time must be reasonable
-Offeror may set terms of acceptance

Mirror Image Rule
If the offer is presented in one way, the acceptance must be done in same way.

Bilateral- Promise for promise
Unilateral- Promise for action

Consideration
A bargained for exchange- each side is inducing the other to agree.
-The thing bargained for can be a promise or action.
-The thing bargained for can be a benefit to the promisor or a detriment to the promisee.

-Gifts do not apply
Adequacy
-Court will generally not weigh the value of the promise.
-If the parties are satisfied with the bargain initially, then a court will not consider the value of the bargain.

Exceptions- Not enforceable
1. Past considerations
2. Pre-existing duty
3. Accord in satisfaction of liquidated debt (cannot settle for less than total amount if total amount is known.)
4. Illusory Promises
EX p. 142 Real estate deal. Ernest money agreement- $5000 check held in escrow for 60 days by bank.
Seller gives up time and other offers. Getting nothing.
Buyer gets time to inspect and decide. Giving up nothing.

Equitable Remedies
-Non-monetary solutions
1. Promissory Estoppel/Detrimental Reliance
Must show statement was made knowing that it would be relied upon, it was relied upon, to their detriment, and they law should remedy.
2. Quasi Contracts
A. Plaintiff gave some benefit to the defendant
B. Reasonably expected to be paid
C. Defendant would be unjustly enriched if plaintiff is not paid

Is the Agreement Legal?
If not it is VOID

Gambling in WA
Authorized or criminalized by RCW 9.46
Tribal Gaming - allows state to contract with tribes for gambling.

Tribal Law
Individual law and courts. Semi-sovereign states. Some federally recognized and some not.

Insurance - a wager?
Life Insurance
-Requires insured to have an insurable interest in the subject of the policy
-The objection to these policies "was not the temptation to murder but the fact that such wagers came to be regarded as mischievous kind of gaming."

Usurious Contracts
Excess interest in generally defined in the statute. RCW 19.52
(Most consumer contracts not governed by such statutes. EX credit cards, payday loans.)

Licensing Statutes
Limit right of someone to receive money under contract that requires a license but does not actually have one.
EX Public Protection- Construction work performed without a license may not collect for work.

Public Policy Violations
A court may refuse to enforce a contract if, based on common law principles, it violates "public policy"
How the Supreme Court decides cases- video on tvw.org

Restraint of Trade
Free trade is the basis of the American Economy and any bargain not to compete is suspect and, generally, unenforceable. There are two common exceptions:
1. Sale of a business
The buyer of an existing business may ask the seller to agree not to compete with the business. This agreement is enforceable if it is reasonable:
-In time
-Geographic place
-Scope of Activity
Court may change these terms in contract based on reasonableness.
2. Employment
Non-competition clause
-Time
-Geographic limits
-Scope of activity

Exculpatory Clauses
Release one of the parties from liability if the other party is injured.
Unenforceable only if:
-Attempts to avoid liability for intentional torts or gross negligence
-Parties have greatly disparate bargaining power
-Clause is not clearly written or visible

Parent cannot release liability on behalf of child. Parent cannot settle claim of minor.

Unconscionable Contracts
One that the court refuses to enforce because of fundamental unfairness.
"No man in his sense and not under delusion would make... and no honest and fair man would accept."

Seller/Buyer Negotiation
Read handout and think about what terms and conditions you want.

Did the parties have the capacity to agree?
Lack capacity:
-Minority
-Intoxication
-Mental incompetence
at the time the contract is formed

Contracts with minors
In WA the age of majority for contracting is 18.
Contract with minor is not void, only voidable. And may be
-Disaffirmed
Only if: the disaffirmance is timely
AND the minor returns the consideration received-to the extent possible.
Necessaries (food, clothing, shelter) may not be disaffirmed.
-Ratified
After becoming an adult, the minor may ratify the contract If the contract is ratified, it is enforceable.

Mental Impairment
The court must have determined impairment.
A contract with a person who has a mental impairment is governed by the same principles that apply to a contract with a minor- the incapacitated person may either disaffirm or ratify.

Intoxication
General rule is that intoxication is not a defense to enforcement of a contract.
However, if intoxication results in an inability to have the requisite mental capacity to make a contract then the contract is voidable.
-This is a very high burden.