9–1. Types of Contracts. Professor Dixon was an adjunct professor at Tulsa Community College (TCC) in Tulsa, Oklahoma. Each semester, near the beginning of the term, the parties executed a written contract that always included the following provision: “It is agreed that this agreement may be cancelled by the Administration or the instructor at anytime before the first class session.” In the spring semester of Dixon’s seventh year, he filed a complaint with TCC alleging that one of his students, Meredith Bhuiyan, had engaged in disruptive classroom conduct. He gave her an “incomplete” grade and asked TCC to require her to apologize as a condition of receiving a final grade. TCC later claimed, and Dixon denied, that he was told to assign Bhuiyan a grade if he wanted to teach in the fall. Toward the end of the semester, Dixon was told which classes he would teach in the fall, but the parties did not sign a written contract. The Friday before classes began, TCC terminated him. Dixon filed a suit in an Oklahoma state court against TCC and others, alleging breach of contract. Did the parties have a contract? If so, did TCC breach it? Explain. [Dixon v. Bhuiyan, 10 P.3d 888 (Okla. 2000)]
9–2. Definiteness of Terms. Southwick Homes, Ltd., develops and markets residential subdivisions. William McLinden and Ronald Coco are the primary owners of Southwick Homes. Coco is also the president of Mutual Development Co. Whiteco Industries, Inc., wanted to develop lots and sell homes in Schulien Woods, a subdivision in Crown Point, Indiana. In September 1996, Whiteco sent McLinden a letter enlisting Southwick Homes to be the project manager for the developing and marketing of the finished lots (lots where roads had been built and on which utility installation and connections to water and sewer lines were complete); the letter set out the roles and expectations of each of the parties, including the terms of payment. In October 1997, Whiteco sent Coco a letter naming Mutual Development the developer and general contractor for the houses to be built on the finished lots. A few months later, Coco told McLinden that he would not share the profits from the construction of the houses. McLinden and others filed a suit in an Indiana state court against Coco and others, claiming, in part, a breach of fiduciary duty. The defendants responded that the letter to McLinden lacked such essential terms as to render it unenforceable. What terms must an agreement include to be an enforceable contract? Did the McLinden letter include these terms? In whose favor should the court rule? Explain. [McLinden v. Coco, 765 N.E.2d 606 (Ind.App. 2002)]
9-3. Intention. Before an employee convention, Nationwide Mutual Insurance Co. created a committee, whose members included Mary Peterson, to select a theme. The committee announced a contest for theme suggestions: “Here’s what you could win: His and Hers Mercedes. An all expense paid trip for two around the world. Additional prize to be announced. (All prizes subject to availability.)” David Mears submitted the theme “At the Top and Still Climbing.” At a dinner of Nationwide employees, Peterson told Mears that he had won two Mercedes. Mears and others who heard this believed that he had won the cars. Nationwide never gave him the cars, however, and he filed a suit in a federal district court, alleging breach of contract. At the trial, Peterson claimed that she spoke with a facetious tone and, in reality, had no intention of awarding the cars. Is Mears entitled to the cars? Why or why not? [Mears v. Nationwide Mutual Insurance Co., 91 F.3d 1118 (8th Cir. 1996)]
9–4. Consideration. In 1995, Helikon Furniture Co. appointed Gaede as its independent sales agent for the sale of its products in parts of Texas. The parties signed a one-year contract that specified, among other things, the commissions that Gaede would receive. Over a year later, although the parties had not signed a new contract, Gaede was still representing Helikon when it was acquired by a third party. Helikon’s new management allowed Gaede to continue to perform for the same commissions and sent him a letter stating that it would make no changes in its sales representatives “for at least the next year.” Three months later, in December 1997, the new managers sent Gaede a letter proposing new terms for a contract. Gaede continued to sell Helikon products until May 1997 when he received a letter effectively reducing the amount of his commissions. Gaede filed a suit in a Texas state court against Helikon, alleging breach of contract. Helikon argued in part that there was no contract because there was no consideration. In whose favor should the court rule, and why? [Gaede v. SK Investments, Inc., 38 S.W.3d 753 (Tex.App.—Houston [14 Dist.] 2001)]
9–5. Unconscionability. Frank Rodziewicz was driving a Volvo tractor-trailer on Interstate 90 in Lake County, Indiana, when he struck a concrete barrier. His tractor-trailer became stuck on the barrier, and the Indiana State Police contacted Waffco Heavy Duty Towing, Inc., to assist in the recovery of the truck. Before beginning work, Waffco told Rodziewicz that it would cost $275 to tow the truck. There was no discussion of labor or any other costs. Rodziewicz told Waffco to take the truck to a local Volvo dealership. Within a few minutes, Waffco pulled the truck off the barrier and towed it to Waffco’s nearby towing yard. Rodziewicz was soon notified that, in addition to the $275 towing fee, he would have to pay $4,070 in labor costs and that Waffco would not release the truck until payment was made. Rodziewicz paid the total amount. Disputing the labor charge, however, he filed a suit in an Indiana state court against Waffco, alleging in part breach of contract. Was the towing contract unconscionable? Would it make a difference if the parties had discussed the labor charge before the tow? Explain. [Rodziewicz v. Waffco Heavy Duty Towing, Inc., 763 N.E.2d 491 (Ind.App. 2002)]
9–6. Covenant Not to Compete. Gary Forsee was an executive officer with responsibility for the U.S. operations of BellSouth Corp., a company providing global telecommunications services. Under a covenant not to compete, Forsee agreed that for a period of eighteen months after termination from employment, he would not “provide services * * * in competition with [BellSouth] * * * to any person or entity which provides products or services identical or similar to products and services provided by [BellSouth] * * * within the territory.” Territory was defined to include the geographic area in which Forsee provided services to BellSouth. The services included “management, strategic planning, business planning, administration, or other participation in or providing advice with respect to the communications services business.” Forsee announced his intent to resign and accept a position as chief executive officer of Sprint Corp., a competitor of BellSouth. BellSouth filed a suit in a Georgia state court against Forsee, claiming in part that his acceptance of employment with Sprint would violate the covenant not to compete. Is the covenant legal? Should it be enforced? Why or why not? [Bellsouth Corp. v. Forsee, 595 S.E.2d 99 (Ga.App. 2004)]
9-7. Fraudulent Misrepresentation. Division West Chinchilla Ranch made numerous TV advertisements that induced listeners to go into the business of raising chinchillas. The advertisements stated that, for a payment of $2,150 or more, Division would send one male and six female chinchillas and—for an additional sum—cages, feed, and supplies. Division’s representations were that “chinchilla ranching can be done in the basement, [and] spare rooms, . . . with minor modifications” and that chinchillas were “odorless and practically noiseless” and “a profitable pastime that can explode into a FIVE FIGURE INCOME.” All statements would lead one to believe that no special skill was needed in the raising of chinchillas. Based on these representations, Adolph Fischer and others (the plaintiffs) purchased chinchillas from Division. None of the plaintiffs was a sophisticated businessperson or highly educated. It soon became apparent that greater skill than that advertised was required to raise chinchillas and that certain statements made by Division’s sales representatives as to the value of the pelts were untrue. None of the plaintiffs had financial success with their growing (ranching) of chinchillas over a three-year period. The plaintiffs sought to rescind the contracts to get their money back, claiming fraud on the part of Division. Discuss whether Division’s statements constitute fraud. [Fischer v. Division West Chinchilla Ranch, 310 F.Supp. 424 (D.Minn. 1970)]
9-8. Statute of Frauds. Carol Mann and Gerald Harris worked for Helmsley-Spear, Inc. (HSI), as account managers for various HSI properties. In 1983, each received a bonus of $50,000 for their work in converting an HSI apartment complex, known as Windsor Park, into a cooperative housing unit. The conversion had taken several years to complete. After they had finished the Windsor Park conversion, they were asked to work on another cooperative conversion of two HSI apartment buildings known as Park West Village. Mann and Harris were orally promised compensation, over and above their base salaries, on the basis of a formula similar to the one that had been orally agreed upon with regard to the Windsor Park conversion. In 1987, after they had completed the conversion of Park West Village, they were fired, and HSI refused to pay them the additional compensation. Among other things, HSI contended that their oral agreement concerning the extra compensation was unenforceable under the Statute of Frauds. How should the court rule on this issue, and why? [Mann v. Helmsley-Spear, Inc., 177 A.D.2d 147, 581 N.Y.S.2d 16 (1992)]
9–9. Third Party Beneficiary. Acciai Speciali Terni USA, Inc. (AST), hired a carrier to ship steel sheets and coils from Italy to the United States on the M/V Berane. The ship’s receipt for the goods included a forum-selection clause, which stated that any dispute would be “decided in the country where the carrier has his principal place of business.” The receipt also contained a “Himalaya” clause, which extended “every right, exemption from liability, defense and immunity” that the carrier enjoyed to those acting on the carrier’s behalf. Transcom Terminals, Ltd., was the U.S. stevedore—that is, Transcom off-loaded the vessel and stored the cargo for eventual delivery to AST. Finding the cargo damaged, AST filed a suit in a federal district court against Transcom and others, charging in part negligence in the off-loading. Transcom filed a motion to dismiss on the basis of the forum-selection clause. Transcom argued that it was an intended third party beneficiary of this provision through the Himalaya clause. Is Transcom correct? What should the court rule? Explain. [Acciai Speciali Terni USA, Inc. v. M/V Berane, 181 F.Supp.2d 458 (D.Md. 2002)]
9-10. A Question of Ethics
Jacobsen attended Columbia University from 1951 to 1954. During his years at Columbia, Jacobsen was a difficult student and critical of his professors. He shifted his academic interests a number of times—from physics to social work to creative writing and other areas. In his last year, he attended classes only as he chose, and he rejected the university’s regimen requiring examinations and term papers. Ultimately, he failed to graduate because of poor scholastic standing. When Columbia sued Jacobsen for $1,000 in tuition still owed by him, Jacobsen countered with the allegation that the university had failed to impart the “wisdom” promised—by its motto, its brochures, the inscriptions over its buildings, in its presidential addresses, and so on. Because Columbia had promised something it could not deliver, it was guilty of misrepresentation and deceit and should return to Jacobsen all the tuition he had paid—$7,016. [Trustees of Columbia University v. Jacobsen, 53 N.J.Super. 574, 148 A.2d 63 (1959)]
1. Do you agree with Jacobsen that Columbia, by implicitly promising to impart wisdom, was guilty of misrepresentation? Can “wisdom” be imparted?
2. What exactly is the nature of a university’s contractual duty to its students?
3. Review the list of equitable maxims in Chapter 1. Which maxim is most appropriate to Jacobsen’s behavior in this case?