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socrateaser, Attorney
Category: Business Law
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Experience:  Retired (mostly)
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1. Business Ethics Loren Vranich, a doctor practicing under

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1. Business Ethics

Loren Vranich, a doctor practicing under the corporate name Family Health Care, PC., entered into a written employment contract to hire Dennis Winkel. The contract provided for an annual salary, insurance benefits, and other employment benefits. Another doctor, Dr. Quan, also practiced with Dr. Vranich. About nine months later, when Dr. Quan left the practice, Vranich and Winkel entered into an oral modification of their written contract whereby Winkel was to receive a higher salary and a profit-sharing bonus. During the next year, Winkel received the increased salary. However, a disagreement arose, and Winkel sued to recover the profit-sharing bonus. Under Montana lam, a written contract can be altered only in writing or by an executed oral agreement. Dr. Vranich argued that the contract could not be enforced because it was not in writing. Does Winkel receive the profit-sharing bonus? Did Dr. Vranich act ethically in raising the defense that the contract was not in writing?

2. Acceptance

Peter Andrus owned an apartment building that he had insured under a fire insurance policy sold by J.C. Durick Insurance (Durick). Two months prior to the expiration of the policy, Durick notified Andrus that the building should be insured for $48,000 (or 80 percent of the building’s value), as required by the insurance company. Andrus replied that (1) he wanted insurance to match the amount of the outstanding mortgage on the building (i.e., $24,000) and (2) if Durick could not sell this insurance, he would go elsewhere. Durick sent a new insurance policy in the face amount of $48,000, with the notation that the policy was automatically accepted unless Andrus notified him to the contrary. Andrus did not reply. However, he did not pay the premiums on the policy. Durick sued Andrus to recover these premiums. Who wins?

3. Preexisting Duty

Robert Chuckrow Construction Company (Chuckrow) was employed as the general contractor to build a Kinney Shoe Store. Chuckrow emplyed Ralp Gough to perform the carpentry work on the store. The contract with Gough stipulated that he was to provide all labor, amterials, tools, equipment, scaffolding, and other items necessary to complete the carpentry work. Gough’s employees erected 38 trusses at the job site. The next day, 32 of the trusses fell off the building. The reason for the trusses having fallen was unexplained, and evidence showed that it was not due to Chuckrow’s fault or a deficiency in the building plans. Chuchrow told Gough that he would pay him to reerect that trusses and continue work. When the job was complete, Chuckrow paid Gough the original contract price but refused to pay him for the additional cost of reerecting the trusses. Gough sued Chuckrow for this expense. Can Gough recover?

4. Unilateral Mistake

Mrs. Chaney died, leaving a house in Annapolis, Maryland. The representative of her estate listed the property for sale with a real estate broker, stating that the property was approximately 15,650 square feet. Drs. Steele and Faust made an offer of $300,000 for the property, which was accepted by the estate. A contract for the sale of the property was signed by all the parties. When a subsequent survey (done before the deed was transferred) showed that the property had an are of 22,047 square feet, the estate requested the buyers to pay more money for the property. When the estate refused to transfer the property to the buyers, they sued for specific performance. Can the estate rescind the contract?
1. Assuming that the Montana law prohibits oral modifications of written contracts without actual performance/execution, then unless some profit-sharing was actually paid, or some memorandum exists from Loren proving the profit-sharing agreement was made, then Dennis cannot enforce the modified agreement, because he cannot satisfy the burden of production necessary to prove the contract's existence. Re the ethics of Loren's actions, ethical judgments are subjective, so the question is irrelevant, because it has no effect on the legal outcome of the dispute. The contract is either enforceable or it's not -- that is the only issue.

2. Andrus made an offer to purchase insurance for $24,000. Durick rejected the offer and made a counteroffer containing an automatic acceptance absent affirmative notification. Andrus' failure to pay the premiums is notice to Durick of the rejection of the counteroffer. Andrus wins.

3. Gough was under a preexisting duty to construct the trusses. Chuckrow was never obligated to pay for the reerection of those trusses, and Gough's preexisting duty cannot operate as consideration for Chuckrow's offer to pay. Therefore the contract was not modified, and Chuckrow is obligated only for the original contract price.

4. A contract may be rescinded for mistake. Where the mistake is mutual, the parties can agree to rescind or the court can reform the contract to meet the original expectations of the parties. Where the mistake is unilateral, the party seeking rescission must not bear the risk of the mistake, and the other party must not have actually or reasonably should have known of the rescinding parties error.

Here, the estate asserted the square footage of the property in its offer, and the buyer accepted the estate's assertion. This could be a mutual mistake, however, real property is observable, and there was no intentional deception. The estate could have easily noticed that the property was larger than asserted. The estate, thus made a unilateral mistake concerning the size of the property and the price, and the buyer did not jump at the estate's error. Therefore, the buyer can enforce the contract by specific performance.


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Customer: replied 5 years ago.
What would be the applicable issue, solution, and justification for each of the four scenarios?
Issues: public policy, acceptance, preexisting duty, unilateral mistake.
Solution: I don't recognize this terminology. Legal questions are traditionally answered using the FIRAC method (facts, issue, rule, analysis, conclusion).
Justification: ibidem.

Hope this helps.

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