U.S. Business Organizations Friday: 14:00 - 17:00 Location ... · IBM (10 shares = 139.60 USD per...

SS 2019

U.S. Business Organizations Friday: 14:00 - 17:00Location: Hörsaal XVIII [Mel]

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Our Class Stocks❖ Apple (10 shares = 204.18 USD per share = 2,418.00 USD)

❖ IBM (10 shares = 139.60 USD per share = 1,396.00 USD)

❖ Disney (10 shares = 328.50 USD per share = 3,285.00 USD)

❖ Coca-Cola (10 shares = 48.26 USD per share = 482.60 USD)

❖ PepsiCo. Inc (10 shares = $126.40 USD per share = 1264.00 USD)

❖ Imaginary Value of our portfolio = 8,845.0 USD

❖ UBER (To Be Decided)

Review of Session1:

❖ Business organization, an entity formed for the purpose of carrying on commercial enterprise.

❖ Business enterprises customarily take one of the following forms: individual proprietorships, partnerships, limited-liability companies or corporations

Define:

Contract

• A contract (K) is an agreement that can be enforced by a court of law or equity

Breach of Contract

Define

Breach

Failure to live up to the terms of a contract. The failure may provoke a lawsuit, in which an aggrieved party asks a court to award financial compensation for the loss brought about by the breach.

How do courts define breach?

Immaterial Breach and Substantial Performance

❖ Under Common Law, a Plaintiff can sue for breach of contract and collect damages if he has substantially performed the contract, even if there is an immaterial (non-willful) breach.

❖ If the Plaintiff has not fully performed the contract, the Defendant can successfully assert a counterclaim for damages caused by his failure to perform

UCC = PERFECT TENDER

❖ USS does not recognize substantial performance

❖ Instead, it follows the rule of perfect tender

❖ Except for an installment contract, the seller must tender the correct amount of conforming goods at the time specified in the contract or the buyer can reject the good without liability and sue the seller for damages

UCC Installment Contract❖ An installment contract is one where the seller does not have the obligation

to deliver all of the goods to be sold under the contract at one time.

❖ If a contract is determined to be an installment contract, the rule of perfect tender, which permits the buyer to reject non-conforming goods if all of the goods are to be delivered at one time, is inapplicable

❖ A failure by the seller to deliver the appropriate quantity of conforming goods on time, with with respect to one installment of an installation contract is breach of the total contract only if the nonconformity SUBSTANTIALLY IMPAIRS the value of the ENTIRE CONTRACT

Remedies

Types of Remedies❖ Types

❖ Damages

❖ Recission: Cancel the contract and get a refund for attempted service or product

❖ Reformation: Rewrite the contract so it is more versatile, forgiving, helpful, realistic …

❖ Specific Performance: D must perform (not for contracts in services)

❖ When a party cannot sue on the contract

❖ Restitution Damages (quantum meruit) = fair value of the benefit conferred on the other party

Remedies for Breach of Contract: Damages❖ Restitution is a remedy designed to restore the injured party to the position

occupied prior to the formation of the contract.

❖ Parties seeking restitution may not request to be compensated for lost profits or other earnings caused by a breach. Instead, restitution aims at returning to the plaintiff any money or property given to the defendant under the contract

❖ Plaintiffs typically seek restitution when contracts they have entered are voided by courts due to a defendant’s incompetence or incapacity. The law allows incompetent and incapacitated persons to disavow their contractual duties but generally only if the plaintiff is not made worse off by their disavowal.

Remedies for Breach of Contract: Damages

❖ Expectation Damages (Gold Standard): Compensation awarded to the party harmed by a breach of contract for the loss of what he reasonably anticipated from the transaction that was not completed. In other words, expectation damages is compensation that tries to place the harmed party in the position he would have been in had the breach not occurred.

Case: Hadley v. Baxendale ❖ Foundation of the logic of limitations on expectation damages

❖ In Hadley, the crank-shaft in a mill broke and the mill owner had to send the crank-shaft to the manufacturer so that the manufacturer could make a new one.

❖ The mill owner and the courier that he used to send the crank shaft entered into a contract under which the courier promised that he would deliver the crank-shaft to the manufacturer the next day. However, the courier breached his contract and did not deliver the crank-shaft for several days. The mill owner sued the courier for the lost profits he would have made had the crank shaft been delivered to the manufacturer on time. The court ruled that the miller could not recover the lost profits. The court said that, in such a case, the injured party could recover for damages that followed naturally from the breach but that special damages could only be recovered if those special damages were “in the contemplation” of both parties at the time the contract was made.

Remedies for Breach of Contract: Damages

❖ Based on the Hadley ruling, there is a distinction in modern contract law between general damages arising from a breach and special damages that are unique (uniquely contemplated) to the injured party. General damages, as we mentioned, are the damages that naturally flow from a breach but are not linked to the particular circumstances of the harmed party.

❖ These damages are never barred under the Hadley rule because the entire purpose of expectation damages is to compensate the harmed party for the general damages he has suffered. For example:

Remedies for Breach of Contract: Damages❖ Expectation damages can only be recovered if they can be calculated to a reasonable certainty. Where

damages cannot be calculated to a reasonable certainty, the injured party will only be able to recover nominal damages. (We will discuss nominal damages a little bit later).

❖ Typically, the issue of certainty arises in cases where the damages suffered are in the form of lost profits. The general rule regarding lost profits and certainty in calculating damages is that if the injured party is an established business, lost profits are not treated as speculative because they can be estimated from past profits. Therefore, an established business will generally recover for its lost profits.

❖ However, where the injured party is a new business so that there are no past profits with which to estimate future profits, the courts examine each case individually and, if the courts can calculate damages to a reasonable certainty, then damages will be awarded. However, in the event that courts cannot, the injured party will be awarded nominal damages only.

Duty to Mitigate❖ Finally, an injured party has an obligation to try to mitigate damages. In

fact, the injured party will not be allowed to recover for any damages that could have been mitigated.

❖ There are three kinds of contracts for which the duty to mitigate generally applies:

❖ contracts for the sale of goods,

❖ employment contracts and,

❖ construction contracts.

Remedies for Breach of Contract: Recission

❖ Rescission is the name for the remedy that terminates the contractual duties of both parties, while reformation is the name for the remedy that allows courts to change the substance of a contract to correct inequities that were suffered.

Remedies for Breach of Contract: Specific Performance

❖ Specific performance is an equitable remedy that compels one party to perform, as nearly as practicable, his or her duties specified by the contract. Specific performance is available only when money damages are inadequate to compensate the plaintiff for the breach. This ruling often happens when the subject matter of a contract is in dispute.

Compromise and Settlement

❖ Forbearance (a promise not to assert a right) is not valid consideration if it involves forbearance of a totally frivolous claim.

❖ Forbearance is valid if the person seeking to enforce the contract reasonably believes he has a valid claim.

The Difference Between Torts and Contracts

Subject-Matter of Contract Claim: Enforcement of promises exchanged with adequate consideration

Subject-Matter of Tort Claim: Non-contractual civil wrongs

What is a Tort?

❖ In common law jurisdictions, a tort is a civil wrong that unfairly causes someone else to suffer loss or harm, resulting in legal liability for the person who commits the tortious act.

❖ Although crimes may be torts, the cause of legal action is not necessarily a crime, as the harm may be due to negligence.

What is a Tort?

❖ A “tort” is “[a] private or civil wrong or injury, including action for bad faith breach of contract, for which the court will provide a remedy in the form of an action for damages.”

Define:

Tortfeasor

One who commits a tort

What is a Tort?

❖ In order to prevail, the plaintiff in the lawsuit, commonly referred to as the injured party, must prove that a breach of duty (i.e., either an action or lack of action) was the legally recognizable cause of the harm. The victim of the harm can recover his or her loss as damages in a lawsuit.

❖ When someone pursues a claim under a tort, the goal (or legal remedy) is usually the award of damages.

❖ Damages in tort are generally awarded to restore the plaintiff to the position he or she was in had the tort not occurred.

Damages

❖ Damages are the means by which a party injured in tort is compensated for the harm suffered, and an injured party is generally entitled to recover damages for the natural and probable consequences of the tort.

❖ Damages are classified as

❖ Compensatory (or actual) damages

❖ Punitive damages

Compensatory Damages

❖ The purpose of compensatory damages is to make the injured party whole by compensating him or her for injuries sustained as a result of the defendant’s actions. BLACK’S LAW DICTIONARY 270 (Abridged 6th ed. 1991).

Compensatory Damages

❖ Compensatory (or actual) damages

❖ Economic

❖ Non-economic; and

❖ Physical impairment or disfigurement

Economic Damages

❖ Economic damages typically refer to the pecuniary harm suffered by an injured party, or those damages that can be accurately calculated in monetary terms.

Non-Economic Damages

❖ Non-economic damages refer to the non-pecuniary harm suffered by an injured party. Such damages include emotional distress, pain and suffering, inconvenience, fear and anxiety, and impairment of the quality of life.

❖ Non-economic damages, as well as punitive damages, are often limited by statute due in large part to the widespread tort reform passed in state legislatures as a result of excessive damage awards.

Punitive Damages

❖ Meant to punish the defendant and make an example of him or her in order to deter similar conduct. Punitive damages are similar to non-economic damages in that they are often limited by statute.

Generally: No Attorney’s Fees

❖ In general, attorney fees are not recoverable as damages or costs in civil litigation unless authorized by contract, statute, or court rule. This general rule, known as the “American rule” stands in stark contrast to the “English rule,” which provides attorney fees to the prevailing party. Costs, however, are typically awarded to the prevailing party.

General Categories of Torts:

❖ The specific causes of actions comprising tort law in the United States are too numerous to list, but include liability arising out of:

❖ (1) Intentional misconduct

❖ (2) Unreasonable conduct;

❖ (3) Defects in the design, manufacturing, or marketing of products sold; and

❖ (4) One’s relationship to the tortfeasor.

Intentional Torts

Intentional Torts against Persons:❖ Assault

❖ Battery

❖ False Imprisonment

❖ Defamation of Character

❖ Intentional Infliction of Emotional Distress

❖ Misappropriation of the Right to publicity

❖ Invasion of the Right to Privacy

Intentional Torts against Property:

❖ Trespass to Land

❖ Trespass to and Conversion of Personal Property

Intentional Torts against Persons:

❖ “The intent with which tort liability is concerned is not necessarily a hostile intent, or a desire to do any harm. Rather it is an intent to bring about a result which will invade the interests of another in a way that the law will not sanction.” WILLIAM L. PROSSER, LAW OF TORTS 31 (4th ed. 1971).

Unintentional Torts

Negligence:

❖ Elements of Negligence

❖ Duty—defendant owed a duty of a care to plaintiff

❖ Breach—defendant breached the duty of care

❖ Causation—defendant’s negligent act caused the plaintiff’s injury

❖ Damages—plaintiff suffered an injury

Negligence:

❖ Negligence is perhaps the most commonly asserted cause of action in the United States. “Negligence is the failure to use such care as a reasonably prudent and careful person would use under similar circumstances.” BLACK’S LAW DICTIONARY 716 (Abridged 6th ed. 1991).

Special Negligence Doctrines:

❖ Negligent Infliction of Emotional Distress

❖ Negligence per se

❖ Res ipsa loquitur (“the thing speaks for itself”)

Strict Liability

❖ Defective Products (e.g. products liability)

❖ Ultra-hazardous Activities (e.g. blasting activities)

❖ Dangerous Animals (e.g. wild animals)

Negligence:






Negligent Infliction of Emotional Distress

❖ If the defendant’s negligence causes damage to an individual, a person, who does not suffer physical injury as a direct result of the negligent conduct can recover for negligent infliction of emotional of distress only if

❖ (a) he experiences some actual physical harm as opposed to embarrassment or mental anguish, from defendant’s negligence:

❖ (b) he is either within he zone of danger, or,

❖ (c) he witnesses harm to a family member

Negligent Infliction of Emotional Distress❖ The plaintiff can recover for negligent infliction of emotional distress only if the

defendant’s conduct was sufficient to cause emotional distress in a person of normal sensitivities.

❖ Once this objective test is met, the plaintiff can recover for any emotional harm he actually suffers, even if the harm is unusual.

❖ Property damage alone is not enough

❖ If the plaintiff suffers physical injury caused by the negligence of the defendant’s mental distress is an element of his damages, and the distinct elements of the tort need not be met for the plaintiff to recover.

Strict Liability —Products Liability ❖ Product liability refers to “the legal liability of manufacturers and sellers to

compensate buyers, users, and even bystanders, for damages or injuries suffered because of defects in goods purchased.” BLACK’S LAW DICTIONARY 840 (Abridged 6th ed. 1991);

❖ Model Uniform Product Liability Act, § 102(2) (1979) (defining product liability to include “all claims or action brought for personal injury, death or property damage caused by the manufacture, design, formula, preparation, assembly, installation, testing, warnings, instructions, marketing, packaging, or labeling of any product”).

Strict Liability —Products Liability

❖ Thus, this tort action makes a manufacturer liable if its product has a defective condition that makes it unreasonably dangerous to the user or consumer. BLACK’S LAW DICTIONARY 840 (Abridged 6th ed. 1991).

Proving Liability

Burden of Proof:

❖ “Burden of proof” is “[t]he obligation of a party to establish by evidence a requisite degree of belief concerning a fact in the mind of the trier of fact or the court.” BLACK’S LAW DICTIONARY 135–36 (Abridged 6th ed. 1991).

❖ In civil litigation, the initial burden of proof is on the plaintiff. Although there are times the burden of going forward may shift to the defendant, such as where the plaintiff has established a prima facie case, the plaintiff bears the burden of proof throughout trial. However, a defendant bears the burden of proof on all affirmative defenses raised in response to a Complaint.

Standard of Proof

❖ In civil litigation, a plaintiff must prove his or her case by a “preponderance of the evidence,” which is defined as “that degree of proof which is more probable than not.” BLACK’S LAW DICTIONARY 819 (Abridged 6th ed. 1991).

❖ This degree of proof stands in stark contrast to, and represents a crucial departure from, the degree of proof required in a criminal case in the United States, where the burden of proof is “beyond a reasonable doubt.” “Beyond a reasonable doubt” means that “facts proven must, by virtue of their probative force, establish guilt.” Id. at 111. The standard of proof beyond a reasonable doubt has limited use in civil cases, such as claims for exemplary damages.

How do we define a commercial seller?❖ The rule of tort liability applicable to commercial sellers and other distributors of

products generally has been stated as follows: “[o]ne engaged in the business of selling or otherwise distributing products who sells or distributes a defective product is subject to liability for harm to persons or property caused by the defect.” RESTATEMENT (THIRD) OF TORTS: PRODUCTS LIABILITY § 1 (1998) (superseding the RESTATEMENT (SECOND) OF TORTS § 402A (1965));

❖ see also Newton v. Admiral Corp., 280 F. Supp. 202, 203 (D. Colo. 1997) (noting Section 402A of the RESTATEMENT (SECOND) OF TORTS “in effect implies a warranty by the seller that the product is free from defects which rendered the product unreasonably dangerous to the user”).

Negligence:






Palsgraf v Long Island Railroad Co.

❖ Plaintiff was standing on a platform of defendant's railroad after buying a ticket to go to Rockaway Beach. A train stopped at the station, bound for another place. Two men ran forward to catch it. One of the men reached the platform of the car without mishap, though the train was already moving. The other man, carrying a package, jumped aboard the car, but seemed unsteady as if about to fall. A guard on the car, who had held the door open, reached forward to help him in, and another guard on the platform pushed him from behind. (Palsgraf v. Long Island R.R. Co., 248 N.Y. 339, 340-41 (N.Y. 1928))


❖ In this act, the package was dislodged, and fell upon the rails. It was a package of small size, about fifteen inches long, and was covered by a newspaper. In fact it contained fireworks, but there was nothing in its appearance to give notice of its contents. The fireworks when they fell exploded. The shock of the explosion threw down some scales at the other end of the platform, many feet away. The scales struck the plaintiff, causing injuries for which she sues. (Palsgraf v. Long Island R.R. Co., 248 N.Y. 339, 341 (N.Y. 1928))


1.Did the train workers’ duties of care extend to the plaintiff?

2.Must the plaintiff be within the range of foreseeability for a duty to be owed?

Palsgraf: Cardozo’s Majority

The conduct of the defendant's guard, if a wrong in its relation to the holder of the package, was not a wrong in its relation to the plaintiff, standing far away. Relatively to her it was not negligence at all. Nothing in the situation gave notice that the falling package had in it the potency of peril to persons thus removed. Negligence is not actionable unless it involves the invasion of a legally protected interest, the violation of a right. "Proof of negligence in the air, so to speak, will not do" (Palsgraf v. Long Island R.R. Co., 248 N.Y. 339, 341 (N.Y. 1928))


A different conclusion will involve us, and swiftly too, in a maze of contradictions. A guard stumbles over a package which has been left upon a platform. It seems to be a bundle of newspapers. It turns out to be a can of dynamite. To the eye of ordinary vigilance, the bundle is abandoned waste, which may be kicked or trod on with impunity. Is a passenger at the other end of the platform protected by the law against the unsuspected hazard concealed beneath the waste? (Palsgraf v. Long Island R.R. Co., 248 N.Y. 339, 342 (N.Y. 1928))

Palsgraf: Cardozo’s MajorityPalsgraf v. Long Island R.R. Co., 248 N.Y. 339, 343 (N.Y. 1928) (“Even then, the orbit of the danger as disclosed to the eye of reasonable vigilance would be the orbit of the duty. One who jostles one's neighbor in a crowd does not invade the rights of others standing at the outer fringe when the unintended contact casts a bomb upon the ground. The wrongdoer as to them is the man who carries the bomb, not the one who explodes it without suspicion of the danger. Life will have to be made over, and human nature transformed, before prevision so extravagant can be accepted as the norm of conduct, the customary standard to which behavior must conform.”) (Palsgraf v. Long Island R.R. Co., 248 N.Y. 339, 342 (N.Y. 1928))


“This does not mean, of course, that one who launches a destructive force is always relieved of liability if the force, though known to be destructive, pursues an unexpected path. ” Palsgraf v. Long Island R.R. Co., 248 N.Y. 339, 344 (N.Y. 1928)

Palsgraf: Cardozo’s MajorityNegligence is not a tort unless it results in the commission of a wrong, and the commission of a wrong imports the violation of a right, in this case, we are told, the right to be protected against interference with one's bodily security. But bodily security is protected, not against all forms of interference or aggression, but only against some. One who seeks redress at law does not make out a cause of action by showing without more that there has been damage to his person. If the harm was not willful, he must show that the act as to him had possibilities of danger so many and apparent as to entitle him to be protected against the doing of it though the harm was unintended. Affront to personality is still the keynote of the wrong. Confirmation of this view will be found in the history and development of the action on the case. Negligence as a basis of civil liability was unknown to mediaeval law…Liability for other damage, as where a servant without orders from the master does or omits something to the damage of another, is a plant of later growth …


“The law of causation, remote or proximate, is thus foreign to the case before us. The question of liability is always anterior to the question of the measure of the consequences that go with liability.” Palsgraf v. Long Island R.R. Co., 248 N.Y. 339, 346 (N.Y. 1928)

Palsgraf: Andrew’s Dissent

Assisting a passenger to board a train, the defendant's servant negligently knocked a package from his arms. It fell between the platform and the cars. Of its contents the servant knew and could know nothing. A violent explosion followed. The concussion broke some scales standing a considerable distance away. In falling they injured the plaintiff, an intending passenger. (Palsgraf v. Long Island R.R. Co., 248 N.Y. 339, 347 (N.Y. 1928))


Is it a relative concept — the breach of some duty owing to a particular person or to particular persons? Or where there is an act which unreasonably threatens the safety of others, is the doer liable for all its proximate consequences, even where they result in injury to one who would generally be thought to be outside the radius of danger? (Palsgraf v. Long Island R.R. Co., 248 N.Y. 339, 347 (N.Y. 1928))


“Negligence may be defined roughly as an act or omission which unreasonably does or may affect the rights of others, or which unreasonably fails to protect oneself from the dangers resulting from such acts.” Palsgraf v. Long Island R.R. Co., 248 N.Y. 339, 348 (N.Y. 1928)

Palsgraf: Andrew’s DissentWhere there is the unreasonable act, and some right that may be affected there is negligence whether damage does or does not result. That is immaterial. Should we drive down Broadway at a reckless speed, we are negligent whether we strike an approaching car or miss it by an inch. The act itself is wrongful. It is a wrong not only to those who happen to be within the radius of danger but to all who might have been there — a wrong to the public at large. Such is the language of the street. Such the language of the courts when speaking of contributory negligence. Such again and again their language in speaking of the duty of some defendant and discussing proximate cause in cases where such a discussion is wholly irrelevant on any other theory. (Perry v. Rochester Line Co.,219 N.Y. 60.) (Palsgraf v. Long Island R.R. Co., 248 N.Y. 339, 349 (N.Y. 1928))


“Due care is a duty imposed on each one of us to protect society from unnecessary danger, not to protect A, B or C alone.” Palsgraf v. Long Island R.R. Co., 248 N.Y. 339, 349 (N.Y. 1928)


“Once again, it is all a question of fair judgment, always keeping in mind the fact that we endeavor to make a rule in each case that will be practical and in keeping with the general understanding of mankind.” Palsgraf v. Long Island R.R. Co., 248 N.Y. 339, 354-55 (N.Y. 1928)


The proposition is this. Every one owes to the world at large the duty of refraining from those acts that may unreasonably threaten the safety of others. Such an act occurs. Not only is he wronged to whom harm might reasonably be expected to result, but he also who is in fact injured, even if he be outside what would generally be thought the danger zone. There needs be duty due the one complaining but this is not a duty to a particular individual because as to him harm might be expected. Harm to some one being the natural result of the act, not only that one alone, but all those in fact injured may complain.

Palsgraf v. Long Island R.R. Co., 248 N.Y. 339, 350 (N.Y. 1928)

What is“proximate cause”

Scholars see Palsgraf as a proximate cause case that hinged on Cardozo’s quiet substitution of a risk-rule conception of proximate cause for the prevailing natural-and-probable-sequence conception. What rendered “negligent” the LIRR guard’s pushing of the passenger was the risk of destroying the passenger’s package, not the risk of physically injuring a woman down the platform, Seavey observed. Liability in negligence requires a match between the risk and the injury

What is“proximate cause”

“An injury or damage is proximately caused by an act, or a failure to act, whenever it appears from the evidence in the case, that the act or omission played a substantial part in bringing about or actually causing the injury or damage; and that the injury or damage was either a direct result or a reasonably probable consequence of the act or omission.” BLACK’S LAW DICTIONARY 853 (Abridged 6th ed. 1991).

Administrative and Regulatory Law

Laws that may apply to US Businesses

❖ Federal and State Tax Laws

❖ Employment and Labor Law

❖ Environmental Laws

❖ Laws and Rules governing certain professions

❖ State law requirements, such as licensing

Bringing it all Together: Negotiation Activity #1

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Transcript of U.S. Business Organizations Friday: 14:00 - 17:00 Location ... · IBM (10 shares = 139.60 USD per...