Ch10 Business Practice Contract Law and Real Property Law.docx

CHAPTER 10: BUSINESS PRACTICE: CONTRACT LAW AND REAL PROPERTY LAW TRANSPARENCY MASTERS Contract Law Elements of a Contract Legal Principles Affecting the Validity and Enforceability of a Contract Breach of Contract Ownership Interests in Real Property Non-Ownership Interests in Real Property Intellectual Property PURPOSE AND SUBSTANTIVE CONTENT This chapter introduces students to some of the general legal concepts of contract law and real property law. Also included is a brief overview of the law of landlord/tenant. CHAPTER OUTLINE Technology Corner Case File 10-1 Introduction 10-2 Contract Law Formation of Contracts Performance of Contracts Assignment of Contract Rights 10-3 Real Property Law Ownership Interests in Real Property Non-ownership Interests in Real Property Landlord/Tenant Law 10-4 Intellectual Property Law Copyright law Patent Law Trademark Law Trade Secret Law Featured Website Chapter Summary Terms to Remember Questions for Review Questions for Analysis Assignments and Projects SKILL BUILDING The examples, assignments, case questions, and projects provide the opportunity for students to build the following skills: Legal Research Investigative Case Analysis Document Summarization CASE SUMMARIES, CASE QUESTIONS, AND SUGGESTED ANSWERS Keith v. Buchannan, 173 Cal. App. 3d 13, 220 Cal. Rptr. 392 (1985) (Pg. 207) This is an action based on breach of express and implied warranties arising out of the purchase of a yacht by plaintiff. Plaintiff purchased a boat intended to be used for long distances on the ocean. In purchasing the vessel, plaintiff states that he relied on representations made by the sales representative and representations contained in printed literature that the boat would be seaworthy for such use. Plaintiff also had a friend who was involved in a boat building enterprise inspect the vessel before it was purchased. The trial court found that the written statements in the brochure were opinions and therefore no express warranty was created. It also found that no implied warranty of fitness was created because plaintiff relied on his own experts. The court discusses the law of express and implied warranties as found in the Uniform Commercial Code (as adopted in California). Under the UCC, express warranties are created by any affirmation of fact relating to the goods that becomes part of the basis of the bargain and any description of the goods which is made part of the basis of the bargain. The court states that statements found in a brochure can create express warranties. In this case, the vessel purchased was described in the brochure as a “picture of sure-footed seaworthiness” and a “carefully well-equipped and very seaworthy vessel.” Furthermore, seller was aware that appellant was looking for a vessel sufficient for long distance ocean-going cruises. The statements were statements of fact. The court also discussed what part of the “basis of the bargain” test means. The court stated that a buyer need not show that he would not have entered into the agreement absent the warrant or even that it was a dominant factor. It only needs to be part of the basis or merely a factor or consideration inducing the buyer to enter into the bargain. The facts in this case indicate that it was a factor. As to the issue of implied warranty of fitness, the court points out that the main issue is whether the buyer relies on the skill and judgment of seller. In this case, buyer relied on his own expert. The trial court’s judgment regarding express warranty was reversed. The finding on implied warranty was affirmed. Why is this case dependent on the Uniform Commercial Code and not general contract law? Suggested Answer: This is a contract for the sale of goods, i.e., a boat, and therefore under the U.C.C. Does a careful shopper risk the loss of warranties? Suggested Answer: Obviously, this case indicates that when shoppers rely on their own research and own experts they risk losing rights under implied warranties although not their rights under express warranties. Before buyers lose their rights under express warranties the seller must show that the express warranties were not a factor in buyer’s decision to purchase of the item. This would be very difficult. If a shopper’s investigation showed that the seller’s representations were not true, that shopper would probably not purchase the item. What is the difference between an express warranty and an implied warranty? Suggested Answer: An express warranty is a statement of fact made by the seller, either orally or in writing concerning the goods sold that forms part of the basis of the bargain. An implied warranty is not a statement that is made or printed. Rather, when an item is purchased, the buyer is entitled to rely on the fact that the item will be fit for its intended use. ProCD, Inc. v. Zeidenberg, 908 F. Supp 640 (W.D. Wis. 1996) (Pg. 218) Plaintiff created a comprehensive national directory of residential and business listings and sells these on CD-ROM. Defendant downloaded data from the CD-ROM and made it available over the Internet. He did not, however, download the software that plaintiff had developed and used on the CD-ROM. Plaintiff filed an action seeking an injunction prohibiting defendant from distributing the material on the Internet. Each party made a motion for summary judgment. Defendant was granted summary judgment. The appellate court affirmed, stating that federal copyright law controlled this situation. Under federal copyright law, public data such as phone numbers is not subject to copyright protection. The court also considered a Wisconsin Computer Crimes Act that made it unlawful to modify, destroy, access, take, or copy computer data willfully, knowingly, and without authorization. In this case, however, federal law preempts. Explain the plaintiff’s argument. Suggested Answer: Plaintiff contends that the defendant infringed plaintiff’s copyright when he copied and used the SelectPhone CD-ROM for purposes of commercially distributing the listings on the Internet because copyright protection extends to both the telephone lists and to the software. Explain the defendant’s argument. Suggested Answer: Defendant argues that the SelectPhone data is not copyrightable but, nonetheless, copyright law permits him to make a copy of the program as long as it is essential to his personal use of the program and is not used in a manner inconsistent with the plaintiff’s copyright. Discuss the Feist case relied upon by the court. Suggested Answer: In the Feist case the U.S. Supreme Court held that a telephone company’s white pages were not entitled to copyright protection. The Court stated that facts are not copyrightable, although compilations of data are copyrightable if there is some creativity or originality to the compilation. Copyright protects originality and creativity. It does not simply protect hard work in compiling data. Universal City Studios, Inc. v. Nintendo Co., 746 F.2d 112 (2nd Cir. 1984) (Pg. 248) This is a case concerning trademark infringement brought by Universal, who owned the rights to the name and character of King Kong, against Nintendo, who produced the famous game, Donkey Kong. Universal claimed that Donkey Kong infringed on the name and character of King Kong. After comparing and inspecting both the Donkey Kong game and the King Kong movies, the trial court found that the differences between the two were great and that Donkey Kong was clearly a parody of King Kong. The trial court found that there was no likelihood of consumer confusion between the two and therefore granted summary judgment. The appellate court agreed. Who are the parties to this case? What type of business organization is each party? How do you know? Suggested Answer: Plaintiff is Universal City Studios, Inc. This is obviously a corporation since the term “Inc.” appears in the name. Nintendo Co., is defendant. Although the court does not expressly describe its business status, it talks about Nintendo of America, its “wholly owned subsidiary.” These are terms used to describe corporations. Why did Universal sue Nintendo? Suggested Answer: Universal claimed that in producing the game Donkey Kong, Nintendo was infringing on the use of the character King Kong in violation of 15 U.S.C. § 1125 (a) in that Nintendo’s actions suggested to the public that the product originated with or was authorized by the owner of the King Kong name. Universal also asserted claims based upon common law unfair competition, trademark and trade name principles. 3. How did the court distinguish “King Kong” from “Donkey Kong”? Suggested Answer: The court says that the name Kong and King Kong connote an ape-like creature. The addition of the word Donkey creates an entirely different impression and thus the likelihood of confusion does not exist. ETHICAL CHOICES A friend of yours, who is also a paralegal, has asked you to come work with her. She owns and operates “Paralegal Eviction Services,” a company that helps landlords evict tenants. The firm employs no attorneys. You do not enjoy your present job in a law office and would like to find another job. Your friend has even offered you a partnership interest in the business. What do you do? (Pg. 213) Points to Discuss: Can paralegals offer their services directly to the public? Is it the unauthorized practice of law? If they can work directly with the public what are the possible pitfalls? Review both the NALA and NFPA definitions of legal assistant or paralegal. If one is offering services to the public is he or she really a paralegal? Do paralegals who work directly for the public provide a needed service? Assume that you work in a law firm. A complex intellectual property litigation case is set for trial in one week. In organizing the file before trial, you locate a document that was not produced during discovery because no one knew of its existence. The document is obviously relevant, but is very harmful to your client’s position. The client is your neighbor. What do you do? (Pg. 230) Points to Discuss: Does the client’s status as a neighbor have any bearing? Do you owe any special duty to friends and family? What is your obligation regarding the document? Do you have to turn it over? Are you in a conflict situation? Are there special problems when you represent family and friends? Does that mean that you should not work on cases involving family or friends? QUESTIONS FOR ANALYSIS 1. Review the case file at the beginning of the chapter. How would Kersch protect his computer chip? Suggested Answer: A patent would be appropriate. 2. Assume that Kersch enters into an oral agreement to lease a building for eleven months. Three months into the lease, Kersch decides to buy a building. Can he cancel the lease without penalty? Suggested Answer: An oral lease for less than one year is usually enforceable. Therefore he cannot cancel unilaterally without penalty. 3. Review the Ethical Choices in this chapter. Which NALA and/or NFPA ethical rules or guidelines apply to the situations? Review your state’s ethical rules (hint: go to www.nala.org and find a link). Which of those rules apply? Suggested Answer: The NALA and NFPA rules are found in Appendix II of the text. State’s rules will vary. Chapter 10: Business Practice: Contract Law and Property Law True/False In contract law, the person who makes an offer is the offeree. A bilateral contract is one in which both parties have made promises to perform. In most contracts the consideration consists of promises to do something. Contracts by emancipated minors are usually valid. The parole evidence rule limits the types of evidence that be used to prove terms of an agreement The key feature of joint tenancy is a right of survivorship. Deeds are used to transfer ownership to property. A lawsuit to evict a tenant is known as an unlawful detainer action. Once a patent is obtained it is good forever. Patent and copyright laws are federal rather than state. Multiple Choice The Uniform Commercial Code controls: contracts for the sale of goods contracts involving interstate commerce contracts involving banks contracts for the sale of real property none of the above Contracts usually contain the following: mutual consent consideration capable parties legal subject matter all of the above A contract entered into by a minor is usually void is usually voidable is usually enforceable against the minor becomes enforceable if not rescinded within 60 days none of the above Which of the following is a void contract? contract entered into by a minor contract entered into by someone who is drunk contract entered into by someone who suffers a mental incapacity but who had not been adjudicated by a court to be incapable contract entered into by someone who has been adjudicated by a court to be incapacitated or insane all of the above are void The legal doctrine that allows the court to treat a certain situation as if a contract exists, even where one of the elements is missing, is known as: quasi contract promissory estoppel parole evidence rule statute of frauds assignment The Statute of Frauds requires that all contracts be in writing limits the types of evidence that can be used to prove the terms of the contract provides a remedy for fraudulent acts requires that certain types of contracts be evidenced by a writing requires that written contracts be notarized Which of the following does not indicate an ownership interest in real property? fee simple life estate joint tenancy month-to-month tenancy community property A type of deed in which the grantor makes no representations is a: quitclaim deed warranty deed grant deed none of the above all of the above Which of the following indicates a non-ownership interest in real property? mortgage deed of trust lien lease all of the above 10. The “Golden Arches” is an example of something that is entitled to protection under a. patent law b. copyright law c. trade secret law d. trademark law e. all of the above Answer Key 1. False 2. True 3. True 4. True 5. True 6.True 7. True 8. True 9. False 10. True 1.a 2.e 3.b 4.d 5.a 6.d 7.d 8.a 9.e 10.d