MARYLAND CONTRACTS DISTINCTIONS PROFESSOR BRENDAN HURSON UNIVERSITY OF MARYLAND CAREY SCHOOL OF LAW

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1 MARYLAND CONTRACTS DISTINCTIONS PROFESSOR BRENDAN HURSON UNIVERSITY OF MARYLAND CAREY SCHOOL OF LAW CHAPTER 1: MARYLAND CONTRACTS DISTINCTIONS A. Frmatin f Cntracts 1. Mutual Assent Mutual assent: Offer + + cnsideratin + n valid Maryland Distinctin Means f Acceptance Maryland allws any methd f acceptance, unless therwise specified by the. Example 1: Rger is trying t sell his PlayStatin 4 fr $350. Dee can accept this ffer by any reasnable means (e.g., phne call, text, , letter) but if Rger said specifically that Dee must accept by certified letter, then all the ther methds f acceptance wuld be inapprpriate. Electrnic signatures under the Unifrm Electrnic Transactins Act (UETA), an electrnic transactin may be agreed upn by bth parties, but such prvisin must be cnspicuus within the cntract and agreed t. Mailbx rule almst exclusively applies t bilateral cntracts (when there is ne prmise in exchange fr anther prmise) 2. Cnsideratin The legal detriment that is bargained fr in rder fr the cntract t exist Exam Tip 1: Cnsideratin is tested nearly every year n the Maryland Bar Exam. Can take the frm f: A return t d smething; A return prmise t frm ding smething legally permitted; The actual f sme act; r Refraining frm ding sme act. Maryland Distinctin Additinal Frms f Cnsideratin

2 Past cnsideratin: T prevent Prmise f marriage: While the prmise f is an adequate cnsideratin, n lawsuit fr any f prmise t marry will survive unless the fiancée is. Prmise t make a reciprcal will: Each persn names the ther as Example 2: Zack tells Kelly, If yu put me in yur will, I will name yu in mine and give yu my beach huse as a life estate. This is adequate cnsideratin because it is. 3. Prmises Binding withut Cnsideratin Maryland Distinctin Statute f Limitatins A prmise t pay a debt after the statute f limitatins has run is enfrceable withut new cnsideratin. Maryland has NO requirement fr a cntract t be under seal, but ding s raises the statute f limitatins t bring a breach f cntract suit frm three years t years Maryland Distinctin Prmissry Estppel Can be used t enfrce a prmise that is nt supprted by cnsideratin Example 3: Bb is ut f twn when a blizzard hits. Daryl, his gd friend and neighbr, shvels Bb s driveway. Bb returns and thanks Daryl, prmising t pay him $100. Bb desn t pay. Daryl sues Bb fr $100. Daryl will lse. A prmise is binding if: i) The prmisr shuld reasnably expect it t induce actin r frbearance n the part f the prmisee r third persn; ii) The prmise did induce such actin r frbearance; AND iii) can be avided by enfrcement f the prmise. Maryland requires prf f reliance by evidence B. Defenses t Cntract Frmatin After a breach, the breaching party can ffer defenses t shw that a cntract was nt frmed such that there was n meeting f the minds due t a mistake r misunderstanding, misrepresentatin,, undue influence,, r lack f capacity. Maryland Distinctin Rescissin Due t Mistake Themis Bar Review, LLC MD Cntracts Distinctins

3 Mistakes relate t a basic that materially affects perfrmance Unilateral mistake: May result in rescissin f a cntract when: The mistake is s severe that cntract enfrcement wuld be ; The mistake relates t a prtin f the cntract; and The party seeking rescissin was neither f nr the cause f the mistake. Mutual mistake: parties are mistaken as t an essential element f the cntract. Example 4: Denny and Dale cntract fr the sale f a cw. They bth think the cw is barren. When it turns ut that the cw is nt barren, rescissin might be permitted n the grund that bth parties made a mistake. Maryland permits t cmpensate a party which was harmed. Maryland permits the f written cntracts t fix a mistake, unless a third party is likely t suffer harm. Maryland Distinctin Lack f Capacity Parties must be cmpetent (i.e., have t be held t cntractual duties). Incmpetency: Arises frm infancy, r defect, guardianship,, and crprate incapacity Infancy: When an infant makes a cntract, it is by the infant but nt by the ther party; i.e., the infant may either disaffirm r the cntract and avid any liability under it r hld the adult party t the cntract. Example 5: Frank, age 16, ges t a car dealership with a check fr the full amunt f a used car. The dealership takes the check and gives Frank the car. The check bunces. The dealership cannt enfrce the cntract because Frank is under 18, which is the age f majrity in Maryland. Frank may als disaffirm any respnsibility related t the cntract, but he may als enfrce the cntract. Crprate incapacity: When a crpratin acts ultra vires (beynd its legal authrity), the cntract is Maryland curts have allwed recvery fr under quantum meruit when a crpratin cmmits an ultra vires act. MD Cntracts Distinctins 2016 Themis Bar Review, LLC 3

4 C. Defenses t Cntract Enfrcement Maryland Distinctin Uncnscinability A cntract (r part f ne) is s unfair t ne party that n in the psitin f the parties wuld have agreed t it Maryland curts have applied uncnscinability in cntracts f ( take it r leave it ) Maryland requires bth prcedural and uncnscinability t be present in rder t refuse t enfrce a cntract n the grunds f uncnscinability. Maryland Distinctin Public Plicy Nn-cmpete clauses: Maryland fllws the majrity rule that nn-cmpetitin clauses in emplyment cntracts will be enfrceable if the restraint is cnfined t what is reasnably necessary fr the prtectin f the business f the emplyer and d nt impse undue n the emplyee and are nt against public interest. D. Implied-in-Fact Cntracts and Quasi-Cntracts Maryland Distinctin Quasi-Cntractual Recvery By a plaintiff in breach: When there is n express cntract r there is an errr in an agreement t vid it, curts will allw quasi-cntract actins fr based n unjust enrichment r quantum meruit. This requires that: E. Discharge The plaintiff cnferred a benefit n the defendant; The defendant has f the benefit; The defendant the benefit and under the circumstances, equity requires that he wuld be unjustly enriched withut paying the plaintiff fr the benefit; The plaintiff had a reasnable expectatin f being paid; AND The plaintiff had. Exam Tip 2: This is a frequently tested tpic n the Maryland Bar Exam. Remember t check whether the plaintiff had clean hands. When there is a gd, lawful, vluntary cntract, with n frmatin defenses, a party can argue that his/her perfrmance is nt pssible because f impssibility, illegality, r impracticability. Maryland Distinctin Impracticability A party can successfully claim that his/her perfrmance was impracticable because f an unfreseen ccurrence; e.g., a huge increase in fuel csts. In Maryland, a seller cannt claim impracticability because f the failure f a surce f supply if the failure was at the time the cntract was frmed Themis Bar Review, LLC MD Cntracts Distinctins

5 F. Third-Party Beneficiary Cntracts Maryland Distinctin First Restatement Maryland fllws the First Restatement f Cntracts with respect t third-party beneficiary cntracts (i.e., classifying third-party beneficiaries as creditr, dnee, r beneficiaries). Example 6: Chris agrees t paint Brun s huse in return fr Brun s prmise t pay $500 t Beyncé because Chris wes Beyncé $500. Beyncé is a creditr beneficiary and can recver the $500 frm Brun. If the prmisee entered the cntract fr the purpse f cnferring a gift n a third party, then the third-party dnee beneficiary is given the right t sue the prmisr. Example 7: Dnald pays Ted t build a huse fr Marc. Marc is a dnee beneficiary f the cntract between Dnald and Ted. An incidental beneficiary a beneficiary wh is nt a dnee r creditr beneficiary has n rights t enfrce the cntract. G. Assignment f Rights Maryland Distinctin Assignment f Rights In Maryland, the assignr s duties must be expressly assumed in all land sale cntracts by the assignee and cannt merely be implied. With regards t wage assignments, Maryland limits such matters t mnths, with special prvisins requiring them t be in writing and recrded prperly. H. Statute f Frauds Cntracts under the Statute f Frauds are unenfrceable unless they are. The memrandum must: Be in writing; Be signed by the party t be ; AND Cntain the essential r material f the deal. UETA: Electrnic dcumentatin satisfies the Maryland Statute f Frauds as a writing. I. Breach f Cntract and Remedies Maryland Distinctin Reasnable Certainty T recver damages, a plaintiff must prve the dllar amunt f damages within a reasnable certainty. MD Cntracts Distinctins 2016 Themis Bar Review, LLC 5

6 Maryland curts are hesitant t award because they are t speculative. Maryland Distinctin Other Damages Attrney s Fees: In Maryland, attrney s fees are generally nt recverable unless authrized by. Emtinal Damages: Damages fr emtinal distress are generally nt awarded in cntracts cases. Cst Damages: Maryland law allws a buyer t deduct the cst damages resulting frm a breach frm the price still due, as lng as the buyer first infrms the seller. [END OF HANDOUT] Themis Bar Review, LLC MD Cntracts Distinctins