Part 1 - RAGBRAI Contract Case

Anneworks at Big Insurance Company (BIC).As part of BIC's wellness program, employees are encouraged to participate in various events such as 2K or 5K runs, being active with a fitness center, riding on bike rides, going for walks during lunch hours and so on.Additionally, employees are encouraged toadjust theireating habits to include more fruit, vegetables, etc.The wellness program provides brown bag lunches on establishing a good diet, how to stay fit and so on.It was common for employees to receive cash bonuses or prizes if they reached certain levels of achievement (losing 20 pounds, completing a fitness class, etc.).

BIC's Wellness Coordinator, Molly Goodheart, posted a challenge in the company newsletter that stated if an employee were willing toparticipate in Iowa's RAGBRAI (Register's Annual Great Bike Ride Across Iowa) in Julyand IF an employee could ride the entire route (from the Missouri River to the Mississippi River) during the week-long event THEN the employee wouldreceive a $500 bonus and the time taken off would not be regarded as "vacation" or "personal time."

Instead of having to use vacation or personaltime, the employee would be said to have worked away from the office promoting "goodwill" for BIC.As part of the deal, each BIC employee would be required to wear clothing that had BICinsignia (jacket, riding outfit, hat, etc.) and they would be regarded as "BIC Ambassadors" during the ride.(Hey, if you don't like it, take the week off as vacation and wear what you want, okay?! Ha!)

The announcement (posted in the company newsletter as well as on bulletin boards around the building) stated the RAGRAI Challenge was limited to10 BIC employees.To be eligible for the $500 bonus pay, an employee had to complete some forms, make sure there was someone who would cover their weekly work, get an approval from their supervisor, etc. and then submit the form to Molly Goodheart's office.Molly's office then interviewed each applicant and decided upon the10 people whowould get to be BIC Ambassadors for RAGBRAI.

Annesubmitted all the necessary paperwork and was one ofthe10 people chosen to be a BIC Ambassador by Molly and her office.She and9 other BIC employeescompleted the week-long ride in late July.

What Anne or the otheremployeesdid not realize was that between the time theywere chosen(early June) and the time they actually rode on RAGRBAI (end of July) Molly Goodheart had quit her job and was replaced by Eric Strongman.Eric did notlearn of the RAGBRAI"BIC Ambassador" projectuntilthe week RAGBRAI was going on.He did not wish to use $5,000 of his budget to pay the "BIC RAGBRAIAmbassadors."

The BIC Human Relations Officedid not take the week of work away from each person as it determined each person had been working for BIC during the ride. Thus, Anne did not losea week of personal or vacation time.However, Eric Strongman refused to pay the $500 to her and the others.

Anne and the other9 BIC employees who had completed the ride were really upset.As a group of 10 individuals, theyfiled a lawsuit against BIC in Small Claims Court seeking theirmoneyfrom BIC.BIC had argued it was up to the Wellness Office to determine whether to pay the bonuses.BIC also claimed each employee was not docked any time for being on the ride for the full week.

Note:Even though Eric Strongman and his Wellness Department have discretion over how to spend its own funds, he and the department are part of Big Insurance Company.Thus, if Eric has not acted lawfully regarding the $500 payments, BIC is liable, too.The real issue is whether Eric's decision not to pay Anne and the others was lawful.

1. If a Small Claims judge were to decide this case, she would use the "objective theory of contracting" todetermine if a contract existed between BIC andAnne.(Note:Willrefer to Anne only to save time as opposed to "Anne and the other 9 BIC employees .....")In yourown words what does this mean?

2.Assuming there is a legally recognized contract between Ann and BIC, would it bea bilateral contract or a unilateral contract? Explain the difference between a bilateral and unilateral contract and give an example of each.

3. Let's say thatEric Strongman hadnotified Anne and the other employee hewould not pay the $500 on thethird day of the 7-day ride (rather than after it was over).Would BIC have had a legal right to terminate its offer at that time?Why or why not?

4.Was the above situation an express or implied contract?Explain the difference and give an example of each kind of situation.

5.What are two or three legal arguments why BIC should NOT have to pay the $500 payments to each of the10 plaintiffs in this case? (This question is asked since most people believe Anne and the others do have a legal right to be paid the money since they completed the ride, had relied on the promises to their detriment, etc.).(Yes, this is a hard question!)

Part2 -Not Paying Undocumented Workers

6.An unethical employer hires 10 undocumentedworkers (people from another country without proper legal papers) to work in a "factory farm."The employer provides them with a house to live in (you can imagine what it is like) next to the factory farm.However, the employer pays them very little money.Theundocumented workersgo to a lawyer and explain the situation.She (the lawyer) explains the contract with their employer is illegal - in other words it is void.However, the lawyer states she does believe the law will allow them to sue the employer for "a reasonable, lawful wage" for services rendered.(Obviously in real life theundocumented workerswill be reluctant to do it but we will use this for sake of illustration).

Explain what legal theory (discussed in Chapter 10) thelawyer can argue that justifies theundocumented workershave a right to be paid a lawful wage for the services they have rendered even though there is no legal contract with the employer.(Do not state federal law requires a minimum wage is to be paid to an undocumented worker - we are looking for something other than that.)

Part3 -Revocable versus Irrevocable Offers

In Chapter 11 the author discusses offers.Most offers are revocable, meaning the offeror (person who made the offer) can revoke (cancel) it at any time before the offeree (person to whom offer was given) accepts.A few offers are irrevocable, meaning the offer cannot be canceledafter it is made.

7.FarmerSeller had offered tosell aused combineto FarmerBuyer for $35,000.The combine was destroyed by a fire on Monday night.Farmer Buyer who was not aware the combine was destroyed by a fire the night before, agreed to buy the combine on Tuesday by sending FarmerSeller an email.Is there a contract between the parties?Why or why not?

8.Buyer paid $1,000 for a 30-day option (written agreement)to purchasea 80 acres for$9,000 per acre.During the 30-day time periodSeller died.Can Buyer still exercise his option to buy (within the 30 days)even though Seller died? (Does Seller's estate have to honor the option or was the contract terminated upon the death of the seller?)

Part4 - Lucy v Zehmer - "We Were Just Joking!"

On Page 262 is a very famous contract case. Here is a link that provides an overview of the famousLucy v Zehmer case. If the link does not work here is the URL:http://en.wikipedia.org/wiki/Lucy_v._Zehmer. Here is the actual ruling of the Virginia Supreme Court as written by Justice Buchanan. Here is the URL:http://www.west.net/~smith/Lucy_v_Zehmer.htm/

The defendants in this case were Adrian Hardy Zehmer (known also as Al Zehmer) and his wife, Ida Mae Zehmer. They owned a restaurant, service station and motel with guest cabins. The Zehmers also owned a 472 acre tobacco farm called the Ferguson farm. The farm had been purchased by Mr. Zehmer as an investment in the early 1940s for $11,000.

The plaintiff was Welford Ordway Lucy (sometimes called Bill Lucy). He and his older brother, John C. Lucy, made their living in the timber business and also tobacco farming.

9.Was thedocument that Mr. and Mrs. Zehmer wrote out andgave to Mr. Lucy an offer or a contract?Explain.

10.You will see the trial court (where this case started -- in a county court) ruled in favor of Mr. and Mrs. Zehmer and ruled there was no contract between the parties. Why do you think the trial court ruled this way? Explain.

11.The Supreme Court of Virginia ruled there was a contract between the parties and reversed the trial court.What was the reasoning of the court in deciding this case?What did the appellate court believe the big issue was?(Hint:It was not justintoxication of the parties.)

12. Mr. Lucy was suing for "specific performance" of the contract. What does "specific performance of a contract" mean? What did the buyer, Mr. Lucy, really want when the case was over?

Part5 -Emails and Texts

13.The On Page 268 ofthe printed textbook (Section 11-1c) there isan Adapting the Law to the Online Environment.The author presents a situation in which a man had filed a lawsuit against adefendant following a car accident (defendant owned the car).The lawyers for both sides negotiated a settlement in which the defendant agreed to pay the plaintiff (injured driver) $230,000.The terms of the settlement were sent back and forth via email.The plaintiff signed a notarized document accepting the deal and releasing the defendant of further liability.

Shortly after theexchange of emails, etc. the court issue a summary judgment in favor of the defendant and declaring defendant was not liable to the plaintiff.(Think about this!AFTER agreeing to pay a person $230,000 the insurer learns a court has ruled in its favor and that it is NOT liable to the man!)As you can understand, the insurance company sought to set aside the agreement it had made with the claimant.Everyone went tocourt (again) and it was determined by a judge that the settlement worked out via email was legally binding on the defendant insurance company.

Why would the insurance company have believed the agreement worked out via emailwas not legally binding?Again - do not get into the fact a judge had determined the insurance company was not liable - the question deals with the insurer claiming theback and forth emails were not legally binding.It is the form of the agreement thatthe insurance company was alleging was not binding on it.

14.In that same boxed material / section the author refers to a case involving a company that provided referrals for customers and charged based on the number of referrals (more referrals, pay more money).In that case executives of both the advertising company and the customer sent text messages back and forth.Those texts altered the terms of the original contract the parties had.When thecustomer agreed to pay for unlimited referrals, did the court rule the texts were sufficient to change the terms of the dealwhen the advertisingfirm sued forover $1 million?!Explain.

Part6 -ActionsSpeak Louder Than Words

15.On Page 269 of the text (Section 11-lc)is a case involving a woman whooffered to purchase a house from a nonprofit organization for $79,900.The executive director of the nonprofitorganization made some changes to the woman's offer, initialed the changes he made on her offer and then signed the "acceptance" to her offer.The woman (offeror) did initial the date change (for closing) but did not initialthe other changes made to her offer and she did not sign the revised document.

Later the buyer attempted to get out of the contract.The seller (organization) claimed she had accepted the terms of the revised offer by her conduct.The buyer alleged the terms of the written agreement should govern the situation andshe had not approved ofthe allegedchanges in writing.She claimed the organization had revoked (turned down) her offer by writing a new price on the offer, etc.

How did the court rule in this case and why?Explain.