Questions & Problems

1. Explain why the first question a person should ask when getting ready to analyze a contract problem is, "Is this alleged contract a contract for the sale of a good?"

2. What is the difference between an offer for a unilateral contract and an offer for a bilateral contract? Why might that difference be important to understand?

3. What must a party prove to recover under the theory of quasi-contract?

4. What is the mirror image rule?

5. What is the mailbox rule?

6. R. J. Reynolds Tobacco Company (RJR) operated a customer rewards program, called Camel Cash, from 1991 to 2007. Under the terms of the program, RJR urged consumers to purchase Camel cigarettes, to save Camel Cash certificates included in packages of Camel cigarettes, to enroll in the program, and, ultimately, to redeem their certificates for merchandise featured in catalogs distributed by RJR. The plaintiffs were 10 individuals who joined the Camel Cash program by purchasing RJR's products and filling out and submitting signed registra-tion forms to RJR. RJR sent each plaintiff a unique enrollment number that was used in communications between the parties. These communications included catalogs RJR distributed to the plaintiffs, containing merchandise that could be obtained by redeeming Camel Cash certificates. From time to time, RJR issued a new catalog of merchandise offered in exchange for Camel Cash, which it either sent on request or mailed to consumers enrolled in the program. The number of Camel Cash certificates needed to obtain merchandise varied from as few as 100 to many thousands, and this encouraged consumers to buy more packages of Camel cigarettes and to save Camel Cash certificates to redeem for more valuable items. RJR honored the program from 1991 to 2006, and, during that time, Camel's share of the cigarette market nearly doubled, from approximately 4 percent to more than 7 percent. In October 2006, however, RJR mailed a notice to program members announcing that the program would terminate on March 31, 2007. The termination notice stated: "As a loyal Camel smoker, we wanted to tell you our Camel Cash program is expiring. C-Notes will no longer be included on packs, which means whatever Camel Cash you have is among the last of its kind. Now this isn't happening overnight-there will be plenty of time to redeem your C-Notes before the program ends. In fact, you'll have from OCTOBER '06 through MARCH 07 to go to camelsmokes.com to redeem your C-Notes. Supplies will be limited, so it won't hurt to get there before the rush."

Beginning in October 2006, however, RJR stopped printing and issuing catalogs and told consumers that it did not have any merchandise available for redemption. Several of the plaintiffs attempted, without success, to redeem C-Notes or obtain a catalog during the final six months of the program. The plaintiffs had saved hundreds or thousands of Camel Cash certificates that they were unable to redeem.

In November 2009, the plaintiffs filed a class action complaint against RJR. They alleged breach of contract and promissory estoppel, among other claims, because RJR's actions had made the plaintiffs' unredeemed certificates worthless. The defendant argued that it had no bilateral contract to breach because the plaintiffs had not promised to anything. The trial court agreed and dismissed the complaint. The plaintiffs appealed. How do you think the appellate court ruled, and why? [Sateriale v. R.J. Reynolds Tobacco Co., 697 F.3d 777, C.A.9 (Cal. 2012).]

7. An oral agreement was made between multiple parties to put together some money and open a bar and restaurant. The men first had to create joint company. However, one potential owner was not able to provide his share of the funding at the time of the company formation and was subsequently pushed out of the deal by the other owners; who formed the company without him. The man then sued the owners. In response, the defendants argued that the plaintiff had no documentation to support a cause of action. The court had to decide whether the plaintiff's complaint and statement of fact could support a breach-of-contract claim when no contract seemed to exist. Furthermore, the court considered the idea that a theory of quasi-contract could maintain a cause of action that could consist of the theft of ownership opportunity and/or breach of fiduciary duty. How do you think the court ultimately decided? [Don v. Broger, 2012 Slip Op 51934U.J?

8. NDWC Investment Properties owned six properties in DeKalb County, Georgia, which were secured by fully amortized 30-year loans. At some point before the trial, NDWC entered into negotiations with Branch Banking and Trust (BB&T) to refinance their loans. In the course of the negotiations, BB&T offered NDWC a lower interest rate on all six of the DeKalb County properties but only for a five-year term. NDWC expressed concerns about moving from 30-year fixed loans to a series of five-year loans. According to NDWC, BB&T assuaged NDWC's fears by assuring them that BB&T would continue to refinance the remaining balance on the loans in four successive five-year terms at the current market interest rate. NDWC made an agreement based on the oral representations by BB&T.

In December 2009, NDWC transferred the six DeKalb properties along with the loans to a newly created company named Corso Properties. BB&T approved the loan transfer but explained to Corso that the term would be for one year instead of five because Corso was a new company. Corso asserted that it had made an oral agreement with BB&T that BB&T would refinance the remaining balance in successive five-year terms if Corso satisfied certain conditions. In 2011. BB&T refused to renew the loans despite Corso's claims that it had met the required conditions.

Corso subsequently filed an action against BB&T, asserting claims of breach of Georgia's implied covenant of good faith and fair dealing when making contracts, fraud in the inducement, and fraud in the general. BB&T filed a motion to dismiss based on the plaintiff's failure to allege an independent breach of contract claim, as well as not pleading their fraud claims with enough details. The plaintiffs submitted an amended complaint which no longer contained the fraud in general claim but now included a breach of oral contract claim.

BB&T responded with a second motion to dismiss, asserting that the amended complaint failed to state a claim upon which relief could be granted. The plaintiffs did not respond to the defendant's second motion to dismiss and the defendant was dee unopposed. What arguments could the plaintiffs have made if they had responded to the defendant's second motion? Although the defendant won by being deemed unopposed, the court still reviewed the defendant's grounds for dismissal. How did the court rule on each of the three claims: Breach of Oral Contract, Breach of Duty of Good Faith and Fair Dealing, and Fraud in the Inducement? How do state laws affect this decision? Recall the WPH standards for Business Ethics. Although the court would have ruled in favor of BB&T by a matter of law, was the way BB&T acted ethical? [Corso Properties, LLC and WC Investment Property, Inc. v. Branch Banking And Trust Company, (2013 U.S. Dist. Lexis 137955).]

9. In April 2011, Elias Groisman entered into a contract with Shabsi Pfeifer to sell three real properties to Pfeifer on the condition that Pfeifer satisfied two liens on the properties against Groisman's name and upon payment of $55,000. The e-mail which contained the offer did not have an end date by which Pfeifer had to complete performance.

More than six months later, Groisman entered a contract of sale for the three properties with Maya Development, LLC. In December 2012, Pfeifer filed a complaint against Groisman and Maya Development, seeking specific performance of the contract for the sale of real properties.

The trial court dismissed the case, and Pfeifer appealed to the New York Appellate Division Supreme Court. Did Groisman and Pfeifer enter into a valid contract on April 2011? What kind of agreement did both parties have instead? Based on your answers to the previous answers, who won the court case? Why? [Shabsi Pfeifer v. Elias A. Groisman, et al., 997 N.Y.S.2d 706 (N.Y. App. Div. 2014).]

10. Dr. Griffith allowed his life insurance to lapse after May 15, 2007. According to US Life's life insurance policy, he was granted a 31-day grace period, after which he would be able to reinstate his insurance by paying the balance of the unpaid bill and receiving written approval from US Life of the required evidence of insurability. According to a reminder notice, Griffen had 60 days to make a full payment. On or around June 15, 2007, the insurance provider sent Griffith a lapse notice that included a reinstatement form and a self-addressed envelope, and required payment and the reinstatement form to be received by the policy provider within 30 days from the lapsed coverage. On July 23, 2007, Griffith electronically directed payment to American Medical Association Insurance Agency (AMAIA), which acted as a third-party administrator for US Life. AMAIA acted on US Life's behalf to bill and collect premiums. AMAIA received the check from Griffith on July 30, 2007. On July 28, 2007, Griffith was kneeling beside his bicycle at Bethany Beach, Delaware, when he was struck by a car that had drifted off the road when the driver fell asleep at the wheel. Do you think Griffith was insured at the time of his death? Why or why not? [US Life Insurance Company v. Wilson, 2011 Md. App. LEXIS 52.]

11. Adwoa Gyabaah was hit by a bus owned by Rivlab Transportation Company. She retained attorney Aronsky to represent her in negotiations with the bus company, their insurance company, and their attorneys for a contingency fee of one-third of her recovery. On October 1, 2010, defendant tendered Aronsky its $1 million policy limits for purposes of settlement. After Aronsky explained the settlement to her, Gyabaah said she accepted it and signed a general release on October 5, 2010. Aronsky said he would hold onto the release for her until she decided whether she wanted the settlement in one lump sum or paid over a period of time. On December 9, 2013, Gyabaah retained a new lawyer, Kenneth Wilhelm, and he advised Aronsky that Gyabaah did not wish to settle the case nor have the release sent over to the defendant. Aronsky filed a motion with the court seeking to enforce the $1 million settlement and setting his contingency fee at one-third of the recovery in accordance with the contingency agreement. The relevant issue in this case was whether there was a valid settlement agreement between the bus company and Gyabaah. Do you think the court found a valid agreement? Why or why not? [Gyabaah v. Rivlab Transp. Corp., 22 N.Y.3d 1018, 4 N.E.3d 359, 2013 N.Y. LEXIS 3446 (2013).]

The trial court dismissed the case, and Pfeifer driver fell asleep at the wheel. Do you think Griffith appealed to the New York Appellate Division was insured at the time of his death? Why or why Supreme Court. Did Groisman and Pfeifer enter into not? [US Life Insurance Company v. Wilson, 2011 a valid contract on April 2011? What kind of agree- Md. App. LEXIS 52.] ment did both parties have instead? Based on your answers to the previous answers, who won the court 11. Adwoa Gyabaah was hit by a bus owned by Rivlab case? Why? [Shabsi Pfeifer v. Elias A. Groisman, et Transportation Company. She retained attorney al., 997 N. Y.S.2d 706 (N.Y. App. Div. 2014).] Aronsky to represent her in negotiations with the bus company, their insurance company, and their 10. Dr. Griffith allowed his life insurance to lapse after attorneys for a contingency fee of one-third of her May 15, 2007. According to US Life's life insurance recovery. On October 1, 2010, defendant tendered policy, he was granted a 31-day grace period, after Aronsky its $1 million policy limits for purposes of which he would be able to reinstate his insurance by settlement. After Aronsky explained the settlement paying the balance of the unpaid bill and receiving to her, Gyabaah said she accepted it and signed a written approval from US Life of the required evi- general release on October 5, 2010. Aronsky said he dence of insurability. According to a reminder notice, would hold onto the release for her until she decided Griffen had 60 days to make a full payment. On or whether she wanted the settlement in one lump sum around June 15, 2007, the insurance provider sent or paid over a period of time. Griffith a lapse notice that included a reinstatement On December 9, 2013, Gyabaah retained a new form and a self-addressed envelope, and required lawyer, Kenneth Wilhelm, and he advised Aronsky payment and the reinstatement form to be received that Gyabaah did not wish to settle the case nor by the policy provider within 30 days from the lapsed have the release sent over to the defendant. Aronsky coverage. On July 23, 2007, Griffith electronically filed a motion with the court seeking to enforce the directed payment to American Medical Association $1 million settlement and setting his contingency fee Insurance Agency (AMAIA), which acted as a third- at one-third of the recovery in accordance with the party administrator for US Life. AMAIA acted on US contingency agreement. The relevant issue in this Life's behalf to bill and collect premiums. AMAIA case was whether there was a valid settlement agree- received the check from Griffith on July 30, 2007. ment between the bus company and Gyabaah. Do you On July 28, 2007, Griffith was kneeling beside his think the court found a valid agreement? Why or why bicycle at Bethany Beach, Delaware, when he was not? [Gyabaah v. Rivlab Transp. Corp., 22 N.Y.3d struck by a car that had drifted off the road when the 1018, 4 N.E.3d 359, 2013 N. Y. LEXIS 3446 (2013).]success, to redeem C-Notes or obtain a catalog dur- company named Corso Properties. BB&T approved ing the final six months of the program. The plaintiffs the loan transfer but explained to Corso that the term had saved hundreds or thousands of Camel Cash cer- would be for one year instead of five because Corso tificates that they were unable to redeem. was a new company. Corso asserted that it had made In November 2009, the plaintiffs filed a class action an oral agreement with BB&T that BB&T would refi- complaint against RJR. They alleged breach of con- nance the remaining balance in successive five-year tract and promissory estoppel, among other claims, terms if Corso satisfied certain conditions. In 2011, because RJR's actions had made the plaintiffs' unre- BB&T refused to renew the loans despite Corso's deemed certificates worthless. The defendant argued claims that it had met the required conditions. hat it had no bilateral contract to breach because the Corso subsequently filed an action against BB&T, plaintiffs had not promised to do anything. The trial asserting claims of breach of Georgia's implied cov- court agreed and dismissed the complaint. The plain- enant of good faith and fair dealing when making tiffs appealed. How do you think the appellate court contracts, fraud in the inducement, and fraud in the ruled, and why? [Sateriale v. R.J. Reynolds Tobacco general. BB&T filed a motion to dismiss based on Co., 697 F.3d 777, C.A.9 (Cal. 2012).] the plaintiff's failure to allege an independent breach 7. An oral agreement was made between multiple par- of contract claim, as well as not pleading their fraud ties to put together some money and open a bar and claims with enough details. The plaintiffs submitted restaurant. The men first had to create a joint com- an amended complaint which no longer contained the pany. However, one potential owner was not able to fraud in general claim but now included a breach of provide his share of the funding at the time of the oral contract claim. company formation and was subsequently pushed out BB&T responded with a second motion to dismiss, of the deal by the other owners; who formed the com- asserting that the amended complaint failed to state a pany without him. claim upon which relief could be granted. The plain- The man then sued the owners. In response, the defen- tiffs did not respond to the defendant's second motion dants argued that the plaintiff had no documentation to dismiss and the defendant was deemed unopposed. to support a cause of action. The court had to decide What arguments could the plaintiffs have made if whether the plaintiff's complaint and statement of they had responded to the defendant's second motion? fact could support a breach-of-contract claim when Although the defendant won by being deemed no contract seemed to exist. Furthermore, the court unopposed, the court still reviewed the defendant's considered the idea that a theory of quasi-contract grounds for dismissal. How did the court rule on could maintain a cause of action that could consist of each of the three claims: Breach of Oral Contract, the theft of ownership opportunity and/or breach of Breach of Duty of Good Faith and Fair Dealing, fiduciary duty. How do you think the court ultimately and Fraud in the Inducement? How do state laws decided? [Don v. Broger, 2012 Slip Op 51934U.] affect this decision? Recall the WPH standards for 8. NDWC Investment Properties owned six properties Business Ethics. Although the court would have ruled in Dekalb County, Georgia, which were secured in favor of BB&T by a matter of law, was the way by fully amortized 30-year loans. At some point BB&T acted ethical? [Corso Properties, LLC and before the trial, NDWC entered into negotiations WC Investment Property, Inc. v. Branch Banking And with Branch Banking and Trust (BB&T) to refinance Trust Company, (2013 U.S. Dist. Lexis 137955).] their loans. In the course of the negotiations, BB&T offered NDWC a lower interest rate on all six of the 9. In April 2011, Elias Groisman entered into a contract Dekalb County properties but only for a five-year with Shabsi Pfeifer to sell three real properties to term. NDWC expressed concerns about moving from Pfeifer on the condition that Pfeifer satisfied two liens 30-year fixed loans to a series of five-year loans. on the properties against Groisman's name and upon According to NDWC, BB&T assuaged NDWC's payment of $55,000. The e-mail which contained the fears by assuring them that BB&T would continue to offer did not have an end date by which Pfeifer had to refinance the remaining balance on the loans in four complete performance. successive five-year terms at the current market inter- More than six months later, Groisman entered a est rate. NDWC made an agreement based on the oral contract of sale for the three properties with Maya representations by BB&T. Development, LLC. In December 2012, Pfeifer filed a In December 2009, NDWC transferred the six DeKalb complaint against Groisman and Maya Development properties along with the loans to a newly created seeking specific performance of the contract for the sale of real properties.Questions & Problems 1. Explain why the first question a person should ask when getting ready to analyze a contract problem is, From time to time, RJR issued a new catalog of good?" 'Is this alleged contract a contract for the sale of a merchandise offered in exchange for Camel Cash, which it either sent on request or mailed to consumers 2. What is the difference between an offer for a uni- enrolled in the program. The number of Camel Cash certificates needed to obtain merchandise varied from lateral contract and an offer for a bilateral con- as few as 100 to many thousands, and this encouraged tract? Why might that difference be important to consumers to buy more packages of Camel cigarettes understand? and to save Camel Cash certificates to redeem for 3. What must a party prove to recover under the theory more valuable items. of quasi-contract? RJR honored the program from 1991 to 2006, and, 4. What is the mirror-image rule? during that time, Camel's share of the cigarette mar- 5. What is the mailbox rule? ket nearly doubled, from approximately 4 percent to more than 7 percent. In October 2006, however, RJR 6. R. J. Reynolds Tobacco Company (RJR) operated a mailed a notice to program members announcing that customer rewards program, called Camel Cash, from the program would terminate on March 31, 2007. The 1991 to 2007. Under the terms of the program, RJR termination notice stated: "As a loyal Camel smoker, urged consumers to purchase Camel cigarettes, to we wanted to tell you our Camel Cash program is save Camel Cash certificates included in packages of expiring. C-Notes will no longer be included on Camel cigarettes, to enroll in the program, and, ulti- packs, which means whatever Camel Cash you have mately, to redeem their certificates for merchandise is among the last of its kind. Now this isn't happen- featured in catalogs distributed by RJR. ing overnight-there will be plenty of time to redeem The plaintiffs were 10 individuals who joined the your C-Notes before the program ends. In fact, you'll Camel Cash program by purchasing RJR's prod- have from OCTOBER '06 through MARCH '07 to ucts and filling out and submitting signed registra- go to camelsmokes.com to redeem your C-Notes. tion forms to RJR. RJR sent each plaintiff a unique Supplies will be limited, so it won't hurt to get there enrollment number that was used in communications before the rush." between the parties. These communications included Beginning in October 2006, however, RJR stopped catalogs RJR distributed to the plaintiffs, containing printing and issuing catalogs and told consumers that merchandise that could be obtained by redeeming it did not have any merchandise available for redemp- Camel Cash certificates. tion. Several of the plaintiffs attempted, without