Northern Virginia Personal Injury Lawyer Blog : Northern Virginia Injury Lawyer & Attorney : Brien Roche Law Firm : Medical Malpractice, Product Liability, Car Accidents : Washington DC, North Virginia, Maryland

As mentioned, the typical contract involves an offer being made, the offer then being accepted by another party, and the exchange of some consideration. There are, however, other theories or means by which a contract may come into existence.

Sometimes a person who is not technically a party to a contract may have rights under the contract if he or she is a third-party beneficiary. In order for that beneficiary to enforce the contract with the other parties to the transaction, that beneficiary typically must have been intended by the other parties to benefit from the contract. A typical third party beneficiary arrangement would be a party who was injured by another person and who then sues that responsible party and makes a claim against their liability insurance policy. The injured person is an intended beneficiary of that responsible party’s policy and may sue to enforce payment under the policy.

In some instances, a quasi-contract may be recognized. A quasicontract is a contract implied even though there is no express promise to do anything. In order for a quasi-contract to be recognized, there must have been some benefit conveyed by one party to another. The purpose of recognizing quasi-contracts is to prevent the party receiving the benefit from being unjustly enriched.

In addition, the concept known as promissory estoppel may be recognized to enforce certain obligations. If certain promises are made and the other person reasonably relies on them and suffers some loss as a result, then under certain circumstances, that person may sue to enforce the promise made, even if no actual contract was formed.
 

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In determining whether one party has failed to comply with the terms of the contract to the point in which damages should be awarded, the court will ask whether the breach of the contract is material. A material breach of contract is one that goes to the very heart of the agreement. In the house painting example, the failure to pay the one hundred dollars obviously goes to the very heart of the agreement and that failure to pay clearly would be a material breach of contract. If, on the other hand, the painter was one day late in completing the job then, typically, that one day delay would not be a material breach of contract unless the contract contained a time is of the essence clause. If such a clause was in the contract, then that means that the parties have expressly agreed that every minute counts. If the party that is required to perform does not perform on time, then that will be considered a material breach that may bar any right to payment that the parties may have.

A material breach of contract goes to the very heart of the agreement.
 

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Contracts are the foundation of our commercial system. A contract is an agreement. If the agreement is violated then the person who is in violation is liable for the damages called for under the contract. If Joe agrees to paint your house for a hundred dollars by a certain date, and after completing the job satisfactorily you refuse to pay Joe, then you are in breach of the contract and he can sue you for one hundred dollars. If Joe has to hire an attorney to file that lawsuit, then he may be able to recover his attorney’s fees provided that the contract allows for that.

The general rule of law in the United States is that each party has to pay its own attorney fees regardless of who prevails. There has been a movement over the last several years to require that in civil litigation the losing party pay the attorney’s fees of the winning party. This is the law in some countries. But the United States has never adopted that rule because it has been felt that such a rule would deter worthy litigants from bringing claims that are justifiable if they thought that there was any chance of their losing and thereby having to pay the attorney’s fees of the
opposing party.

Referring back to the house painting example, if Joe knew that you were going to hire the most expensive lawyer in town and knew that those attorney fees could be thousands of dollars, that certainly would be a significant deterrent for him to file suit. If he lost, he would have to pay more than what his own claim was for. In the American system of justice, a party should not be deterred from bringing a suit for fear that he or she may have to pay the legal fees of the other side if he or she loses.

The philosophy within the American judicial system is that the courts are accessible to any party who feels as though he or she has been wronged by some other person. In earlier times, when one person wronged another there might be a duel in the street to resolve that dispute. Our civilization has evolved to the point where we wish to deter those types of confrontations and encourage parties to resolve their disputes in a civil fashion in front of a judge or jury instead. As such, the American Rule does not allow for the recovery of attorney’s fee unless stipulated in a written agreement. This is generally considered to be the more democratic rule in that the threat of attorney’s fees being awarded should not be a deterrent to a potentially worthy litigant bringing a law suit.
 

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Once a contract has been entered into, the parties are obviously interested in the performance of the contract. It is not unusual, however, that there are certain conditions imposed on one or both parties before performance is necessary. For example, in your typical homeowners insurance contract, a condition that you must satisfy before your insurance company is obliged to make any payments to you is to provide a sworn proof of loss statement itemizing the damage that you are claiming. The insurance company also has the right to examine you under oath as to that claim. Once those conditions have been satisfied, the insurance company has an obligation to pay you for the damages incurred that are covered by your policy.

Sometimes those conditions within the contract may be the subject of what is referred to as waiver or estoppel. A condition may be waived if the insurance company informs you that you do not have to comply with that condition. A waiver is a relinquishment of a known right. If the insurance company has a right to require that you file a written proof of loss and they expressly waive that or tell you that you do not have to file a written proof of loss, then that constitutes a waiver of that condition.

In some instances, a party may be estopped from requesting that the conditions be satisfied. For instance, again referring to the insurance claim, if the insurance adjuster handling the matter told you that he would complete the proof of loss form and then submit it to you for your signature within the time allowed by the contract and you relied upon that representation, then the insurance carrier may be estopped from denying coverage to you for failing to have filed the proof of loss form within the time allowed.

An estoppel arises when a party makes a representation and the other party relies upon that representation to his or her detriment. In the example, the insurance adjuster represented that he would complete the proof of loss form. You relied upon that, and as a result of that adjuster’s failure to do what he said he would do, your proof of loss form was not submitted in a timely fashion. In that circumstance, the insurance company would be estopped from denying your claim for failing to comply with the condition.
 

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Terms within the contract that are not expressly defined are typically given their dictionary definition by any court that may be called upon to interpret the contract. A rule of evidence that is important in regard to contract interpretation is the parol evidence rule. It declares that statements made by the parties prior to the signing of the contract will not be considered by a court in a contract dispute. The rule is well recognized and may be further strengthened by language within the contract itself that expressly says that the parties are only bound by the terms of the contract as set forth in the four corners of the document. The logic behind the parol evidence rule is that parties should not rely on precontract statements to define the intent of their agreement when, in fact, they have gone to the pains of putting their agreement in writing with the understanding that the writing constitutes the entire agreement.

The parol evidence rule may seem to be somewhat inconsistent with the example of how a party was fraudulently induced to enter into a contract for the sale of a home. The parol evidence rule, however, should not be confused with that instance of fraud. Fraudulent statements that are made to induce a party to enter into a contract are not deemed to be governed by the parol evidence rule. Fraudulent statements may be a basis for setting aside the contract because those fraudulent statements undermine the integrity and fairness of the agreement.

The meaning of a contract may also be garnered from looking at the prior course of dealing between the parties to this contract. That is, their prior course of dealing may give some clue as to what they intended the contract to mean.

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There are several other defenses that can conceivably be asserted to a claim to enforce a contract. For instance, if one of the parties was a minor or suffering from mental incompetency at the time, then those facts may be defenses to the validity of the contract. This defense is called lack of capacity to contract. Likewise, if there was a mutual mistake by the parties, then that could void a contract on the theory that there has been no meeting of the minds and therefore no agreement.

Example: A mutual mistake might arise in a circumstance in which the seller offers to sell his 1964 Cadillac that is parked in front of his home and the purchaser agrees to buy the 1964 Cadillac parked in front of the home. However, it turns out that there were in fact two 1964 Cadillacs parked in front of this home and the parties were referring to different vehicles when they entered into what they thought was their agreement. In that type of circumstance, there has been no meeting of the minds because the parties were mutually mistaken as to which vehicle was being sold.

It is not unheard of that in the course of defending a contract claim, the defendant may claim that he or she was induced to enter into the contract due to fraud on the part of the other party. Fraud can be loosely defined as a misrepresentation of a material fact.

Example: You want to buy a house. You ask the sellers whether they have ever had a wet basement. The sellers tell you that they have never had a wet basement even though they know full well that it is untrue. That misrepresentation may constitute fraud.

If you then proceed to buy the house, based upon the false representation and find out after the sale that in fact the basement does leak, then you may sue the sellers for the fraud. To make your claim, you must have been induced to enter into the contract and to have suffered certain damages. In this case, you bought a house that was faulty and therefore, worth less than what you paid.

Other conceivable defenses to a contract claim could come in the formof duress, undue influence, impossibility, and frustration. Duress is simply a threat or perceived threat to induce a party to enter into a contract. If someone puts a gun to your head and makes you sign a contract, that contract is not enforceable because you were operating under duress. Duress may also come in a number of other forms that may be considerably more subtle.

Undue influence arises when certain persons may have a great deal of control over a party and utilize that control in order to unduly influence a person to enter into a contract.

Example: Betty holds a power of attorney for her next door neighbor who is 94. The power of attorney authorizes Betty to conduct all of the financial affairs for her neighbor. If Betty encourages her next door neighbor to sign a contract selling his home for $100,000 under market value, that would be an example of undue influence. It would be a basis for setting aside that contract of sale.

Impossibility arises where it truly becomes impossible to perform a contract due to something that is unforeseen by the parties. For instance, the destruction of the World Trade Center made the performance of the leases for that building impossible. A related concept is that of frustration of purpose. For instance, during the inauguration of a new president, there may be certain contracts entered into. If the inauguration, however, is canceled, then the purpose of those contracts has been frustrated. If you were one of the suppliers who agreed to provide the grandstands for the inauguration, the U. S. Government may be able to void the contract with you since the inauguration is not going forward.

Most contracts can and should be brief and straightforward.

If you have ever read a multi-page contract drafted by an attorney, you probably found it to be a nightmarish experience. Although complicated business transactions call for contracts that are precise and complex, most contracts can and should be brief and straightforward. To the extent that there is any ambiguity in a contract, typically that ambiguity is interpreted against the party that drafted the contract.
 

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Contracts may either be in writing or oral. Whether the contract is oral or in writing, it is equally valid, although there may be problems enforcing certain types of contracts that are not in writing. Most states have adopted, in some form or another, a law know as the Statute of Frauds. The Statute of Frauds is a law that is designed to minimize the possibility of fraudulent behavior in certain types of transactions. For instance, a person buying or selling land cannot enforce a contract of sale for land unless that contract is in writing. The logic behind that requirement is that over the years, there has been so much litigation relating to oral contracts for the sale of land and allegations of fraudulent behavior that those types of contracts must be in writing and be signed by the person against whom the agreement is being enforced. That type of requirement is designed to minimize the likelihood of there being any fraud perpetrated against the buyer. If the seller signs the agreement and agrees to sell the land for a certain price and all of that is confirmed in writing, then the chance of that transaction being fraudulent is considerably reduced.

The Statute of Frauds is designed to minimize the possibility of fraudulent behavior.

Other types of transactions that typically need to be in writing to be enforcable are transactions that involve pledging the credit of another for a transaction, agreements to marry, agreements to pay real estate brokerage commissions, agreements that cannot be performed within one year, and agreements to lend money or extend credit for a significant amount, such as $25,000 or more. All of those types of transactions are ones that over the years have been found to be the subject of frequent litigation with allegations being made of fraud. Because of that, many states have found it best to require those types of transactions be put in writing and signed by the party against whom enforcement of the contract is being sought.
 

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Contracts are the foundation upon which our economic system is built. They are of such importance that a body of law has developed known as the Uniform Commercial Code. This uniform law has been adopted by most states in the Union—either in whole or in part—and lays out certain principles dealing with commercial transactions (contracts). The Uniform Commercial Code, in large measure, governs the conduct between merchants and other parties dealing with merchants.

The Uniform Commercial Code establishes legal principles that control many business transactions. For instance, when you buy a piece of exercise equipment from a sporting goods store, your legal right to return that equipment, to get replacement parts, or to file suit for a problem related to the equipment are all governed both by the warranty that comes with the product and also by the Uniform Commercial Code.

The Uniform Commercial Code also governs transactions involving security instruments and negotiable instruments. A security instrument is a document (typically filed at a courthouse or other public repository) that is designed to put the public on notice that a particular item of personal property, which may be found at a particular location, is security for a debt of the owner of that property to another person.

A security instrument in that regard is similar to a mortgage on your home. A mortgage is a type of security instrument that is designed to secure the mortgage lender in the event you do not make your monthly mortgage payments. If you fail to make your monthly mortgage payments, then the lender has the right to foreclose and to sell your property at public auction.

The Uniform Commercial Code also deals with negotiable instruments. A negotiable instrument is any instrument that may be negotiated or sold for value. For instance, a promissory note wherein one person promises to pay another a fixed amount of money is a negotiable instrument. Likewise, a check is a negotiable instrument. The Uniform Commercial Code deals with the law governing those types of instruments.
 

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Most people have probably had the experience of attending an auction. The conduct of an auctioneer is similar to negotiating a contract. The auctioneer is putting a product on the market for sale and by announcing certain figures, he or she is requesting offers to purchase the item for that price. If you raise your hand and offer the number that the auctioneer has mentioned, then that is deemed to be an offer for the consideration as stated by the auctioneer. When the auctioneer drops the gavel on the highest offer, that is deemed to be an acceptance of that last offer. As part of any auction, there may also be certain published conditions that are made part of the auction. If that is so, then by bidding at the auction, you have agreed to those terms.

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Consideration is a very elusive, but important concept. An easy way to think of it is as the tit for tat, the quid pro quo or, to put it another way, it is simply the meat of the agreement. If there is no consideration, then there is no contract. Going back to the example of the house painting, if Joe wrote you a letter offering to paint your house, but never stated when he would finish it or what compensation he expected and you simply wrote back saying that those terms were agreeable, that would probably not be a contract because there is no consideration stated.

Typically the performance of a preexisting legal duty cannot serve as consideration for a contract. For instance, if you are already under a duty to perform a certain act and you then promise to do it as the consideration for a contract, that consideration is insufficient.

Forbearance to do a certain act may serve as consideration.

Example: If Connie agrees not to sue you for payment of $100, then that is sufficient consideration to make a contract enforceable. That forbearance serves as a legal detriment and therefore is sufficient consideration.
 

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The way that an agreement comes about is generally through an offer being made by one party and then that offer being accepted by the other party.

Example: If Joe were to send you a letter offering to paint your house for one hundred dollars with such work to be accomplished by a certain date and you then wrote on the bottom of the letter that these terms were agreeable and sent that back to Joe, that letter would constitute a written contract. The offer was in the form of the letter. The acceptance came in the form of your acknowledging the agreement. The consideration for the agreement is the one hundred dollars to be paid for the services rendered.

The offer may come in two different forms—written or oral form. The more precise the terms of the offer, the better off the parties will be in establishing the certainty of their agreement. A common example of an offer is an advertisement that may appear in the newspaper by a car dealer offering to sell a used Toyota Camry for $17,500.

Suppose you were to see that advertisement and go to the dealership prepared to pay $17,500. If the dealer then told you that there were other terms that were not stated in the advertisement (handling charges, processing fees and other such fees), you could rightfully tell the dealer that it made an offer to sell this vehicle for $17,500 and you are prepared to pay it. The dealer is obliged to sell the vehicle to you for that amount. (Of course on top of that $17,500 would be any taxes that are mandated by law.) The advertisement constituted an offer and you accepted the offer for the agreed upon consideration of $17,500.

If, on the other hand, you had come into the dealership and rather than offering $17,500, you offered to pay $17,000 for the vehicle, then that would be a counter offer. A counter offer is, by its very terms, a rejection of the original offer. The dealership would be free to reject your counter offer.

There are several different ways that an offer may be framed. The person making the offer may state certain terms and conditions that have to be met in order for the offer to be accepted. If those terms and conditions are not met, then there cannot be a valid acceptance of the offer.
 

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Life is about agreements. The materials in this section explore these agreements.

Agreements you make with others are often called contracts, but there are several variations on this. You have employment contracts and marital contracts; your lease is a contract, as are arrangements with creditors.

The first two chapters of this section cover the laws of contracts and torts. This serves as an introduction to the remaining chapters that cover specific areas in which the principles of contract law and tort law are applied.

A contract is an agreement between two persons to either do something or not to do something in exchange for some form of consideration. An agreement may come in several different forms. The agreement may be implied as a result of the conduct of the parties. On the other hand, the agreement may be expressed, meaning that the parties have expressly stated what their intentions are and what they wish to obtain as a result of the agreement. An expressed contract may be in writing or it may be oral. Either type of contract is equally enforceable in most instances, although a written contract is always preferable because it clearly sets forth the terms of the agreement. An oral contract is always subject to dispute, because the parties may have different recollections of exactly what they agreed to.

A contract may be in writing or it may be oral.

Sometimes people classify contracts as unilateral or bilateral. A unilateral contract might be most easily thought of as one in which the offer can be accepted only by doing some act. For instance, if your neighbor offers a $100 reward for the return of his cat, then you can accept that offer only by returning the cat.

A bilateral contract, on the other hand, is one where the giving of a promise is the expected consideration. Most contracts are bilateral. For example, you agree to buy my car for $100. You have agreed to do something (pay me $100) and I have agreed to do something (sell you my car).

 

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A federal court may have subject matter jurisdiction, but no personal jurisdiction over the defendant.

Lawyers frequently argue over the respective merits of bringing a civil claim in state court versus federal court. Some lawyers maintain that it is always to the advantage of the plaintiff to litigate a claim in federal court for the following reasons.

* The Federal Rules of Evidence typically are a bit more lenient, and therefore more favorable to a plaintiff than are the state rules of evidence.

* The federal courtrooms are much grander and larger than the typical state courtrooms, and therefore juries are likely to be more impressed with a case brought in federal court and more likely to return a verdict favorable to the plaintiff.

* Federal judges are sometimes considered higher caliber than state court judges.

Those reasons are very subjective and there are probably as many lawyers across the nation who feel that it is better for a plaintiff to file suit in state court than it is in federal court. In any event, since the plaintiff initiates the lawsuit, the plaintiff has the opportunity, to some extent, to choose the forum. Even though a suit may be initiated in state court, if the federal subject matter jurisdiction requirements have been met, then the defendant may remove that case from state court to federal court.

Once a case has been initiated in federal court, the process that is followed is much the same as what has been described previously in the state court system. The particular procedural rules that are followed in federal court may differ from what are followed in state court, but the basic procedure is much the same once the lawsuit has been initiated.

When hearing a diversity case, a federal court is, in essence, sitting as if it were a state court. The federal judge who is called upon to make rulings of law has to apply the pertinent state law that governs that transaction. If a citizen of Connecticut sues a citizen from Massachusetts in a federal court in Massachusetts for an automobile accident that occurred in the state of Connecticut, then the federal judge in Massachusetts is going to apply Connecticut law to that claim. Massachusetts law on the particular issues in questions may be markedly different than Connecticut law.

A federal judge, however, who hears a federal question case typically is going to apply federal law, since the claim itself arose under federal law.

Even though a federal judge may be called upon to apply state law in a diversity claim, he or she is still bound by the Federal Rules of Procedure, which govern the civil procedure in that court system. He or she is also bound by the Federal Rules of Evidence, which are the rules that govern the admissibility of evidence in the federal court system. As such, a federal judge, when sitting in a diversity claim, is called upon to apply a number of different types of law—both state law and federal law—to different aspects of the case.

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