Uncle and Aunts Transfer of Ownership

Uncle and Aunts transfer of ownership

Leslie Guo's Uncle and Aunt wanted to sell their electronic store to her. They wanted to keep it in the family and offered her a discount from $400,000 to $300,000. However, Guo insisted she pay the full price. She could not get a loan of $400,000 therefore she borrowed $200,000 and agreed to pay $150,000 and remaining $250,000 would come from her profits each year until it was cleared.

If there were to be a situation where Guo and her Uncle and Aunt disagree or Guo become insolvent to pay back her uncle and aunt, how much would Guo be affected?

In this situation, when dealing with family, we should question whether undue influence was involved. However, this does not seem to be the case because Guo did not use her dominance to make her uncle and aunt, sell their business. Whether if Guo was dominated into buying the business is unclear, she wanted to go into the finance sector but said she came upon an unexpected chance to do something different. More importantly, the contract seemed to be fair. Guo's Uncle and Aunt offered to sell it at a much lower price but agreed upon selling it at full price, which was reliably valued. Thus, the situation doesn't seem to be undue influence.

An important question we should ask about the agreement is, was there a contract written between Guo and her uncle and aunt? A contract that requires something to be done more than one year after the contract is made must be in written form. If the contract is not in written form, the contract still exists but neither party can sue the other for breach. So if Guo becomes insolvent and cannot pay her uncle and aunt, then they cannot sue Guo for breach. However, two requirements must be made in order for the contract to be considered 'performed over more than one year'.

1) Contract requires one party to do something more than one year after date contract is made

2) Contract requires or allows other party to do something more than one year after date contact made.

If contract requires that at least one party fully perform its obligations within one year after contract made, then statute of fraud does not apply.

In this case, Guo is to give out profits to her Uncle and Aunt each year until the balance of $250,000 was cleared. Which meets the first requirement. Whether her uncle and aunt gave full ownership in the beginning or gave her gradual ownership as she cleared the balance is unknown. If they gave her full ownership in the beginning, it does not have to be in written form. If they were giving her gradual ownership as she cleared the balance, then the second requirement would be met and the contract must be in written form in order to be useful in a lawsuit.

John Pierce Renovator

Leslie Guo hired John Pierce, a local contactor, to renovate the interior of the store. Pierce does not have any experience with renovating retail stores. The cost for the project was to be about $40,000 but he wasn't sure about the cost of the display cabinet. He gave her an ultimatum to either cover the cost overrun on the cabinet or shop for them herself. She offered him $5000 extra to find the best price available and John agreed. However, he found that he would need $10,000 for good quality cabinets or he would have to use low quality. Even though Leslie was annoyed by John's promise to find the best available price, she agreed to pay $10,000.

There are two things that are in question. One is whether or not Pierce kept his promise to find the best available price out in the market or did he rush into quoting the first few cabinets he found. If Pierce is to be proven that he did not do his best looking for the best available price (Compare with other renovators or actually find cheaper cabinet with same quality) then he breached his contract (Fundamental). Possible remedy could be for Guo to sue for damages after Pierce's performance is completed. The damages would likely be the price difference between the cheaper cabinet and the cabinet used with the same quality.

The next issue comes with interpretation of the contract. The express term of the contract was: with $5000 extra, he will find the best cabinet under that price range. The implied term was: with $5000 extra, Pierce will find the best priced cabinet relative to quality, whether it was over or under $5000. Adequacy of consideration requires each party to give something but does not have to be in equal value. In this case, Guo probably believed that since they already agreed to $5000, Pierce must use the best possible cabinets he can find. However, due to interpretation differences the judge would look at both sides of the interpretation and use quantum meruit. If in fact, $10,000 was a reasonable price to charge for the cabinets used in the retail store, then Guo should pay the full $10,000.

Leather Laptop Bags

A local designer approached Guo with a leather laptop bag to sell in her store. Guo offered to sell the bag on consignment and offered the designer 60% of the sales generated. In return, she will promote her product and make her look good. The sign read, "carry your computer safely and look great doing it!" However, a customer came in one day threatening to sue the designer and the retail store for the damages done after she dropped the laptop bag. She has since taken down the sign and warned all the customers who bought the bag. The designer is now suing the store for ruining her reputation after a promise to make her look good.

One thing for certain is that Guo is guilty of misrepresentation. On her sign it said, "Carry your computer SAFELY while looking great!" which is false because the plaintiff (student who broker her laptop) claimed that the bag did not have any padding to keep the laptop safe. Whether she knew it was faulty or not determines whether if she was fraudulent, negligent or innocent. There are 5 requirements for fraudulent misrepresentations:

(i) Misrepresentation of fact- the misrepresentation was given as a fact in the sign claiming that it provides safety for the laptop.

(ii) Was the misrepresentation false? The statement "safely" was proven to be false by the plaintiff.

(iii) Knowledge of falseness- whether or not Guo knew whether the product was faulty is unknown.

(iv) Intend reliance by victim? It does not seem that Guo intended to cause harm to the plaintiff

(v) Victim relies and suffers harm as a result- due to