Contracts Commons^™

Changing The Beneficiary Of A Life Insurance Contract, Grover C. Grismore

Michigan Law Review

A cursory examination of the court reports will reveal that there is a constant stream of cases coming before our courts in which the principal questions at issue involve the disposition of the proceeds of matured life insurance policies. The question arises most often when the insured, having reserved the right to change the beneficiary, had manifested an intention that someone other than the beneficiary named in the policy should receive the proceeds, but had not complied with the formalities prescribed in his contract for effecting a change. Unfortunately, the answer to the question in the particular case has often …

Landlord And Tenant-Interpretation Of Clause In A Lease Providing For Termination In Event Of Destruction Of Premises, Alan C. Boyd

Michigan Law Review

The plaintiff leased property from the defendant for a term of years. The lease provided that the lessor should repair damage from fire and that "the tenancy shall not be terminated unless such repairs shall require more than ninety days." A fire occurred which damaged the property so badly that it could not be repaired within ninety days. The lessor took the position that the tenancy had automatically terminated with the occurrence of the fire. The lessee filed a bill for a declaratory judgment, claiming that under the terms of the lease he had the option either to terminate or …

Conflict Of Laws-Validity Of A Contract-Application Of Renvoi, R. Lawrence Storms S.Ed.

Michigan Law Review

Plaintiff (British actor, James Mason) and defendant signed an agreement in England contemplating the formation of an American company for producing motion pictures. Plaintiff was to give his exclusive services to the company, and defendant was to make all financial arrangements and generally to manage the company. A dispute arose as to the legal effect of the agreement. Plaintiff won a judgment that the agreement was not a valid contract because of its indefiniteness as to essential terms. On appeal, held, affirmed. Mason v. Rose, (2d Cir. 1949) 176 F. (2d) 486.

Courts-Validity Of Contracts Restricting Venue In Actions Under The Federal Employers' Liability Act, John C. Walker S. Ed.

Michigan Law Review

Petitioner suffered injuries in the course of his duties as an employee of respondent railroad. Subsequently, respondent advanced money to petitioner and the latter agreed in writing that if his claim could not be settled he would sue only in the county or district where he resided at the time of the injury, or in the county or district where the injury was sustained. This agreement restricted petitioner's choice of venue to either a state or federal court sitting in Michigan. Ignoring the contract, petitioner sued in an Illinois court. Respondent then brought suit in the Michigan courts to enjoin …

Regulation Of Business-Antitrust Law As Affected By Standard Oil Company Of California V. United States, William R. Worth S. Ed.

Michigan Law Review

In Standard Oil Company of California v. United States, the Supreme Court of the United States has given what appears to be a final and definitive answer to this question, although differing from what had formerly been thought to be the "final and definite answer." This comment will be centered on that case and its implications.

The Conflict Of Laws: A Comparative Study. Volume Three. Special Obligations: Modification And Discharge Of Obligations, Ernst Rabel

Michigan Legal Studies Series

Among the multitude of conflicts principles that, according to various claims, should determine the law applicable to all contracts, only two have resisted the test of critical analysis. These, indeed, form an adequate groundwork. First, the freedom of parties to choose the law applicable to their contract must be recognized as a general rule without petty restraint. Second, in the absence of such agreement, a contract should be governed by the law most closely connected with its characteristic feature.

The first proposition is essential to the second. To deny party autonomy means rigid conflicts rules created by some superior authority. …

Negotiable Instruments Under The Uniform Commercial Code, George E. Palmer

Michigan Law Review

The ambitious undertaking of the American Law Institute and the National Conference of Commissioners on Uniform State Laws to draft a "Uniform Commercial Code" includes a proposed revision of the Negotiable Instruments Law. This is not merely an attempt to patch up the present statute. It is virtually a complete rewriting. It includes many changes and additions in substance as well as a radical reorganization and rephrasing of language where no change in substance is designed. · It includes the much needed separation of the provisions relating to investment instruments such as corporate bonds from those relating to bills, checks, …

Partnerships-Limited-Failure To Comply With Statutes As Basis For Unlimited Liability, Fred W. Freeman S. Ed.

Michigan Law Review

The recent decision of the Eighth Circuit Court of Appeals in Kistler v. Gingles, that a limited partner under the Arkansas Limited Partnership Act fails to avoid unlimited liability if the terms of the statute are not complied with, illustrates the inherent danger of the limited partnership. This statute, which is typical of the limited partnership statutes antedating the Uniform Limited Partnership Act, provides, in part, for an affidavit by one of the general partners stating that the sums which each limited partner proposes to contribute to the enterprise have actually and in good faith been paid into the …

Contracts - Mutuality- Consideration In A "Requirements" Contract, Robert W. Shadd S. Ed.

Michigan Law Review

Plaintiff, a wholesale liquor distributor, and defendant entered into a contract under which plaintiff agreed to place orders with defendant from time to time for all such wines as it might require under labels bearing plaintiff's own brand or trade name. Defendant agreed to fill these orders for a period of sixteen months, as well as orders for other wines bottled under labels not the exclusive property of plaintiff. As to the latter types of wine, however, plaintiff was expressly left free to purchase from others. When defendant refused to complete orders pursuant to this agreement, plaintiff brought an action …

Contracts-Duration Of Indefinite Employment Contracts That Specify Period Of Pay, Paul E. Anderson S.Ed.

Michigan Law Review

Normally a contract which does not express a time for performance is treated as enforceable. The courts interpret it to require that performance be completed within a reasonable time, basing their conclusion on a presumption of the intention of the parties. However, in the area of employment contracts, an exception to the reasonable time rule has developed. An indefinite contract for services is generally held to be terminable at will. The questions that come to mind are two: What is" the basis for the unique treatment of employment contracts? What are the manifestations of intent that will defeat application of …

Insurance-Liability Of Insurer For Judgment In Excess Of Policy Limits, Clinton R. Ashford S.Ed.

Michigan Law Review

A liability insurer has issued a policy, reserving the sole right to effect a settlement, and refuses to settle, within the limits of the policy, a claim against the insured. A judgment in excess of the policy limit is then recovered against the insured. These circumstances present the question whether the insurer may be liable to the insured for the amount of the judgment in excess of the policy limit.

This comment will be limited to consideration of cases involving only the above facts, and no attempt will be made to consider the liability of the insurer for failing to …

Constitutional Law--Commerce Clause--Is Organized Baseball Interstate Commerce, Charles Hansen

Michigan Law Review

Plaintiff contracted to play baseball for defendant ball club. The agreement contained the usual "reserve" clause whereby the player agreed not to perform for a team other than defendant unless assigned or released. By terms of the contract, broad disciplinary power over the contracting parties was accorded the commissioner of baseball, and when plaintiff breached the reserve clause, an exercise of that power resulted in his being barred from Organized Baseball for a period of five years. Suit was brought against the organizations comprising Organized Baseball under the Sherman Act, for damages caused by the consequent deprivation of plaintiff's means …

Contracts - Municipal Corporations - Revocability Of Offer Submitted Under Statutory Competitive Bidding, Richard H. Conn

Michigan Law Review

In accordance with statutory provisions, the city commissioners of Atlantic City advertised for bids for certain public improvements. Plaintiff submitted a sealed bid accompanied by a deposit of $5,000, as required by the advertisement, to guarantee execution of the contract if it were the successful bidder. When the bids were opened, plaintiff was the lowest bidder by a considerable margin. Investigation disclosed that an appreciable error had been made in the calculation of its bid, however, and before any official action had been taken, plaintiff advised the city commission of the mistake and withdrew the bid. Nevertheless, the contract was …

Quasi-Contracts-Landlord And Tenant-Recovery For Overpayment Of Rent In Violation Of Statute, William P. Sutter

Michigan Law Review

Plaintiff occupied a dwelling house from 1928 to 1945, paying $35 per month rent until September, 1941. In that month, defendant, his landlord, increased the rent to $75, which plaintiff paid until September, 1945. The property was registered with the Office of Price Administration at a maximum rental of $35, and this fact was known to plaintiff. Plaintiff's suit to recover the overpayment of $40 per month was dismissed. On appeal, held, affirmed. No statute specifically authorized restitution, and the illegality of the contract precludes restitution in absence of statute. Jones v. Chennault, (Mich. 1948) 35 N.W. (2d) …

Coming Into Equity With Clean Hands, Zechariah Chafee, Jr.

Michigan Law Review

The most amusing maxim of equity is "He who comes into Equity must come with clean hands." It has given rise ,to many interesting cases and poor jokes. The maxim has been regarded as an especially significant manifestation of the ethical attitude of equity as contrasted with the common law. Pomeroy, for instance, argues that the principle involved in this maxim is "merely the expression of one of the elementary and fundamental conceptions of equity jurisprudence." Pomeroy's theory is that chancery has power to force a defendant to comply with the dictates of conscience as to matters outside the strict …

Insurance-Effect Of Incontestable Clause In Suit For Reformation Of Policy, N. S. Peterman S. Ed.

Michigan Law Review

For over twenty years, defendant insurer accepted premiums on a life insurance policy issued to plaintiff. Defendant then discovered that a clerical error had been made in the original policy, as a result of which plaintiff's premium payments were approximately one-half the premiums defendant normally received for the type of policy actually issued. Defendant asked for reformation of the policy on the ground of mistake, and the trial court granted the relief sought. On appeal, held, reversed. The action was barred by the incontestable clause. Richardson v. Travelers Insurance Co., (App. 9th, 1948) 171 F. (2d) 699.

Specific Performance-Marketable Title To Realty-Compelling Vendor To Purchase Outstanding Interest, Robert Dilts

Michigan Law Review

Plaintiffs sued for specific performance of a contract for the sale of real estate. Their attorney had concluded that the abstract furnished by defendant indicated a possible outstanding undivided one-half interest in the property. Refusing to accept a conveyance unless the alleged defect was eliminated or protection offered against an attack on the title, plaintiffs sought a decree requiring defendant to clear title and convey according to the contract. There was no showing that defendant could obtain a conveyance of the alleged outstanding interest. Held, specific performance denied. Bartos v. Czerwinski, 323 Mich. 87, 34 N.W. (2d) 566 …

Specific Performance-Scarcity As Justification For Specific Performance Of Contract For Purchase Of New Car, Richard H. Conn

Michigan Law Review

In two recent cases, prospective purchasers entered into written contracts with local automobile distributors for the purchase of new cars. Because of the scarcity of new cars, the prospective purchasers' names were put on waiting lists establishing a priority for delivery as new cars were received by the distributors. In both cases the distributors refused without excuse to perform when cars became available for delivery. The prospective purchasers sought specific performance on the basis that the current scarcity of new cars and the difficulty of obtaining them elsewhere for cash alone made the legal damage remedy inadequate. Held, (a) …

Quasi-Contracts -- Taxation -- Rescission Of Gift For Failure To Achieve Donor's Purpose Of Minimizing Federal Income Taxes, N. S. Peterman S. Ed.

Michigan Law Review

In 1937, plaintiff made a gift of stock in a closed corporation to his wife, the defendant. For two years defendant received cash dividends on the stock transferred to her and paid income taxes thereon. Late in 1938 the corporation was dissolved; the assets were distributed to the shareholders, and a partnership was formed. Defendant continued to report the income received by her from the partnership. In 1946, the Tax Court sustained the contention of the commissioner of internal revenue that the entire income from this partnership was taxable to plaintiff under the doctrine of Commissioner v. Tower. Plaintiff …

Contracts-Impossibility-Effect Of Crop Failure On Middleman's Contract, John C. Walker

Michigan Law Review

Defendant, a produce dealer, offered to sell to plaintiff a specified quantity of Texas "New Crop U.S. 1 blackeye peas." When the original offer was made on June 13, 1947, plaintiff asked how defendant could be sure the peas would be ''No. 1.'' Defendant replied that because the locality of Dilley, Texas, had been unusually dry, the pea crop would be sold as dry ''blackeyes;" defendant also stated that he had already made a contract to purchase 7,000 bags of these "blackeyes" from a certain canning company. On June 16 the contract for 800 bags of peas was consummated, delivery …

Contracts-Duty To Mitigate Damages Upon Anticipatory Breach Of Forward Contract Of Sale, William F. Snyder

Michigan Law Review

The theory of our law in regard to damages for breach of contract has been to give the innocent party as nearly as possible what he would have received had the contract been performed. To this end, our courts have worked out a rough formula which has been described by Professor Grismore as follows:

" ... The promisee is, in general, entitled to recover the economic equivalent of the performance promised, at the time and place fixed in the contract, plus any losses incurred or gains prevented through not receiving it, less any savings that have resulted to the promisee …

Contracts--Mutual Assent--Effect Of Insanity, Earl R. Boonstra

Michigan Law Review

Defendant listed a hotel with plaintiff, a broker, who procured a purchaser. Defendant refused to sell and pleaded insanity in defense to an action for a commission. The jury was charged to hold for defendant if it found defendant mentally incapable of entering into the contract. On appeal from a judgment for defendant, held, the instruction was erroneous. The unadjudicated insanity of one of the parties is not sufficient reason for setting a contract aside where the executed contract was made in good faith, for a fair consideration, and without notice of infirmity, and if the parties cannot be …

Landlord And Tenant-Lessee's Covenant To Pay Taxes-Liability Of Assignee Who Has Reassigned, L. K. Cooperrider S.Ed.

Michigan Law Review

A 100-year lease contained the following covenant, " . . . lessee further agrees that he will, as additional rent, pay . . . all taxes and assessments . . . which shall, during said term, be levied, assessed, or otherwise imposed. . . The lessee 'agrees that he will pay such taxes . . . before any fine . . . may be added thereto for non-payment thereof." Defendant, assignee of the lessee, had reassigned on December 16, 1936; Plaintiff, lessor, sought to recover from him unpaid taxes for the calendar year 1936. In Minnesota, property taxes are assessed …

Contracts - Impossibility - Effect Of Temporary Inability To Perform, E. C.V. Greenwood S.Ed.

Michigan Law Review

On August 16, 1940, plaintiff village and defendant corporation entered into a contract under which defendant agreed to build for plaintiff an electric plant and distribution system. This contract contained two provisions that became significant in the light of the litigation that ensued: (1) a not uncommon provision for extension of time beyond the 180 days allotted for performance, in case of delay caused by the fault of the plaintiff, or by the fault of neither party, and (2) a provision for postponement of the commencement of performance until after termination favorable to plaintiff of a pending suit for declaratory …

Recent Developments In Restitution: Rescission And Reformation For Mistake, Including Misrepresentation, Edward S. Thurston

Michigan Law Review

In accordance with underlying equitable principles, restitution is granted where a mistake has been made by one or both parties to a transaction or series of transactions because of which one of them has obtained an advantage which it would be unjust for him to retain.

There are two forms of relief, one based upon rescission, the other upon reformation. The first seeks the undoing of a transaction and the replacing of the parties into the positions, as nearly as may be, originally occupied. On the other hand, reformation seeks the performance of an agreement as the parties to it …

Quasi-Contracts-Taxation-Rescission Of Gifts Where Gift Fails To Achieve Donor's Purpose Of Minimizing Federal Income Taxes, Charles M. Soller S.Ed., Edwin F. Uhl S. Ed.

Michigan Law Review

A recent Michigan case, Stone v. Stone, presents problems of complexity and far-reaching importance. The plaintiffs, husband and wife, each owned a one-half interest in a family business partnership, and each apparently reported a proportionate share of the partnership earnings for federal income tax purposes. For the purpose of further reducing taxes on the income of the family unit, each parent transferred a one-quarter interest in the partnership to one of their two minor children, and thereafter each parent and child filed separate income tax returns reporting one-fourth of the partnership earnings as individual income. Each parent, under a …

Contracts-Broker's Listing Agreement-Effect Of Lease Of Property By Owner, C. E. Becraft

Michigan Law Review

Plaintiff, a broker, procured from defendant a listing agreement for the sale of defendant's property. Plaintiff produced a purchaser, ready, willing, and able to purchase the property, but defendant refused to convey inasmuch as he had leased the property after giving the listing agreement. The lessee refused to cancel the lease for less than $3,000. Plaintiff brought an action to recover his commission and defendant disclaimed liability as the execution of the lease was known to plaintiff and to the prospective purchaser before the offer to purchase was made. Held, defendant could not alter the plaintiff's rights by placing …

Contracts-Remedies For Misrepresentation-Measure Of Recovery, Richard J. Archer S.Ed.

Michigan Law Review

In a preceding comment in this series, the various remedies affording relief for misrepresentation were examined for the purpose of determining what remedies are available in case of an innocent misrepresentation. Discussion was directed toward actions for damages for deceit, actions at law and in equity for restitution, the recovery of damages for breach of warranty, and the action based on the enforcement of representations on a theory of estoppel. The purpose of the present comment is to re-examine these remedies to determine what relief can be obtained by each of them, assuming for this purpose that all of the …

Contracts--Specific Performance-Defense Of Hardship Caused By Defendant's Improvements After Giving Option To Purchase, Robert E. Anstaett

Michigan Law Review

In a lease of plaintiff's corner lot to defendant corporation in 1941, the latter granted plaintiff a five-year option to purchase adjacent lots owned by defendant for $35,000, which was then a fair price. In 1945 defendant's officers, overlooking the option agreement, authorized construction of a warehouse on the adjacent property. After defendant had expended about $20,000 in the construction, plaintiff exercised her option by giving notice to defendant. Upon defendant's refusal to convey, plaintiff sued for specific performance. The trial court dismissed the complaint. Held, reversed and remanded with instruction to decree specific performance upon condition that plaintiff …

Labor Law - "Channeling" The Duty To Bargain - Effect Of Violation Of "No-Strike" Clause In Existing Agreement, John F. Buchman S.Ed.

Michigan Law Review

Employer and union had an existing collective agreement which provided detailed procedures for adjusting grievances, including arbitration as the final step, and contained a no-strike clause. Disputes arose concerning action taken by the employer affecting working schedules, overtime work, and other conditions of employment without consulting the union; and disciplinary measures were taken against certain employees in pursuance of the new working rules. The union finally called a strike, without filing grievances according to the contract procedure on the disputes which were the immediate causes of the strike. The employer discontinued hearings on two pending grievances and refused to negotiate …