lOMoARcPSD| 38777299
NATIONAL ECONOMICS UNIVERSITY -------***-------
INTRODUCTION TO LAW AND BUSINESS TRANSACTIONS
BOOK: THE LEGAL ENVIRONMENT TODAY
CASE 10-7 (PAGE 285-286) TABLE OF CONTENTS I. Case
Brief.................................................................................................................3
II. Case Analysis..........................................................................................................4
1. Definition..............................................................................................................4
• Scenarios............................................................................................................4
• Exceptions..........................................................................................................4
Consideration.....................................................................................................4
• Elements of consideration..................................................................................4
2. About the contest..................................................................................................5
• Participants.........................................................................................................5
• Rule....................................................................................................................5
3. Formation of contract..........................................................................................6 lOMoARcPSD| 38777299
• Offer...................................................................................................................6
Acceptance.........................................................................................................7
• Consideration.....................................................................................................8
4. Enforceable contract formation..........................................................................9
5. Type of contract..................................................................................................10
6. Problems.............................................................................................................10
7. Case law..............................................................................................................12
8. Comparing with similar cases...........................................................................12
8.1. Steelhead Townhomes, L.L.C. v. Clearwater 2008 Note Program, LLC. 12
8.2. Bertelsen v. Channel Bio, LLC.................................................................13
III. Case conclusion & answers for question...........................................................13
IV. Law Application: Vietnam Civil Code...............................................................14
• Điều 119 Bộ luật Dân sự 2015 quy định về hình thức giao dịch dân sự...........14
• Điều 400 Bộ luật Dân sự 2015 quy định về thời điểm giao kết hợp đồng........14
• Khoản 3 Điều 404 Bộ luật Dân sự 2015 quy định về giải thích hợp đồng........15
V. References..............................................................................................................1 5 I. Case Brief
- Akansas – Missouri Forest Products, LLC (Ark-Mo), sells supplies to make
wood pallets. Mark Garnett is the owner of Ark-Mo
- Blue Chip Manufacturing (BCM) makes pallets. Stuart Lerner is the owner of BCM
- Mark Garnett and Stuart Lerner went to a business together. They agreed that
Ark-Mo would have a 30% ownership interest in their future projects - Lerner
formed Blue Chip Recycling, LLC (BCR), however, he allocated only 5% interest to Ark-Mo. Garnett objected
- In “Telephone Deal", Lerner promised Garnett that Ark-Mo would receive a 30%
interest in their future project in the Midwest => Garnett agreed to forgo an ownership interest in BCR. lOMoARcPSD| 38777299
- When Blue Chip III, LLC (BC III), was formed to operate a repair facility in the
Midwest, Lerner told Garnett that he “was not getting anything”.
Ark-Mo filed a suit in a Missouri state court against Lerner, alleging breach of contract. II. Case Analysis 1. Definition Scenarios
o Past consideration (No new obligation) o Gift o Promise is illusory
• Exceptions o Agreements signed by 1 party Option Contracts Assignments Promissory notes
UCC - Prior Consideration $500 • Consideration
Consideration in the form of something received or promised that convinced a party to
the contract to make the deal.
Consideration usually is defined as the value (such as cash) given in return for a promise
(in a bilateral contract) or return for performance (in a unilateral contract). As long as
consideration is present, the courts generally do not interfere with contracts based on
the amount of consideration paid. lOMoARcPSD| 38777299 Elements of consideration
o Legally Sufficient Value: To be legally sufficient, consideration must be
something of value in the eyes of the law. The “something of legally sufficient
value” may consist of the following duty to do.
1. A promise to do something that one has no prior legal
2. The performance of an action that one is otherwise not obligated toundertake.
3. The refraining from action that one has a legal right to undertake(called a forbearance)
Consideration in bilateral contracts normally consists of a promise in
return for a promise, as explained earlier. In a contract for the sale of
goods, for instance, the seller promises to ship specific goods to the
buyer, and the buyer promises to pay for those goods. Each of these
promises constitutes consideration for the contract.
o Bargained for exchange: The second element of consideration is that must
provide the basis for the bargain struck between the contracting parties. The
item of value must be given or promised by the promisor (offeror) in return
for the promisor's promise, performance, or promise of performance. 2. About the contest Participants
o Mark Garnett, an owner of Arkansas-Missouri Forest Products, LLC (Ark- Mo)
o Stuart Lerner, an owner of Blue Chip Manufacturing (BCM) lOMoARcPSD| 38777299 Rule
To make a submissible case for breach of contract, a plaintiff must establish: (1) a
mutual agreement between parties capable of contracting; (2) valid consideration; (3)
mutual obligations arising out of the agreement; (4) part performance by one party and
prevention of further performance by the other; and (5) damages resulting from the
breach of contract. Accordingly, Ark-Mo must present substantial evidence to support
each element. Because the last two elements—breach and damages—are not disputed,
our analysis will focus on the first three elements: Mutual Agreement between Parties;
Valid Consideration; Mutual Obligations.
Lerner asserts Ark–Mo did not make a submissible case for breach of contract because
there was no evidence of mutuality of agreement regarding the essential terms of the
Telephone Deal. Lerner argues the Telephone Deal between Lerner and Ark-Mo was
nothing more than “a promise to negotiate further deals in the ‘future.’ ” We disagree.
There was substantial evidence in the record to establish that the terms of the Telephone
Deal were capable of being made certain and that there was a meeting of minds between
the parties regarding Ark–Mo's ownership interests in future projects in the Midwest.
The terms of the Telephone Deal were that Ark–Mo would be entitled to a 30%
ownership interest in future projects in the Midwest and that, in return, ArkMo would
not pursue an ownership interest in BCR. These terms are sufficiently definite to enable
us to give them an exact meaning. There was evidence at trial from which the jury could
reasonably determine that the Telephone Deal was based upon the parties' long history
of pursuing business together.
3. Formation of contract Offer
Garnett and Lerner agreed that Ark-Mo would have a 30 percent ownership interest in
their future projects. When Lerner formed Blue Chip Recycling, LLC (BCR), to manage
a pallet repair facility in California, however, he allocated only a 5 percent interest to lOMoARcPSD| 38777299
Ark-Mo. Garnett objected. In “Telephone Deal", Lerner promised Garnett that Ark-Mo
would receive a 30 percent interest in their future project in the Midwest, and Garnett
agreed to forgo an ownership interest in BCR. But when Blue Chip III, LLC (BC III),
was formed to operate a repair facility in the Midwest, Lerner told Garnett that he “was
not getting anything”. Ark-Mo filed a suit in a Missouri state court against Lerner, alleging breach of contract.
The foregoing evidence was sufficient as a whole for the jury to determine that (1)
Lerner and Garnett first agreed that Ark–Mo would have a 30% ownership interest in
future CHEP projects, (2) they later changed their agreement to give Ark–Mo a 30%
ownership interest in future CHEP projects in the Midwest and Ark-Mo would not
pursue an ownership interest in BCR, and (3) the parties' actions from the formation of
BC II until BC III was formed were consistent with those agreements. A reasonably
prudent person would be led to believe from the actions and words of Lerner and Garnett
that the parties intended those agreements to exist between them. Accordingly, there is
substantial evidence, with probative force, upon the issue of whether there was a
meeting of minds between the parties, from which the jury could have reasonably decided the case.
The fact that some terms of an agreement were not capable of ascertainment at the time
the agreement was entered into, and these precise terms were to be determined by
mutual agreement in the future when they became ascertainable does not make the contract unenforceable. Acceptance
According to the terms of the Telephone Deal, Ark-Mo was obligated not to pursue any
ownership interest in BCR in consideration of Lerner's promise to allocate Ark– Mo a
30% ownership interest in future CHEP projects in the Midwest. In return, Lerner was
obligated to give Ark–Mo a 30% ownership interest in future CHEP projects the parties lOMoARcPSD| 38777299
would do together in the Midwest. Because both parties were held to an implied
requirement to act in good faith and make reasonable efforts, the possibility that there
might not be any more opportunities for CHEP projects does not render these mutual
obligations illusory. Therefore, we find Ark–Mo presented substantial evidence from
which a jury could reasonably find mutuality of obligation existed in the Telephone Deal Consideration
Substantial evidence and reasonable inferences exist from which a jury could find that
the Telephone Deal was supported by valid and sufficient consideration. According to
the Parking Lot Deal, Lerner and Garnett agreed to share profits and losses in their
future projects with CHEP by Ark-Mo having a 30% ownership interest in the projects.
Later, when Lerner allocated only a 5% interest in BCR to Ark-Mo, Garnett simply
could have accepted the 5% proposal, but he refrained from doing so. Instead, Garnett
asked Lerner whether Ark–Mo would then be entitled to a 30% interest in future CHEP
projects if they are in the Midwest. Lerner answered in the affirmative.
Thinking that would be the “best [he] could get at that point,” Garnett accepted Lerner's
answer and made no further demand regarding BCR. From the parties' exchange and
conduct afterward, it is reasonable to infer that Garnett, on behalf of Ark-Mo, forwent
its opportunity to have an ownership interest in BCR instead of having Lerner agree
that Ark–Mo is entitled to a 30% ownership interest in the future CHEP projects in the Midwest.
To do so was a detriment to Ark-Mo, as a promise, because Ark–Mo was not legally
bound to forego its opportunity to have a 5% ownership interest in BCR, which is worth
approximately $1 million. Garnett, on behalf of Ark-Mo, could have accepted Lerner's
5% proposal and still attempted to have Lerner agree to the terms of the Telephone
Deal. However, Garnett chose not to do so, and it is reasonable to infer that he made a
strategic choice for the “best [he] could get at that point.” In other words, Ark-Mo, lOMoARcPSD| 38777299
through Garnett, changed its position in reliance on Lerner's new promise. We find this
consideration a valid legal consideration that could sufficiently support a contract. See
Holt v. Jamieson, 847 S.W.2d 194, 197 (holding that the plaintiff's forbearance from
filing a mechanic's lien when he had a right to do so constituted a valid legal
consideration for a contract).
Viewing the foregoing evidence and the reasonable inferences drawn from there in the
light most favorable to the verdict, we find that Ark–Mo presented substantial evidence
from which a reasonable juror could find that valid legal consideration supported the Telephone Deal.
4. Enforceable contract formation
The Telephone Deal did not violate the parole evidence rule and was not barred by the
BC II Operating Agreement. Ark-Mo argues that the Telephone Deal was not an oral
amendment of the BC II Operating Agreement. Ark-Mo further argues that no provision
of the BC II Operating Agreement prohibited a separate agreement based on a personal
promise by Lerner. Ark-Mo argues that Lerner testified he controlled who would
receive interest in CHEP opportunities and created a direct obligation for himself through his promises.
Lerner asserts there was no evidence of legal consideration for the Telephone Deal.
Lerner argues that Garnett did not specifically testify that he agreed to “forego” an
ownership interest in BCR in exchange for a 30% ownership interest in future CHEP
projects in the Midwest. Lerner also argues that Ark–Mo had neither the existing
ownership interest nor the right to an ownership interest in BCR to forego. Lerner adds
that he received no right, interest, profit, or benefit under the Telephone Deal. lOMoARcPSD| 38777299
The Telephone Deal was supported by valid and sufficient consideration. Lerner and
Garnett agreed to share profits and losses in their future projects with CHEP by ArkMo
having a 30% ownership interest in the projects. Later, when Lerner allocated only a
5% interest in BCR to Ark-Mo, Garnett simply could have accepted the 5% proposal,
but he refrained from doing so. Instead, Garnett asked Lerner whether Ark– Mo would
then be entitled to a 30% interest in future CHEP projects if they are in the Midwest.
Lerner answered in the affirmative. Thinking that would be the “best [he] could get at
that point,” Garnett accepted Lerner's answer and made no further demand regarding
BCR. From the parties' exchange and conduct afterward, it is reasonable to infer that
Garnett, on behalf of Ark-Mo, forwent its opportunity to have an ownership interest in
BCR instead of having Lerner agree that Ark–Mo is entitled to a 30% ownership interest
in the future CHEP projects in the Midwest.
To do so was a detriment to Ark-Mo, as a promise, because Ark–Mo was not legally
bound to forego its opportunity to have a 5% ownership interest in BCR, which is worth
approximately $1 million. Garnett, on behalf of Ark-Mo, could have accepted Lerner's
5% proposal and still attempted to have Lerner agree to the terms of the Telephone Deal.
However, Garnett chose not to do so and it is reasonable to infer that he made a strategic
choice for the “best [he] could get at that point.” In other words, Ark-Mo, through
Garnett, changed its position in reliance on Lerner's new promise. We find this
consideration a valid legal consideration that could sufficiently support a contract the Telephone Deal. 5. Type of contract
Informal Contract: These contracts are what most use daily. An informal contract is an
agreement, orally or written, usually of a simple nature. Informal contracts, also known
as informal agreements, can be legally binding, but it is much harder to enforce these in court. lOMoARcPSD| 38777299 6. Problems
Ark-Mo argues the trial court erred in granting Lerner’s motion for JNOV because Ark-
Mo had made a submissible case for breach of contract by proving with substantial
evidence that Lerner orally agreed Ark-Mo would receive 30% ownership interests in
future projects together with CHÉP in the Midwest. In Point II, Ark-Mo argues the trial
court erred in granting Lerner’s motion for JNOV because there was sufficient evidence
of consideration to support the oral contract. We agree.
Lerner argues that the terms of the contract were not definite because the contract did
not specify the price that Ark–Mo was supposed to pay for its 30% ownership interest
in future CHEP projects. Lerner further argues that other essential terms were also
missing, such as what future CHEP projects would entail, whether Ark–Mo's 30%
interest would be voting or non-voting, where the term “Midwest” would encompass,
who else would be involved in future CHEP projects, what type of business structure
would be formed to operate future CHEP projects, what type of work would be
performed by the members of the businesses, how much any members of the businesses
would be paid for their salaries, and when and if distributions were to be made. We disagree.
With the standards in mind, the terms of the Telephone Deal, which Lerner characterizes
as fatally uncertain and indefinite, were made sufficiently certain and were supported
by evidence at trial. As the parties' words and acts expressed and manifested their
intention, the parties pursued CHEP business together with a particular framework of
ownership interests. When the parties entered into the Telephone Deal, however, the
price Ark–Mo would have to pay for its 30% ownership interest in a CHEP project was
not capable of ascertainment because the capital needs for a future CHEP in the
Midwest could not be identified at that time. lOMoARcPSD| 38777299
The fact that the Telephone Deal was without detailed terms, such as what a future
CHEP project would encompass, who would be involved in a project, what business
structure would be used, and what salary a member would be paid, does not make the
contract too uncertain and indefinite to be enforced. Although an oral contract's terms
must be definite, those terms need not always be detailed.
Considering the evidence of the parties' prior dealings and conduct, the terms of the
Telephone Deal are sufficiently definite without those detailed terms. The terms are that
Ark–Mo would not pursue any claim of ownership interest in BCR but that Ark– Mo
would receive a 30% ownership interest in future CHEP projects done together in the
Midwest. The absence of detailed terms did not render this basic agreement between
the parties indefinite. Further, the detailed terms are capable of being ascertained in the
future, based on the parties' prior conduct and reasonable business practices. Lerner also
argues that the term Midwest is indefinite.
Here, substantial evidence exists from which a jury could find that mutuality of
obligations arose out of the Telephone Deal. According to the terms of the Telephone
Deal, Ark-Mo was obligated not to pursue any ownership interest in BCR in
consideration of Lerner's promise to allocate Ark–Mo a 30% ownership interest in
future CHEP projects in the Midwest. In return, Lerner was obligated to give Ark–Mo
a 30% ownership interest in future CHEP projects the parties would do together in the
Midwest. Because both parties were held to an implied requirement to act in good faith
and make reasonable efforts, the possibility that there might not be any more
opportunities for CHEP projects does not render these mutual obligations illusory.
Therefore, we find Ark–Mo presented substantial evidence from which a jury could
reasonably find mutuality of obligation existed in the Telephone Deal. 7. Case law
• Steelhead Townhomes, L.L.C. v. Clearwater 2008 Note Program, LLC lOMoARcPSD| 38777299
• Bertelsen v. Channel Bio, LLC
8. Comparing with similar cases
8.1. Steelhead Townhomes, L.L.C. v. Clearwater 2008 Note Program, LLC
• Respondents: Steelhead Townhomes, L.L.C.
• Appellants: Clearwater 2008 Note Program, LLC.
• Jonathan Sternberg, Kansas City, for appellant. John M. Duggan, Deron A.
Anliker, Overland Park, KS, for respondent.
➞ The judgment of the circuit court is affirmed.
8.2. Bertelsen v. Channel Bio, LLC
• Participants: Ralph Richard Bertelsen, Plaintiff, v. CHANNEL BIO, LLC, et al., Defendants.
➞ It is hereby ordered that Defendant Channel Bio, LLC's motion to dismiss is denied
at to Count I and granted as to Count II. (Doc. No. 17.)
III. Case conclusion & answers for question
Yes. There was consideration to support the Telephone Deal. Consideration can consist
of a promise, a performance, or a forbearance (refraining from an action that one has a legal right to undertake).
In this problem, Mark Garnett, an owner of Arkansas-Missouri Forest Products, LLC
(Ark-Mo), and Stuart Lerner, an owner of Blue-Chip Manufacturing (BCM), agreed to
engage in wood-pallet enterprises together, with Ark-Mo to have a 30 percent
ownership interest in their future projects. When Lerner formed Blue Chip Recycling,
LLC (BCR), to manage a pallet repair facility in California, however, he allocated only
a 5 percent interest to Ark-Mo. Garnett objected. In a "Telephone Deal," Lerner lOMoARcPSD| 38777299
promised that Ark-Mo would receive a 30 percent interest in their future projects in the
Midwest. Garnett then agreed to forego an ownership interest in BCR.
Acting on Ark-Mo's behalf, Garnett could have accepted the 5 percent allocation in
BCR, but he refrained from doing so. Instead, he accepted Lerner's promise of a 30
percent share in their future projects in the Midwest and made no more demands
regarding BCR. In other words, Garnett gave up the opportunity to have an ownership
interest in BCR in exchange for Lerner's agreement that Ark-Mo would have a 30
percent ownership interest in certain future projects.
In the actual case on which this problem is based, Ark-Mo filed a suit in a Missouri
state court against Lerner, alleging breach of contract. The court issued a judgment in
Lerner's favor. A state intermediate appellate court reversed, in part on the reasoning
stated here. "Valid legal consideration supported the Telephone Deal."
IV. Law Application: Vietnam Civil Code
Điều 119 Bộ luật Dân sự 2015 quy định về hình thức giao dịch dân sự 1.
Giao dịch dân sự được thể hiện bằng lời nói, bằng văn bản hoặc bằng hành
vicụ thể. Giao dịch dân sự thông qua phương tiện điện tử dưới hình thức thông
điệp dữ liệu theo quy định của pháp luật về giao dịch điện tử được coi là giao dịch bằng văn bản. 2.
Trường hợp luật quy định giao dịch dân sự phải được thể hiện bằng văn
bảncó công chứng, chứng thực, đăng ký thì phải tuân theo quy định đó.
Điều 400 Bộ luật Dân sự 2015 quy định về thời điểm giao kết hợp đồng 1.
Hợp đồng được giao kết vào thời điểm bên đề nghị nhận được chấp nhậngiao kết. lOMoARcPSD| 38777299 2.
Trường hợp các bên có thỏa thuận im lặng là sự trả lời chấp nhận giao
kếthợp đồng trong một thời hạn thì thời điểm giao kết hợp đồng là thời điểm
cuối cùng của thời hạn đó. 3.
Thời điểm giao kết hợp đồng bằng lời nói là thời điểm các bên đã thỏa
thuậnvề nội dung của hợp đồng. 4.
Thời điểm giao kết hợp đồng bằng văn bản là thời điểm bên sau cùng ký
vàovăn bản hay bằng hình thức chấp nhận khác được thể hiện trên văn bản.
Trường hợp hợp đồng giao kết bằng lời nói và sau đó được xác lập bằng văn bản thì
thời điểm giao kết hợp đồng được xác định theo khoản 3 Điều này.
Khoản 3 Điều 404 Bộ luật Dân sự 2015 quy định về giải thích hợp đồng 1.
Khi hợp đồng có điều khoản không rõ ràng thì việc giải thích điều khoản
đókhông chỉ dựa vào ngôn từ của hợp đồng mà còn phải căn cứ vào ý chí của
các bên được thể hiện trong toàn bộ quá trình trước, tại thời điểm xác lập, thực hiện hợp đồng. 2.
Khi hợp đồng có điều khoản hoặc ngôn từ có thể hiểu theo nhiều nghĩa
khácnhau thì phải giải thích theo nghĩa phù hợp nhất với mục đích, tính chất của hợp đồng. 3.
Khi hợp đồng có điều khoản hoặc ngôn từ khó hiểu thì phải được giải
thíchtheo tập quán tại địa điểm giao kết hợp đồng. 4.
Các điều khoản trong hợp đồng phải được giải thích trong mối liên hệ
vớinhau, sao cho ý nghĩa của các điều khoản đó phù hợp với toàn bộ nội dung hợp đồng. 5.
Trường hợp có sự mâu thuẫn giữa ý chí chung của các bên với ngôn từ
sửdụng trong hợp đồng thì ý chí chung của các bên được dùng để giải thích hợp đồng. 6.
Trường hợp bên soạn thảo đưa vào hợp đồng nội dung bất lợi cho bên kia
thìkhi giải thích hợp đồng phải theo hướng có lợi cho bên kia. lOMoARcPSD| 38777299 V. References
[1] Arkansas-Missouri Forest Products, LLC v. Lerner, 486 S.W.3d 438 | Casetext Search + Citator
[2] Arkansas-Missouri Forest Products, LLC v. Lerner et al, No. 4:2015cv00771 - Document 23 (W.D. Mo. 2016)
[3] Giao dịch dân sự là gì? Điều kiện để giao dịch dân sự có hiệu lực