1. Ivan Johnson owned a dilapidated apartment building in Olney, Illinois, which he rented to James and Cora Chester for a very low rental rate. While most apartments in the small city rented between $450 and $900 per month, Ivan rented the apartment to the Chester family for only $325 per month.

Not only did Cora and James pay their rent on time, they also began to remodel and rehabilitate the apartment. Over the next four years they installed two new bathrooms, carpeted the floors, installed a new heating system, and rewired, repaired the plumbing, and painted the entire apartment. Ivan Johnson periodically stopped by and saw the work in progress, but he never said anything about the work to either Cora or James. In fact, over time the Chester couple had transformed the unit into a respectable apartment.

Three years to the day after James and Cora completed the renovation work, Ivan Johnson served them with an eviction notice. James and Cora Chester filed a lawsuit (counterclaim) seeking the value of the work they had done to improve the apartment.

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REQUIRED: Discuss the arguments for Ivan Johnson, and discuss also the arguments for Cora and Ivan Chester. Who will prevail? Note the legal basis for each of your rulings (conclusion). After all, you must be the judge in this court!

2. Arthur Murray, Inc. is a national franchisor of dancing schools. Dancing Dean Bee is a franchisee in Florida. Dancing Dean made various contracts with Mrs. (Vivian) Vance, a 53-year old widow without surviving family. In fact, VV is still emotionally distraught over the loss of her husband of 33 years. While they had had no children and had lived together long enough to witness the deaths of their parents and siblings, VV and her husband had been incredibly happy. She was lonely and in deep despair.
It was during this time that VV first responded to the offer of free dance lesson from the local Arthur Murray Dance School (franchisee Dancing Dean’s Arthur Murray operation). During this time of mourning and at all times herein, Dancing Dean paid incredible attention to Vivian Vance (VV), and he praised her potential greatness with continually flattering comments about her underdeveloped dancing skills. He tells her, “Vivian, with just a few lessons, I think you could compete in ballroom dancing contests. You are a natural.” In the end, over a period of sixteen months, VV had purchased a contract for 2450 hours of dance lessons for a total cash outlay of $49,500. After several weeks and billings of $17,500 for dance lessons, at each of which Dancing Dean and his employees would praise VV for her dance expertise and suggest that she could already compete in some regional ballroom dancing contests, VV extended her contract for another 500 hours. Even after deducting the payments she made for the $17,500 in dance lessons, she still owed $42,500 for future dance lessons (continuing her training for professional ballroom dancing. After a month-long vacation, during which VV talked with a long-time friend, VV finally realized how much of her savings she had already expended. Her friend, who observed VV’s dancing at a New Orleans’ club, tried to gently break it to VV that she was actually ot a very good dancer.

Upon return to Miami, VV brought suit to cancel the remainder of the contract for dance lessons and its $42,500 remaining balance due. In her complaint she alleged that she has now learned that she had attained little or no real skill as a dancer and that she had no aptitude for professional dance, that Arthur Murray’s (the Murray franchisee’s) employees and Dancing Dean Bee himself had taken advantage of her emotional distress over the unexpected death of her husband of 33 years and had purposefully misrepresented her skills and taken unconscionable advantage of her while she was experiencing such a serious state of bereavement. She also alleged that she had relied on the expertise of the professionals at the Arthur Murray franchise (owned by Dancing Dean Bee) to assess her ability as a dancer, which they had intentionally and falsely represented.

In Dancing Dean’s response (on behalf of himself and his franchise), he contends that his representations and those of his employees were mere trade puffery. Any reasonable person would realize that such flattery was subjective and that it also functioned as needed encouragement to novice dancers. As such there was no factual basis for a claim of misrepresentation; rather, VV was merely experiencing buyer’s remorse.

QUESTIONS: (1) Under what circumstances may a fraudulent misrepresentation as to value arise? (2) Under what circumstances may a statement of opinion, if ever, be relied upon as fact? (3) Has Dancing Dean Bee (doing business as “Arthur Murray Dance School of Miami” taken improper advantage or in any other way improperly induced VV to enter into the alleged contractual agreement? (4) What is your ruling (as judge) and its basis in law, regarding whether VV is bound in contract or whether the remainder is void or voidable?

3. State Farmer Insurance Inc. (State) entered into an automobile insurance policy with Frank Slick, a visitor to Lubbock who was from Oklahoma City. One provision of the policy covered Slick’s (his automobile was covered property) against an accident caused by an uninsured motorist. Frank Slick was driving his 2010 Lexus automobile (the one covered by the State policy) southbound on Avenue Q in Lubbock, Texas, when Grace Mack ran a stop light and crashed into the front end of the Lexus with her 2005 Ford pickup. Grace Mack, who was at fault and without funds, was uninsured. After investigation by an independent adjuster representing State (the insurance carrier for Slick), State agreed that $14,275 in damages to the Lexus should be reimbursed by State. Frank Slick had negotiated with Lubbock Mercedes Cars Inc. (LMCI) for the purchase of a 2012 Mercedes E Class. Frank paid $7,500 in cash, agreed to transfer full title to his 2011 Lexus, and assign the insurance check from State in full payment for the used Mercedes E Class.

RECAP OF FIRST PART: Frank Slick negotiated a contract for the purchase of a 2012 Mercedes E Class from LMCI. In return for the LMCI, Slick paid $7500 in cash, transferred title to the 2010 Lexus (which LMCI intended to repair and sell), and assigned all right, title, and interests in the State Farmers Insurance Inc. (State) settlement for uninsured motorist damages (the $14,275). [A memo had been delivered to Frank Slick by the adjuster that read in part: “To Whom It May Concern: a $14,275 settlement draft will be issued by State Farmers Insurance Inc. in the first week of March, 2013 (about two weeks later). “ Slick used this memo as proof of the amount he was able to assign to LMCI.]

LMCI called the adjuster for State and requested that the adjuster inform State of the assignment. The adjuster sent a letter to State informing State of the assignment. In addition, one week prior to the issuing of the settlement check, LMCI called State and confirmed that the insurance check for $14,275 had been assigned to LMCI. LMCI was sending a certified copy of the assignment later that same day. However, two days before the check’s issue, Frank Slick’s mother (Truly Slick) called State and asked that they stop payment on any check issued to the assignee LMCI, and she indicated it was no longer necessary. The company did not mail the check to LMCI, but it did send the amount to Frank Slick at his Oklahoma City address, where he lived with Truly Slick. Of course, he has now fled there, and LMCI has been unable to recover the monies directly from him.

LMCI sues State Farmers Insurance Inc. to recover the $14,275 that they allege was assigned to them. State defends by alleging that they received no written assignment prior to the issuance of the check to Frank Slick.

Discuss whether LMCI can recover from State, noting all relevant law.

4. (a) On April 1, 2010, Derek and Dana Daniels owned a house in St. George, Utah, and they purchased a standard homeowners’ policy from Aetna Casualty Insurance (Aetna) that insured them against fire, flood, and other risks. On March 31, 2011, the policy lapsed, and the Daniels failed to pay the premium to reinstate the coverage during the month of April (2011). On Ma7 2, 2011 a fierce fire swept through the area and very seriously damaged Dana and Derek Daniels’ house. The good news was that agents from Aetna promptly visited the Daniels and helped them through the crisis. The agents assured the Daniels that all of the damage was covered by their insurance, instructed them on which things to throw out because insurance would replace them, and helped them choose materials for repairing other things in and around the house. The bad news was that the agents were wrong, as the Daniels’ policy had expired between 5 and 6 weeks before the fire.

Derek Daniels presented Aetna with a bill for $81,957 worth of meticulously itemized work that he and his wife had done under the close supervision and direction of Aetna agents. Aetna noted that the policy had lapsed, that no insurance policy was then in force at the time of the fire, and that they had no valid contract in existence at the time of the fire. Thus, Aetna refused to pay the bill.

Derek and Dana Daniels sued Aetna, but they did not allege a breach of contract, as the policy had, in fact, expired. The Daniels alleged that Aetna should be liable under a theory known as promissory estoppel.

Will the Daniels succeed on this basis? Explain fully.

(b). Regardless of the ruling in their case against Aetna, the Daniels realize they must repair and rebuild their house within six months in order to beat the rugged winter weather prevalent in the area. They decide to hire McMullen Construction to do all work, which calls for a contract amount of $84,500. McMullen assured them that even a sole proprietor like he was could complete the rebuilding within six months. Upon those assurances, the Daniels paid a sum of $14,500 in advance, and McMullen began work. Sadly, just two months after beginning the work, McMullen was killed in a vehicular accident on his way from home to Home Depot. His widow knows nothing about construction, and all work comes to a halt. Her attorney does hire a local advisor, and (based upon the assessment of the local construction advisor) the attorney alleges that McMullen had completed 50% of the work. Hence, he serves the Daniels a bill for $42,250 for the work done. He does note the cash advance of $14,500, and he demands payment only for the difference ($42,250 less 14,500 = $27,750) of $27,750.

Dana and Derek Daniels refuse to pay. Instead, they work hard to find the only two area contractors capable of completing the work. The firms and bids to complete the work are set forth below:
• Bob Vance Construction’s bid calls for the Daniels to pay an additional $54,500 to do the work required to complete the work on the original contract (the $84,500 contract above).
• Phil’s Construction Corporation bids $58,000 for the labor and materials to complete the original $84,500 contract.
Required: Fully describe any legal theory upon which McMullen’s widow can recover. Note the amount, if any, that McMullen’s widow (on behalf of her husband’s estate) could recover.

5. (a) A single mother supporting her college-age daughter (Kari King), Kathy King has worked for the past 25 years as a hair stylist; the past 16 years she had worked at Head First Style Salons, Inc., an Alabama company owning a state-wide chain of salons, which provide haircuts, coloring, and styling for men and women. King had served in various Head First facilities, and she temporarily managed one of the Head First Style Salons. She has no other job experience of any significance.

Kathy King quit her job with Head First and began working as manager of a Sport Clips shop, which is located in the same mall as the store she just left. Sport Clips offered only haircuts and primarily served men and boys. Head First Style Shops filed suit, claiming that Kathy King was violating the noncompetition agreement that she had, in fact, signed. The employment contract Kathy King signed approximately 16 years earlier when she first joined the Head First Style Salons, Inc. organization contained the following clause: “Kathy King, in consideration for her employment with Head First Style Salons, Inc., hereby agrees that she is prohibited from working at a competing business within a two-mile radius of any Head First facility for 12 months after leaving the company. “ Head first operates in 10 different shops in each of the six counties closest to Kathy King’s home in Birmingham, Alabama. As a result of the restriction, no viable opportunity was found within 50 miles of Kathy King’s home.

The trial court issued an injunction (a court order that directed that Kathy King cease her employment with Sport Clips or any other style shop within 2 miles and any Head First facility. Kathy King appeals.

Please note that neither Alabama nor any other state other than California has a general prohibition on non-compete agreements. Nevertheless, King’s lawyers are able to make a number of arguments against the validity of the clause.

REQUIRED: Discuss fully the arguments that you think Kathy King should make in order to convince the Court of Appeals that the clause should be unenforceable.

(b). While Kathy is struggling with the legal battles involved above, Kari King decides to help out and earn money to support the family and pay some of her college expenses. A store next to the University of Alabama allows her to use space for her entrepreneurial effort: Kari’s Coffee Shop. Her “Double-the-Caffeine” drinks are a real hit with the students. She is doing incredibly well with Kari’s Coffee Shop.

CAF-FEEN-Friend, Inc. is an expanding chain of coffeehouses, with locations that are spreading throughout the college towns of Alabama. CAF-FEEN-Friend, Inc. (CAF) is aggressively purchasing existing coffee shops and converting them to CAF-FEEN-Friend shops. Maxwell Homes (CAF President and CEO) approaches Kari King with an excellent offer to buy out her shop. Besides a six figure buyout, the terms include the following:
• Kari will be employed for one year after the sale of her business to CAF-FEEN-Friend, Inc. (at a salary of $70,000).
• For 4 years after the sale, Kari will not open a competing business (coffee shop) within 12 miles of her current location.
• For the same 4 years, she will not work anywhere in the United States for a competing coffee retailer.

REQUIRED: Are the last two terms above enforceable against Kari?