EXAM 2: LAW 2221 Spring 2020
Before beginning this exam, CAREFULLY read the Exam 2 instructions (located with this document in the Exam 2 Canvas module)!!!
Each question part (A, B, C, etc.) will be worth 5 points.
Question 1
Review the following paragraph and then answer Questions A through E below.
Employee hereby covenants and agrees that Employee will not, without the prior written consent of the Company, directly or indirectly, whether individually or through any entity controlled by Employee, during the term of this Agreement and for a period of 3 years from the termination of this Agreement, for any reason, directly or indirectly, on his own behalf or in the service or on behalf of others, whether or not for compensation, engage in any business activity, or have any interest in any person, firm, corporation or business, through a subsidiary or parent entity or other entity (whether as a shareholder, agent, joint venturer, security holder, trustee, partner, consultant, creditor lending credit or money for the purpose of establishing or operating any such business, partnership or otherwise) which is competitive with the then existing business of the Company. Notwithstanding the foregoing, Employee may own shares of competing companies whose securities are publicly traded, so long as such securities do not constitute five percent or more of the outstanding securities of any such company.
- What type of clause is the paragraph above? Why would an employer want to use a clause like this in an employment contract?
The paragraph captures a non-compete, which is one of the critical elements included in an employee contract. This clause is regularly used by employers to ensure that their employees do not just resign whenever it is convenient and when they have acquired the desired experience to start their own similar operations that are in direct competition with the firm. It also ensures that employees do not take the knowledge and experience they have gathered to the firm’s competitors, putting the firm at a disadvantage (Roy, 2019).
- Would the clause above be enforceable in an employment contract under Alabama law? Explain why or why not.
A review of this clause shows that as it presently constituted, it could not be enforceable within the state of Alabama. This is because, even though the state of Alabama does have a statute that allows employers to have their employees sign non-compete agreements, there is a certain limitation that has been stipulated which this clause does not fulfill. On the one hand, the contract will have to for an employee who holds a critical role within the firm and is thus privy to various business secrets. Further, the above clause requires that an employee uphold the no-compete for a period of three years, which is not reasonable. According to Alabama law, a reasonable time is a year for one who sells goods, two years for non-con-compete, and 18 months for agreements on non-solicitation agreements Christian & Small LLP, 2016).
- Would the clause above be enforceable in an employment contract in Georgia? Explain why or why not.
An assessment of this clause in line with Georgia law shows that it is also not legally enforceable in that state. This is because the clause lacks one critical element, which is the geographical limitation. Georgia law indicates that, for a non-compete to be enforceable, it must be reasonable with a stipulated geographical region of enforcement as well as the time period (Weinrich, 2018). Therefore, even though this clause does have a particular timeframe, it does not provide the geographical distinctions
- Imagine that a company has already hired an employee and the Employee has signed an employment contract WITHOUT a clause like the one above. The Company realizes it made a mistake and wants to ask the Employee to sign a second contract containing the clause above. The Company wants to tell the Employee that he must sign the second contract if he wants to keep his job. If the Employee signs the second contract under those circumstances, would that contract be enforceable? Why or why not?
The second contract would not be enforceable. This is because for a person to enter into a contract, there are a number of elements that are considered to be essential. Failure to have any of those elements means that the contract is not enforceable. For one, a person must get an offer and accept the offer; they must have some considerations, which are the benefits that both parties get as well as free consent (Roy, 2019). Looking at the second contract shows that the Employee is not given free consent to consider the contract and accept it. They are forced to sign the contract under threat of job loss.
- Imagine that McDonald’s decides to require all of its new employees to sign agreements at the time of hire saying that they will not work for competing fast food restaurants in the same town for one year after leaving McDonald’s. Would this agreement be enforceable if a McDonald’s cashier quits to go work at Burger King? (Hint: There is a pretty clear answer to this no matter what state’s law applies.)
Indeed this clause would be enforceable if the cashier had signed the agreement. A look at the clause shows that it provides a reasonable geographical area that is limited to the town as well as time, which is one year. Further, the contract is given to new employees joining the firm.
Question 2
Michael is a software developer who is hired by TechCo, Inc. on a five year employment contract. Michael is a resident of Maryland. TechCo, Inc. is incorporated in Delaware and its headquarters are located in Madison, Wisconsin. Michael applied for the job after seeing a job posting placed by TechCo in several of the major newspapers in Maryland. Michael works from home in Maryland. His manager, Linda, works from TechCo’s headquarters in Wisconsin. Each week, Linda calls Michael several times to check on the status of his work. Linda and Michael also exchange emails several times a day. TechCo deposits Michael’s paycheck every two weeks in Michael’s bank account at his bank in Maryland. However, Michael is TechCo’s only Maryland employee. None of the TechCo executives working at the Wisconsin headquarters has ever traveled to Maryland on business.
After Michael has worked for TechCo for three years, Linda calls and tells him that the Company must terminate Michael’s employment because the Company is having financial difficulties. Michael believes that TechCo has breached its employment contract with him. Michael wants to file a breach of contract lawsuit under state law in a Maryland state court. He is seeking $100,000 in his suit.
Answer Questions A and B below:
- Would a Maryland state court be able to exercise personal jurisdiction over TechCo, Inc.? Assume that Maryland has a long-arm statute that provides that Maryland courts may exercise personal jurisdiction to the extent permitted by the Due Process Clause of the Fourteenth Amendment to the United States Constitution. Be sure to provide thorough analysis for your answer. (Hint: Consider the 4 routes to personal jurisdiction we discussed in class.)
In this case, the Maryland state court would not be in a position to exercise personal jurisdiction over the Company TechCo, Inc. This is based on the fact that even though Michael is a resident of Maryland, TechCo, Inc which is the defendant does not meet the criteria that would give a court in Maryland personal jurisdiction over them. First, the Company has not consented to such jurisdiction; second, the Company does not have a presence within the state. As the case shows, the Company did not have a branch within the state, and Michael worked from home. Further, the Company has very minimum contact with the state. As the case reveals, Michael was the only Employee of the Company in Maryland, as a way of communication, Michael dealt with Linda his contact via phone and email. Finally, the management of the Company has not even been to Maryland. While the Company has had some contact with Maryland, it has only been fortnightly when the payslip was deposited at Michael’s bank, thus not substantial (Lawshelf, n.d).
- Would a Delaware state court be able to exercise personal jurisdiction over TechCo, Inc. if Michael decided to file a lawsuit there? Why or why not?
In case Michael opted to file this case with a state court in Delaware, the court in the state would be able to exercise personal jurisdiction. This is based on the fact that although the headquarters of the Company are in Madison, Wisconsin, TechCo, Inc was incorporated in this state and thus has a presence here. Further, the Company had made intentional contact with the state giving its court personal jurisdiction. Therefore Michael would be able to pursue his suit in this state.
Question 3
Answer Questions A through D below:
- Your friend, Tyler, has just bought a fuzzy purple suit jacket with silver glitter stars. You (obviously) are totally jealous, and go online to buy one for yourself. However, the jackets are all sold out online. You decide to offer to buy Tyler’s new jacket from him. Write a statement that would qualify as an effective legal offer to purchase Tyler’s jacket. (Hint: Your statement needs to create the power of acceptance in the offeree!)
I ______________ hereby agree to sale to__________ this “fuzzy purple suit jacket with silver glitter” for $20 on______________.
Signature________________________
- Explain why your answer to Question A qualifies as an offer from the standpoint of contract law. (Hint: How does your statement meet the requirements for an effective offer?)
The information presented in section “A677” meets the requirements for an offer that is effective because it captures all the necessary elements. First, it’s clear and definite, letting the targeted parties know what is being sought. Further, it communicates to the offered the proposed conditions and allows them to either accept or reject the offer (Money matters, 2020).
- Assume that after you make your offer to Tyler, he replies, “How dare you!!! That’s a terrible price!!! I’m insulted! Outraged! You disgust me! But, I accept your offer.” Has Tyler accepted your offer? Explain why or why not.
Indeed Tyler has accepted the offer. This is because when it comes to a contract, there are other elements beyond what is written that communicate acceptance or rejection, specifically, the actions of the party. In this case, although Tyler’s words communicate that he did not like the offer, his actions said he accepted. As such, this offer has been accepted.
- Assume that after you make your offer, Tyler says he needs to think about whether to accept. Three days later, you decide you don’t want to buy the coat. You have not heard anything from Tyler. What should you do immediately?
For an offer contract to be accepted and constitute an agreement, both parties must reach a consensus. They must agree on the same thing then proceed with their agreement. In this case, the fact that Tyler says that he needs to think about it means he is yet to accept the offer. On the other hand, the decision that you don’t want to purchase the court serves to nullify the offer. The offer for purchase is not binding because the parties had not come together and signed the document turning it into a promise/agreement. As such, even though you have not heard anything from Tyler, you can contact him and rescind the offer.
Question 4
Compare and contrast arbitration and mediation. What are some of the key differences?
The concept of mediation and arbitration can sometimes be confused to imply the same thing since they work towards the same goal. However, although they both work towards ensuring issues are resolved fairly, they are quite different.
On the one hand, arbitration has a third party to make a decision for the two conflicting parties. Through this approach, the arbitrator takes time to listen to the two parties present their cases, evidence, and testimony in the same manner as a court trial and then makes a decision (BCICAC, 2020). This approach is, however, different from a court trial since it is a bit less formal.
On the other hand, mediation is different based on the fact that the neutral third party is only instrumental in helping the two conflicting parties reach a negotiated agreement. Unlike in arbitration, where the third party decides, and the ruling is binding to both parties, it is impossible to attain a resolution in mediation unless the two parties agree (BCICAC, 2020). The mediator goes back and forth between the members as they seek to establish a resolution that is mutually and agreeable to both parties.
Question 5
Your friend, Amber, is excited because she just sold her car. She tells you she sold her car to a 17-year-old. You ask her whether anyone else signed the contract along with the 17-year-old, and Amber tells you no. You think to yourself, “Wow, Amber is a nice girl, but she is pretty dumb.” Why are you correct?
In this case, Amber is dumb because, for a contract to be legally binding, it must be between parties that have attained the age of majority. This age varies from state to state, but for almost 18 years is the accepted level. Therefore when Amber sold her car to a17-year-old and signed a contract, it was not legally binding. As a minor the law does not recognize such a contract since the minor is not competent enough to enter into such an agreement; further, the contract is voidable (Lawrence, n. d)
References
BCICAC (2020). A Difference between Arbitration and Mediation. Retrieved from http://bcicac.com/about/what-is-mediationarbitration/difference-between-arbitration-and-mediation/
Christian & Small LLP (2016). Details on Alabama’s New, More Restrictive Non-Compete and Non-Solicitation Statute. Retrieved from https://csattorneys.com/details-on-alabamas-new-more-restrictive-non-compete-and-non-solicitation-statute/
Lawrence, G. (n. d ) What Is Legal Contract Age? Retrieved from https://smallbusiness.chron.com/legal-contract-age-54655.html
Lawshelf (n.d) Jurisdiction Over the Parties or Things – Personal Jurisdiction retrieved from https://lawshelf.com/coursewarecontentview/jurisdiction-over-the-parties-or-things-personal-jurisdiction
Money matters (2020). Essential elements of a valid contract. Retrieved from https://accountlearning.com/essential-elements-of-a-valid-contract/
Roy, D. (2019). Common and Important Clauses in an Employment Agreement. Retrieved from https://blog.ipleaders.in/important-and-common-clauses-in-an-employment-agreement/
Weinrich, N. F (2018). Finally! GA Court Issues Guidance on “New” Non-Compete Statute. Retrieved from https://www.bfvlaw.com/finally-a-georgia-appellate-court-issues-guidance-on-the-new-non-compete-statute/