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Business Law

Business Law Essay Answers

Instructions:

For this exercise, you will be reading through a hypothetical case and answering the questions that follow.  I have provided summary of the rules regarding unconscionability first, so that you may review them before reading through the facts of the case.  Please submit your answers the same way you submitted the answers to the Torts Practice Problems Worksheet. In other words, type your answers directly into your Discussion response, but with numbers before each answer so I know which question you are answering.  Answer each question in complete sentence. For example, your discussion response should look something like this:

1. The parties to this contract are …..

2. There was/was not a valid agreement because….

3. The consideration requirement was/was not met because… 

4. The parties met/did not meet the Capacity requirement because…

5. The parties met/did not meet the Legalityrequirement because  …

6. The three requirements for a valid release of liability are ….. The release of liability Anna signed met/did not meet these 3 requirements because…. 

7. I think Anna’s parents will/won’t be successful in convincing a court that this release of liability was not a valid contract because…

8. If a court decides that this release of liability was not a valid contract, that means Anna’s parents ….

Summary Regarding Unsconscionability

Courts can refuse to enforce a contract if they find that it is unconscionable. An unconscionable contract is a contract that is so unfair to one party that a court believes it should not be enforceable under the law.  It is a contract in which one party gains no real benefit, usually because they negotiated or entered into the contract from a much weaker position than the other party. In other words, there was a major difference in bargaining power between the parties.  In a lawsuit, if a court decides that a contract is unconscionable, they will typically declare the whole contract void, or limit the contract’s application to avoid an unconscionable result.  

Courts created the doctrine of unconscionability to prevent unfair oppression.  A person trying to get out of a contract they think is unconscionable will have to prove two things to the court.  First, they must convince the court that the contract was procedurally unconscionable.  Second, the court must decide that the contract was also substantively unconscionable.

A contract is procedurally unconscionable(i.e. the procedures the parties to finalize the contract were unconscionable) if there was inequality in the parties’ bargaining power, or one party was unfairly surprised by hidden terms in the contract. 

A contract is substantively unconscionable (i.e.  the actual terms or substance of the contract are unconscionable) if the distribution of costs/benefits in the contract is overly harsh or one-sided.

Hypothetical Case:

Last year, your 24-year old daughter, Anna, enrolled in nursing school. All second year students in the nursing program were required to go on an out of state school field trip to Phoenix to visit a first-of-its-kind hospital for treatment of the mentally ill. Without completion of the field trip, students would fail a course that was necessary for graduation. Students received 12 hours of credit for the trip.

Before going on the trip, your daughter signed a release of liability, which was required for all students traveling on the school’s bus. Students who refused to sign the release were not permitted to board the bus. People were free to travel to Phoenix on their own, but would have to pay for it out of their own pocket. Travel on the school bus was free and covered by the students’ tuition and program fees.

Nine moths before the field trip, the bus driver had been convicted of a DUI. He completed his alcohol education classes and other court-ordered obligations required as a result of his conviction. His drivers license suspension had been removed, and he had been permitted to drive again two months before the field trip. He drove a bus that was equipped to carry 30 people. Including the faculty accompanying the students, there were 34 people on the bus on the day of the field trip. The school knew this was overcrowding, but did not feel it was necessary to book a second bus just for 4 people.

After stopping for dinner the first night of the drive, they all got back in the bus and back on the freeway. Three hours into the drive, everyone had fallen asleep. As they were going up a mountainside, the bus driver swerved right to avoid an oncoming car and the bus fell off the side of the hill. Your daughter and one other student were killed instantly. Police investigations after the accident revealed that the bus driver had a blood alcohol level of .09, .01 above the legal limit.

Anna’s family sues the school for negligence. The school files a motion to dismiss the case, because they say Anna signed a Release of Liability before the field trip.  The court now has to decide whether to enforce the Release of Liability as a valid contract, or void it and allow Anna’s family to sue.

The language of the release read as follows:

In consideration of the transportation provided me for the school trip, I hereby waive, release and discharge any and all claims for damages for death, personal injury or property damage which I may have, or which may hereafter accrue to me, as a result of my participation in said transportation. This release is intended to discharge in advance the school, bus company, and bus driver from and against any and all liability arising out of or connected in any way with my participation in the bus trip from Nursing University to Phoenix Hospital for the Mentally Ill, even though that liability may arise out of negligence or carelessness on the part of the persons or entities mentioned above. 

I further understand that serious accidents occasionally occur during bus trips, and that participants in bus trips occasionally sustain mortal or serious personal injuries; and/or property damage, as a consequence thereof. Knowing the risks of bus trips nevertheless, I hereby agree to assume those risks and to release and hold harmless all of the persons or entities mentioned above who (through negligence or carelessness) might otherwise be liable to me (or my heirs or assigns) for damages. It is further understood and agreed that this waiver, release and assumption of risk is to be binding on my heirs and assigns. I agree to accept and abide by the rules and regulations of the Nursing University. 

Using the doctrine of unconscionability and everything else you’ve learned about the four requirements for a valid contract, complete the questions below…

Questions to Turn In:

1. Who are the parties to the contract? 

2.  Was there a valid Agreement between the parties? I.e. was there a valid offer and was it accepted properly? Explain.

3. Was the Consideration requirement met? Explain. What did each side give up at the time the contract was entered into?

4. Did the parties meet the Capacityrequirement?  Explain why or why not.

5. Did the parties meet the Legalityrequirement? Was the contract illegal? Does it violate public policy? Explain why or why not. Specifically, is this contract unconscionable? Why or why not?

6. Think back to the 3 additional requirements we discussed that are necessary for a valid Release of Liability? Does the contract the school had Anna sign meet the 3 requirements for a valid Release of Liability? Why or why not? 

7. Overall, do you think Anna’s parents will be successful in convincing a court that this release of liability was not a valid contract? Why or why not? 

8. If a court decides that this release of liability was not a valid contract, what does that mean for Anna’s parents and their lawsuit against the school? 

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