USING THE I-R-A-C STRUCTURE IN WRITING EXAM ANSWERS
The IRAC method is a framework for organizing your answer to a business law essay
question. The basic structure is: Issue, Rule, Analysis, and Conclusion. Using this simple
framework for structuring your answer will ensure that you have written a complete answer.
Issue
Begin your answer by stating the issue presented by the essay question.
Sometimes the question will provide the issue for you. If not, then ask: What is
the legal question that, when answered, determines the result of the case? The
issue should be stated in the form of a question in a specific, rather than general
form: “Is there an agency relationship if there was no compensation paid?”
would be an acceptable issue. “Will the plaintiff win?” would not be acceptable.
Note that the issue may be case specific, mentioning the parties’ names and
specific facts of the case. Example: “Did Jones have an agency relationship with
XYZ Corp. due to his acting on behalf of XYZ and following its instructions?”
The issue can encompass all cases which present a similar question. Example:
“Is an agency created whenever there is an employment relationship?” Most
cases present one issue. If there is more than one issue to address, then you must
write a separate IRAC analysis for each issue.
Rule
The rule describes which law or test applies to the issue. The rule should be
stated as a general principal, and not a conclusion to the particular case being
briefed. Example: “An agency relationship is created when there is an
agreement that the agent will act for the benefit of the principal at the principal’s
direction or control regardless of whether compensation is paid” would be an
acceptable rule. “The plaintiff was the defendant’s agent” would not be an
acceptable rule. Do not use parties’ names or specific facts from the case. Hint:
Frequently, the rule will be the definition of the principle of law applicable in the
case. Example: An agent may not use or disclose confidential information
acquired through the agency absent an agreement to the contrary.
Analysis
The analysis is the most important, and the longest, part of your answer. It
involves applying the Rule to the facts of the problem or question. You should
use the facts to explain how the rule leads to the conclusion. Discuss both sides
of the case when possible. Important: Do not merely state a conclusion without
also stating reasons for it. A conclusion without reasons or explanation means
that you have not used the rule and the facts to analyze the issue. Hint: The rule
can be used as a guide in your discussion. Example: Suppose the issue is
whether A is an independent contractor. Using the facts of the case, explain
whether or not they fit into the definition of what is an independent contractor:
“In this case, A was told by the foreman what to wear, how to operate the
machine, and when to report to work each day, giving her little control over the
job.” If the rule is a test with multiple factors, then you must analyze each factor
by pointing out how the facts do (or do not) fulfill each factor.
Conclusion
The conclusion is your answer to the Issue. State the result of your analysis.
Examples: “Smith is liable for negligence” or “Therefore, no valid contract was
formed between X and Y.” If there are multiple issues, there must be multiple
conclusions as well.
SAMPLE IRAC ANALYSIS
Caroline was employed as a receptionist for ABC Corporation. Her desk was located
at the entrance of the corporate office and her duties were to greet customers, answer
telephone calls, sort mail, and respond to general requests for information about ABC. One
day, while all of the managers of ABC were out of the office, a representative of XYZ
Insurance Co. stopped by to solicit ABC as a new client. He told Caroline that he wanted to
find out whether ABC might be interested in canceling its present employee health insurance
plan and adopting a plan provided by XYZ. Although Caroline explained that none of the
ABC managers were in the office, the XYZ representative nevertheless described his
company’s health insurance plan in detail. When Caroline reacted by stating that XYZ’s
plan sounded better than the current ABC plan, the XYZ representative immediately
produced a contract for Caroline to sign. Reluctantly, Caroline signed the contract accepting
the offer to adopt XYZ’s insurance plan. If XYZ seeks to enforce the contract against ABC,
is ABC bound to the contract?
ANSWER
EXPLANATION
Whether the insurance contract is binding on ABC Corp.
depends on whether A had actual or apparent authority to
enter into it. Actual authority is the agent’s power or
responsibility expressly or impliedly communicated by the
principal to the agent. Express actual authority includes the
instructions and directions from the principal, while implied
actual authority is the agent’s ability to do whatever is
reasonable to assume that the principal wanted the agent to
do to carry out his or her express actual authority. Here,
Caroline’s express authority was to answer phones, direct
messages, collect and sort the daily mail, greet visitors, and
schedule appointments for the company managers. Her
implied authority was to do anything reasonably related to
performing those duties. She was not given any express
authority to sign contracts, and signing contracts was not
related to or implied in her duties as a receptionist.
Therefore, Caroline had no actual authority to bind ABC to
the contract.
First, the main issues to be
addressed are stated.
Apparent authority arises when the principal’s conduct, past
dealings, or communications cause a third party to
reasonably believe that the agent is authorized to act or do
something. In this case, ABC did not communicate to XYZ
that Caroline had authority to enter into an insurance
contract, and no facts suggest that ABC and XYZ had done
business in the past. The nature and typical responsibilities
of Caroline’s position as a receptionist does not make it
reasonable for the XYZ representative to conclude that she
was empowered to select and approve health insurance
plans for ABC’s employees. Thus, Caroline had no
apparent authority to authorize the contract. Because
Caroline did not have either actual or apparent authority to
sign the contract, it is not binding on ABC Corp.
The general rule of law to be
applied in analyzing the next
issue is stated.
Next, the applicable rules of law
or legal tests to be used in
analyzing the issue are explained.
The rule of law or legal test is
applied to the facts. Note that the
facts are not merely repeated;
rather, they are linked to elements
of the rule or test as evidence to
explain and justify the ultimate
conclusion that there is no actual
authority.
Conclusion as to the first issue.
The rule is applied to the facts.
Note that the facts mentioned are
those that relate to the definition
of apparent authority.
Conclusion for the second issue.
An overall conclusion is reached
as to the issue of liability.
CASE 15.1
TRUE STATIC
OTVESS
L&H Construction Co. v. Circle Redmont, Inc.
District Court of Appeal of Florida, Fifth District, 55 So.3d 630 (2011).
GOD WE 1
RUST
BACKGROUND AND FACTS L&H Construction Company was a general contractor involved in
the renovation of the Thomas Edison historic site in West Orange, New Jersey, for the National Park Service.
L&H contracted with Circle Redmont, Inc., which is based in Melbourne, Florida, to make a cast-iron stair-
case and a glass flooring system. Redmont's original proposal was to "engineer, fabricate, and install"the
staircase and flooring system.
During negotiations, however, installation and its costs were cut from the deal. In the final agreement,
payment was due on "Supervision of Installation instead of "Completion of Installation."Nevertheless,
the final agreement stated that Redmont would engineer, fabricate, and install"Later, Redmont claimed
that this was a mistake. L&H insisted that installation was included. L&H filed a suit in a Florida state court
against Redmont. The court found that the word install in the phrase "engineer, fabricate, and install" was
the result of a mutual mistake. L&H appealed.
CASE 15.1 CONTINUES
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292
UNIT THREE Contracts and E-Contracts
CASE 15.1 CONTINUED
IN THE LANGUAGE OF THE COURT
PER CURIAM. [By the Whole Court)
A mistake is mutual when the parties agree to one thing and then, due to either a scrivener's error
[an error made by the person copying the document) or inadvertence (carelessness), express something
different in the written instrument. [Emphasis added.]
Clearly, the final contract between L&H and Redmont was ambiguous. While the final
*** proposal stated that Redmont was to "engineer, fabricate and install" the staircase and
flooring system. (the agreement alsol states that the final $40.000 progress navment was "Due
CASE 15.1 CONTINUED
IN THE LANGUAGE OF THE COURT
PER CURIAM. [By the Whole Court)
****
A mistake is mutual when the parties agree to one thing and then, due to either a scrivener's error
[an error made by the person copying the document] or inadvertence (carelessness), express something
different in the written instrument. [Emphasis added.]
Clearly, the final contract between L&H and Redmont was ambiguous. While the final
*** proposal stated that Redmont was to "engineer, fabricate and install" the staircase and
flooring system, [the agreement also] states that the final $40,000 progress payment was "Due
upon Supervision of Installation." The trial court allowed the parties to present some parol
evidence to establish the parties' true intent and subsequently found the contract contained
a mutual mistake as to whether Redmont was to install, or merely supervise, the installation
of the product. This was an issue that could have been decided for or against either party and
we cannot say the trial court's findings of fact were unsupported by competent, substantial
evidence. Although the face of the contract clearly reflected a duty to install, Redmont's wit-
nesses' testimony supported the trial court's finding that it was the express understanding
between Redmont and L&H that Redmont would only supervise, and not provide complete
installation of the staircase and flooring system.
Redmont's witnesses testified that L&H knew that installation was being deleted as a
means of saving money for L&H. Redmont's installation supervisor testified that the final
*** proposal was specifically worked up to schedule the progress payments toward the end
of the job pursuant to L&H's president's request, and that L&H had decided that it wanted
only installation supervision, and the contract price reflected installation supervision, not
complete installation. Redmont's chief financial officer] further testified that L&H was aware
that Redmont was not going to install the product "because L&H's president had asked us
to take the installation out to save money." Moreover, Redmont's president testified that he
spoke directly with L&H's president regarding Redmont's supervision of installation and it was
decided that Redmont would only provide installation supervision. *** Redmont's president
also reiterated [repeated] that he had direct conversations with L&H's president where he said,
"Fred, how can we save me some money here and what can we do." The weight to be given to
the testimony turned on the witnesses' credibility, a matter exclusively within the trial court's
province.
DECISION AND REMEDY A state intermediate appellate court upheld the lower court's finding
that the use of the word install in the parties' agreement was a mutual mistake. The appellate court reversed the
lower court's final judgment in Redmont's favor on other grounds, however.
WHAT IF THE FACTS WERE DIFFERENT? Suppose that Redmont had intentionally misled
L&H to believe that installation was included in the price. Would the court's decision on the mutual mistake issue
have been different? Discuss.
THE ECONOMIC DIMENSION The parties performed as agreed, with Redmont working on sched-
ule and L&H making timely payments, until the issue of installation arose. Assuming that no further disputes
CASE 15.2
Fazio v. Cypress/GR Houston I, LP
Court of Appeals of Texas, First Division, __S.W.3d__(2012).
CATE ON
BACKGROUND AND FACTS Peter Fazio began talks with Cypress/GR Houston I, LP, to buy retail
property whose maintenant was a Garden Ridge store. In performing a background investigation, Fazio
and his agents became concerned about Garden Ridge's financial health. Nevertheless, after being assured
that Garden Ridge had a positive financial outlook, Fazio sent Cypress a letter of intent to buy the property
for $7.67 million based on the currently reported absolute net income of $805,040." Cypress then agreed
to provide all information in its possession, but it failed to disclose that:
1. A consultant for Garden Ridge had recently requested a $240,000 reduction in the annual rent as
part of a restructuring of the company's real estate leases.
2. Cypress's bank was so concerned about Garden Ridge's financial health that it had required a per-
sonal guaranty of the property's loan.
The parties entered into a purchase agreement, but Garden Ridge went into bankruptcy shortly after
the deal closed. Fazio sued Cypress for fraud after he was forced to sell the property for only $3.75 million.
A jury found in Fazio's favor, but the trial court awarded judgment n.o.v. ("notwithstanding the verdict",
see Chapter 3) to Cypress. Fazio appealed.
IN THE LANGUAGE OF THE COURT
Evelyn V. KEYES, Justice.
We * * * hold that Fazio's claims clearly fall within the category of claims for which an action for
fraudulent inducement lies. [Emphasis added.]
Cypress knew from the express representation in the LOI [letter of intent] that Fazio was
willing to pay the requested purchase price of $7,667,000 for the Property "based on the cur-
rently reported absolute net income of $805,040." It further knew that this income was gener-
ated by rental income received from Garden Ridge. Fazio agreed in the LOI to conduct due
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Editorial review has deemed that any suppressed content does not materially affect the overall leaming experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
CHAPTER 15 Mistakes, Fraud, and Voluntary Consent 295
CASE 15.2 CONTINUED
diligence [background investigation], and, in accepting the LOI, Cypress agreed to "provide
Buyer with all information in [its) possession ***." Fazio, an experienced real estate inves-
tor, and his experienced agents conducted reasonable due diligence before Fazio signed the
Purchase Agreement, including requesting and reviewing all economic information about the
Property in Cypress's possession. When Fazio discovered disturbing information about Garden
Ridge in the financial statements provided to him, he conducted further investigations with
both Garden Ridge and Cypress. He was repeatedly assured that all was well and that Garden
Ridge anticipated strong sales ***.
A reasonable person in Fazio's position would clearly have attached importance to the
facts that approximately eight months before he purchased the Property in September 2003,
Garden Ridge had retained [a consultant] to assist it in restructuring and renegotiating Garden
Ridge's real estate leases; [the consultant] had prepared a letter for Garden Ridge to send to
landlords; a copy of that letter, stating that Garden Ridge was restructuring and that as part of
its restructuring it needed to reduce its occupancy costs at certain stores, including the Garden
Ridge store on the Property, was sent to Cypress's President, Maguire, on March 5, 2003; and
[the consultant] had contacted Cypress's Director of Finance and others at Cypress on at least
three other occasions to discuss the proposed rent relief, seeking an annual rent reduction of
30% for the Property, or $241,512.
A reasonable real estate investor who had signed an LOI to purchase the Property for
$7,667,000 on September 2, 2003 would also attach importance to and be induced to act on
the information that, on August 14, 2003, Cypress's lender, Guaranty Bank, had requested
that Cypress's President execute a personal guaranty of the balance of $4,500,000 on the
$5,704,000 loan secured by the Property because the bank was concerned about Garden
Ridge's financial condition.
*** We*** hold that Cypress's active concealment of this material information, which it
was under a duty to disclose as financial information material to the real estate transaction in
its possession, was fraudulent as a matter of law.
DECISION AND REMEDY The Texas appellate court reversed the trial court and held that Cypress
was liable to Fazio for fraud.
THE ETHICAL DIMENSION Was Cypress's conduct unethical? Why or why not?
THE SOCIAL DIMENSION What does the decision in this case suggest to sellers of commercial real
estate and others who engage in business negotiations?
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