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Intro To Business Law

Chapters 7, 8, 9, 10, 11, 12, 13
STUDY
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Promisor
In contract law, the one making the promise
Promisee
In contract law, the person to whom the promise is made
Formal Contract
Contracts that require a special form or method of creation
Executed Contract
A contract that has been fully performed on both sides
Four elements for contract formation
1. an agreement
2. supported by legally sufficient consideration
3. for a legal purpose
4. made by parties who have the legal capacity to enter into the contract
A voidable contract
A valid contract that can be avoided at the option of one or both of the parties.
Unenforceable Contract
One that cannot be enforced because of certain legal defenses against it.
Void Contract
No contract at all
Quasi contracts
Contracts implied in law
Requirements of a Contract
1. Intention
2. Definiteness
3. Communication
4. Acceptance
Mailbox Rule
Acceptance becomes valid when it is dispatched (when it is put into the mail).
Forbearance
The refraining from an action that one has a legal right to undertake
Consideration
The value given in return for a promise
Rescission
The unmaking of a contract
Accord and Satisfaction
A debtor offers to pay, and a creditor accepts, a lesser amount than the creditor originally claimed was owed.
A release
A contract in which one party forfeits the right to pursue a legal claim against the other party
Covenant Not to Sue
The parties simply substitute a contractual obligation for some other type of legal action based on a valid claim.
Emancipation
When a child's parent or guardian relinquishes the legal right to exercise control over the child.
Contractual Capacity
The legal ability to enter into a contractual relationship.
Disaffirmance
The legal avoidance, or setting aside, of a contractual obligation.
Ratification
The act of accepting and giving legal force to an obligation that previously was not enforceable.
Blue Laws
"Sunday" laws prohibit the formation or performance of certain contracts on a Sunday
Contracts in Restraint of Trade
Anticompetitive agreements
Covenants Not to Compete
Promises not to compete are often contained as anccillary (secondar, or subordinate) clauses in contracts concerning the sale of an ongoing business
Procedural Unconscionablility
Relates to factors bearing on a party's lack of knowledge or understanding of the contract terms
Adhesion Contracts
One written exclusively by one party( thee dominant party, usually the seller or creditor) and presented to the other on a take it or leave it basis
Substantive Unconscionability
Characterizes those contacts, or portions of contracts, that are oppressive or overly harsh
Exculpatory Clauses
Clauses that release a party from liability in the event of monetary or physical injury (no matter who is at fault)
Blue Sky Laws
State laws that regulate the offering and sale of securities for the protetion of the public and state statutes regulating the sale of insurance
Severable (divisible) contract
Consists of distinct parts that can be performed separately, with separate consideration for each part
Unilateral Mistake
Made by only one of the contracting parties
Bilateral (Mutual) Mistake
Made by both parties
Material Fact
A fact important to the subject matter
Scienter
Guilty Knowledge
Fraud Involves three elements
1. A misrepresentation of a material fact must occur
2. There must be an intent to deceive
3. The innocent party must justifiably rely on the misrepresentation
Duress
Forcing a party to enter into a contract because of the fear created by threats
Statute of Frauds
A statute which stipulates what types of contracts must be in writing or be evidenced by a record
The One-Year Rule
Contracts that cannot, by their own terms, be performed within one year from the day after the contract is formed must be in writing to be enforceable
Collateral Promise (Secondary Promise)
is one that is ancillary (subsidiary) to the principal transaction
Prenuptial Agreement
Agreement made before a marriage that define each partner's ownership rights in the other partner's property
Privity of Contract
Establishes the basic principle that third parties have no rights in contracts to which they are not parties.
Third Party Beneficiary Contract
Exceptions to the rule must be made when justice cannot be served by adherence to a rule of law
Assignor
The party assigning the rights to a third party
Assignee
The party receiving the rights
Assignment
The transfer of contract rights to a third person
Obligee
The person to whom a duty or obligation is owed
Obligor
The person who is obligated to perform the duty
Intended Beneficiary
The third party has legal rights and can sue the promisor
Incidental Beneficiaries
Cannot enforce a contract to which he or she is not a party
Condition
A possible future event, the occurence or nonoccurrence of which will trigger the obligation under a contract
Conditions Precedent
A condition that must be fulfilled before a party's promise becomes absolute
Condition Subsequent
When a condition operates to terminate a party's absolute promise to perform
Concurrent Conditions
When each party's absolute duty to perform is conditioned on the other party's duty to perform
Complete Performance
When a party performs exactly as agreed
Substantial Performance
A party who in good faith performs substantially all of the terms of a contract
Breach of Contract
Nonperformance of a contractual duty
Material Breach of Contract
When performance is not at least substantial
Anticipatory Repudiation of a Contract
Before either party to a ontract has a duty to perform, one of the parties may refuse to perform his contractual obligations
Discharge by Rescission
For mutual rescission to take place, the parties must make another contract
Discharge by Novation
The process of novation substitutes a third party for one of the original parties
The requirements of a novation
1. The existence of a previous, valid obligation
2. Agreement by all of the parties to a new contract
3. The extinguishing of the old obligation (discharge of the prior party)
4. A new, valid contract
Discharge by Accord and Satisfaction
The parties agree to accept performance different from the performance originally promised.
Accord
An executory contract (one that has not yet been performed) to perform some act to satifsfy an existing contractual duty that is not yet discharged
Contract Alteration
The law allows an innocent party to be discharged when one party has materially altered a written contract without their knowledge or consent
Statutes of Limitations
Limit the period during which a party can sue on a particular cause of action
Bankruptcy
A proceeding in bankruptcy attempts to allocate the debtor's assets to the creditors in a fair and equitable fashion
Impossibility of Performance
After a contract has been made, performance may become impossible in an objective sense.
Grounds for discharge by impossiblilty of performance
1. When a party whose personal perfomance is essential to the completion of the contract dies or becomes incapacitated prior to performance
2. When the specific subject matter of the contract is destroyed.
3. When a change in the law renders performance illegal.
Commercial Impracticability
Courts may excuse parties from their performance obligations when the performance becomes much more difficult or expensive
Frustration of Purpose
In principle, a contract will be discharged if supervening circumstances make it impossilbe to attain the purpose both parties had in mind when making the contract
Damages (Types)
1. Compensatory (to cover direct losses and costs)
2. Consequential (to cover indirect and foreseeable losses)
3. Punitive (to punish and deter wrongdoing)
4. Nominal (to recognize wrongdoing when no monetary loss is shown)
Reformation
Is an equitable remedy used when the parties have imperfectly expressed their agreement in writing
Requirements of Quasi Contract
1. The party conferred a benefit on the other party.
2. The party conferred the benefit with the reasonable expectation.
3. The party did not act as a voluteer in conferring the benefit.
4. The party receiving the benefit would be unjustly enriched by retaining the benefit without paying for it.
Online Agreements Should Include
1. A clause that clearly indicates what constitures the buyer's agreement to the terms of the offer, such as a box containing the word "I accept" that the buyer can lik on to indicate acceptance.
2. A provision specifying how payment for the goods (including any applicable taxes) must be made.
3. A statement of the seller's refund and return policies.
4. Disclaimers of liability for certain uses of the goods. For example, an online seller of business forms may add a disclaimer that the seller does not accept responsibility for the buyer's reliance on the forms rather than on an
attorney
5. A provision specifying the remedies available to the buyer if the goods are found to be defective or if the contract is otherwise breached. Any limitation of remedies should be clearly spelled out.
6. A statement indicating how the seller will use the information gathered about the buyer.
7. Provisions relating to dispute settlement, such as an arbitration clause, a choice-of-law clause, or a forum-selection clause
Forum-Selection Clause
Indicates the forum, or location, for the resolution of any dispute arising under the contract
Click-On Agreements
Also referred to as "click-on license or click-wrap agreement
Shrink-Wrap Agreement
An agreement whose terms are expressed inside a box in which the goods are packaged
Browse-Wrap Terms
Do not require an internet use to assent tot he terms before, say, downloading or using certain software.
E-Signature
an electronic sound, symbol, or process attached to or logically associated with a record and executed or adopted by a person with the intent to sign the record
Partnering Agreement
A seller and a buyer who frequently do business with each other agree in advance on the terms and conditions that will apply to all transactions subsequently conducted electronically
UETA
The Uniform Electronic Transactions Act, adopted at least in part, by forty-eight states. The UETA declares that a signature may not be denied legal effect or enforceability solely because it is in electronic form.
The E-SIGN Act of 2002
refers explicitly to the UETA and provides that if a state has enacted the uniform version of the UETA, it is not preempted by the E-SIGN Act
Attribution
In electronic transactions, attribution refers to the procedures that may be used to ensure that the person sending an electronic record is the same person whose
e-signature accompanies the record.
Notarization
If existing state law requires a document to be notarized, the UETA provides that this requirement is satiffied by the electronic signature of a notary public or other person authorized to verify signatures.