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Business LAW Test 2
Terms in this set (51)
presumed to exist by law unless otherwise challenged
minors/insane can avoid contractual obligations
disaffirm(cancel out) a contract during minority or within reasonable time after reaching of majority (18)
person age 17 purchases tv set, while still at age 17, she decides to disaffirm the contract. Can she?
Yes because she's a minor (capacity)
person age 17 purchases tv set, two days after her 18th bday, she disaffirms the contract. disaffirmation enforcable?
yes reasonable amount of time (Capacity)
person age 17 purchase tv set on installment basis, making payments monthly. one day after her 18th bday, she pays installment. two days later, she disaffirms contract. enforceable?
no because the payment was made after her 18th bday, therefore she has installment capacity.
jethro (17) purchases used car for 8,000 from eddy car sale. same night jethro totally demolishes the car. can jethro disaffirm the contract?
Yes, minor gets $ back, eddy car sale gets totaled car back(capacity)
eddy sells little boy loaf of bread for 100$. can minor disaffirm the contract ?
yes but because it a necessity he keeps the bread and pays fair price for it. (capacity)
If the subject matter of the contract is illegal, then the contract is void... not voidable. contract is neither valid nor enforcable
borrow 20,000 from eddy, agreeing to pay interest at rate of 10%... Daily . does this contract exist?
no state regulates interest rates.(legality)
(Gambling) purchase of pork belly on margin account gambling
no just risky investment in market
the creation of risk, not the degree of risk
transaction of gambling
transaction is not gambling if an existing risk merely transferred by the agreement, from the seller to the buyer. gambling creates risk which did not exist prior
i promise to pay you 100 if the skins win in exchange for return promise to pay 100 if cowboys win. you agree.
-are we gambling?
-Prior to making agreement, what risk exist for either party with respect tot he subject matter of the agreement?
-Yes due to dded risk
Buyer purchases from guido all of the business assets of the restaurant for 2,000,000. market value of net tangible assets is 1,600,00.
After purchasing Guido house of pasta, whats the worst thing that could happen?
what would protect them from that?
1.open new house next door
2.covenant not to compete from seller;clause in contract
suppose Guido contractually agreed not to engage in any business in the western hemisphere for next 50 years. Would the agreement be enforceable
No, the agreement is too excessive(western hemisphere +50 years is too much)
Statute of frauds
Existence of the elements of Offer,acceptance,consideration,capacity,legality create a valid contract
statute of frauds requires?
we orally agree on a contract we must write and signed by party against whom the enforcement is being sought or court will not hear case.
august 1 20x1, concessionaire enters a contract with frostburg state university to sell refreshments at the bobcat football games during 20x2 season, 1sept 20x2-15nov 20x2. does this contract must comply with statute of frauds?
yes, its more then 1yr in advance
compliance of SoF required for 1,000,000 service contract to be completed in less than a year from date of creation of contract?
compliance with SoF required for sales of goods for $499?
is putting both 1 and 2 in contract useless?
1.no can go to court through word of mouth
2.no oral agreement can go to court
3.no always a good idea to put contract in writing
we orally agree to 120 days payment after delivery. later, we put the agreement in writing and sign it. the writing expresses payment is due 30 days after delivery. what is enforceable?
30 days, writing is legal document to follow by
"Performance" example of common law
As public accountant, you prepare financial statement for a client. after delivery of FS client discovers a missing $
1. are you discharged of your contractual duty?
2.DO you have right to compensation?
3. what is terminology for level of performance
1. Yes, objective was substantially met
3. substantial performance
offeror offers to sell tie. before acceptance he dies. offeree subsequently say, i accept. does a contract exist?
no, death @ offer stage= termination
Discharge due to impossibility of performance
1.obligor of a personal service dies(death)
2.the subject matter becomes illegal susquent to the (illegal)creation of the contract
3. destruction of the subject matter before passage of the risk of loss (destruction)
lawful contract of 100 ak47 rifles. Subsequent to the creation of contract, the US GOv bans all transfers of assault weapons. Are parties discharge of contractual duties.
yes by operation of illegal subject matter
sale of 500 industrial grade diamonds at 2,000/carat. subsequent to creation of contract, US places embargo on all diamonds from south Africa, causing the market value of diamonds to jump 3000/carat. seller cant make profit by contract price. are parties discharged due to commercial frustrations?
no, assumable risk which is fluctuation in MKT price
baker from town had contractual duty to deliver baked goods to ski lodge. Snow storm closed road between town and lodge for week. was the baker excused for not delivering daily during week in which road was closed?
could be yes or no
house owner offers 9,00 if painter paint house. Offer accepted. After reasonable amount of time from contract, no one has performed. Painter sues the houseowner for breach of contract because he wasn't payed. Who prevails?
house owner prevails, duty to pay is dependent on occurrence of condition
obligor of a duty delegates the duty to a delegate. delegate breaches duty. obligee wins judgement for 1,000,000 against the obligor and the delegate , joint and severally. can the obligee pursue both parties for 500,000?
yes, joint and severally
can obligee pursue the judgment claim against the delegate for 1,000,000 and ignore the obligor?
yes, if there is joint+severally liability and vice versa
enter contract with contractor to have rooms built onto house. Contractor does everything besides roofs. delegates to subcontractor who does a shit job. you contact the contractor and tell him to fix the problem, he informs you to call subcontractor is he off the leash?
no he can not discharge himself
obligee assigns the right to receive 9,000 to an assignee. the obligor pays the obligee according to the terms of the contract. the assignee demands payment from obligor. who will prevail?
creekman owed 800,000 to the neighbor. suppose that the neighbor promised to forgive creekmans debt if creekman had an impoundment created. in consideration of the neighbors promise, creekman entered into a contract with a contractor for the construction of a dam. the contractor fails to build the dam. neighbor sues the contractor for breach of contract. who will prevail?
neighbor because he is the creditor beneficiary
could specific performance be granted as a remedy in the form of:
a.performance by a rock band in the lane center?
b.transfer of ownership to 10,000 bushels of wheat?
c.mona lisa(the painting)
d.transfer of a deed to real property?
a. no you cant force a person to perform a service
b.no, money damages can restore
c.yes,money damages couldn't fix this
d.if residence no, commercial yes
muffler on Ps car sucks and he gets a new muffler. subsequently P sells his car. he says "i must recover my new muffler." does the buyer have a right to the muffler
yes, muffler becomes part of the car by accession
Gift inter vivos
gift during life
- must be unconditional
transfer title to personal property through gift inter vivos
1. intention of the donor to make a gift
2.delivery by the donor
3. acceptance by the donee(receiver)
landowner transfers ownership of leaves from his yard to his neighbors yard. landowner has intention to make gift and he makes delviery. has title to the leaves been transferred to the neighbor?
no, there was no acceptance
donor is in contemplation of death
property must be returned if
donor doesnt die
donor revokes gift
tie-man intends to make a gift to you. stating "i am making a gift to you of this tie under the condition my wife gets me a new one for Christmas" upon acceptance has title been transferred
no, gifts cannot have conditions
reduce size collection tie-man gifts his nephew a tie. he has a fight with the nephew and demands the tie back. is the donee legally obligated to return the tie?
gift inter vivos, no right of reversion
who incurs gift tax?
a thief steals tv from owner, sells tv to a good faith buyer had no idea theif did not have good title to pass? who has superior claim to title? why?
the owner/no transfer of title with stollen goods
original owner delivers her tv to eddy's tv sales and service shop for repairs. Fast eddy reparis tv and sells tv(without authorization) to good faith customer for value. who has superior claim to title?
the customer who purchased the Tv from
Joint ownership tom,dick,harry jointly purchase a sailboat. tom dies, in his WILL he leaves his son the boat. the others don't like him a believe they should split toms shares, who has the rights?
Element of a joint Tenancy with Rights of Survivorship
1. all tenants must acquire interest at the (same time)
2all tenants must have (equal interest)
3all tenants must have the right to( use at all times)
tom,dick,harry own sailboat as joint tenants with rights to survivorship. Tom get pissed and decides to sell his interest to Manson. can he sell in a joint tenant WRS to an outside party?
yes, tenant has unilateral right to serve an interest
Mr.P wants to get a houseboat and sell his house. Ms.P says no way, so Mr.P sells his half of the deed to the house. does Ms.P have a new house buddy?
No, tenancy by the entireties
delivery of goods by the bailor to a bailee with the understanding that the good are to be returned to the bailor at some future time. often is, but doesn't have to be created by a contract
elements creating bailment
1.delivery of the good by the bailor
2. intention of the bailee to take control of the goods
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