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Business Law Test II
Terms in this set (75)
Ability to enter into a contractual relationship
Minors, Intoxicated, Mental Illness
Under the age of the majority (usually 18). Can enter into contracts provided it is not an illegal contract (alcohol, tobacco, etc)
Avoidance of a contractual obligation
When can a minor disaffirm?
During minority or reasonable time after turning 18
When minors disaffirm -
They must do so "all or nothing", return goods or pay a reasonable value for them, committing a fraud may deny the right to disaffirm
Acceptance or affirmation of a legal obligation; may be express or implied
Explicit written or oral agreement
Failure to disaffirm in a reasonable amount of time or expressing conduct inconsistent with disfaffirmance.
Contracts with minors:
Can be entered into permitting they are not illegal, can be disaffirmed at any time by the minor and a reasonable time after turning 18, can be ratified post 18.
Contracts under Intoxication/Impairment
Voidable and ratifiable by intoxicated party, enforceable by other party if you can prove that intoxicated party understood legal consequences
Contract with the Mentally Ill/Incapable
Void, voidable if incompetent at the time, valid is made when the person was competent
Contracts contrary to Statues
Usury, Gambling, Sabbath, Licensing
Unreasonable lending rate
Contracts contrary to Public Policy
Restraining free competition, Unconscionable (unfair or oppressive), Exculpatory (releasing someone from contract after monetary or physical injury)
Considerations of Ancillary Agreements
Purpose, Time, Georgraphy
Shocks conscience of the court
Oppressive or harsh term (necessary but not sufficient), EX. no remedy for non-performance
Flaw in creation that leads to bad result (necessary)
What act is necessary in proving Unconscionably
Procedural Unconscionably (flaw in creation)
Types of Procedural Unconscionability
Unintelligible Language, Disparity in bargaining power
Defense of Contract Formations
Lack of genuine assent, fraudulent representation
Elements showing lack of genuine assent
Bilateral Mistake/Unilateral Mistake
Either party can rescind
Enforceable unless a mistake of fact (other party should resonantly recognize the mistake of fact, inadvertent mathematical error without gross negligence).
Elements of Fraudulent Representation
Misrepresentation of material fact, Intent to deceive, innocent party must justifiably rely on the misrepresentation
Misrepresentations of Material Fact
Express (written/oral), Conduct, From a profession that is relied on, By silence (withholding information).
Forcing a party under the fear of a threat = rescindable contract
Contracts made when someone's free will has been removed = voidable
Statue of Frauds
Contracts that involve writing
Contracts that involve writing (SoF)
Contracts involving land, Contracts that cannot be performed within a year and a day, Collateral Promises, Promises in consideration of marriage, Contracts for the sale of goods priced at more than 500.
Oral Contract Enforceability
If performance is possible within a year and a day from formation
One Year Rule
Contracts that cannot be performed within one year from the day after the contracts formation = MUST BE PERFORMED IN WRITING
Anything ancillary to principal transaction or primary contractual relationship
Does not need to be in writing enforceable
Must be in writing enforceable (such as that of the countersigning of a loan).
Exception to Secondary Obligation
Main Purpose Rule - answering for the debt of another, does not have to be in writing enforceable if the answering is in the third party's interest.
Exceptions to the Statue of Frauds
Do not require writing - Partial performance, Admission in court proceeding, Promissory Estoppel, Equity favors enforcement
Exception to statue of Frauds, assess how much injury will be suffered should the contract not be enforced
Exception to statue of Frauds (requiring writing) - Denial of retraction if promisee justifiably relies on something.
Requirements of Statue of Frauds
Writing (confirmation, invoice, sales slip), Composition (identifies parties, subject, essential terms (quantity, price agreement), consideration. NOT ENFORCEABLE WITHOUT SIGNATURE
Discharge & Third Party Rights
Transfer of rights to another (either to perform or to require performance).
Assignor / Obligor
Party assigning rights
Assignee / Obligee
Party receiving rights
Rights that cannot be assigned
Prohibited in Statue (workers comp.), calls for performance of personal services, when doing so will change risk of duties of obligor, explicit stipulation against transfer of rights
Transfer of duty to a third person, assumes duty as if it was held to initial delegator
Stipulations of Delegation
If delegee does not perform, delegator is still liable, rights and duties are transfered
Duties that cannot be delegated
Performance depends on special skill, special trust in obligor, performance will vary materially, contract prohibits delegation
Third Party Beneficiary
Contract made for the benefit of a third person
Person for whose benefit the contract is created = can sue the promissor directly
Received benefits but have no rights to the benefit and consequently cannot sue.
Conditions of Performance
Trigger/discharge contractual obligation
Must be fulfilled before a party's promise becomes absolute
A condition that operates to terminate a party absolute promise to perform
Requires mutual simultaneous performance, each party's absolute duty is contingent on the other's performance.
Discharges By Performance
Complete Performance, Substantial Performance, Performance to the satisfaction of another, Breach of contract, Anticipatory repudiation of a contract
Reasonable person standard, someone who performs all terms in good faith.
Breach of Contract
Allows other party to sue: minor breach/material breach
Work can be resumed after breach, the majority of the work was substantial
Performance was not in the least substantial
Anticipatory Repudiation of a Contract
Material Breach, choosing to perform before the obligation to perform sets in. Non-breaching party can seek remedy for damages and a contract somewhere else. Breaching party can carry on before it is treated as a breach.
Discharge by Operation of Law
Contract alteration, statue of limitations, objective impossibility, commercial impracticability, Frustration of Purpose (mutual impossibility to fulfill contract).
No one could do it, death or incapacity, subject mater is destroyed, intervening superseding illegality.
Legal remedy for non-breaching parties for the loss of a bargain. Aims to put the party in a place had the contract been fully performed.
Only damages sustained from the loss, attempts to make up for what was lost.
Other expenses incurred as a result of breach
Damages that result from breach of contract = flowing from reach. Punitive & Nominal.
Punish wrongdoers for wrong doing (tort)
No actual financial damages occur, a matter of principle
Mitigation of Damages
Injured Part has responsibility to mitigate to themselves
Contract is canceled and parties are restored to original positions
Returning of goods, property, and funds after rescission. Ensures equity and unjust enrichment of parties.
Calls for the performance of an act when monetary damages would be inadequate, but not available for breached contracts of personal services.
Equitable remedy allowing for reformation or re-writing of contract to reflect true feelings and intentions of parties. Available when contract in writing is imperfect
Recovery Based Quasi-Contract
Show benefit was conferred, Conferrer expected to get paid (was not volunteered), retaining the benefit would result in unjust enrichment of receiving party.
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