Business Law Exam 2 Review

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Checklist of 7 Key Characteristics of a valid contract
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Letters of IntentLetters summarizing negotiation progress that do not generally create enforceable legal obligationsProblems with definitenessTerms of offer must be definite. If they are vague then even if the offeree agrees to accept the deal, a court doesn't have enough info to enforce it and there is not contractDifferent ways that offers can be terminated1. Termination by Revocation 2. Termination by Rejection 3. Termination by Expiration 4. Termination by operation of lawMirror Image RuleUnder common law, acceptance must be precisely the same terms as the offerMailbox Rule - When does acceptance/revocation of an offer occur?Acceptance is generally effective the moment it is out of the offeree's control Offers and terminations or revocations of offers are effective when recievedWhat is consideration?The inducement, price, or promise that causes a person to enter in to a contract and forms the basis for the parties' exchangeWhat types of items can be considered acceptable "value" for valid consideration?- An "Act" (doing something not required by law) - A "Forbearance" (an agreement to not do something that is legal) - A "promise to act of forebear" (promise to do, or not to do, something in the future)Requirements of legality for a contract to be enforceable and types of illegal contracts?- a contract that is illegal is void and unenforceable Two types of illegal contracts: 1. Those that violate a statute 2. Those that violate public policyWhy are illegal contracts unenforceable ?It would be socially destructive and would be participating in illegal conduct and lose credibility and powerNon-Compete AgreementsWhen one party agrees to refrain from competition in a stated type of business To be valid, a non compute agreement must be ancillary to a legitimate bargain (must be part of larger agreement)Two most common settings for legal non-compete contracts1. Sale of business; enforceable if: - Reasonable in time, - Geographic area, and - Scope of activity 2. Employment relationships; enforceable if: - it is essential to employer, - Fair to employee, and - harmless to general public (include: trade secrets, confidential info, customer lists, etc.)What do capacity and consent mean in the context of enforcing contracts?Capacity: the legal ability to enter into a contract Consent: Refers to whether a party truly understands the terms of the contract and whether s/he made the agreement voluntarilyContract Issues relating to minors and exceptions to the general principle that they can void/dis-affirm contracts?Because a minor lacks legal capacity they can create only a voidable contract. Only the party lacking capacity may void contract A minor who wishes to escape from a contract generally may dis-affirm it; they my notify other party that they refuse to be bound by the agreement. A minor may dis-affirm a contract anytime before turning 18 or within a reasonable amount of time after turning 18 Possible exceptions: necessaries , misrepresentation of age, emancipationMentally impaired persons and when contracts with them are void or voidable ?Party suffering from mental impairment usually creates only a voidable contract If a person has been adjudicated incompetent all future agreements are voidMeaning of FRAUD, what plaintiff must show to win a case alleging fraud, and remedies for fraud in the context of contract law- If defendant knows a statement of fact if false, or is uncertain whether it is true; and intends that the other party rely on the statement, then there is no fraud - Plaintiff must show: 1. intentional or reckless misrepresentation of fact 2. Materiality 3. Justifiable Reliance Remedies: 1. Rescinding the contract 2. Suing for damages 3. or bothDuressIf one party makes an improper threat that causes the victim to enter into a contract, and the victim had no reasonable alternative, the contract is voidable. In most states today, economic duress can also be used to void a contract. In analyzing a claim of economic duress, courts look at these factors: - acts that have no legitimate business or purpose - Greatly unequal bargaining power - an unnaturally large gain to one party - Financial distress to one partyUndue InfluenceTo prove undue influence, the injured must demonstrate: - a relationship between the two parties either of rust or domination, and - May be reason to rescind agreements, or render the transactions voidableStatute of Frauds and what types of contracts must be in writing to be enforceableA plaintiff may not enforce any of the following agreements unless the agreement, or some memorandum of it, is in writing and signed by the defendant. The agreements that have to be in writing are those: - for any interest in land, - That cannot be performed within one year - to pay for the debt of another - made by an executor of an estate to pay estate debts - made in consideration of marriage; and - for the sale of goods of $500 or moreWhat the writing must containThe writing must consist of more than one document, written at different times, with each document making a piece of the puzzle. The writing must: - be signed by the defendant - state with reasonable certainty; - the name of each party - the subject matter of the agreement - and all of the essential terms and promisesWhat is required by the UCC's Statue of Frauds?The UCC requires writing for the sale of goods priced $500 or more. The statute of frauds section has three important elements: 1. The basic rule 2. The merchants' exception 3. Special circumstancesHow does the UCC differ from common law regarding when a contract must be in writing to be enforceableThe key difference is that the codes does not require all of the terms of the agreement to be in writing the code looks for something simpler: an indication that the parties reached an agreement4 Principles contract interest that a court may seek to protect by remedies1. Expectation interest 2. Reliance Interest 3. Restitution interest 4. Equitable InterestThe Expectation interestThis interest is what the injured party reasonably thought s/he would get from the contract. The goal is to put her/him in the position s/he would have been in if both parties had fully performed their obligationsReliance InterestEven if the injured party has not shown an expectation interest, s/he can still recover damages if s/he proves that they spent more money in reliance on the agreement and that, in fairness should receive compensationRestitution InterestThe injured party may be unable to show an expectation interest or reliance. But perhaps s/he has conferred a benefit on the other party. Here, the objective is to restore the injured party the benefit s/he has providedEquitable InterestIn some cases, money damages will not suffice to help the injured party. something more is needed, such as an order to transfer property to the injured party or an order forcing one party to stop doing somethingTypes of DamagesDirect Damages: Most common monetary award for the expectation interest. Flow directing from the contract Consequential Damages: Reimburse for harm that results from the particular circumstances of the plaintiff. These damages are only available if they are foreseeable consequence of the breachHadly v Bavendale rule about foreseeability regarding consequential damagesThe injured party may recover consequential damages only if the breach party should have foreseen them when the two sides formed the contract4 Types of real property1. Land (including subsurface and some air space) 2. Buildings 3. Plant Life 4. FixturesFixturesGoods that have become attached to real property ex: water heaters and sinksEstates in real propertyFee simple absolute: Full ownership privileges in propertyConcurrent EstatesWhen two or more people own real property at the same time, they have concurrent estates Most common forms of concurrent estates are: 1. Tenancy in common 2. Joint tenancy, and 3. Tenancy by the entiretyTenancy in commonMost common form; tenants have equal proportionate interest in the entire propertyJoint TenancyGives the parties proportionate ownership of the property, an absolute right to partition, and the right of survivor-shipThe different types of deedsEasementsGives on person the right to enter land belonging to another and make limited use of it, without taking anything awayEasements can be created by- Grant - Reservation (owner sells land but reserves some right to enter the property) - Implication (clearly implies creation in favor of new parcels) - Necessity (someone absolutely must make use of another's property) - Prescription (use is open and notorious, adverse to owner, continuous and uninterrupted for # of years required by statute)Adverse PossessionAllows someone to take title of land if s/he meets certain testsIn most states, to gain ownership of land by adverse possession the user must prove- entry and exclusive possession - open and notorious possession - A claim adverse to the owner - continuous possession for a statutory periodNuisance LawAn unprivileged interference with a persons use and enjoyment of his/her property ex: offensive noise, odors, smokeZoningState laws that permit local communities to regulate building and land useEminent Domain(5th amendment) Power of the Government to take private property for public use4 Types of Land-lord Tenancy1. Tenancy for Years: Any lease for a stated period of time 2. Periodic Tenancy: created for a fixed period and then automatically continues for additional periods until either party notifies the other of termination 3. Tenancy at will: No fixed duration 4. Tenancy of sufferance: When a tenant remains on the premises, against the wishes of the landlord, after the expiration of a true tenancyWhat is "quiet enjoyment" in the context of landlord-tenant law?The right to use the property without interference of the landlordWhat are exculpatory clauses in leases? Are they generally valid in residential leases?State landlord is not liable for any injuries that occur on rented premises regardless of cause they are generally void in residential leasesTenancy by the entiretyGives each legal spouse ownership of the entire property, and they both have a right or survivorship neither can convey their interest if parties wish to sell their interests they must do so together Divorce terminates and leaves it as two parties as tenants in common