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B-Law Test #3

Terms in this set (111)

4 Elements for an Enforceable Contract are:
1. Agreement
2. Consideration
3. Capacity
4. Legality
What is consideration?
Each party must have something at stake in the arrangement
Two elements of consideration
1. something of legally sufficient value must be given in exchange for the promise
2. there must be a bargained-for exchange
What is legally sufficient value?
1. something of value in the eyes of the law
2. may consist of:
- a promise to do something that you otherwise have no prior legal duty to do
- performance of an action that you are otherwise not obligated to undertake (ex: provide accounting services)
- forbearance
What is forbearance?
the refraining from an action that one has a legal right to undertake
- ex: not purchasing goods from another supplier
What is bargained-for exchange?
The basis for a bargain struck between or among the contracting parties. It distinguishes contracts from gifts
Hamer v. Sidway
- Uncle becomes indebted to nephew after uncle promises nephew $5,000 if he can refrain from drinking, using tobacco, swearing and playing cards or billiards for money until age 21
- Nephew fulfills promise to refrain
- Nephew gives the right to receive the money to receive the money to Louisa Hamer. - Uncle Dies
- Sidway, executor for the Estate of the Uncle refuses to pay Hamer
- Executor argues there was no consideration given in exchange for the promise to pay $5,000
- Court disagrees and says the action of refraining from a legal right is consideration
Consideration: Adequacy
involves "how much" consideration is given; measuring whether bargain was fair
- courts typically don't get involved in determining adequacy as long as consideration is legally sufficient
Preexisting Duty
promise to do what one already has a legal duty to do and does not constitute legally sufficient consideration
What is the goal of preexisting duty?
to prevent against extortion or a "hold-up" game
- ex: construction example from lecture
Rescission
A remedy whereby a contract is canceled and the parties are returned to the positions they occupied before the contract was made. (an example where consideration is lacking)
Past Consideration
promises made in return for actions or events that have already taken place (this is unenforceable)
- bargained-for exchange is missing
- ex: companies that attempt to impose a non-compete covenant upon an existing employee
Illusory Promise
when promisor has not definitely promised to do anything even though it appears he or she has made a promise (agreement lacks consideration)
What are all of the agreements that lack consideration?
- preexisting duty
- rescission
- past consideration
- Illusory promise
What is accord and satisfaction
A common means of settling a disputed claim, whereby a debtor offers to pay a lesser amount than the creditor purports to be owed.
What is accord?
the agreement under which one party promises to give or perform, and the other party to accept, in satisfaction of a claim, something different from what the parties originally agreed
What is satisfaction?
performance (usually payment) which takes place after the accord is executed
liquidated debt
A debt whose amount has been ascertained, fixed, agreed on, settled, or exactly determined.
- accord and satisfaction CANNOT take place
unliquidated debt
the amount of the debt is not ascertained or settled, and reasonable persons may differ/disagree over the amount owed
What is release?
A contract in which one party forfeits the right to pursue a legal claim against the other party.
- it prohibits any further recovery beyond the terms stated in the release
A release is generally binding IF:
1. given in good faith
2. stated in a signed writing (required by many states)
3. accompanied by consideration
What is a Promissory Estoppel?
can be used to enforce a promise when the promisee has justifiably relied on it and when justice will be better served by enforcing the promise
- as a result, promisor can't argue lack of consideration to a defense
What five elements must be met for a promissory estoppel?
1. there must be a clear and definite promise
2. promisor should have expected promisee would rely on the promise
3. promisee reasonably relied on the promise by acting or refraining from some act
4. promisee's reliance was definite and resulted in substantial detriment
5. enforcement of the promise is necessary to avoid injustice
What is contractural capacity?
It is the legal ability to enter into a contractural relationship
What is the age of majority?
18
Can a minor enter a contract?
a minor can enter into any contract an adult can, provided that the contract is not one prohibited by law for minors (ex: sale of tobacco)
To avoid a contract, a minor needs to:
clearly show an intention not to be bound by it
What is disaffirmance?
The legal avoidance, or setting aside, of a contractual obligation.
Must disaffirm the ___________ contract
entire
What does a minor have to do to disaffirm a contract?
Must express through words their intent not to be bound by it.
Can you disaffirm a contract after the minor comes of age?
can disaffirm a contract even after the minor comes of age, as long as the contract was entered into as a minor
An adult who entered into a contract with a minor _____________ avoid their contractual duties on the same grounds
CANNOT
What are the exceptions to a minor's right to disaffirm (public policy)?
- marriage contracts
- contracts to enlist in the military
- contracts entered into by a minor engaged in business as an adult
- contracts for necessaries: basic needs such as food, clothing, shelter, and medical services
Ratification
the conformation of an act or agreement that gives legal force to an obligation that previously was not enforceable
express ratification
Occurs when, after reaching age of majority, individual states either orally or in writing that he/she intends to be bound by contract entered into while a minor
implied ratification
Occurs when former minor takes action after reaching age of majority consistent with intent to ratify contract
Parent's liability for minors
parents are not liable for the contract entered into by minor children acting on their own, except contracts for necessaries, which the parents are legally required to provide
A contract entered into by an intoxicated person might be...
voidable at that person's option; they must return all consideration received
- must prove intoxication impaired reason and judgment
Mentally Incompetent Persons
Contracts made by mentally incompetent persons can be void, voidable, or valid
Mentally Incompetent Persons - Void:
if a court has previously determined that a person is mentally incompetent and has appointed a guardian to represent the person
- Only guardian can enter into binding contract on that person's behalf
Mentally Incompetent Persons - Voidable:
if a court has not previously judged a person to be mentally incompetent and the person did not know he or she was entering into the contract or the person lacked the mental capacity to comprehend its nature, purpose, and consequences
- Can only be voided by the mentally incompetent person; not other party
Mentally Incompetent Persons - Valid:
if person was competent when contract was formed
- Lucid intervals: temporary periods of sufficient intelligence, judgment, and will
What is legality in a contract?
To be enforced, contract must be formed for a legal purpose.
Contracts Contrary to Public Policy
- Contracts in restraint of trade
- covenant not to compete
Contracts Contrary to Statute
If the object or performance of a contract is rendered illegal by statute after the contract has been formed, the contract is considered to be discharged/terminated (made illegal)
covenant not to compete
A contractual promise of one party to refrain from conducting business similar to that of another party for a certain period of time and within a specified geographical area. (not allowed)
Unconscionable Contract or Clause
A contract or clause that is void on the basis of public policy because one party was forced to accept terms that are unfairly burdensome and that unfairly benefit the stronger party.
Procedural Unconscionability
lack of knowledge or understanding of the contract, often involves inconspicuous print, unintelligible language, lack of an opportunity to read the contract or ask questions about its meaning
Substantive Unconscionability
when contract or a provision is oppressive or overly harsh
- focus on provisions that deprive one party of the benefits of the agreement or leave the party without remedy for nonperformance by the other
exculpatory clause
A clause that releases a contractual party from liability in the event of monetary or physical injury, no matter who is at fault.
- NOT typically enforced
- CAN be enforced for places like health clubs, amusement parks, skiing facilities
Effect of Illegality
neither party to an illegal bargain can sue for breach and neither party can recover for performance rendered
Exceptions to effect of illegality
- justifiable ignorance of the facts
- members of protected classes
- withdrawal from an illegal agreement
- severable contracts
- fraud, duress, or undue influence
justifiable ignorance of the facts
When one party has no reason to know that the contract is illegal, that party can often recover any benefits given up in a partially executed contract
Members of Protected Classes
When a statute is clearly designed to protect a certain class of people, a member of that class can enforce a contract in violation of the statute even though the other party cannot.
Withdrawal from illegal agreement
If the illegal part of a bargain has not yet been performed, the party rendering performance can withdraw from the contract and recover the performance of its value
Severable Contracts
contract that is divisible because it consists of distinct parts that can be performed separately, with separate consideration given for each part
- Court may enforce the legal portion but not the illegal portion, so long as the illegal portion does not affect the essence of the bargain
Fraud, Duress, or Undue Influence
Often, one party to an illegal contract is more at fault than the other party
When one party uses fraud, duress, or undue influence to induce the other party to enter into an agreement, the second party will be allowed to recover for the performance or its value
This is an example of:
"trucking company can still collect its fees even though it has transported illegal goods (i.e., the shipment of those goods is illegal)"
justifiable ignorance of the facts
This is an example of:
"statutes restrict working hours of flight attendants and pilots; if they are required to work more than the maximum, they can recover for those extra hours of working"
members of protected classes
This is an example of:
"After (illegally) placing a $1,000 bet on a boxing match with a bookie, you can withdraw before receiving the payout (which is the illegal part of the agreement)"
Withdrawal from an illegal agreement
This is an example of:
"employment agreement that includes an overly broad (illegal) covenant not to compete"
severable contract
This is an example of:
"if an insurance company violates a statute when selling insurance, the purchaser of coverage can still enforce the policy and recover from the insurer"
members of protected classes
Four Types of Intellectual Property
- patents
- trademarks
- trade secrets
- copyrights
Trademark
A distinctive word, symbol, or design that identifies the manufacturer as the source of particular goods and distinguishes its products from those made or sold by others.
Lanham Act of 1946
Federal law that protects companies from losing business to rival companies that use confusingly similar trademark
Federal Trademark Dilution Act
- amendment to Latham act of 1946
- allows trademark users to bring a lawsuit in federal court for trademark dilution
Dilution
weakening of a famous trademark's ability to identify and distinguish goods or services, regardless of competition in the marketplace or the likelihood of confusion
Trademarks and Service Marks are
- catchy phrases
- abbreviations
- shapes (ex: packaging container)
- ornamental colors
- ornamental design
- sounds
Trademark Registration
Must register with the US Patent Trademark Office. Registration allows the use of the R with the circle symbol. Mark must be currently in commerce or applicant intends to put into commerce within 6 months
Renewal of Trademark Registration
- renewable between fifth and sixth years after initial registration
- every 10 years thereafter
Trademark Infringement
when someone else uses the registered trademark in its entirety or copies it to a substantial degree, intentionally or unintentionally
What are the elements of a successful claim for trademark infringement?
- plaintiff must show defendant's use of the mark created a likelihood of confusion about the origin of the defendants goods or services
- does not have to show defendant acted intentionally or that the mark is registered
Remedy for trademark infringement
Injunction: court order that restrains a person from committing an act which infringes upon the legal rights of another person
- the plaintiff may also recover damages, plus profits received by defendant; court may also order destruction of related goods
General rule about distinctiveness of trademark
only those trademarks that are sufficiently distinctive from all competing trademarks will be protected
fanciful trademarks
involve invented words- no common understandable link to the product
ex: google, Kleenex, and Qdoba
arbitrary trademarks
involve common words not ordinarily associated with the product
ex: apple, dutch boy
Suggestive Trademarks
bring to mind something about a product without describing the product directly
- ex: Dairy Queen
Generic Terms
Terms that refer to an entire class of products are not entitled to protection, even if the term was originally the name of a trademarked product.
- ex: escalator, trampoline, raisin bran
Distinctiveness of the mark: secondary meaning
descriptive terms, geographic terms, personal names, and color schemes are not initially distinctive and do not get registered until customers associate them with specific items made by a particular company
ex: FedEx and its color scheme; sports team colors
Service Mark
A trademark that is used to distinguish the services (rather than the products) of one person or company from those of another.
Certification Mark
A mark used by one or more persons, other than the owner, to certify the region, materials, mode of manufacture, quality, or other characteristic of specific goods or services.
ex: Good Housekeeping Seal of Approval
Trade dress
image and overall appearance (look and feel) of a product that is protected by trademark law
- subject to the same protection as trademarks
Counterfeit Goods
Goods that copy or otherwise imitate trademark goods but are not genuine ("knockoffs")
- have negative financial effects on legitimate businesses
- can pose serious health risks (pharmaceuticals)
Penalties for Counterfeiting
- $2m or 10 years in prison
- Forfeit the counterfeit items
Trade name
A name that a business uses to identify itself and its brand. A trade name is directly related to a business's reputation and goodwill and is protected under trademark law.
- ex: Coca-cola
license agreement
Agreement which permits the use of a trademark, copyright, patent, trade secret, or other forms of intellectual property for certain limited purposes.
LicenSOR
party that owns the intellectual property rights and issues the license
LicenSEE
party that obtains the license from the licensor
Patent
A property right that gives an inventor exclusive right to make, use, sell, or offer to sell an invention in the U.S. for a limited time
America Invents Act
The first person to file an application receives protection.
There is a 9 month limit for challenging a patent.
patents for inventions are valid for
20 years
patents for design are valid for
14 years
What is patentable?
An invention must be novel, useful, and not obvious in light of current technology
What is not patentable?
Laws of nature, natural phenomena, and abstract ideas
Patent Infringement
a tort whereby a firm makes, uses, or sells another's patented design, product, or process without the patent owner's permission
Can patent infringement occur under U.S. law when it is made and sold in another country?
Heck No!
Remedies for Patent Infringement
- injunction against the infringer (defendant), damages, lost profits
- treble damages if the infringement was willful
Which of the following cannot receive copyright protection?
A. A screenplay
B. Text on a company website
C. Lyrics to a song
D. Design of a new piece of sporting equipment
D. Design of a new piece of sporting equipment
Copyright
an intangible property right granted by federal statute to the author or originator of a literary or artistic production of a specified type
Copyrights owned by publishing companies expire:
95 years from the date of publication or 120 years from the date of creation (whichever is first)
For works by more than one author, the copyright expires:
70 years after the death of the last surviving author
Works created after January 1, 1978, have a copyright for the life of the author plus________
70 years
What can be copyrighted?
1. Literary works;
2. Musical works and accompanying music;
3. Dramatic works and accompanying music;
4. Pantomimes and choreographic works;
5. Pictorial, graphic, and sculptural works;
6. Motion pictures and other audiovisual works;
7. Sound recordings;
8. Architectural works.
9. Original comilations
Copyright infringement
whenever the form or expression of an idea is copied
- reproduction does not have to be exactly the same as the original
Remedies for Copyright Infringement
guilty may be liable for damages or criminal penalties (for willful violations)
Fair Use Exception
you may copy from any copyrighted work for the purposes of criticism, comment, news, teaching, research w/o paying royalties
Trade secrets are:
formula, device, idea, process, or other information used in a business that gives the owner a competitive advantage in the marketplace
- ex: R&D, pricing information, marketing techniques, and production methods
Paris Convention of 1883
170 countries allows parties in one country to file for patent and trademark protection in any other signatory country
Berne Convention of 1886
Copyright protection afforded in all signatory countries
TRIPS Agreement of 1994
Standards for international protection of IP rights, including patents, trademarks, and copyrights for movies, computer programs, books, and music
Madrid Protocol
- Simpler process and lower costs for trademark registration
- U.S. company may submit one application and designate other member countries in which it would like to register mark
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