Business Law Exam 2

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Attributes of contracts
1. Binding
2. specific services/product
3. rights & duties
4. agreement
5. courts will enforce
6. parties
7. rights & remedies for breach
8. bargained- for exchange – quid pro quo
Uniform Commercial Code
Article 2 governs the sale of goods (all states)
sale: the transfer of title from seller to buyer
goods:tangible personal property (personal property is all property other than an interest in land)
Elements of a binding contract
1. mutual assent (did both parties agree)
2. consideration
3. legality
4. capacity * (voidable)
Express contract
everything is specifically spelled out
details specifies
Implied contract
in fact: conduct/behavior of parties
ex.)When you go to a CPA it is implied that you will get billed
in law: (Quasi Contract) courts want to avoid unjust enrichment
Unilateral Contract
a contract in which only one party makes a promise
a promise in exchange for an action
Bilateral contract
a contract in which both parties make a promise
promise in exchange for a promise
Valid Contract
meets all required elements (4 elements)
Void Contract
does not meet all required elements
Voidable Contract
a contract capable of being void (lacks capacity)
Unenforceable contract
a contract for the breach of which the law provides no remedy
statute of frauds
Promissory Estoppel
a doctrine enforcing some non contractual promises
reasonable reliance
remedy (a court will enforce the promise to the extent necessary to avoid injustice)

in certain circumstances in which detrimental reliance has occurred, the courts will enforce non-contractual doctrines

Executed contract
a contract that has been fully performed by all of the parties
Executory contract
a contract that has yet to be fully performed
something is not yet complete
Effective when communicated or received
mirror image rule of an offer
an acceptance cannot deviate from the terms of the offer
expires by its own terms
expires in a reasonable period of time
until revoked
firm offer, option, statue
Invitation to Offer
inviting to offer
effective when received
an offer may be terminated or at any time before it is accepted, subject to firm offer, option, statute
mailbox or deposited acceptance rule
must be accepted through communication of offer
force of coercion by physical compulsion or improper threats
Undue Influence
unfair persuasion of a person by a party generally in a dominant position based upon a confidential relationship
Fraud In the Execution
misrepresentation that deceives the defrauded person as to the very nature of the contract

ex.) having someone sign a contract without the person knowing everything in the contract

Fraud In The Inducement
generally referred to as deceit
an intentional misrepresentation of material fact by one party to the other, who consents to enter in a contract in justifiable reliance upon misrepresentation

induce somebody to do something they otherwise would not have done; show a person a false reality

Justifiable reliance

mutual — both parties are mistaken as to the same set of facts
assumption of risk — a party who has undertaken to bear the risk of a mistake will be unable to avoid the contract
Illusory Promises (Legal Sufficiency)
statement that is in the form of a promise but imposes not obligation upon the maker of the statement

ex.) I will pay you when I win the lottery

Modification of a Preexisting Contract (Legal Sufficiency)
parties mutually agree to chance an item in the contract

mutually rescind

New Contract (Legal Sufficiency)
can’t be preexisting
have to add something else –> legal benefit
Output Contract (Legal Sufficiency)
a seller’s agreement to sell her entire production to a particular purchaser

constitutes consideration
not illusory

Unliquidated Debts
obligation disputed as to either its existence or its amount
Liquidated Debts
an obligation the existence or amount of which is undisputed
Licensing (Violation of Statutes)
regulatory — one that is intended to protect the public from malpractice (CPA License, Driver’s License)

revenue — does not seek to protect, used to furnish revenue (car tags)

sale of business–non compete clause
reasonable depending on
2. geographical location
Violation of Public Policy Agreements
agreements that…
1. restrain trade
2. exempt or exculpate a party from liability for his own tortious conduct
3. unconscionable
4. involve tortious conduct
5. tend to obstruct the administration of justice
6. corrupt public officials or impair the legislative process
7. impair family relationships
Exculpatory Clauses
cause a party to be liable for their own tortious act
ex.) gun membership
Negligence in advance
Wave liability in advance
Assumption of risk
a party should assume the risk involved
unconscionable contracts (unenforceable)
substantive — court will not enforce it; oppressive or grossly unfair; actual terms of the contract
procedural — as the negotiation fair?
Essential Elements of Contracts
1. Mutual Essent
2. Consideration
3. Capacity
4. Legality

without 1, 2, & 4 the contract is void
without capacity the contract is voidable

Minors — Opportunity to Disaffirm
opportunity to get out of the contract
Minors — ratify
when minor turns 18
makes the contract binding ab initio (from the beginning)
Minors — necessary
food, shelter, clothing, medical
Minors — liability for misrepresentation of age
prevailing view is that a minor may disaffirm the contract
Minors — liability for tort
if a tort and contract are so intertwined that to enforce the tort the court must enforce the contract, the minor is not liable
Incompetent Persons
under guardianship — void
mental illness — voidable
affects mutual assent
Intoxicated Persons
a contract entered into by an intoxicated person (on who cannot understand the nature and consequence of her actions)is voidable
Statutes of frauds
oral contracts that are not enforceable
must be in writing to be enforceable
1. interest in land (deed, mortgage, easement, license) of goods $560 or more
3. promise to pay debt of another
4. something that cannot be performed within a year — apply j possibility test
5. consideration of marriage (something in exchange for fdsf marriage)
Statutes of Fraud — Exceptions to “Sale of Goods”
specialty manufactured goods
delivery, payment, acceptance
Parole Evidence Rule
can’t enter evidence into litigation that was not previously there — contradict contract
ex.) laundromat machine warranty. Owner wants to testify that he SAID the warranty would be for one year (while on stand)
voluntary transfer of a right
sale or gift
sale with consideration
assignment that cannot be revoked; consideration makes it a K
Rights NOT assignable
materially increases duty, risk, burden
personal rights
express prohibition
prohibited by law
Delegation will not be permitted if
personal ( he was hired as a professor for his expertise)
prohibited by agreement (a company agrees to build a house for someone but delegates it to a different company)
prohibited by law (a registered nurse cannot delegate writing a prescription to another unlicensed person)
substitute a party; the delegator is discharged and the 3rd party becomes directly bound upon his promise to the obligee
Third Party Beneficiaries
3rd party intended from the beginning of the contract
Two types
1. intended (child is the intended beneficiary of the car example)
2. incidental (best friend of child cannot sue the car dealer if the car is not delivered)
conditions — express and implied
precedent (real estate deal)
concurrent (has to take place at the same time)
subsequent (terminates the obligation to perform due to a later event)
material or not
significantly impairs
perfect tender
allows discharge
substantial performance
does not allow discharge but does allow damages
anticipatory repudiation
a notification that a party will not be able to perform by the agreed date
mutual rescission: both parties want to give up rights
substitute: give up 1st one & substitute a new one
accord & satisfaction
operation of law
impossibility of performance
destruction of the subject matter
subsequent illegality
commercial impracticability & no reasonable way to get hte job done
frustration of purpose
Categories: Business Law