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BusinessLaw101 pt. 2
BusinessLaw pt. 2
| Question | Answer |
|---|---|
| Contractual Capacity | The ability to understand that a K is being made and to understand its general meaning. |
| Factual Incapacity | Exists when there is serious mental illness, significant mental deficit, intoxication/drug use, and age |
| Minors | A person who is under 21 years of age. The law treats them as a class lacking contractual capacity. Minors or their guardians can disaffirm K's anytime during incapacity/reasonable time after capacity. |
| Ratification | K can become valid when the minor gains mental capacity. |
| Necessities | A minor NEEDS the item(s) in K.(Travel, Work) A minor can disaffirm a K but is liable under quasi K for reasonable value. |
| Restitution | The minor must return the consideration, no matter if it is damaged, destroyed, lost, stolen. The other party must return all things received from minor to the minor. |
| Mental Incompetence | K is voidable IF 1) K is fair and 2) other party had no reason to know of mental incompetence. |
| 3rd Party Liability | Co-signer shares responsibility with minor. If the minor withdraws, the cosigner is still bound. The parent may be liable if the minor is acting as the agent of the parent. |
| Intoxication/Drug Use | If one is intoxicated, one must have been so under the influence that one didn't know a contract was made at all. The same goes for when drug use is involved. |
| Unilateral Mistake | A mistake made by one of the parties. This is generally not voidable, but unless the other knew/ had reason to know of mistake, the K is voidable. |
| Material Mistake of Fact | Fact comes up after K is made. Ex:Cows only make milk when pregnant. Owner attempts to impregnate, but is unsuccessful. He sells the cow cheaply. Later, Owner finds out the cow is pregnant from his attempts. K is voidable, or be made into quasi K. |
| Material Mistake of Opinion | Opinion is made before K. EX: Bob sells a Lisa a rock and tells her it's topaz. She finds out it's actually an uncut diamond. K is NOT voidable. |
| Mutual Mistake | Both parties mistaken about SAME material fact. K voidable by either party. |
| Fraud | making of a false statement of a past or existing fact. K is voidable by deceived party. |
| Components of Fraud | 1.False statement of material fact 2. made w/ knowledge/reckless regard 3. Made w/ intent to deceive 4. Listener reasonably relies on false statement 5. Listener suffers financial harm |
| What can be done for Mental Incompetent | An adjudication of M.I., which is a petition of the court that is filed to place a guardian over the M.I. K's made after the petition is granted are VOID. |
| Consideration | The legal concept of value in connection with contracts. It is anything of value in the common sense, promised to another when making a contract. |
| Elements of Consideration | Legal detriment on both sides, doing something the party had no prior legal obligation to do OR refraining from something the party had the legal right to do (forbearance) |
| Bargained-for and Exchanged | The parties negotiate for the consideration and exchange one promise for another. Past consideration and moral obligations are not bargained-for and exchanged. |
| Adequacy of consideration | Relevant only when proving mistake, fraud, undue influence or duress |
| Preexisting Duty | No consideration, Exists under statute or prior contract, Part payment of overdue debt without new consideration is a preexisting duty, Part payment of overdue debt disputed in good faith is consideration. Paying before the debt is due is consideration |
| Exceptions to Consideration | Promissory Estoppel, Modification of a Sale of Goods Contract (UCC), Waiver of the Statute of Limitations, Model Written Obligations Act (PA) |
| Model Written Obligations Act (PA) | Written & signed promise, Statement of the intent to be bound. |
| Noncompetition Clauses | One cannot work when sale of an ongoing business, Employment. Invalid: unreasonable in time, unreasonable geographic area or scope. |
| If Noncompetition Clause is invalid | Void or Apply Blue Pencil Rule |
| Blue Pencil Rule | Court may strike parts of a covenant not to compete in order to make the covenant reasonable |
| Statute of Frauds | Contract must be written to be enforceable. Created anytime before the lawsuit. Any writing, ex. letter, memo, and check. Content: essential terms, ex. identify parties, subject matter, Signature: must be signed by party being charged (defendant) |
| One year provision | year begins when contract is made, different from date when performance of contract begins, leeway w/ weather |
| Real estate | Mortgages, easements and covenants |
| Surety | promise made to creditor, Consideration of marriage, Sale of Goods (UCC), MUST BE WRITTEN |
| Exceptions of Surety (prove oral contract) | Promissory estoppels, Sufficient part performance, Main Purpose Rule |
| Main Purpose Rule | Promise to pay the debt of another need not be in writing to be enforceable if the promisor was motivated by a desire for advantage or benefit |
| Parol Evidence Rule | Prior oral or written statements cannot be used to modify a contract complete on its face |
| Third Party Beneficiary contracts | Intended not incidental, Creditor beneficiary |
| Creditor beneficiary | May enforce the promise against both parties |
| Donee beneficiary | May only enforce against the promisor |
| Discharge of Contracts | By Performance, By Agreement, By Novation, By Impossibility, Operation of Law |
| Novation | The substitution of a new obligation for an old one, usually by the substitution of a new debtor or of a new creditor. |
| Impossibility | Destruction of specific subject matter, Change of law, Death or disability (personal services) |
| No Impossibility | Shortages, increased burden or cost, weather, Excuse, force majeure clauses |
| Breach | Failure to/act perform in a manner called in contract. |
| Lawsuits for Breach | 1.Rescind K and Restitution (Status Quo Ante) 2. Damages (Losses caused and Gains prevented) 3. Specific Performance (Court Ordered) |
| Consequential Damages | Compensate for 1.Losses caused & 2. gains prevented. Must be Reasonably Foreseeable, Prove with reasonable certainty, Mitigation by non-breaching party. |
| Mitigation of Damages | Nonbreaching party does what is reasonable to minimize damage. Must prove damages with reasonable certainty |
| Liquidated damage clause | Provision in K stipulated the amount of damages. (set price or equations) Used when difficult to prove actual damages. May not be excessive or punitive |
| Specific Performance | Court orders performance. Used when 1. Subject matter is unique 2. Prevents irreparable harm. 3. Money damages are inadequate. |
| Exception to Specific Performance | Not ordered for personal service contracts. |
Created by:
bja34
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