BUSINESS LAW TEST 2

What are the exceptions to a minor's right to disaffirm a contract?

(1) misrepresentation of age - some states still allow the minor to disaffirm, others do not. (2) contracts for necessaries - if a minor disaffirms a contract for necessaries, they will be liable for the reasonable value

How does one party's performance effect the other's obligation to perform? Contrast complete performance, substantial performance and material breach.

1. complete performance- when a party performs exactly as agreed; both parties must perform according to the contract 2. substantial performance- when party performs in good faith substantially, all the terms of the contract can enforce the contract against the other party; if the breaching has substantially performed, the non-breaching party is NOT discharged from their obligations 2. material breach- when a performance is not at least substantial; if the variance or material is significant; if the breaching party has material breach, the non-breaching party is discharged

What risk does a minor's right to disaffirm a contract pose for businesses? Give examples of businesses that do business with minors and for which a minor's right to disaffirm a contract might by relevant.

1. contracts for necessaries- a minor is bound to a contract for necessaries but only to the extent of the fair market value of the necessary 2. restitution- varies from state to state 3. misrepresentation of age- the majority view still allows disaffirmance

Contracts that violate statutes may be void. List some examples per the text.

1. contracts to commit a crime 2.usury (illegal if interest rate exceeds legal limit) 3. gambling 4. licensing statutes

What is required for an exculpatory clause to be valid? Be sure you understand each of these requirements.

1. nature of tort committed- unenforceable for gross negligence or intentional tort 2. whether the party attempting to shift the risk negligence is a business in public interest- a business that serves the public interest cannot use exculpation clause (expressed negligence rule- terms must say that the user is assuming the risks of the proponent negligence) 3. Whether the clause is conspicuous- language cannot be ambiguous

What factors are used to determine whether a party has substantially performed his contractual obligations?

1. party must have performed in good faith (intentional failure to comply is a breach of contract) 2. the performance must not vary greatly from the performance promised in the contract 3. the performance must create substantially the same benefits as those promised in the contract

Contracts that violate public policy may be void. List some examples per the text.

1. unconscionable contracts (oppressive) 2. exculpatory clauses 3. discriminatory contracts 4. adhesion contracts 5. contracts to commit a tort

What is factoring?

A company and a factor enter into an agreement in which the factor purchases a company's accounts receivable (such purchased accounts are called factored accounts), collects on the factored accounts, then pays the company the purchase price of the accounts.

Define and discuss the enforceability of a click-on agreement.

A form of agreement used for software licensing, websites, and other electronic media. It requires the user to agree to terms and conditions before using a website or completing an installation or online purchase process. Clickthrough agreements must require the user to actively click "I agree" to the terms of service before they can proceed with their requested services. To enhance enforceability, the site design must not allow the user to proceed without giving active consent—clicking a box

What is the difference between fraud and negligent misrepresentation?

A fraudulent misrepresentation requires knowledge that a statement is not true, whereas a negligent misrepresentation only requires that there be no reasonable ground to believe something is true or where the speaker should have known otherwise.

Give examples of how one might ratify a contract entered into while he was a minor.

A minor retains the right of disaffirmance of any contract into which he or she enters, whether or not it has already been executed. ... In order to disaffirm a contract made before he or she reached the legal age of majority, the minor must state—either in writing or orally—his or her intention not to honor the contract.

What is a counter offer and what is its effect?

A offer different from initial, changes contract

Mental Incapacity.

A person who lacks mental capacity can void, or have a guardian void, most contracts (except contracts for necessities). ...

Define illusory consideration aka illusory promises.

A promise that is unenforceable due to indefiniteness or lack of mutuality, where only one side is bound to perform. An example of this would be an agreement between a seller and buyer which states that the seller "agrees to sell all of the ice cream he wants to" to the buyer.

What does it mean to say that an offer has been revoked?

A revocation of offer is the withdrawal of a previous offer to engage in some sort of legally binding contract. ... Revocation of offer is used by the offering party to formally cancel the offer before the other party has accepted it.

What does it mean to say that an assignment is valid?

A valid assignment takes effect the moment it is made regardless of whether notice of the assignment is given to the other party to the contract. ... When an assignment is made for consideration, the assignor warrants: That the right assigned is valid; That the assignor owns the claim assigned; and.

What is a void contract?

A void contract is missing an element. In this case, the contract does not have to be terminated in court. It simply does not have to be executed, and both parties can walk away.

Define and discuss the enforceability of a browse wrap agreement.

A website agreement (typically the website's terms of use or service) that aims to bind the user by virtue of the user browsing the website. Unlike a clickwrap agreement, browsewrap agreements do not require a user take action to affirm his consent to be bound.

Generally, when can a minor disaffirm a contract?

After reaching age 18 for x amount of time

Under what circumstances is an offer not revocable?

After the contract is signed and all requirements are met for it to be a valid contract

What is the effect of illusory consideration?

An agreement in which one party gives as consideration a promise that does not actually obligate him to anything under the contract.

What is an assignment?

An assignment of contract occurs when one party to an existing contract (the "assignor") hands off the contract's obligations and benefits to another party (the "assignee"). Ideally, the assignor wants the assignee to step into his shoes and assume all of his contractual obligations and rights.

Define an option contract.

An options contract is an agreement between two parties to facilitate a potential transaction involving an asset at a preset price and date. ... Buying an option offers the right, but not the obligation to purchase or sell the underlying asset. For stock options, a single contract covers 100 shares of the underlying stock.

What is required for consideration to be valid?

For a consideration to be valid there must be a promise from both sides. ... This means that there must be a promise by one party against the promise of the other party.

What is a delegation?

In contract law and administrative law, delegation (Latin intercessio) is the act of giving another person the responsibility of carrying out the performance agreed to in a contract.

Can the failure to disclose information be a misrepresentation of fact?

In other cases, the misrepresentation occurs through the company's silence on a key issue, such as an auto defect or hidden fee. This silence, also known as failure to disclose, is a form of fraud.

What are the elements of fraud? Be sure you understand each of the elements.

In the United States, common law generally identifies nine elements needed to establish fraud: (1) a representation of fact; (2) its falsity; (3) its materiality; (4) the representer's knowledge of its falsity or ignorance of its truth; (5) the representer's intent that it should be acted upon by the person in the manner reasonably contemplated; (6) the injured party's ignorance of its falsity; (7) the injured party's reliance on its truth; (8) the injured party's right to rely thereon; and (9) the injured party's consequent and proximate injury. See, e.g., Strategic Diversity, Inc. v. Alchemix Corp.

Is a contract void for inadequate consideration? Why or why not?

Inadequate consideration does not automatically invalidate a contract. However, inadequate consideration generally has the effect of making the contract unenforceable in court.

Can one waive his right to rely on the representations of another? If so, how?

It is possible through the express waiver of reliance, which is a contractual provision that states both parties are relying solely on their own information.

What three categories of people lack contractual capacity and why, generally?

Minors Have No Capacity to Contract. Minors (those under the age of 18, in most states) lack the capacity to make a contract. ...

When a minor disaffirms a contract, does he have to pay restitution?

No. People who can prove they lacked the capacity to enter a legally binding contract and minors can disaffirm a contract. A minor may rightfully disaffirm any contract into which he or she enters, whether or not it has already been performed.

What are the elements required for a valid contract?

Offer and acceptance, consideration (something of value must be exchanged), capacity(age and state of mind), consent ( no coercion) and legal object(nothing illegal)

How can an offer be terminated by an act of the parties?

Offers may be terminated in any one of the following ways: Revocation of the offer by the offeror; counteroffer by offeree; rejection of offer by offeree; lapse of time; death or disability of either party; or performance of the contract becomes illegal after the offer is made.

Can the failure to fulfill a promise be a misrepresentation of fact?

Promises to perform future acts are not legal representations and failure to perform them doesn't change that fact. But if a defendant, at the time of making that promise, had no intention of carrying it out, that promise is considered a misrepresentation of present fact that can form the basis for a fraud claim.

What is the effect of an offeree rejecting an offer?

Rejection is another way that an offeree can terminate an offer. Once the offeror receives the notice of rejection, termination of the offeree will take effect.

When must a plaintiff prove harm to establish fraud?Understand the different measures of damages in fraud cases.

Seeking rescission of contract, return of their obligation or money back, court may award punitive damages

What causes a valid contract to be unenforceable?

Some common defenses to enforcing a contract are lack of capacity, duress, undue influence, misrepresentation, nondisclosure, unconscionability, public policy, mistake, and impossibility. If these exist an otherwise valid contract may be unenforceable.

What is required for the existence of an agreement?

Technically, these are the requirements for a valid offer and a valid acceptance consideration, offer and acceptance, legal purpose, capable parties, and mutual assent

What must the writing include to satisfy the statute of frauds?

The Statute of Frauds can be satisfied by any signed writing that (1) reasonably identifies the subject matter of the contract, (2) is sufficient to indicate that a contract exists, and (3) states with reasonable certainty the material terms of the contract.

What are the rights of the assignor after the assignment?

The assignee is the party that receives the rights and obligations under the contract, but wasn't an original party to the contract. The assignor was an original party to the contract and is the party that transfers its contractual rights to another party. The other original party to the contract is the obligor.

In what form i.e., written or oral, must an assignment be made?

The assignment does not necessarily have to be in writing; however, the assignment agreement must show an intent to transfer rights.

Is consideration required for a valid assignment?

The assignor must receive consideration for the agreement, otherwise the assignment will be ineffective. However, an absolute assignment does not require consideration to be given

Define restitution.

The basic purpose of restitution is to achieve fairness and prevent the UNJUST ENRICHMENT of a party. Restitution is used in contractual situations where one party has conferred a benefit on another party but cannot collect payment because the contract is defective or no contract exists. Example: is money paid in a breach of contract case to make up for breach of contract

Define ratification.

The doctrine of ratification comes into play when a person has done an act on behalf of another without his knowledge or consent. ... Therefore ratification is a kind of affirmation of unauthorised acts. It is thus explained in section 196 of Indian Contract Act 1872 and in other section.

What is the difference between a delegation and a ovation?

The effect of a delegation, from the perspective of the obligee, is that now two parties (the original debtor and the new party) are liable to repay the debt instead of one. A novation, on the other hand, results in the discharge of the original debtor and the liability of only the third (new) party.

How does a plaintiff establish an implied agreement?

The legal elements of an implied-in-fact contract are the same as an express contract: offer and acceptance, consideration and mutuality of intent.

Explain the objective theory of contracts.

The objective theory of contracts holds that an agreement between parties is legally binding if, in the opinion of a reasonable person who is not a party to the contract, an offer has been made and accepted.

What are the primary objectives of contract law?

The primary purpose of contract law, he contends, is to enforce the agreement of the parties. For there to be a contract, substantial agreement must exist and the parties must have freely intended to be legally bound. In interpreting contracts, courts are primarily trying to carry out the intent of the parties.

Generally, what is consideration? Understand what the word refers to generally. The following question requires a more specific definition.

The special word "consideration" in contract law refers to something that has value in the eyes of the law. Consideration: is an essential element to make a contract. must be provided for a contract to be legally binding.

What is the rule for assessing the validity of an assignment?

The validity of an assignment may be dependent on the type of language used in the written agreement- it needs to be in the present tense. That is, the assignor must state, "I am assigning my contract rights to X party", rather than "I will be assigning my contract rights to X party"

Define a merchant's firm offer.

When goods are sold, a firm offer is considered to have taken place when there has been a signed promise to keep the offer open and the merchant involved in the sale qualifies as a merchant under the Uniform Commercial Code

Can an opinion be a misrepresentation of fact?

Yes.

What is required for an acceptance to be valid?

You need to agree to all the terms of the contract. Your agreement must be without any condition and without requiring any changes. This is called the mirror-image rule, where your acceptance mirrors the terms of the offer.

What is a severability clause in a contract?

a clause that states what will happen to an agreement if one part is deemed unenforceable; indicates that a contract is divisible and consists of distinct parts that can be performed separately, with separate consideration for each party and should be enforced to the fullest extent

To what damages is a party entitled if the other has substantially, but not completely, performed his contractual obligations?

a party is entitled to damages that can offset the non-breaching party's obligation

What are the sources of contract law and when are they applicable?

common law, which is based on case rulings, and statutory law, which is based on federal and state statutes. Contract law uses both common law and a set of statutory rules known as the Uniform Commercial Code.

What is a valid contract?

valid contract is a written or expressed agreement between two parties to provide a product or service that satisifies the above elements for a valid contract

What duties cannot be delegated?

(1) contract that expressly forbids delegation. (2) the delegation is prohibited by statute or public policy (3) duties that are personal in nature—they depend on the skill, talents, and expertise of the obligor

Generally, when can an offeror revoke an offer?

Before the contract is signed.

What types of contracts must be in writing per the statute of frauds?

Contracts that involve the sale or transfer of land. Contracts that involve promises by executors to pay estate debts. Contracts that involve a promise to act as a guarantor or surety. Contracts that involve the sale of goods worth more than $500.

What duties can be delegated?

Delegation of duties involves an obligor obtaining a third party to perform his responsibilities under a contract in his stead.

What does it mean to disaffirm a contract?

Disaffirmance is the right for one party to renounce a contract. The person must indicate that he or she will not be bound by the terms outlined in the agreement expressly or implicitly. People who can prove they lacked the capacity to enter a legally binding contract and minors can disaffirm a contract.

Are waivers of reliance clauses in contracts enforceable?

Enforceable if the clause specifically addresses the subject matter

What are the rights of the assignee after the assignment?

Generally, after a valid assignment, all the rights and obligations of the assignor pass to the assignee. The assignee steps into the shoes of the assignor. The assignee is now responsible for fulfilling any remaining obligations under the contract, and the assignee will reap the benefits of the contract.

What must a party establish in order to avoid his contractual obligations due to commercial impracticality?

Must establish that their performance became much more difficult and expensive than what the parties originally expected at the time the contract was formed; must not have been foreseeable when the contract was made

What degree of culpability is required for negligent misrepresentation versus for fraud?

Negligent misrepresentation- liable if the defendant does not provide reasonable care, not purposeful; fraud- liable if the defendant has an intent to deceive , intentional

What two elements comprise the agreement?

Offer and acceptance

What can a business do to mitigate the risk that a minor will disaffirm a contract?

Requiring a cosigner to become personally obligated under the contract

Explain how conditions are used in contracts to mitigate risks.

Used to mitigate foreseeable risks because conditions state the occurrence or nonoccurence of an event will trigger the performance of a legal obligation or terminate an existing obligation under a contract

Must a rejection be expressed?

Yes

Must the revocation of an offer be expressed?

Yes

What is the effect if a provision of a contract is illegal?

if a contract is divisible into legal and illegal portions, a court may enforce the legal portion, but not the illegal one

What is the effect if a contract is for an illegal purpose?

it is void; plaintiff cannot obtain help from the courts

What is the effect of material breach on the non-breaching party?

material breach discharges the non-breaching party from the contract.

What must a party establish in order to avoid his contractual obligations due to frustration of purpose?

must establish that the contract contained supervening circumstances that make it impossible to attain the purpose both parties had in mind when the contract was made; must not have been reasonably foreseeable

How can an offer be terminated by operation of law?

termination by death or insanity of either party; (ii) termination by a supervening illegality; and (iii) termination by destruction. ... An offer can terminate by the death or insanity of either the offeror or the offeree.

What is the purpose of an exculpatory clause?

to release a party from liability in the event of monetary or physical injury no matter who is at fault