Business Law - CONTRACT LAW

Explain the requirement of fraud: MADE KNOWINGLY

The party misrepresenting the material fact must do so knowingly

Explain the requirement of fraud: CAUSING INJURY TO THE OTHER PARTY

The party to whom the misrepresentation was made must have suffered ìnjury as a result. Frequently however, the false statement or concealment does not cause injury. In this case, there is no fraud

Explain the requirement of fraud: WITH INTEND TO DEFRAUD

The purpose is to create an advantage over the other party

Explain what is meant by OFFER?

The simplest way to form an express contract begins with a formal offer This offer may be transmitted by acts or words, spoken or written, directly to the offeree, or in conversation, through the mails, by wire, by messenger or through any medium whatsoever

Why is it there Lack of mutual Agreement?

There are six reasons why mutual assent may be lacking: 1. mistake 2. fraud 3. Innocent misrepresentation 4. Undue influence 5. Duress 6. Unconscionability

In which cases is there LACK OF CAPACITY of the parties to make a contract?

Three categories of persons may lack capacity to make a contract: 1. Minors 2. Insane Persons 3. Intoxicated Persons

What is a CONTRACT?

A contract is a legally enforceable agreement, EXPRESS or IMPLIED.

What is it intended by CONTRACTS INVOLVING NECESSARIES?

CONTRACTS INVOLVING NECESSARIES: A minor is legally liable for necessaries that he/she has used or consumed and that were provided by another person at the minor's request.

Explain lack of CONSIDERATION by DOING WHAT ONE IS BOUND TO DO

If a person already has a contract, an additional agreement to perform this same contract is lacking in consideration

What happens is the subject matter of an agreement is legal?

If it happens it is not legal; the agreemrent is not enforceable. In this respect, we do not use the expression "void" or "voidable"; the illegal agreement simply has no existence in contemplation.

Explain the requirement of fraud: JUSTIFY RELIED UPON

If the seller lies, knowingly and intentionally, and the buyer recognizes (or should recognize) the lie but buys anyway, there is no fraud. So to be a fraud it must be JUSTIFY RELIED UPON

What happens if there is UNILATERAL mistake?

Unilateral mistake by one party, however, is not grounds for cancellation unless the other party knew about the mistake and said nothing.

Is the contract affected by a mistake?

A mistake concerning an incidental or trivial detail or insignificant matter will not affect the fact of agreement so long as there is agreement on the basic or material features of the transaction.

Explain lack of CONSIDERATION by MORAL OBLIGATION

A moral obligatìon (what a person ought to do) has no legal substance, it Is not measurable and not commercial.

Hay can be an ACCEPTANCE transmitted?

Acceptance in any manner or by any medium, so long as reasonable and meeting the requirements of the offer (if any), is as effective as any other method

Explain lack of CONSIDERATION by ILLUSORY PROMISES

An illusory promise is not an actual promise: the promiser offers to do something only if he/she 'rishes" or 'needs' to.

When can an OFFER be revoked?

An offer may be withdrawn at any time before it is accepted.

Explain the LACK OF CAPACITY OF INSANE PERSONS

Any temporary, oppressive condition affecting the mind and the ability to understand may amount to legal insanity, particularly if this condition is apparent to the other party.

Which is the effect of illegality of SUBJECT MATTER?

As a general rule, a court of law will not admit into evidence any matter pertaining to an illegal agreement.

Explain the agreements that violate STATUTES. With respect to SUBJECT MATTER ILLAGALITY

Criminal Statutes such as those declining with murder would have no legal effect and would be unenforceable. -Blue Laws: Prohibiting purchases on sundays -Usury: Unlawful rate of interest

What is it intended by DISAFFIRMANCE BY A MINOR?

DISAFFIRMANCE BY A MINOR: Is the cancellation or rejectlon of a contract made during ones minority.

Does silence constitute acceptance?

Generally, silence is not acceptance, nor can the offeror impose a duty upon the offeree to speak.

What is a COUNTEROFFER?

Is an "acceptance" that modifies the offer or attempts to get a better deal.

What is it intended by MINOR'S LIABILITY FOR FRAUD?

MINOR'S LIABILITY FOR FRAUD: A minor is responsible for his torts down to a very tender age; however, a parent is not responsible for the torts of a minor child.

Explain lack of assent by DURESS

It is coercion, either physical or mental, that deprives a person of free will and leaves that person with no reasonable alternative other than to accept the contract terms as imposed on him/her.

Explain lack of assent by UNDUE INFLUENCE

It occurs when one party takes advantage of another by reason of a superior position in a close or confidential relationship. (Like professor and Students)

What is CONTRACT LAW?

The law of contracts is a framework to ensure that lawful expectations are met or that remedies are provided

Explain lack of assent by FRAUD

The minds not only do not meet, but one party is guilty of deceptive, dishonest conduct.

What are OPTION CONTRACTS?

The option contract (usually referred to as an "option") commits the offeror to keep his/her offer open in return for a specified price. In other words, the offeror makes a contract to hold the offer open for some specified period, and is paid a consideration for this agreement.

Which are the two reasons why the SUBJECT MATTER may be Illegal?

There ore two reasons: 1. Statute 2. Public policy Statutes are legislative acts; public policy is a judicial determination of prevailing morality.

Explain the LACK OF CAPACITY OF INSANE PERSONS

For intoxication by drugs or alcohol to operate as a defense to a claim based on contract, the intoxication must: A. be such as to deprive the subject of the ability to understand the nature of his/her agreement, and B. Be apparent to the other party

How do we get to a MUTUAL AGREEMENT?

NEGOTIATION it is the meeting of the minds (Not always necessary, some transactions dont need it)

Explain lack of assent by UNCONSCIONABILITY

"Unconscionable" describes special situations in which an overbearing party in a superior position imposes outrageously unfair terms on some other party

Which are the five requirements for finding of FRAUD

(1) Misrepresentation of a material fact (2) made knowingly (3) with intent to defraud (4) justifiably relied upon (5) causing injury to the other party

Explain the classification of contract by type of PERFORMANCE? (BILATERAL - UNILATERAL)

1. A BILATERAL contract is based on an exchange of promises (a promise for a promise). 2. A UNILATERAL contract involves a promise by one party and an act by the other. If however, the person receiving the offer promises to act before doing so, the contract may become bilateral.

Explain the classification of contract by type of ENFORCEABILITY? (VALID - UNENFORCEABLE)

1. A VALID contract meets all legal requirements and can be enforced by either party. 2 An UNENFORCEABLE contract does not meet one or more legal requirements and cannot be enforced by either party

Explain the classification of contract by type of ENFORCEABILITY? (VIOD - VOIDABLE)

1. A VOID contract has no validity and cannot be enforced by either party (Ex. Agreements made under threat of physical force) 2. A VOIDABLE contract is binding on only one of the parties. The other partv has the option to withdraw from the contract or enforce it. (Ex. Contracts made by minors and contracts made under mental duress.)

Explain the classification of contract by type of PERFORMANCE? (EXECUTED - EXECUTORY)

1. An EXECUTED contract is one that has been fully performed by both parties, all promises have been fulfilled 2. In an EXECUTORY contract something remains to be done bv one or both parties

Explain the classification of contract by type of INFORMATION? (EXPRESS - IMPLIED)

1. An EXPRESS CONTRACT is stated in words, written or oral, or partly wrvitten and partly oral. The express contract 1s overtly consciously and specifically arrived at. 2. There are two types of IMPLIED CONTRACTS those implied IN FACT and those implied IN LAW: 2.1. The existence and the terms of an implied IN FACT contract are manifested by conduct, rather than words. The proof of the contract lies in the conduct of the parties. 2.2. An implied-in-law or quasi contract is created by operation of law (,.e., a court implíes a contract) in order to avoid unjust enrichment of one party at the expense of another.

Which are the 3 ways to classify a CONTRACT?

1. By type of information (Express - Implied) 2. By type of performance (Bilateral - Unilateral) (Executed-Executory) 3. By enforceability (Valid - Unenforceable) (Void-Voidable)

Which are the four ESSENTIAL ELEMENTS of a valid contract? Also known as requirements

1. Capacity of the parties (Legally Competent. Ex: Representative Power) 2. Mutual agreement (assent) or meeting of the minds (a valid offer and acceptance). 3. Consideration (somethmg of value given in exchange for a promise) (Something IN RETURN). 4. Legality of subject matter

What is the principle of CONTRACT INTERPRETATION?

1. Determine the INTENT of the parties from words or actions taken as a whole, not from isolated words, actions, or events. 2. Capture the intention of the parties when the contract was done.

Under which circumstances silence may constitute acceptance?

1. If the offeror observes the offeree acting in response to the offer, and says nothing, there may be a contract. 2. The parties may mutually agree that silence will constitute acceptance by the recipient of goods that are shipped to him/her. 3. If the parties, by previous dealings, have considered silence to be acceptance, the silent party must reject the offer if he/she wishes to change the customary practice.

When is there Lack of CONSIDERATION?

1. Illusory Promises 2. Doing what one is bound to do 3. Moral Obligation 4. Past Consideration 5. Statute of Limitations 6. Requirements and Outputs Contracts 7. Promissory Estopel

Which are the requirements of an OFFER?

1. It must indicate a clear intent to make a contract. 2. It must be sufficiently definite so that a court can determine the actual intent of the parties. 3. It must be communicated to the other party.

Describe the process of NEGOTIATION

1. Negotiations begin with discussion or exchange of comments to etermine mutual interest in making a deal. 2. Mutual interest is clarified and refined in terms of both parties' basic obiectives. These objectives concern such things as description of goods to be sold, work to be performed, and price for goods or services. 3. The subject of the contract is defined, and a price is agreed upon. 4. The deal is now worked out in detail (e.g., cash or check, delivery tomorrow or next week, guarantees, fine points such as color and fabric). 5. The contract is formally accepted-a written agreement is prepared and executed, or the parties shake hands or otherwise express an intention to be bound.

Which are the exceptions to the easy withdrawal of an OFFER?

1. Option Contracts 2. Unilateral Contracts (Since it depends on the performance of an act by the offeree, some courts consider that the offer can be revoked unless there has been substantial performance) 3. Uniform Comercial Code (a merchant's firm written offer to buy or sell goods cannot be revoked during the term specified in the offer) 4. Promissory Stoppel (if the offeree reasonably relies on the offer s being held open, and will suffer injustice if it is revoked, then the offer ìs deemed irrevocable)

Describe the process of AGREEMENT

1. Preliminary discussions (Exchange of comments, opinions in order to verify there is mutual interest) 2. Definition of the interest (LOI: Letters of interest) (Write a phrase to clarify that is a non-valid document) 3. Memorandum 4. NDA: Non disclosure agreement CA: Confidential Agreement 5. Due Diligence (Before the execution of the final binding) 6. Execution of final and binding agreement. 7. Pre Contractual Liability (In which it is agreed to be in a serious negotiation because all are investing in resources and etc.)

Explain the agreements that violate PUBLIC POLICY. With respect to SUBJECT MATTER ILLAGALITY

1. Restraint of trades (Agreements restricting a person in the pursuit of higher livelihood) 2. Exculpatory Clauses (provisions that disclaim liabltity for negligence or other actions) 3. Other Public Policy Illegality (Obstruct justice, Corrupt public officials, Impair public morality, Offend public concepts of decency, Discriminate because of race; religion, color, or national origin in the sale or rental of property or the use of public facilities)

The mutual assent is manifested in which two concepts?

1. The ACCEPTANCE 2. The OFFER

Which are the standards of the ACCEPTANCE

1. The acceptance must be clear and unqualified Unqualified(cant add any condition or addition) 2. The offeree must accept in any manner required by the offer.

Which are the Five kinds of threats are generally considered DURESS in contract law?

1. Threat of physical violence or harm to the individual or to his/her family or property 2. Threat of corinal prosecution 3. Threat of a lawsuit, but only if the threat is made with actual knowledge that the suit would be without any basis 4. Threat of personal or family social disgrace

Is an advertisement an offer?

General advertisements, catalogs, brochures, and announcements are usually not offers because: 1. They are not sufficiently definite 2. They are not commumicated to a spectfic person or persons, or 3. The circumstances of publication indicate lack of contractualment. Advertisements are usually considered to be "invitations to deal,"

What happens when there is an MUTUAL mistake?

In general, there is no binding contract if a material mistake or fallacy is mutual. In general, mutual mistake of a material fact is grounds to cancel a contract.

Explain the LACK OF CAPACITY OF MINORS

In most states both parties must be at least 18 years old to make a legally binding agreement, a few states set the minimum age at 21.

When can an ADVERTISEMENTS be considered an offer?

In the following circumstances, however, an advertisement can be construed to be an offer it is so specific to an identified or identifiable person or group that contractual intent can be inferred.

Define MATERIAL MISTAKE

Is a mistake that goes to the very heart of the agreement

Is INNOCENT MISREPRESENTATION a FRAUD?

It is NOT. It is not a tort and does not give rise to a claìm for damages The only remedy available to the plaintiff is rescission of the contract.

Explain lack of CONSIDERATION by PROMISSORY ESTOPPEL

Occurs when a promise is made without any consideration, but the promisee, relying upon the promise, takes certain action, or fails to take action.

Explain lack of CONSIDERATION by PAST CONSIDERATIONS

Past consideration is somethmng that was performed without expectation of obtaining somethìng in return from the other party

What is it intended by RATIFICATION BY A MINOR?

RATIFICATION BY A MINOR: Once a minor reaches the age of 18, he/she may accept the contract, and thus ratify it.

Explain the requirement of fraud: MISREPRESENTATION of a MATERIAL FACT

Represent something that its not true. Matters pertaining to value and matters asserted as opinion are generally not factual in nature and are not grounds for fraud.

Explain lack of CONSIDERATION by REQUIREMENTS AND OUTPUT CONTRACTS

Requirements and output contracts should be accompanied by an estimate of the quantities to be bought or sold. In most cases the facility buying or selling should have a record of needs or production. If there is no such record, the contract could be 'illusory," that is, no obligation to buy or sell could be demonstrated

Explain lack of CONSIDERATION by STATUTE OF LIMITATIONS

Sometimes a contract is barred (no longer subject to legal action) by the statute of limitations

Which are the consequences of FRAUD?

The defrauded party can: 1. Rescind the contract and get back any consideration paid 2. Retain the goods or value obtained and sue in tort for damages

Define INCIDENTAL MISTAKE

The facts are not known. Not a common fallacy, but no judgement abost value.