business law

restitution

(n.) the act of restoring someone or something to the rightful owner or to a former state or position; making good on a loss or damage

"Firm offers"

for the sale of goods made by a merchant and subject to the provisions of the Uniform Commercial Code;

Genuineness of Assent

the apparent consent of both parties must be genuine

bargained-for exchange

the consideration given by the promisor must induce the promisee to incur a legal detriment and/or provide a legal benefit to the promisor, either or both of which are sufficient to induce the promisor to make the promise.

Option contracts,

under which the offeror cannot revoke his or her offer for a stipulated time period during which the offeree has the sole right of acceptance.

Consideration

which must be given in order to make a contract legally binding, is legally sufficient and bargained-for value, given by the promisor in return for the promisee performing or refraining from performing some act which results in a detriment to the promisee and/or a benefit to the promisor.

Insufficient Consideration

1. illusory promise 2. gratuitous promise 3. promise of past consideration 4. nominal promise 5. promise of pre existing duty

Bilateral Contract

A bilateral contract arises when a promise is given in exchange for a promise in return (e.g., X promises to deliver a car to Y, and Y promises to pay X an agreed price). In a bilateral contract, the parties are both promisors and promisees.

Mailbox Rule

A common law rule that acceptance takes effect, and thus completes formation of the contract, at the time the offeree sends or delivers the acceptance via the communication mode expressly or impliedly authorized by the offeror.

Implied-in-Fact Contract

A contract formed in whole or in part by the conduct (as opposed to the words) of the parties.

Express Contract

A contract in which the terms of the agreement are fully and explicitly stated orally or in writing.

Valid Contract

A contract satisfying all of the requisites discussed earlier - agreement, consideration, capacity, legal purpose, assent, and form. By contrast,

Informal Contract

A contract that does not require a specified form or method of formation in order to be valid.

Executed Contract

A contract that has been completely performed by both (or all) parties. By contrast,

Formal Contract

A contract that requires a special form or method of formation (creation) in order to be enforceable.

Exculpatory Clauses

A contractual provision that releases a party from liability, regardless of fault.

Liquidated/Undisputed Debt

A debt whose amount has been ascertained, fixed, agreed on, settled, or exactly determined

Unliquidated/Disputed Debt

A debt whose amount is in dispute by reasonable persons.

Quasi or Implied-in-Law Contract

A fictional contract imposed on parties by a court in the interests of fairness and justice, typically to prevent the unjust enrichment of one party at the expense of the other.

agreement

A meeting of two or more minds in regard to the terms of a contract.

Counteroffer

A rejection by the offeree of the original offer, coupled with a new offer made by the original offeree to the original offeror.

Unilateral Contract

A unilateral contract arises when an offer can be accepted only by the offeree's performance (e.g., X offers Y $15 to mow X's yard). Under the modern-day rule, once the offeree has substantially performed the act (the acceptance), the offeror cannot revoke the offer for a reasonable period of time.

I. Elements of a Contract

A. Agreement B. Consideration C. Capacity D. Legality

III. Types of Contracts

A. Bilateral G.Informal B.Unilateral H. Executed C. Express I.Executory D.Implied In Fact J.Valid E.Quasi Contract (contract implied in law) K. Void F. Formal L.Voidable M. Unenforceable

II. Defenses

A. Genuineness of Assent B. Form

Licensing Statutes

All states require those members of certain professions - attorneys, doctors, and architects, to name a few - be licensed by the state. Any contract with an unlicensed individual is illegal and may be unenforceable.

Accord and Satisfaction

An agreement between an obligor (debtor) and obligee (creditor), by which the obligor agrees to pay the obligee some amount owed under the contract (generally less than the amount in dispute) in exchange for a discharge of all obligations owed by the obligor to the obligee.

Contract

An agreement between two or more parties to perform or to refrain from some act now or in the future.

Covenant Not to Sue

An agreement to substitute a contractual obligation for some other type of legal action based on a valid claim.

Release

An agreement whereby one party forfeits its rights to pursue a legal claim against another party.

Effects of Illegality

An illegal contract - one that is contrary to statute and/or to public policy - is, generally, void.

Parent's Liability on Minor's Contracts:

As a general rule, parents are not liable for the contracts made by their minor children unless: Co-sign or child committed some tort or other wrongful act associated with the contract at the direction of one or both parent(s).

Contractual Capacity

Both parties must be competent to enter into the agreement;

Emancipation

Minor is treated as adult.

"Mirror Image" Rule

Prior to the adoption of the Uniform Commercial Code, an offeree's acceptance was required to match the offeror's offer exactly. If the offeree's acceptance materially changed, added to, or deleted any terms in the original offer, the offeree's acts were deemed to constitute a counteroffer, not an acceptance.

Contractual Capacity: Minors

The minimum mental capacity required by law for a party who enters into a contractual agreement to be bound by it. Common law recognizes two classes of persons who are generally not considered to have sufficient capacity to be bound by their contracts: 1) minors; and 2) mentally impaired or incompetent persons.

Rejection

The terms of the offer may be rejected by the offeree, in which case the offer terminates.

Rescission & Novation

The unmaking of an existing contract and making of a new contract between the same parties (e.g., to account for unforeseen difficulties) are known, respectively, as rescission and novation.

Revocation:

The withdrawal of an offer by the offeror, communicated to the offeree prior to the offeree's acceptance.

Pre-existing legal duty

Under most circumstances, a promise to do (or refrain from doing) what one already has a legal duty to do (or refrain from doing) does not constitute legally sufficient consideration.

Usury Statutes

Virtually every state has a statute that sets the maximum rate of interest that can legally be charged for different types of transactions, including ordinary loans

Rules of Interpretation:

When a contract contains ambiguous or unclear terms, a court will resort to one or more of the following rules in order to determine and give effect to the parties' intent.

The Plain Meaning Rule:

When a contract is clear and unequivocal, a court will enforce it according to its plain terms, set forth on the face of the instrument, and there is no need for the court either to consider extrinsic evidence or to interpret the language of the contract.

Promissory Estoppel

When a promisor makes a clear and definite promise on which the promisee justifiably relies, the promisor is bound by the promise, even if it was insufficient to form the basis of a valid, legally binding contract.

Rescission

Canceling an existing contract, and returning the parties to their pre-contract states.

Unconscionable Contracts:

Contracts that require one party, as a consequence of disproportionate bargaining power, to accept5 terms that are unfairly burdensome to that party and unfairly beneficial to the party with greater bargaining power, are generally unenforceable.

Contracts in Restraint of Trade

Contracts that tend to reduce competition for the provision of goods or services in one or more market(s) (e.g., covenants not to compete) are illegal.

Illusory Promises

If the terms of a contract call for performance in such uncertain terms that the promisor has not definitely promised to do (or refrain from doing) anything, the promise is unenforceable for lack of sufficient consideration.

Gambling Statutes

Most gambling contracts are illegal and void, even in states where certain forms of gambling are permitted, subject to governmental regulation.

Necessities

Necessaries required for life, such as food, shelter, clothing, and medical attention.

Agreement

One party must objectively intend to make an offer to enter into an agreement, and the other party must accept the terms of the offer;

Disaffirmance

The legal avoidance, or setting aside, of a contractual obligation.

Past Consideration

Promises made in return for acts or events that have already taken place are unenforceable for lack of sufficient consideration.

Novation

Replacing an existing contract with a new, superseding contract between the same parties.

Contracts Contrary to Public Policy

Some contracts between private parties are void (I.e., not enforceable), because they are against public policy.

Blue Laws

Some states and localities prohibit engaging in certain business activities on Sunday.

Contracts Contrary to Statute

Statutes sometimes proscribe certain types of contracts, contract terms, and/or contractual provisions.

Ratification

The acceptance or confirmation of an act or agreement that gives legal force to an obligation that previously was not enforceable.

Form

The agreement must be in whatever form (e.g., written, under seal, etc.) the law requires.

Legality

The contract's purpose must be to accomplish some goal that is legal and not against public policy;

void contract

is a contract having no legal force or binding effect (e.g., a contract entered into for an illegal purpose);

executory contract

is a contract that has not yet been fully performed by one or more parties.

unenforceable contract

is an otherwise valid contract rendered unenforceable by some statute or law (e.g., an oral contract for the transfer of an interest in real estate).

Voidable Contract

is an otherwise valid contract that may be legally avoided, cancelled, or annulled at the option of one of the parties (e.g., a contract entered into under duress or under false pretenses); and,