FINAL EXAM ACC 473
adhesion contract (Contrary to Public Policy)
(one that is written exclusively by one party and presented to the other on a take-it-or-leave-it basis)
Intoxication
-A condition in which a person's normal capacity to act or think is inhibited by alcohol or some other drug -entered into by an intoxicated person can be either voidable or valid
Minors' Obligations on Disaffirmance
-All states' laws permit minors to disaffirm contracts but differ on the extent of a minor's obligations on disaffirmance. -hold that the minor need only return the goods subject to the contract -if goods are damaged, minor to restore the adult party to the position she or he held before the contract was made.
Covenants Not to Compete in Employment Contracts
-Employees cannot work for competitors or start competing businesses for a specified period of time after termination of employment. -legal in most states if the specified period of time (of restraint) is not excessive and the geographic restriction is reasonable
Parents' Liability
-Parents are not usually liable for contracts made by minor children acting on their own. -Businesses normally require parents to cosign any contract made with a minor
persons adjudged mentally incompetent by a court
-any contract made by that person is void -The court will appoint a guardian who will represent the mentally incompetent individual and enter into binding legal obligations on his or her behalf
if person is sufficiently intoxicated to lack mental capacity
-entered into by an intoxicated person can be either voidable or valid
Minor's right to disaffirm
-express his or her intent, through words or conduct, not to be bound to the contract -must disaffirm the entire contract, not merely a portion of it. -the minor may disaffirm; any adult party to the contract remains bound unless and until the minor's disaffirmance releases her
gambling contracts (most) (Contrary to Statute)
-illegal and unenforceable—even in states where certain forms of regulated gambling are permitted. -All states regulate gambling
Effect of Illegality
-illegal contract is void and both parties are usually considered to be in pari delicto (equally at fault)
Exceptions to a Minor's Right to Disaffirm
-misrepresentation of age -doing business as an adult -contracts for necessaries
Requirements of the Offer
1. Offeror must have a serious intention to be bound by the offer 2. The offer's terms must be reasonably certain, or definite 3. The offer must be communicated to the offeree.
True
A contract in which the stronger party dictates the terms is a adhesion contract True or False
False
A contract that calls for the performance of an illegal act may be enforceable True or False
True
A contract that exculpates one party for negligence will usually be held unconscionable True or False
Contracts to Commit Crimes
A contract to commit a crime is unenforceable and void
False
A contract with an unlicensed practitioner is always enforceable True or False
False
A covenant not to compete is never enforceable True or False
True
A lender who makes a loan at a rate above the lawful maximum commission usury True or False
Usury (Contrary to Statute)
A lender who makes a loan at an interest rate above the lawful maximum commits
True
A minor may disaffirm a contract entered into with an adult True or False
False
A parent is always liable for a minor's contract True or False
Option Contract
A type of irrevocable offer that is held open for a specified period of time in return of consideration.
ASSIGNEE VS DELEGATE
ASSIGNEEE LOSES LIABILITY AS SOON AS SOLD. DELEGATOR (ORIGINAL AND DELEGATED) BOTH ARE LIABLE. SUCKS TO SUCK FOR DELEGATION.
Licensing Statutes (Contrary to Statute)
All states require that certain professionals (e.g., physicians) obtain a license from the state.
False
An intoxicated person who enters into a contract can void it True or False
Termination by Action of the Parties
An offer can be terminated by action of the parties by revocation, by rejection, or by counteroffer
Termination of Offer
An offer can be terminated either by action of the parties or by operation of law
Definiteness of Terms:specific terms
An offer can require specific terms to make the contract definite
"Mirror Image" Rule
At common law, any change in terms automatically terminates the offer and substitutes the counteroffer.
Death or Incompetence of the Offeror or Offeree
Automatically terminates the offer unless it is an irrevocable offer, then recovered from the estate.
D. Valid
Bosley bets Finster on the outcome of the SuperBowl. Gambling on sports events is illegal in their state. Before he game is over, Bosley's attempt to withdraw form the bet is
Disaffirmance within a Reasonable Time (for minor)
Contract can be disaffirmed at any time during minority, or for a reasonable period after minor is emancipated.
Mental Incompetence
Contracts made by mentally incompetent persons can be void, voidable, or valid
Contracts in Restraint of Trade (Contrary to Public Policy)
Contracts that tend to reduce competition for the provision of goods or services in a market
Unconscionable Contracts or Clauses (Contrary to Public Policy)
Contracts whose bargains are so oppressive that the courts relieve innocent parties of part or all of their duties
C. return the car and pay for the same
Ewa, a 16 year old minor, buys a car from Downtown Autos and wrecks it. To disaffirm the contract and satisfy a duty of restitution, Ewa must
Where Intent May Be Lacking
Expressions of opinion, Statements of future intent, Preliminary negotiations, or invitations to negotiate, Advertisements, Live and online auctions, Agreements to agree, Preliminary agreements
B. is reasonable in term son geographic area and time
Franz signs a covenant not to complete with his employer, Gifts 'n More corp. This covenant is enforceable is it
Silence as Acceptance
Generally, silence (or inaction) cannot constitute acceptance but there are exceptions
Prior Dealings
If the offeror and offeree have prior dealings, the offeree has the duty to reject or risk being bound by his silence
D. valid and enforceable
Jaime sells his business to Isabella and, as part of the agreement, promises not to engage in a a business of the same kind, within 30 miles for 1 year. This promise is
Contractual Capacity
Legal ability to enter into a contractual relationship
D. Leigh does not know that Klausen is required to have a license
Leigh contracts with Klausen, a financial planner who is required by the state to have a license. Klausen does not have a license. Their contract is enforceable if
D. unenforceable
Luke is an unlicensed contractor in a state that requires a license to protect the public from unauthorized contractors. Kirkpatrick hires Luke to build an office building. This contract is
REVOCATION/COUNTEROFFER
MUST BE IN HAND. ACCEPTANCE CAN BE EFFECTIVE if sent via US mail.
Agreement
Offer and Acceptance Makes contract valid
Revocation
Offer can be withdrawn by the offeror anytime before offeree accepts the offer, unless the offer is irrevocable.
Lapse of Time
Offer terminates by law when the period of time specified in the offer has passed. If none then end of a reasonable period of time.
creditor beneficiary
PRIME EXAMPLE OF THIRD PARTY BENEFICIARY. LIFE INSURANCE. I PAY INSURANCE SO THAT OTHERS (THIRD PARTY) BENEFIT WHEN I DIE.
Discriminatory Contracts (Contrary to Public Policy)
Party promises to discriminate on the basis of race, color, national origin, religion, gender, age, or disability are contrary to both statute and public policy, and unenforceable
Exceptions to silence as acceptance
Prior Dealings, Acts Consistent with Acceptance
Counteroffer
Rejection of original offer and the simultaneous making of a new offer.
Exculpatory Clauses (Contrary to Public Policy)
Release a party from liability in the event of monetary or physical injury—no matter who is at fault
Definiteness of Terms
Requirements of the Offer; must express: Identification of the parties, Object or subject matter of the contract, Consideration to be paid, Time of payment, delivery, or performance
Communication
Requirements of the Offer; must express; The offer must be communicated to the offeree
Intention
Requirements of the Offer; Contract is judged by what a reasonable person in the offeree's position would conclude about the offer.
A. as a matter of public policy
Sam leases real property from Regina under an agreement that includes an exculpatory clause. This class is likely unenforceable
Contracts Contrary to Public Policy
Some contracts are not enforceable because of the negative impact they would have on society.
True
Some states impose a duty of restitution on minors who disaffirm contracts True or False
Contracts Contrary to Statute
Statutes often set forth rules specifying what may be included in contracts and what is prohibited.
Unequivocal Acceptance
The acceptance cannot impose new conditions on—or change the terms of—the original offer.
Disaffirmance
The legal avoidance, or setting aside, of a contractual obligation
Rejection
The offeree's rejection of the offer (in words or conduct) terminates the offer
Covenants Not to Compete and the Sale of an Ongoing Business
To be enforceable, geographic restrictions must be reasonable and must be effective only for a reasonable period of time after the sale is completed.
C. ratifying the contract before tom reaches the age of majority
Tome is a minor who enters into a contract with Diane. All of the following are effective methods for Tom to ratify the contract EXCEPT:`
D. void
Vincenzo is adjudged mentally incompetent. Sophia is appointed to act as Vincenzo's guardian. Vincenzo signs a contract to sell his house. The contract is
B. enforceable only if Konrad understood its legal consequence
While intoxicated, Konrad agrees to sell his warehouse for half its assessed value. The contract is
Illegal contract (licensing) (Contrary to Statute)
a contract with an unlicensed practitioner is usually is unenforceable
contract for necessaries
are food, clothing, shelter, medicine, and hospital care- anything to maintain a person's status. ma disaffirm but may be liable for the reasonable value
Usurious contracts (Contrary to Statute)
are illegal and may be void in their entirety, although most states simply limit the interest the lender is permitted to collect
Irrevocable offers
cannot be revoked
liquidated damage
cell phone termination plan. you have to cover what you owe in SPECIFIC AMOUNT.
Disaffirmance for necessaries (intoxication)
contracts are voidable, but the intoxicated person is liable in a quasi contract for the reasonable value of the consideration received.
if a personal understand the legal consequences (intoxication)
despite intoxication, contract is usually enforceable.
consequential (special damages)
domino delivery boy. you take car to dealer but they don't give back for 2 weeks even though they promised. you sue, you win damages since car is very important to you and bc of them you lose delivery money.
Effect of Legality
exceptions to rule: -justifiable ignorance of the facts; -being a member of a protected class who may enforce an otherwise illegal contract (even if the other party cannot) -withdrawing from an illegal agreement before any illegality occurs. -a contract that was entered into due to fraud, duress, or undue influence -severable (or divisible) contracts that consist of distinct parts which can be performed separately
Minors (Contractual Capacity)
general rule is that a minor can enter into any contract that an adult can, except contracts prohibited by law for minors
Supervening Illegality
if offer is illegal Legislation or court decision automatically terminates a previously valid offer or renders a contract unenforceable THINK PIE
Destruction of the Subject Matter
if the object breaks. If it occurs before acceptance of the offer, then the offer is canceled
A contract to do something that is prohibited by federal or state statutory law
illegal, void from the outset, and unenforceable.
misrepresentation of age
in most states minor can still disaffirm, semester prohibit this
Ratification (intoxication)
intoxicated person may ratify a contract expressly or impliedly once sober
age of majority
is eighteen years in almost all states. Some states provide for the termination of minority on marriage
incompetent persons not adjudged mentally incompetent by a court (voidable)
may avoid a contract if at the time of contracting, that person (1) did not know he was entering into a contract or (2) lacked the mental capacity to understand its nature, purpose, and consequences
incompetent persons not adjudged mentally incompetent by a court (valid)
may be valid if the person had capacity at the time the contract was formed, such as during a lucid interval
executory contract
neither party can enforce it; if it has been executed, neither party can recover damages.
Emancipation
occurs when a child's parent or legal guardian relinquishes the legal right to exercise control over the child
Procedural unconscionability
often involves inconspicuous print, unintelligible language ("legalese"), lack of an opportunity to read the contract or ask questions about its meaning, or a disparity in bargaining power between the two parties such that the weaker party's consent is not voluntary.
PENALTIES DAMAGE
penalizing other party is not generally enforceable.
Termination by Operation of Law
power to offer to transform the offer to binding, legal obligation can be terminated thru: 1. lapse of time 2. destruction of the specific subject matter of the offer 3. Death or Incompetence of the Offeror or Offeree 4. supervening illegality of the proposed contract
doing business as an adult
some states prohibit minors who engage in business as adults from disaffirming related contracts
state collarary to E-SIGN
states use UETA to make e-signs work!!! this is all that will be on exam!!!!!!!!
Express ratification
takes place when the individual has reached the age of majority and states orally or in writing that she/he intends to be bound by the contract
Implied ratification
takes place when the minor—on reaching the age of majority— indicates an intent to abide by the contract
Disaffirmance (intoxication)
that person must disaffirm while still intoxicated or within a reasonable time after becoming sober
Ratification
the act of accepting and giving legal force to an obligation that previously was not enforceable.
Gambling(Contrary to Statute)
the creation of risk for the purpose of assuming it.
Acceptance
the voluntary statement or act from the offeree that indicates his/her assent (agreement) to the terms of the offer.
Substantive unconscionability
when contracts—or portions of contracts—are oppressive or overly harsh.
