BLS Exam 3

Ex: complying with statute of frauds

"I, Tom, sell you a house for $100,000 described as lot 1414" •Signed with signature •"Hey Tom, per your letter, OK." •Signed with signature

Land Contract Provision

- any kind of agreement that involves the sale of real property or the transfer of certain rights (right-aways, etc) or financing of real property (mortgages, etc) - has to be in writing / unenforceable if not

Contracts that create Violation of Statutes (violate state/federal law) (illegal bargains)

-An agreement declared illegal by statute will not be enforced by the courts Include: 1) Licensing Statutes 2) Gambling Statutes 3) Usury Statutes

Additional Work

-If a party to a contract agrees to do additional work (more than the contract requires), the promise to do it is valid consideration. Ex: If contractor asks Gene for additional $10,000 but agrees to add a waterfall onto a deck to the pool, the promise to do the additional work is consideration. If Gene agrees to pay, then that is his consideration. Both parties are bound

Exceptions to contracts of intoxicated persons being voidable

-If the intoxication just causes the person to exercise poor judgement, the contract is not voidable unless the other party unfairly capitalized on the impaired judgement -When the intoxicated person becomes sober, the contract can be ratified or disaffirmed; however the courts will fairly liberally interpret behavior that seems like ratifying the contract once the intoxicated person becomes sober

Unforeseen Circumstances

-If unforeseen circumstances cause a party to make a promise regarding an unfinished project, that promise is valid consideration Ex: Suppose a pool contractor has been building pools in Gene's neighborhood for 20 years and has never had a problem with rocks until now. While bulldozing for a pool the contractor hits solid rock and it will take $5,000 to clear the rock. Gene agrees to pay. Neither party knew of the rock, contractor gave additional consideration and Gene will be held to promise to pay additional money

Two types of Debts

-Liquidated Debt -Unliquidated Debt

Surety=

-One party doesn't have to perform, unless the first party that promised doesn't perform

Gambling Statutes

-Unless there is a statutory exception, gambling is illegal and agreement to wager are contracts that the courts will NOT enforce •Statutory exceptions - lotto, scratch-offs, casino gambling in some states, insurance policies •States with rule that all gambling is illegal unless the legislature makes an exception -Unless there is statutory exception (lotto, bingo, etc) gambling is illegal and agreement to wager are contracts that courts will not enforce -Make exceptions for churches, race tracks, and insurance companies

Chapter 16

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Chapter 17

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Chapter 18

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chapter 19

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Exceptions to in pari delicto

1) Member of a protected class is party to an agreement that contradicts a statute intended to protect the specific class. That party is allowed to sue for performance 2)When justifiable ignorance of facts leaves one party unaware of a provision of the agreement that would make it illegal (not knowing that the other party intended to fulfill the agreement through illegal means does function as an excuse to one party not being at fault) 3) One of the parties withdraws from an illegal agreement (the key to any recovery is that the party must have withdrawn before any illegality occurred)

Two different areas pertaining to capacity

1) Minors (age) 2) Incompetency (mental conditions)

Examples of Consideration

1) You have all the hamburgers, I do not. You want money, I want a hamburger. I promise to pay you $2 if you promise to give me a burger. Why should you give me a hamburger? Why should I give you $2? Because we both gave up something of legal value. That exchange is the consideration. 2) Aunt says to kid, I will pay you $5 if you give up smoking. Aunt is not legally obligated to give $5, but she promises to do it and he is not legally required to give up smoking. Both giving something of legal value.

For a mutual mistake to interfere with legal consent, ALL of the following must be present:

1) a basic assumption about the subject matter of the contract (a mistake about the existence, quality or quantity of the items to be exchanged) 2) A material effect on the agreement (the mistake must affect the essence of the agreement. A fact is material when it provides a basis for a person's agreeing to enter into the contract) 3) An adverse effect on a party who did not agree to bear the risk of mistake at the time of the agreement (someone who agreed, at the time of the agreement, to bear the risk of mistake but then later wishes to avoid that risk when the contract does not work out as well as they had planed)

Agreements to pay out of the funds of the estate vs Agreements to pay estate bills out of the executors/administrator's own money

1) can be oral. 2) has to be in writing to be enforceable

Exceptions Statute of Frauds

1)Lawsuit exception - if buyer who, charges have been brought agains,t admits in pleadings or testimony or otherwise during court proceedings to an oral contract existing even though the contract was required to be in writing and court will uphold the contract despite its lack of writing, the statute of frauds no longer applies 2)Specially Manufactured goods that cannot be sold to others and manufacturer has substantially manufacturing and the manufacturer has started production, then the statute of frauds doesn't apply and contract will be upheld 3)If goods have been delivered to the buyer or there has been part payment then the statute of frauds doesn't apply and the oral contract will be upheld

Major obstacles to legal assent:

1)mistake 2)misrepresentation 3)undue influence 4)duress 5)unconscionability

What kind of promises/performances are not considered consideration?

1. Pre-existing duty: You are already legally obligated to do promised performance 2. Promise to make a gift (most cases according to "gift" laws can be revoked) 3. Past Consideration: Promise made for a past performance 4. Illusory Promise: Promise is "illusory"

5 situations where contracts must be in writing to be valid

1. Suretyship Provision 2. Executor Administrator Provision 3. Marriage Provision 4. Land Contract Provision 5. One Year Provision

Exceptions to the Pre-existing Duty Rule

1. Unforeseen Circumstances 2. Additional Work 3. Uniform Commercial Code exceptions

Considered when evaluating if undue influence occurred

1. Was the dominant party rushing the other party to consent? 2. Did the dominant party gain undue enrichment from the agreement? 3. Was the non-dominant party isolated from other advisers at the time of the agreement? 4. Is the contract unreasonable because it overwhelmingly benefits the dominant party?

Exceptions to Unilateral mistake where relief is given to the mistaken party

1.If the other party knows you are operating under mistaken understanding and you find out later they knew ... You can possibly get out of contract, might be voidable 2.If the mistake was caused by clerical error that was accidental and did not result from gross negligence 3.The mistake was so serious that the contract is unconscionable, that is, so unreasonable that it is outrageous -If any of these are true the contract may be voidable

Three rules of Disaffirmation

1.Upon the disaffirmance by a minor of a contract, the adult has to return 100% of the consideration it received from the minor. Minor also has to return whatever consideration he received, if any left. a.Ex: Dealer received $500 from minor, dealer has to give back $500. Minor gets car from dealer, minor returns car to dealer. 2.Benefit rule: adult has to give back 100%, but the adult has the opportunity to deduct from that 100% (if he can prove it) an amount equal to the value of the use a.Minor will receive the money he paid minus a deduction for the use. 3.Depreciation rule: adult has to give back 100%, but can deduct either for the depreciation of the subject matter or the price relative to the deterioration. a. Depreciation: loss of value of the good for the passage of time b. Deterioration: destruction of the good

Time and territory rule (for reasonableness)

= based upon the type of business, is the period of time the seller must not compete / is distance [geographically] from the business reasonable?

Past Consideration

A promise cannot be based on consideration provided before the promise was made. -For a promise to be enforceable there must be -bargaining and an exchange. -For a court to enforce a promise, both sides must offer consideration. -Ex: You graduate from college and get a job. After 5 years, your boss says, "Because you have done such a great job the last 5 years, I am going to give you 5 percent of the company stock." Six months later, you still have not received the stock. May you sue your boss to enforce the promise? NO. Because your work has already been performed, yu have given nothing in exchange, and the court will not enforce the promise. A promise cannot be based on consideration provided before the promise was made. Therefore, you are at the mercy of your boss's goodwill. LEGAL PRINCIPLE: Past consideration is no consideration at all. Exception to this rule: • Promises based on past consideration may be enforceable "to the extent necessary to avoid injustice." • In some cases, if past consideration was given with expectation of future payment, the court may enforce the promise.

Example of Suretyship provision

A promises to pay $1 million if B promises to build a house but A needs some type of assurance that B gets the job done so A requires [in the original contract] that B provide a surety bond -Now there exists a contract between B and C (who provides the surety bond, which is that IF B does not perform on time, then C will pay $1 million to A) -C has NO OBLIGATION to pay $1 million to A until it is proven that B has not performed → Any time you have a 3rd party who promises to perform if B does not [must be proven] and must be written contract

Further example of Bilateral Contract Consideration

A will give B $5 if B cuts the grass. B's promise to cut the grass supports A's promise to pay $5. A's promise to pay supports B's promise to cut the grass. They promise each other (exchange of consideration) mutually supporting each other's promise. -B doesn't have to give you $5 and B doesn't have to cut grass

Minors can disaffirm (void) a contract up until?

At any time up to their 18th birthday (or whatever age the majority), they can disaffirm the contract - or shortly after the birthday but before the next performance date -minor must void the entire contract -Once disaffirmed the minor cannot change their mind and reaffirm, it is done and contract is terminated

Bilateral contracts (consideration)

Bilateral contract: two promises=two considerations Example: Nicole promises to pay Mike $200 tomorrow for his bike. Mike promises to sell Nicole his bike tomorrow for $200. There is an oral contract between them. -Nicole's promise is her consideration to Mike -Mike's promise is his consideration to Nicole -There has been a mutual exchange of something of value

When is Consideration considered valid?

Consideration concerns the voluntary change of position. By changing one's position by agreeing to do something you aren't obligated to do is the framework of the legal value that makes you promise valid consideration.

Contract between two minors

Contract between two minors: -Either side can claim the voidable side of the contract -Tends to happen: each minor gives back the consideration they have

UCC Statute of Frauds

Contract for value exceeding $500 has to be in writing -Applies for contracts on the sale of goods

Incomplete contracts

Contract is fundamentally flawed bc it is missing critical info, related to essential terms. -Need to fill in missing parts of contract.

Parol Evidence Rule

Contract is in writing, both parties agree the writing is the "entire agreement of the parties" -Problems arise with written contracts when a party assets that the writing is in some way deficient - so courts rely on Parol Evidence Rule to smooth these things over -Parol Evidence Rule makes oral evidence of an agreement inadmissible if it is made before or at the same time as a writing that the parties intended to be the complete and final version of their agreement.

Intoxicated Persons

Contracts of an intoxicated person are VOIDABLE if the other party had reason to know that intoxication rendered the person unable to understand the nature and consequences of the transaction or unable to act in a reasonable manner in relation to the transaction.

Illegal Bargins

Contracts that are considered generally illegal/unenforceable

One year Provision

Contracts that cannot be fully performed within one year must be in writing -One year period begins the day after the contract is created, not when performance is scheduled to begin -If the performance can be completed in one year, contract does not need to be in writing bc it is not within the statute of frauds -Not if it is LIKELY that the contract can be completed in 1 year, but if it is possible (can be) -If possible at all, then need to be written -Probable things do NOT need to be written

Obligees

Contractual parties who agreed to receive something from the other party -Both parties to a contract are obligees

Obligors

Contractual parties who agreed to something for the other party -Both parties to a contract are obligors

Disproportionate Consideration

Courts are rarely concerned with balanced "value" of consideration exchange -Absent the invasion of consumer laws, unbalanced exchanges of values of disproportionate consideration are just fine as long as there is not fraud, duress, undue influence, etc Ex: I'll pay you $20 for your brand new Mercedes - That is fine Ex: I'll pay you $5 to cut my 5 acre front lawn - That is fine

Differences in licensing statutes occurs because of _________

Difference between types = the underlying goal of the state •Revenue producing licenses- a way the state can make money -Ex: drivers license, car salesman license •Regulatory licenses- primary function is to make sure businesses/professionals covered maintain certain levels of expertise ... aka entry requirements and continuing education -Require special skill or hazard to the public → If don't have the required regulatory license, then your contracts may be unenforceable

Exception to the rule regarding liquidated debt____________

Exception to the rule regarding liquidated debt occurs when the debtor offers different performance Ex: Suppose Natalie offered the credit card company her car in full settlement of the $3,000 debt. If the credit card company accepts, regardless of the value of the car, the debt is paid in full and the credit card company may not sue Natalie for any additional money.

Exceptions to the Parol Evidence Rule

Exceptions to the Parol Evidence Rule 1. Partly written and partly oral contracts a. When a contract consists of both written and oral elements, judges treat it as non-finalized and parties don't intend to have written part represent the finalized agreement. 2. Oral evidence to explain typographical errors a. Not trying to modify contract, just trying to explain the contract/make sure we know what it is 3. Oral evidence to determine/prove that one person lacks the capacity to contract a. Nothing to do with written agreement, about if a person can enter 4. Oral defense - undue influence, illegality, mistake, duress, fraud, etc a. See if contract is void, valid, unenforceable 5. Oral evidence to explain ambiguous terms a. Presents a dilemma in interpretation b. To reach an accurate interpretation, courts allow evidence (even oral) for sole purpose of clarifying (not changing) the ambiguous terms 6. Incomplete contracts a. Contract is fundamentally flawed bc it is missing critical info, related to essential terms. b. Need to fill in missing parts of contract.

Executor Administrator Provision

Executor Administrator Provision -When you write a will (statement of how you want your property distributed upon your death), that will is probated (proved) once you die. -In a will, there is a personal representative (executor) to make sure all bills get paid and all the people receive what you left them.

Substituted Contracts

Have one contract, but both parties decide want to do something else. -You can substitute contracts if you mutually agree to. Ex: A says I'll pay B $5 to wash the car. A decides don't want to pay, B doesn't actually want to wash the car. Instead, they agree A pays $10 to B if he cuts the grass. They both agree to rescind the original contract (promises are taken back) and enter into a new contract.

Liquidated (Undisputed) Debts

In a liquidated debt, there is no dispute that money is owed or how much Ex: Natalie calls her credit card company and explains she is a poor college student and cannot afford to pay the entire $3,000 she owes. The credit card company agrees to accept $2,000 as payment in full. The following month, Natalie receives her new credit card statement showing she owes the remaining $1,000. May the credit card company collect the additional $1,000? YES. • Why YES: A creditor's promise to accept less than owed, when the debtor is already obligated to pay the full amount, is not binding.

Unliquidated (Disputed) Debts

In an unliquidated debt, the parties either disagree about whether money is owed or dispute the amount. -They can settle for less than the full amount if they enter into an Accord and Satisfaction.

Minors (age)

LAW = minors (people who have not reached the age of majority) can only enter into voidable contracts •Minors can get out of contracts that entered into with adults •But adults who enter into contracts with minors can NOT get out of them -Represent rules to protect young, innocent minors against majors who would take advantage of them

EQ: Lady has an addition put on her house. Builder says I will put the addition on your house for $20,000. Builder says that it has taken more time/money than expected, I need $5,000 more. Have to pay it?

Lady doesn't have to pay it. -If he comes up and says I need $5,000 because you need a walkway for the addition, then she has to pay it. New element in the contract

Law of Necessaries

Law of Necessaries: states that if an adult provides necessaries (food, clothing, shelter) in the like to minors, the adult can file a claim to get payment for the cost -Looks like a contract

Usury Statutes

Laws that deal with lending money, particularly between individuals in non-business sense Usury occurs when a party gives a loan at an interest rate exceeding the legal maximum -Rule: statute applies to a loan of money that is repayable absolutely in any event (not a gift) and interest rate is excess of that set by statute is violation of usury laws -If charge more than this, the loan agreement = illegal, unenforceable -Legal rate of interest in most states varies between 5-10% -There are exceptions that give banks/large lenders right and ability to charge excess interest rates → not subject to usury statutes

Legality of purpose

Legality of purpose refers to bargain itself - is it legal?

Licensing Statutes

License= a grant of permission -When the government is involved= grant of permission which has attached certain duties or obligations Different Licensing Statutes •Revenue producing licenses •Regulatory licenses

Ex: turns 18 Jan 1 but next payment is Jan 15 when can disaffirm

Minor can disaffirm the contract by Jan 1 or up to Jan 15.

Mental Conditions

No guardianship, no guardian appointed to manage their affairs either financial or otherwise, they are normal people -If they can prove the have a mental condition and with regards to that condition they are determined so under the official competence ability test - proves if lucid or not •If there is evidence they do not understand the nature / effect of their actions when not 'lucid' (aka they are sometimes lucid/sometimes not): -Then Contracts are voidable if entered when not lucid (when they don't know what is going on) - Person can only disaffirm or ratify the contracts only when they are lucid [certain, clear thinking]

Non-competition clause

Non-competition clause in sale contract is clearly a restraint of trade. -only enforceable IF such clauses [non-competition] are secondary to the purpose of the contract and are present to protect a property interest of the promise [the buyer] •Ex: I sell my barbershop and open a new one right next door. Old customers will probably come to new one instead. •Courts will examine the clause for its reasonableness by applying the time and territory rule. Based on type of business, is the period of time the seller must not compete and is the distance from the business reasonable? •What does the court do if it finds an overly restrictive restrain? It reforms the clause and brings into line with reasonableness. Usually doesn't invalidate the entire contract but changes it.

Oral evidence to explain typographical errors

Not trying to modify contract, just trying to explain the contract/make sure we know what it is

Oral evidence to determine/prove that one person lacks the capacity to contract

Nothing to do with written agreement, about if a person can enter

How to disaffirm

Orally, written, any way to communicate

Accord and Satisfaction

Parties can settle for less than the full amount by entering into an Accord and Satisfaction

Three Requirements for Accord and Satisfaction

Parties can settle for less than the full amount by entering into an Accord and Satisfaction, which must meet Three Requirements to be enforceable: 1) The debt is unliquidated (the amount or existence of the debt is in dispute) 2) The creditor agrees to accept as full payment less than it claims is owed. 3) The debtor pays the amount they have agreed on. Under these circumstances, the debt is fully discharged.

Partly written and partly oral contracts

Partly written and partly oral contracts -When a contract consists of both written and oral elements, judges treat it as non-finalized and parties don't intend to have written part represent the finalized agreement.

Mentally incapacitated persons (adjudicated / probated people)

People adjudged incompetent by the court -Persons are stripped of their ability to enter into any legal contract -Any contract the adjudged tries to enter into because void contract

executor=

Personal representative who oversees / is given authority over the estate •In the course of probating an estate, the executor [or administrator] may find themselves signing contracts / paying bills •RULE = agreements to pay estate bills out of the funds of the estate, can be oral agreements -BUT agreements to pay out of the executor's [or admin's] own money must be written contracts ... eventually get reimbursed

Oral evidence to explain ambiguous terms

Presents a dilemma in interpretation -To reach an accurate interpretation, courts allow evidence (even oral) for sole purpose of clarifying (not changing) the ambiguous terms

Illusory Promise

Promise that is not obligatory and doesn't lead to any mutual obligation -Have to look at the words, see what people are promising -Where the performance by one of the parties is optional. We can't say that they are mutually obligated bc there is a choice -Person isn't required to perform -Terms of equivocation: maybe, might, could, possibly - "Contractual-like" promise, sounds a lot like a contract but since there is no mutual obligation it isn't -Ex: Suppose Shaun offers to sell Molly his skis for $300. Molly responds, "I will look at them in the morning, and if I like them, I'll pay you." At this point, Molly has not committed to doing anything

Promissory Estoppel

Promissory Estoppel One exception to the rule requiring consideration Occurs when three conditions are met: 1) One party makes a promise and either knows or should know that the other party will reasonably rely on it. 2) The other party does reasonably rely on the promise 3) The only way to avoid injustice is to enforce the promise

Non-fraudulent misrepresentations

Representations that are made without due care in ascertaining the truth (could of known the truth if they had tried to find out) -an untruthful assertion by one of the parties about the material fact; prevents parties from having the mental agreement necessary for a legal contract -Offeror made the statement with the intent to induce other to perform but did NOT intend to lie •Representation can be innocent but the result is negligent ... similar to negligence torts [occur when failure to exercise reasonable are to protect another's person or property] -Contracts are voidable

Statutes of Fraud

Required to have contract in writing for it to be valid -5 separate situations [some states have additional ones] where contracts must be in writing to be valid

Legal contact formed and subject becomes illegal

Should a legal contract be formed and its subject later become illegal under a new statute, the contract is considered to be discharged by law. -Because a change in the law has made the subject matter of the contract illegal, both parties are discharged from their obligations under the contract

Invalidating Assent

Something has happened during the course of entering the contract that the law allows the person to take the agreement back -Situations where neither party has a choice to take it back bc it was void in the beginning [illegal or adjudged]

Minor Lying About Age

Split decision: -Some states say the adult would not have to give back the consideration -Other states say doesn't matter, the adult has to give back consideration

Contracts Without Consideration (special cases - consideration not needed)

Statutes of limitations Bankruptcy

What area of the law can the adult use to get their money from a minor who has lied about their age?

Sue the minor for fraud → minors can commit torts but cant go into contracts that aren't voidable

First thing you look for in a contract

Sufficient Consideration

Sufficient Consideration

Sufficient Consideration is achieved: -Once it is determined that each party has given up something of legal value to support the promise of the other and they exchange the consideration of the promises

Suretyship Provision

Surety/secondary obligation is required when one party answers for the obligation of another, used as an insurance, back up if other party doesn't agree i. A party outside of the primary agreement promises to fulfill one of the original party's obligations if the original party fails to fulfill it

Mutual Consideration

The exchange of things of legal value -given to support the promises made

Mistake

The only issues that raise potential for rescission [revoking contract] must be: mistake about the existence, quality or quantity of the items to be exchanged

Purpose of parol evidence rule

The purpose of the pail evidence rule is to prevent evidence that substantially contradicts the agreement in its written form, therefore evidence of prior negotiations and agreements, as well as contemporaneous agreements an negotiations, is typically excluded under the parol evidence rule. A written agreement is assumed to be complete -If have a written contract in place, courts will not hear anything that is not within those 4 corners or any attempts to modify the existing contract

Pre-exisiting Duty

There are TWO PARTS to the preexisting duty rule: 1)Performance of a duty you are obligated to do under the law is not good consideration Ex: A police officer cannot collect the reward offered for the capture of a suspect, because he/she was already obligated to catch the person. 2)Performance of an existing contractual duty is not good consideration.

Contracts that violate Public Policy

These agreements are not illegal per se, as they are not in violation of any statute or legal code, but are nevertheless unenforceable because courts have deemed them to be against public policy -Public policy involves both the governments concern for its citizens and the beliefs people hold regarding the proper subject of business transactions -focus is "what is in societies best interest"

Legality

To be enforceable, contracts must have legal subject matter and must be able to be performed legally -Contracts cannot violate either state or federal law -A contract need not be in violation of a statute to be illegal; agreements against generally accepted public policy are also illegal and unenforceable

fraud

Two types: Fraud in the execution (executing a contract): person is deceived because of the lies of the nature of the form of the contract i. Void b. Fraud in the inducement: person tells a lie to try to get them to do something i. Ex: Person A says buy this land bc there is oil on it to Person B, but there is no oil. Person B finds gold on land instead. Courts will let Person B decide if want to stay in contract or not. ii. Voidable

Exculpatory Clauses

Type of clause found in contract that would relieve 1 of parties of any future tort liability that may occur during performance of that party's duties under contract •For these clauses to be unenforceable - 1 party must be in a superior bargaining position with regard to the other Ex: Landlord cannot put Exculpatory clause in contract with student saying that the student cannot sue if he receives an injury caused by the house. ILLEGAL -Does not benefit society if it allows some parties to get away with not having to pay for wrongs they commit simply because they state they will not be liable in various contracts.

Unconscionable contract clauses

Types of clauses that refer to a term of a contract that is so unreasonable that it imposes an unfair burden on 1 of the parties -used in regard to consumer laws by lousy business people, not by people trying to get out of obligations cause they are lousy business people -Illegal

Mental conditions (incompetent people)

Types: 1) Mentally incapacitated persons (adjudicated / probated people) 2) mental conditions 3) Intoxicated persons

Unilateral Contracts (consideration)

Unilateral contracts: one promise for performances = still two considerations -one party's consideration is the promise and the other party's consideration is the act. Example: Suppose your professor made a statement in class: "If any student shows up at my house on Saturday and does the gardening, I will pay that student $100." You show up and do the gardening. -The professor's consideration to you is the promise of the payment of $100 on completion of the gardening -Your consideration to the professor is the act of completing the gardening. -There has been a mutual exchange of something of value

Common Law restraint of Trade

Unreasonable restraints of trade need to be declared illegal ... otherwise go against public policy of free market enterprise ... BUT some restraints are necessary to avoid undesirable results for one party of a contract

Marriage Provision

When get married you have the ability to enter into an agreement basically controlling your property in case you don't stay married - prenuptial agreement

Statutes of Limitations

You lose the right to use the court if don't claim within the time given -If the breaching party, after the statute of limitations has run (passed), comes up to you and re-promises → by doing that, the claim in rejuvenated -main reason this happens: Guilt Ex: Remember the $500 I owe you --> I will pay that

Consideration

a benefit each person gets or expects to get in return for performing a contractual obligation -Something of "legal value" (not obligated to do or not obligated not to do) that we give up -Makes the contract binding -Make promises to each other when making contract, need to provide consideration with promises to do this -BOTH parties involved must pass a consideration [the exchange] to the other party for it to be a valid contract -Common law rule

Uniform Commercial Code Exceptions

a. In commercial trade, many things change between time you went into and time performed b. "No new consideration is needed if the parties mutually agree to modify the contract and do so in good faith" cEx: Builder tells lady he can't finish the house on May 15th, but he can be done by May 30th. Lady says okay. → An agreement modifying a contract needs no consideration to be binding

Depreciation rule

adult has to give back 100%, but can deduct either for the depreciation of the subject matter or the price relative to the deterioration. a. Depreciation: loss of value of the good for the passage of time b. Deterioration: destruction of the good

Benefit rule

adult has to give back 100%, but the adult has the opportunity to deduct from that 100% (if he can prove it) an amount equal to the value of the use a.Minor will receive the money he paid minus a deduction for the use.

(Under common law) contracts =

agreements btw 2 or more parties which contain the essential elements of: • Mutual assent, exchange of consideration, capacity with respect to the parties involved and legality of purpose • Other situations - courts have rules where will reform an otherwise illegal contract to make it legal / enforceable

Bankruptcy

allows a person with debts (contracts) to be discharged of those debts How: File in bankruptcy, legal person seizes the assets of person and sells as much of it as can to repay the collectors. Then the person is discharged. -People who file bankruptcy have the ability to pick and choose creditors they want to reaffirm with after they are discharged. Reason → do that if have a relationship with a certain bank or family member is a creditor [reaffirmation] -If you reaffirm after discharged, you are still are in debt to creditors. Don't need new consideration for same promise

Misrepresentation

an untruthful assertion by one of the parties about the material fact; prevents parties from having the mental agreement necessary for a legal contract -innocent misrepresentation (results from a false statement about a fact material to an agreement that the person making it believed to be true, innocent parties can rescind the contract, but cannot sue for damages) -Negligent misrepresentation (one party makes a statement of material fact that he/she thinks is true, could have known the truth by using reasonable care to discover or reveal it, even if he had no intent to deceive, in contract law it is treated as though he did have intent) -Fraudulent misrepresentation ( consciously false representation of a material fact intended to mislead the other party: tricked into the agreement, thus the agreement was not voluntary and can be rescinded on the ground that there was no meeting of the minds)

Unconscionability

arises when one of the parties has so ugh more bargaining power than the other that he/she dictates the terms of the agreement and makes a mockery of free will

Mutual mistake

both parties are mistaken about the same set of facts as those facts relate to a basic assumption and that mistake has a material [substantial] effect on the agreement o Ambiguity prevented true meeting of the minds o EX: A is going to pay $20000 for a 2014 KIA car from B who agrees to sell ... both believe it is a 2014 [year = basic assumption] but car is actual a 2013 so BOTH can consider it voidable • Contracts are voidable by BOTH parties

Legal value

can take the form of money, physical objects, services, or a forbearance of action

Severable Contracts

contain multiple parts that can each be performed separately and for which separate consideration is offered. -if they have illegal portions, the court can void only the illegal sections and enforce the rest as long as they represent the main purpose of the original agreement

Improper threats

contracts signed bc of statements made (not harmful, "bad mouth your business") are voidable i. Threatens to file criminal lawsuit unless consent is given to the terms of contract ii. Threatens other's economic interest

Physical compulsion / Force:

contracts that were signed under duress are void

mutual promises to marry each other

do not require writing.

Mistake of Fact

erroneous belief about the facts of the contract at the time the contract is concluded

Unilateral mistake

if one person is mistaken as to material fact, they get no relief (in general). Person usually can't get out of the contract. -Generally these contracts are still considered valid

If a person suffers from delusions that may impair his/her judgement, but can still understand that he/she is entering into a contract and understand his/her obligations under the contract then the contract ________

is valid

If delusions prevent him/her from understand that they are entering into a contract or the nature and extent of his/her obligations under the contract then the contract is _______

is voidable

Real property=

land, house, anything attached to land -"Land" encompasses soil itself and anything attached to land (trees/buildings) - the claim to an oral contract for the sale of land is not enough to prove a contract existed

in pari delicto

legal principle which means both parties are equally responsible for the illegal agreement -when an agreement is deemed illegal, courts will usually label it void

Adequate Consideration

means does consideration exist at all - not how good is contract -Value cannot be looked out like its an equation in contract law - values don't have to balance -Look at if there has been an exchange, not if exchange is proportionate -Exchange might be disproportional but if there is an exchange then it is adequate.

Contracts in which one party promises something in exchange for another's promise to marry

must be in writing to be enforceable

Fraud in the execution (executing a contract)

person is deceived because of the lies of the nature of the form of the contract i. Void

Fraud in the inducement

person tells a lie to try to get them to do something -Ex: Person A says buy this land bc there is oil on it to Person B, but there is no oil. Person B finds gold on land instead. Courts will let Person B decide if want to stay in contract or not. ii.Voidable

Primary obligations and Secondary obligations

primary obligations do not need writing, but secondary obligations do

Legal Assent

promise the courts will require the parties to obey -Make business transactions smoother and more dependable -Without legal assent the contract may be voidable -Voidable contract can be recinded, or cancelled, permitting the person who canceled the contract to require the return of everything she gave the other party

Prenuptial agreements

promises that effect the exchange of property, must be in writing to be valid and enforceable -Agreement two parties enter into before marriage that clearly states the ownership rights each party enjoys in the other party's property -Both sides list all of their assets and make provisions (I want this, we can split this, you have that, etc)

indivisible contracts

requires complete performance by both parties, even if it appears to contain multiple parts -Must be enforced or rejected in their entirety.

laws of decent and distribution

says property goes out to closest blood lines. Administrator does the same thing executor if you don't appoint an executor/dealing with law of decent and distribution

Undue Influence

special relationships in which one person takes advantage of a dominant position in relationship to unfairly persuade the other and interfere with that person's ability to make his or her own decision" -Must have a confidential relationship and a dominant party who is taking advantage of the subordinate -Involves a dominant party in a confidential secret or fiduciary (a person in a position of trust in respect to another persons property - assumes fiduciary would treat others property as their own) relationship with another, and uses that to take advantage of the other -Contracts are Voidable ii. Ex: Bargain with lawyer, attorney, doctor, guardian, relative (dominant)

Capacity

the ability to do something; a legal right, power, or competency to preform some act ... the ability to comprehend both the nature and consequences of one's acts -Third element of a legally binding agreement -A person who has legal capacity has the mental ability to understand his or her rights and obligations under a contract, and therefore presumably to comply with terms

Satisfaction=

the debtor's payment of the reduced amount.

Accord=

the new agreement to pay less than the creditor claims is owed.

If contract can possibly be performed within a year, even if such performance is highly unlikely

then the contract does not need to be in writing to be enforceable.

Oral Defense

undue influence, illegality, mistake, duress, fraud, etc -See if contract is void, valid, unenforceable

Contracts of a person with limited mental capacity can be _______

valid, voidable or void, depending on the extent of the mental incapacity

If a person has been adjudicated insane then his/her contract is__________

void

Most contracts that are not legal =

void BUT some situations where courts intervene on side of unknowing party and provide equitable remedy for person 'not at fault' but finds themselves in an illegal bargain •Other situations - courts have rules where will reform an otherwise illegal contract to make it legal / enforceable

scienter

when a person has no knowledge of the claim's falsity

Duress

when one party is forced into agreement by another Duress can be caused by: -Physical compulsion / Force: -Improper threats:

How to comply with statutes of fraud

• Parties involved • Subject matter • Essential terms • Signature • Legal description