Business Law Chapter 15, 16, 17

Mistake of Fact

(1) A mistake that is not caused by the neglect of a legal duty by the person committing the mistake but, rather, consists of unconscious ignorance of a past or present material event or circumstance. (2) An affirmative defense in which the defendant tries to prove that she or he made an honest and reasonable mistake that negates the guilty-mind element of a crime

Fraudulent Misrepresentation

(1) The tort that occurs when a misrepresentation is made with intent to facilitate personal gain and with the knowledge that it is false (2) In contracts, a false representation of a material fact that is consciously false and is intended to mislead the other party. Also called intentional misrepresentation

Types of Consideration

- A benefit to the promisee: A promise to stay in a job until a particular project is complete (this is a benefit to the employer) - A detriment to the promisor: A promise to your football coach to refrain from riding your motorcycle during football season even though you love riding it - A promise to do something: A promise to cook dinner for your roommate for the next six months - A promise to refrain from doing something: A promise to stop staying out late at night during exam week

Promissory Estoppel Occurs When Three Conditions are Met

- One party makes a promise and either knows or should know that the other party will reasonably rely on it. - The other party does reasonably rely on the promise. - The only way to avoid injustice is to enforce the promise.

For a mutual mistake to interfere with legal consent, all the following must be present

1. A basic assumption about the subject matter of the contract. 2. A material effect on the agreement. 3. An adverse effect on a party who did not agree to bear the risk of mistake at the time of the agreement.

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.

Factors that enter into the finding of undue influence are the following

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 nondominant party isolated from other advisers at the time of the agreement? 4. Is the contract unreasonable because it overwhelmingly benefits the dominant party?

Exculpatory Clause

A clause in a contract that basically frees one party (usually the drafter of the agreement) from all liability arising out of the performance of the contract; generally based on factors such as consumer ignorance or a great deal of unexplained fine print that serve to deprive the less powerful party of a meaningful choice

Adhesion Contract

A contract created by a party to an agreement that is presented to the other party on a take-it-or-leave-it basis. Such contracts are legal but are sometimes rescinded on the grounds of unconscionability and the absence of one party's free will to enter a contract

Indivisible Contract

A contract that cannot be divided and must be performed in its entirety

Severable Contracts

A contract whose terms can be divided

Unliquidated Debt

A debt for which the parties either dispute the fact that any money is owed or agree that some money is owed but dispute the amount

Innocent Misrepresentation

A false statement made about a material fact by a person who believed the statement was true

Negligent Misrepresentation

A false statement of material fact made by a person who would have known the truth about the fact had he or she used reasonable care to discover or reveal it

Sabbath Laws

A law that prohibits the performance of certain activities on Sundays

Legal Assent

A promise to buy or sell that the courts will require that the parties obey

Preexisting Duty

A promise to do something that one is already obligated to do. It is not considered valid consideration

Illusory Promise

A situation in which a party appears to commit to something but really has not committed to anything. It is not a promise and thus not consideration.

Unconscionable

A term applied to a contract in which one party has so much more bargaining power than the other party that the powerful party dictates the terms of the agreement and eliminated the other party's free will

Gambling

Agreements in which parties pay consideration (money placed during bets) for chance, or opportunity, to obtain an amount of money or property

Covenants Not to Compete

An agreement not to compete against a party for a set period of time within a designated geographic area

Accord and Satisfaction

An arrangement between contracting parties whereby one of the parties substitutes a different performance for his or her original duty under the contract. The promise to perform the new duty is the accord, and the actual performance of that new duty is the satisfaction.

Legal Principle

An illusory promise is not consideration Past consideration is no consideration at all When a debt is unliquidated, the parties may enter into an accord and satisfaction

Misrepresentation

An untruthful assertion by one of the parties about a material fact

Duress

Any unlawful act or threat exercised on a person whereby the person is forced to enter into an agreement or to perform some other act against his or her will

Legal Principle

As a general rule, any contract entered into by a minor is voidable by the minor until he or she reaches the age of majority or a reasonable time thereafter Covenants not to compete in conjunction with the sale of a business are generally enforceable if they are for a reasonable length of time and involve a reasonable location.

Chapter 16

Capacity

Chapter 15

Consideration

Liquidated Debt

Debt for which there is no dispute between the parties about the fact that money is owed and the amount of money owed

Chapter 17

Legal Assent

Implied Ratification

Occurs when the former minor takes some action after reaching the age of majority consistent with intent to ratify the contract.

Express Ratification

Occurs when, after reaching the age of majority, the person states orally or in writing that he or she intends to be bound by the contract entered into as a minor.

Ratification

Once a person reaches the age of majority, he or she may ratify, or legally affirm, contracts made as a minor. Once ratified, the contract is no longer voidable.

Concealment

The active hiding of the truth about a material fact

Consideration

The bargained-for exchange; what each party gets in exchange for his or her promise under a contract

Nondisclosure

The failure to provide pertinent information about a projected contract

Capacity

The legal ability to enter into a binding contract

Promissory Estoppel

The legal enforcement of an otherwise unenforceable contract due to a party's detrimental reliance on the contract

Usury

The lending of money at an exorbitant or unlawful rate of interest

Undue Influence

The situation in which one person takes advantage of his or her dominant position in a relationship to unfairly persuade the other person and interfere with that person's ability to make his or her own decision

Rescinded

To cancel a contract

Substantive Unconscionability

Unconscionability that derives from contract terms that are so one-sided, unjust, or overly harsh that the contract should not be enforced

Procedural Unconscionability

Unconscionability that derives from the process of making a contract

Legal Principle

When one party is forced to enter into a contract by the wrongful threat of another, the contract is voidable by the innocent party due to duress.