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Business Law Final Test
Final Test
51
Law
Undergraduate 4
12/03/2012

Additional Law Flashcards

 


 

Cards

Term
Reality of Conscent
Definition
Answers the question: was the offer or acceptance voluntarily made?

Do they REALLY intend to make a free and voluntary offer/acceptance?
Term
Reality of Conscent
Definition
Answers the question: was the offer or acceptance voluntarily made?

Do they REALLY intend to make a free and voluntary offer/acceptance?
Term
Reality Issues
Definition
Misrepresentation
Fraud
Duress
Undue Influence
Term
If a contract is VOIDABLE
Definition
The protected party (the person being taken advantage of/ forced) has the power to END the contract
Term
Misrepresentation
Definition
A false statement of fact (in present or past, not future)
Which is material to the contract
On which the other party relied

Does not require that you KNEW the truth

Car example
Term
Fraud
Definition
Intentional Misrepresentation

Makes it VOIDABLE
Term
Mistake
Definition
Belief about a FACT
That's not true

"Sell you my house at 2nd and Main for $120,000" but you thought the house was the one on 3rd and Main

Other examples:
Location of House
Year of the Car
Thought something was an original

Makes it VOIDABLE
Term
Duress
Definition
Wrongful Coercion
That induces a person to
Enter in to a contract they don't want

Earing and gun example

2 Types:
Physical Compulsion Duress
All other Duress
Term
Physical Compulsion Duress
Definition
Take hand and make someone sign something
Contract is VOID
Term
All other Duress
Definition
VOIDABLE

Threatening to shoot you
You have to believe it's going to happen
His belief of his present immediate ability to do it
Term
Undue Influence
Definition
Unfair PERSUASION of
Susceptible individual

It is PERSUASION rather than COERCION
If you're guilty of undue influence, the contract if VOIDABLE

Usually have a trusing relationship with someone, business partner, family, etc.

Ex. Grandmother giving house to one grandchild instead of any of the other grandchildren
Term
Determining Undue Influence
Definition
Relationship of
Trust (lawyers, pastors, doctors)
Confidence (lawyers, pastors, doctors)
or Dominance (old person living with kid)
Term
Capacity
Definition
A personal of normal mental ability or legal age

You might have all the other elements of a contract but won't have a contract if you don't have capacity
Term
People who don't have capacity
Definition
Minors: Have to be legal age to make valid contract: 18 in most states

Mentally Incapacitated: unable to contract with mental incapacity, affects their ability to make a contract
Term
Capacity: Minors example
Definition
If you have a contract with someone under 18, even if you have offer, acceptance, consideration but have capacity issues because of age. Minor rule driven by age, Contract is VOIDABLE if made by a minor. The power belongs with the minor because the minor will be protected. A mior can stay in or get out of the contract as they see fit

17 year old takes $8000 to buy a used car. He signs contract and pays the $8000 and gets the car. He drives the car home. Contract is voidable. The minors parents have the right to stay in the contract or get out of the contract. Parents can make the minor take the car back if they choose to.
Term
Traditional common law rule:
Definition
If you have a contract with a minor, the minor has the right to disaffirm or terminate the contract
Term
When do minors have the right to terminate?
Definition
Whenever they want. (reasonable time)

Minor can terminate the contract because the contract was made when the person was a minor prior to age 18 so he can get out of the contract

Minor buys car, drives for six months: can terminate the contract

Minor buys car, drives for 2 years, can terminate the contract
Term
Disaffirming: Example
Definition
Car dealership sells minor a car. Instead of paying all the money, the minor buys the car making $400 monthly payments. Minor buys the car on his 17th birthday. He drives the car for 12 months paying the $400 payments every month. He has put 15,000 miles on the car and also put one dent in the car. He takes back the car and wants his money back. He can terminate the contract because he is still a minor one year later.

Minor buys car on 17th birthday, takes the car out and drives 110mph, wrecking the car. Minor now wants money back. (minor will give back the consideration (the wrecked car) he has the car dealer has to give back all the money the minor paid). Car dealer stuck with damages.

Minor gets car, goes to girlfriends. the car gets stolen. Returns to the car dealership the next day and wants his money back. Minor gets his money back.

NOT A QUESTION IF HE CAN GET OUT OF THE CONTRACT BECAUSE HE IS A MINOR.
Term
Does a minor get back all the consideration he/she gave?
Definition
Yes.

If he paid $400 monthly, he will get it all back

If he paid $8000 for the car, he will get the full amount back
Term
Does a minor have to pay for damages?
Definition
No.

Ex. Dealer wants to off-set the amouht of money the minor paid because of damages and wear and tear on the vehicle. No such luck, car dealer is stuck with the damages and the minor must receive all the consideration he gave, or all the money he paid back.

Minor must give back all the consideration he has in whatever shape it is in
Term
Exceptions of minors
Definition
Providing a necessity

A car is NOT a necessity

Food, clothing, and shelter are.

Ex. Minor says he needs a place to live. He signs a contract to rent an apartment. When he signs the contract, the contract is voidable and the minor can get out of the contract before he turns 18 or a reasonable time after turning 18. He will get back all the consideration he paid. Owner can choose to sue for providing a necessity but WON'T get damages. All he'll get is fair market value of the apartment for the time the minor lived there, or the contract amount (whichever is less)
Term
Can am apartment owner sue for breach of contract with a minor?
Definition
There technically is no contract

Can sue for providing a necessity
Term
Minor car example
Definition
Minor goes to buy a car. He swears he is 18. the car dealership asks for ID. The minor brings in a birth certificate showing he is 18 and the drivers license showing he is 18. He buys the car. He shows up back at the car dealership one year later and wants out of the contract. He had lied about his age. The minor can get out of the contract and get all the money he paid back. The car dealership cannot sue the minor for fraud because he is a minor.
Term
Mentally Incapacitated
Definition
Someone who has a medical condition that affects their ability to understand.

Question becomes, do they have the ability to understand what they are doing?
Term
Is it possible for someone who is mentally incapacitated to make a contract if they understand it?
Definition
Yes. ONLY if they understand it
Term
Rules for making a contract with a 35 year old with the mental capability of a 10 year old.
Definition
Contract has to be made so that a 10 year old can understand
Term
Disaffirming when mentally incapacitated
Definition
If it is obvious a person has mental issues, they can terminate contract within a reasonable time after the guardian is aware.

With most mental issues, the person ends up having a guardian. If the guardian is appointed on June 10 and the contract is signed before the guardian is appointed, the guardian can still terminate or disaffirm
Term
Disaffirming in cases of mentally incapacitated persons
Definition
Did the person making the contract have reason to believe the person was mentally incapacitated? (apartment)

No: Mentally incapacitated person gets the money paid back and the apartment owner gets paid for damages.

Yes: Apartment owner does not get paid for damages and the mentally incapacitated person gets all the money back

Necessity rules: Food, clothing, shelter: same rules apply as for a minor
Term
Minors:
Definition
Don't have capacity till 18

Can disaffirm prior to capacity or reasonable time thereafter

If minor disaffirms, he gives back consideration, returns it 'as is'

Person who helped minor can sue for providing necessity- will only get fair market value or contract amount
Term
Mental incapacity
Definition
Right to disaffirm reasonable timea fter guardian finds out about it

When they disaffirm the mentally incapacitated person returns all consideration they have and they get back all the consideration they gave.

Does the other person get damages?
Depends on if they had reason to believe you were mentally incapacitated, If reason to suspect: Get no damages; if no reason to suspect: they get damages

Same necessity rules as minors
Term
Illegality
Definition
Is the contract legal?

It is NOT that something illegal happens, it is simply, is the purpose of the contract illegal?
Term
Illegal Contracts
Definition
Violates statute
Violates public policy
Fail to Obtain Licence
Term
Violates Statute
Definition
Does contract violate Statute?

Contract who's PURPOSE is to violate statute

Commit murder, tort, etc.

Give you $500 to go to the store and get me beer- if i'm 21 it's perfectly legal; if I'm 19, it's not

MAKES VOID
Term
Violate Public Policy
Definition
Restrain of competition
Price Fixing

Agreement to commit a crime

MAKES VOID
Term
Failure to Obtain a License
Definition
MAYBE
Purpose is to protect the public; people have to take a test to know what they're doing

Ex. David offering to take out some kid's appendix. Is he authorized or have license to do it? NO.

No licence= VOID

Sometimes the purpose of the license is to MAKE MONEY

No license= NO EFFECT
Doesn't matter, if the purpose is to make money, contract coulds till be void.
Term
Statute of Frauds
Definition
Every state has it's own SOF

Certain types of contracts HAVE to be in writing

Ex. David's daughter just graduates from college, buys new car, has job at McDonalds, went to bank and entered into a new contract. Salesman lies and says that if she doesn't end up paying, that her dad will. CANNOT BE DONE b/c it has to be in writing.
Term
Collateral (2nd) Contract
Definition
NOT A COSIGNER

a person promises to PERSONALLY perform the contract of another; "I'll pay my daughter's bill"
Term
Contracts for the sale of interest in real estate
Definition
No oral contracts

Either buy it or lease it for longer than a year

Must be in writing
Term
Contract for the "sale of goods" for $500 or mroe (UCC)
Definition
Have to know that there is a statute of frauds dealing with the sale of goods, dont have to know what it is
Term
Contract where executor or administrator agrees to be PERSONALLY liable for a debt of the estate
Definition
Father passes away, 6 months before his death, goes out and buys a 10,000 watch and is making payments, debt now owned by estate. IF family agrees to pay dad's bill, have to get it in writing.
Term
Contract in which the consideration is marriage (pre-nup)
Definition
Does not mean that all, wedding proposals have to be written down

Wife dies, goes to Vegas to meet Bambi the Showgirl, being aware of his money, she says she loves him and wants to get married--how does he protect himself? Prenup

Should be signed before the marriage, doesn't have to be but it's harder to get them to sign after
Term
Bilateral contract that cannot be performed within one year
Definition
Must be in writing

Pay megan $350,000/year for 5 years to sing at his club

Has to be in writing, if not in writing, she can't sue him and win b/c there is no written contacts

Bob and Sam make a bilateral contract on 6/14/05 for Bob to work for sam through 6/14/06 in which Sam gets weekly wages... Will it be done in 1 year? NO. NEEDS to be in WRITING.
Term
Writing Requirement: What's good enough?
Definition
Any writing will do; doesn't have to be drawn up by a lawyer

Have to know the identity of parties in the agreement (doesn't have to state names, but must be able to identify them.)

Have to know what the subject matter is

Have to know financial terms (what he's going to pay for it and when is it due?)

Must be signed by person who is raising the defense
Term
Third Party Beneficiaries
Definition
People who are not part of the original contract but claim to have a benefit from the contract
Term
What are the 3 kinds of people who can benefit from a contract?
Definition
Incidental Beneficiary
Creditor Beneficiary
Donee Beneficiary
Term
Incidental Beneficiary
Definition
Not intended to benefit from the contract

Cannot Sue

No recover under contract
Term
Creditor Beneficiary
Definition
A second contract by which party benefits.

Beneficiary can recover under the assigned contract
Term
Donee Beneficiary
Definition
Gift

Contracting party recovers

He gest to sue (get nominal damages-low damages)

Beneficiary Recovers the value of receiving the item not the actual value of the item

Rose example
Term
A Post-Determination Contract
Definition
Situation where the person is declared mentally incompetent and they LATER make a contract.

The contract is VOID since they had already been found to be incompetent and there is not a contract.

Even if the person's guardian did want to keep the contract and fullfill it, they cannot because it is void
Term
Pre-Determination Contract
Definition
Situation when the person makes a contract and then later is declared incompetent.

If Court also determines that person was incompetent BACK ON THE DAY THEY MADE THE CONTRACT, the contract is VOIDABLE, meaning the person can stay in the contract or get out (disaffirm) as they choose

IF they disaffirm, they get back all the money they paid. Question is now whether they must pay for use/damages of the item before they disaffirmed....

If the other person had reason to believe the person was incompetent, the incompetent person DOES NOT have to pay and only has to return the item as is.

If the other person did NOT have any reason to suspect the person was incompetent, then the incompetent person must pay for use/damages.
Term
Fraud is ALWAYS/NEVER misrepresentation, misrepresentation IS/NOT always fraud.
Definition
Fraud is ALWAYS misrepresentation, misrepresentation is NOT always fraud.

Fraud, you get more damages
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