Term
| What types of consideration can make a promise enforceable? |
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Definition
- A return promise
- An act performed
- A forbearance from acting
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Term
| In what situations can a debtor’s paying only part of a debt be binding on the creditor to forgive the entire debt? |
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Definition
- Bona fide disputes – the parties believe that their claims are just
- Payment before debt is due – the creditor has led the debtor to believe that an early payment would discharge the entire obligation, then the promise to accept the lesser amount is binding on the creditor
- Accord and satisfaction – the debtor makes partial payment and also offers additional consideration in some form other than money, the creditor’s agreement to accept is binding. It is an agreement to substitute a performance other than that required in a contract and the carrying out of that agreement.
- Composition of creditors – a composition of creditors forms when several creditors join and each agrees to take a certain percentage of the original obligation owed.
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Term
| Identify exceptions to the consideration requirement for contracts |
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Definition
- Promissory estoppel – the legal principle that a promise made without consideration is nonetheless enforceable to prevent injustice
- Charitable subscriptions – a person makes a subscription or otherwise pledges money to a charitable organization that depends on voluntary contributions, the obligation involves more than a gratuitous promise to make a gift
- Specific exceptions under the UCC provisions
- A written waiver or discharge of a claim involving an alleged breach of a commercial contract
- An agreement that modifies a contract for the sale of goods
- A merchant’s firm written offer for goods that includes a statement that the offer is irrevocable for a fixed time, not to exceed three months
- State statutory exceptions – a person who has indicated in writing an intention to be legally bound by a promise cannot later assert the lack of consideration defense
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Term
| Distinguish the kind of valuable consideration that will support a property-casualty insurance contract from that which will support a life insurance policy. |
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Definition
- Property-casualty – prepaying a premium is not a condition necessary to make the contract valid, so that if an insured suffers a loss before paying the premium at the outset of a policy period, and insurer cannot refuse to pay damages based on failure of consideration; however, payment of the entire premium becomes and obligation as soon as the coverage begins
- Life insurance – the insurance will not take effect until the purchaser pays the first full premium. Nonpayment can result in forfeiture of policy rights
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Term
| List the types of illegal contracts |
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Definition
- Contracts to commit crimes or torts
- Contracts harmful to the public interest
- Usury Contracts
- Wagering Contracts
- Contracts by unlicensed practioners
- Contracts violating Sunday laws
- Contracts attempting to transfer one's negligence liability
- Contracts restraining marriage
- Contracts restraining trade
- Unconscionable bargains
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Term
| Are exculpatory clauses always illegal? |
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Definition
| Often, but not always, particularly when a party is a t a bargaining disadvantage. Courts interpret them narrowly against the parties attempting to limit their own liability. |
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Term
| Under what circumstances are noncompetition agreements valid? |
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Definition
| When they contain restrictions that are necessary to protect the parties and if they impose no undue hardship on the restricted party |
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Term
| Give three examples of possible illegality in insurance contracts |
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Definition
- The contract covers contraband
- The insured has no insurable interest in the property or life covered
- The insured is allowed to profit from his or her wrongful conduct
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Term
| List the conditions under which an illegal contract might still be totally or partially enforceable |
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Definition
- Applicability of protective laws
- In pari delicto agreements
- Severable contracts
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Term
| List the situations in which genuine assent to contract may be absent |
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Definition
- Fraud
- Mistake
- Duress
- Undue influence
- Innocent misrepresentation
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Term
| Explain the material fact element of fraud |
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Definition
| The misleading statement involves a material fact, that is, a fact that a party would consider important in deciding on a course of action |
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Term
| Describe two situations of fraud in insurance contracts |
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Definition
- Collusion – an agreement by two or more people to defraud another person
- Concealment – misrepresentation by silence
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Term
| Under what circumstances is concealment a defense to an insurance contract? |
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Definition
- The insured knew that the fact concealed was material
- The insured concealed the fact with the intent to defraud
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Term
| Is a unilateral mistake ordinarily a defense to a contract? |
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Definition
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Term
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Definition
| Equitable remedy with which the court rewrites or reforms a contract to reflect the parties' intentions |
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Term
| What effect do mistakes of law have on the binding nature of a contract? |
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Definition
| They do not affect the binding nature of a contact, particularly when the law is not clear |
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Term
| Under what circumstances may duress permit the avoidance of a contract? |
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Definition
| When the wrongdoer deprived the plaintiff of free will in entering the agreement |
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Term
| Under what circumstances may undue influence permit the avoidance of a contract? |
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Definition
| When it results in lack of genuine assent to a contract, usually in confidential relationships in which one party exercises some control and influence over the other. |
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Term
| What is the effect of an innocent misrepresentation relating to a contract? |
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Definition
| If it relates to a material fact and results in a lack of genuine assent, the victim can ask a court to rescind the contract |
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