Exam III Review
Exam III Review BLAW 2361
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This 7 page Study Guide was uploaded by Nancy Ly on Tuesday September 22, 2015. The Study Guide belongs to BLAW 2361 at Texas State University taught by Dr. Hale in Spring 2015. Since its upload, it has received 32 views. For similar materials see Business Law/ Legal Environment in Business Law at Texas State University.
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Date Created: 09/22/15
Business Law Exam Ill Contracts For a K to be enforceable 7 key characteristics must be present 0 Offer All K begin when a person or a company proposes a deal 0 Acceptance Once a party receives an offer he must respond to it in a certain way 0 Consideration There has to be bargaining that leads to an exchange bw the parties K can t be a 1way street both sides must receive some measureable bene t Legality K must be for lawful purpose 0 Capacity Parties must be adults of sound mind Consent Certain kinds of trickery amp force can prevent the formation of a K 0 Writing While verbal agreements often amount to K some types of K must be in writing to be enforceable Agreements made under threats of violence are not enforceable K K a promise that the law will enforce Mutual promises deals in which neither party gave anything to the other but both promised to do something in the future Noncompetition K a K in which one party agrees not to compete w another Bilateral K Both parties make a promise Unilateral K one party makes a promise that the other party can accept only by actually doing something Executory K an agreement in which one or more parties has not ful lled its obligations Executed K an agreement when all parties have ful lled their obligations Valid K one that satis es all of the law s requirement Unenforceable agreement occurs when the parties intend to form a valid bargain but a court declares that some rule of law present enforcing it Voidable K occurs when the law permits one party to terminate the agreement Void agreement one that neither part can enforce usually because the purpose of the deal is illegal or because one of the parties had no legal authority to make a K Express K the two parties explicitly state all the important terms of their agreement the parties intend to K amp agree on explicit terms In am implied K the works amp conduct of the parties indicate that they intended an agreement Parties don t formally agree but their works amp conduct indicate an intention to create a K Two remedies Promissory estoppel cases A made a promise that the P relied on 0 Legal theory of promissory estoppel even when there is no K a P may use promissory estoppel to enforce he A s promise if he can show that A made a promise knowing that the P would likely rely on it P did rely on the promise The only way to avoid injustice is to enforce the promise QuasiK cases A received a benefit from the P 0 Legal theory of quasiK even when there is no Km a court may use quasiK to compensate P who can show that The P gave some benefit to the A P reasonably expected to be paid for the benefits amp A knew this A would be unjustly enriched if he did not pay 0 Quantum meruitdamage awarded P gets quotas much as he deservesquot Parties form a K only if they have a meeting of the minds one side must make an offer amp the other must make an acceptance An offer proposes de nite terms amp an acceptance unconditionally agrees to them Statements that usually do not amount to offers 0 An invitation to bargain is not an offer 0 A price quote is generally not an offer 0 Letter of intent might help distinguish a serious part from one w a casual interest summarize the progress made thus far amp assist the parties in securing necessary nancing 0 An advertisement is generally not an offer 0 Consumer protection statute outlaws false advertising 0 Placing an item up for auction is not an offer it is merely a request for an offer Terms of offer must be de nite Gap ller provisions which are rules for supplying missing terms 0 Output K obligates the seller to sell all of his output to the buyer who agrees to accept it 0 Requirements K obligates a buyer to obtain all of his needed goods from the seller Offers can either be accepted or terminated offers can be terminated in 4 ways 0 Termination by revocation an offer is quotrevoked when the offeror quottakes it backquot before the offeree accepts 0 Option K an interested purchaser buys the right to have the offer held open the offeror may not revoke an offer during the option period 0 Termination by rejection if an offeree rejects an offer the rejection immediately terminates the offer A counteroffer is a rejection 0 Termination by expiration when an offer specifies a time limit or acceptance that period is binding If the offer specifies no time limit the offeree has a reasonable period in which to accept Termination by Operation of Law if an offeror dies or becomes mentally incapacitated the offer terminates automatically and immediately Destruction of the subject matter terminates the offer The offeree must say or do something to accept Mirror image rule requires that acceptance be on precisely the same terms as the offer An offeree who accepts may include in the acceptance terms that are additional to or different from those in the offer 0 Additional terms are those that bring up new issues such as interest rates not contained in the original offer 0 In three circumstances the additional terms in the acceptance do not become part of the K If the original offer insisted on its own terms If the additional terms materially alter the original offer If the offeror receives the additional terms amp promptly objects to them 0 Different terms are those that contradict terms in the offer The majority of states hold that different contradictory terms cancel each other out Clickwrap agreement online agreements that you quotread and agreequot before you agree Shrinkwrap agreement require that before inserting a purchased CD into your computer you must read and agree to all terms in the brochure lf am offer demands acceptance in a particular method or manner the offeree must follow those requirements If the offer does not specify a type of acceptance the offeree may accept in any reasonable manner amp method Mailbox Rule An acceptance is generally effective upon dispatch meaning the moment it is out of the offeree s control Three rules of consideration 0 Both parties must get something of measureable value from the K o A promise to give something of value counts as consideration 0 The two parties must have bargained for whatever was exchanged amp struck a deal Act any action that a party was not legally required to take in the rst place Forbearance refraining from doing something that one has a legal right to do Courts seldom inquire into the adequacy of consideration An illusory promise is not consideration In a requirement K the buyer agrees to purchase 100 of her goods from one seller In an output K the seller guarantees to sell 100 of its output to one buyer amp the buyer agrees to accept the entire quantity Section 2306 expressly allows output amp requirements K in the sale of goods A promise to do something that a party is already obligated to do is not consideration Exceptions of Preexisting Duty 0 Additional work Modi cation rescind cancel Unforeseen circumstances Liquidated debt a debt in which there is no dispute about the amount owed Loan In cases of liquidated debt if the creditor agrees to take less then the full amount as full payment her agreement is not binding Exception Different performance Unliquidated debt 1 the parties dispute whether any money is owed 2 the parties agree that some money is owed but dispute how much 0 When a debt is unliquidated for either reason the parties may enter into a binding agreement to settle for less than what the creditor demands and will be enforce if 0 The debt is unliquidated o The parties agree that the creditor will accept as full payment a sum less than she has claimed 0 The debtor pays the amount agreed upon This agreement is called an accord amp satisfaction The accord is the agreement to settle for less than the creditor clams The satisfaction is the actual payment of that compromised sum K s that violate a statute o Wagers a gambling K is illegal unless it is a type of wagering speci cally authorized by state statute 0 Insurance anyone taking out a policy n the life of another must have an insurable interest in that person 0 Licensing statute when a licensing requirement is designed to protect that public any K made by an unlicensed worker is unenforceable When a licensing requirement is designed merely to raise revenue a K made by an unlicensed person is generally enforceable Usury usury laws prohibit charging excess interest on loans To be valid an agreement not to compete must be ancillary to a legitimate bargain o Ancillary the noncompetition agreement must be art of a larger agreement When a noncompete agreement is ancillary to the sale of a business it is enforceable if reasonable in time geographic area and scope of activity A noncompete clause in an employment K is generally enforceable only if it is essential to the employer fair to the employee amp harmless to the general public Exculpatory duty a K provision that attempts to release you from liability in the event of injury to another party 0 An exculpatory clause is generally unenforceable when it attempts to exclude an intentional tort or gross negligence An exculpatory clause is usually unenforceable when the affected activity is in the public interest such as medical care public transportation or some essential service 0 An exculpatory clause is generally unenforceable when the parties have greatly unequal bargaining power 0 An exculpatory clause is generally unenforceable unless the clause is clearly written amp readily visible An unconscionable K is one that a court refuses to enforce bc of fundamental unfairness Two factors that most often led a court to nd unconscionable 1 oppression meaning that one part used its superior power to force a K on the weaker party 2 surprise meaning that the weaker party did not fully understand the consequences of its agreement Adhesion K standard form Ks prepared by one party amp given to the other on a quottake it or leave itquot basis Voidable Capacity the legal ability to enter into a K o In K law a minor is someone under the age of 18 bc a minor lacks legal capacity she normally can create a voidable K o A voidable K may be canceled by the party who lacks capacity Disaf rm notify the other party that he refuses to be bound by the agreement 0 A minor who disaf rms a K must return the consideration he has received to the extent he is able 0 Restitution restoring an injured party to its original position 0 Status quo rule if a minor cannot return the consideration the adult or store is only required to return its pro t margin to the minor 0 Rati cation words or action s indicating an intention to be bound by a K 0 Exception Necessaries on a K for necessaries a minor must pay for the value of the bene t received 0 Exception Misrepresentation of age 0 A person suffers from a mental impairment if by reason of mental illness or defect he is unable to understand the nature amp consequences of the transaction 0 A party suffering a mental impairment usually creates only a voidable K o The law creates an exception if a person has been adjudicated insane then all of his future agreements are void Adjudicated insane means that a judge has made a formal nding that a person is mentally incompetent amp has assigned the person a guardian o A mentally in rm party who seeks to void a K must make restitution Fraud when a party of a K says something that is factually wrong an injured person must show the following o The A knew that his statement was false or that he made the statement recklessly amp wo knowledge of whether it was false 0 The false statement was material 0 The injured party justi ably relied on the statement Opinions quotpufferyquot do not amount to fraud In the case of fraud the injured party generally has a choice of rescinding the K or suing for damages or in some cases doing both UCC 2721 permits a part to rescind a K amp then sue for damages when fraud is committed Innocent misrepresentation is a person misstates a material fact amp induces reliance but he had good reason to believe that his statement was true then he has not committed fraud Caveat emptor quotlet the buyer bewarequot Nondisclosure of a fact amounts to misrepresentation in these four cases 1 where disclosure is necessary to correct a previous assertion 2 where disclosure would correct a basic mistaken assumption that the other party is relying on a seller generally must report any latent defect he knows about that the buyer should not be expected to discover himself 3 where disclosure would correct the other party s mistaken understanding about a writing 4 where there is a relationship of trust bw the two parties when one party naturally expects openness amp honest based on a close relationship the other party must act accordingly Mistake Bilateral mistake occurs when both parties negotiate based on the same factual error If the parties K based on an important factual error the K is voidable by the injured party Unilateral mistake occurs when only one party enters a K under a mistaken assumption To rescind for unilateral mistake a part must demonstrate that she entered the K bc of a basic factual error amp that either 1 enforcing the K would be unconscionable or 2 the nonmistaken party knew of the error Duress an improper threat made to force another party to enter into a K If one party makes an improper threat that causes the victim to enter into a K amp the victim had no reasonable alternative the K is voidable In analyzing a claim of economic duress courts look at these factors Acts that have no legitimate business purpose Greatly unequal bargaining power 0 An unnaturally large gain for one party 0 Financial distress to one party To prove undue in uence the injured party must demonstrate A relationship bw the two parties either of trust or of domination Improper persuasion by the stronger party Statute of Frauds a P may not enforce any of the following agreements unless the agreement or some memorandum of it is in writing amp signed by the A o For any interest in land That cannot be performed in one year To pay the debt of another 0 When one person agrees to pay the debt of another as a favor to that debtor it is called a collateral promise Exceptionto collateral promise when the promisor guarantees to ay the debt of another amp the leading object of the promise is some bene t to the promisor himself then the K will be enforceable even if unwritten Made by an executor of an estate 0 Made in consideration of marriage 0 For the sale of goods worth 500 or more K writing must include 0 Must be signed by the A 0 Must state with reasonable certainty the name of each party the subject matter of the agreement amp all of the essential terms amp promises Once a K is fully executed it makes no difference that it was unwritten Easement a legal right that an owner gives to another person to make some use of the owner s land Exceptions to K for the sale of land 0 Full performance by the seller 0 Part performance by the buyer 0 The buyer of land may be able to enforce an oral K if she pair part of the purchase price amp either entered upon the land or made improvements to it o Promissory estoppel If a promissor makes an oral promise that should reasonably cause the promise to rely on it amp the promise does rely the promise may be able to enforce the promise UCC s Statute of frauds o The basic rule a K for the sale of goods worth 500 or more 5 no enforceblae unless in writing signed by A indicating that the parties reached an agreement Merchant s exception within a reasonsable time of makgina r oral K if a merchant sends a written con rmation to another amp if the con rmation is de nitie enough to bind the sender herself then the merchant who receives the con rmation will also be bound by it unless he objects in writing within 10 days Specialcircumstances o The seller is specially manufacturing the goods for the buyer 0 The A admits in court proceedings that there was a K o The goods have been delivered or they have been paid for Parol evidence refers to anything that was said done or written before the parties signed the agreement or as they signed it Parol evidence rule when two parties make an integrated K neither one may use parol evidence to contradict vary or add to its terms 0 Exception an imcomplete or ambibuous K if a court determines that a written K is imcomplete or ambiguous it will permit parol evidence 0 A court will permit parol evidence of fraud misrepresentation or duress Integrated K a writing that the parties intend as the nal complete expression of their agreement A third party bene ciary s someone who was not a party to the K but stands to bene t from it lntended bene ciary may enfore a K if the parties intended her to bene t amp if either a enforcing the promise will satisfy a duty of the promise to the bene ciary or b the promise intended to make a gift to the bene ciary If the promise is ful lling some duty the third party bene ciary is called a creditor bene ciary If the promise is making a git the third party is a donne bene ciary Incidental bene ciary someone who might have bene ted from a K between two others bit has no right to enforce that agreement Assignment transferring K rights 0 An assignment for consideration is irrevocable Gratuitous assignment one made as a gift for no consideration 0 A gratuitous assignments generally revocable if it is oral amp generally irrevocable if it is written 0 Once the assignment is made amp the obligor noti ed the assignee may enforce her contractual rights against the obligor The obligor may generally raise all defenses against the assignee that she could have raised against the assignor Delegation transferring K duties Obligor the party obligated to do something Any contractual right may be assigned unless assignment 0 Would substantially change the obligor s rights or duties under the K 0 Assignment is prohibited when the obligor is agreeing to perform personal services 0 Forbidden by law or public policy Validly precluded by the K itself Security interests rights in personal property that assure payment or the performance of some obligation Under UCC 9404 the obligor on a sales K may generally assert any defenses against the assignee that arise from the K amp any other defenses that arose before notice of assignemtn Waiver clause obligor is waiving rights Exclusion clause parties are excluding potential defenses Under UCC 9403 an agreemtn by a buyer or lessee that he will not assert ahgainst an assignee any claim or defense that he may have against the seller or lessor is generally enforceable by the assignee if he took the assignment in good faith for value without notice of the potential defenses Most duties are delegable but delegation does not by itself relieve the delegator of his own liability to perfrom the K An obligor may delegate his duties unless Delegation wouold violate public policy 0 The original K prohibits delegations o The oblige has a sunstantial interest in personal performance by the obigor Repudiated formally notify the other side that one will not perform their side of the K Novation a threeway agreement in which the obligor transfers all rights amp duties to a third pa y
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