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Chapter 16

by: Kendall Davis

Chapter 16 ACCT 324 - 002

Kendall Davis
GPA 3.8

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About this Document

Chapter 16 and a little intro to 17; definitions and examples given in class
Survey of Commercial Law
Julius David Johnson (P)
Class Notes
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This 3 page Class Notes was uploaded by Kendall Davis on Thursday September 8, 2016. The Class Notes belongs to ACCT 324 - 002 at University of South Carolina taught by Julius David Johnson (P) in Fall 2016. Since its upload, it has received 6 views. For similar materials see Survey of Commercial Law in Accounting at University of South Carolina.

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Date Created: 09/08/16
Chapter 16­ September 7  Parent Liability for Minors’ Contracts, Necessaries, and Torts o General Rule: parents not liable for contracts entered into by their minor children  Exception: contracts for necessaries o General Rule: Parents not liable for torts committed by their minor children  Exception:  Individuals Having No Capacity to Contract o Those adjudicated insane  Cannot enter into a contract with an insane person o Those adjudicated habitually intoxicated  Cannot enter into a contract with a known drunk or drug user o Those with appointed legal guardians  Ex: elderly  Rules Regarding Intoxication o Generally: contracts made by intoxicated persons are voidable  If intoxication only causes person to exercise poor judgment, contract not  voidable  When intoxicated person becomes sober, contract can be ratified or  disaffirmed  Exhibit 16.3 in text* look for exam  Illegal Contracts o Contracts with no legal purpose and/or subject matter  Ex: agreement to commit crime o Contracts violating statute(s) and/or “public policy”  Covenant not to compete: o Ex. if someone buys a restaurant and tells the old owner  that they are not allowed to open a restaurant any where in  the state of south Carolina (that’s unfair) instead of in the  area  Ex: Usurious loan agreement (loan contract exceeding state­ imposed maximum interest rate) o Ex: enter into a contract with a landscaper who does not  have a license and you do not have to pay o Hailey vs. Williams  Ex: Unconscionable contract (agreement so unfair that it is “void  of conscience”) Chapter 17  Legal Assent: promise to buy or sell courts will require parties to obey o Without assent, contract may be avoided/rescinded o If you were tricked into the contract it can be voided o Mistake: an erroneous belief regarding material facts of contract at the time  agreement made  Mistake of fact is the only one recognized  Unilateral mistake: mistake made by only one part; generally, contract still binding  Ex. if you make a contract saying that retirement benefits only  benefit you, then you die and your wife wants to get the benefits  Mutual (Bilateral) Mistake: Mistake made by both parties; either party can rescind  Ex. each party thought they were using a different ship of the same name to ship cotton o Fraudulent or Negligent Misrepresentation  Innocent misrepresentation: contract can be rescinded but the other party  cannot sue for damages o Ex. jeep seller thinks it is ’74 but it is actually ’84, but she  actually always thought it was a ‘74  Fraudulent Misrepresentation: intentional, untruthful assertion of material  fact by contracting party; aggrieved party can rescind contract, and sue for damages  Concealment: actively hiding the truth  Nondisclosure: failure to disclose important information about the  contract  Negligent Misrepresentation: Negligent, untruthful assertion of material  fact by contracting party; aggrieved party can rescind contract, and sue for damages o Undue Influence: persuasive efforts of dominant party, who uses special  relationship to interfere with other’s free choice of terms  Any relationship involving one party’s unusual degree of trust in another  can give rise to undue influence  Ex. tricking one’s elderly mother to sell them the farm for an unfairly low  amount  Persuasion o Duress: Occurs when one party threatens other with wrongful act unless assent  given  It is not legal assent  When one threatens physical harm, criminal or frivolous lawsuit,  economic interests  Threat o Unconscionability: occurs when one party has so much relative bargaining power  that he/she effectively dictates terms of contract, resulting in situation where  dominated party, in essence, lacks free will  One party’s bargaining power is too large Chapter 18  Statute of Frauds: rule of state law requiring certain types of contract to be in writing in  order to be enforceable o If contract is not in writing, then courts cannot enforce it o Need reasonable, reliant evidence of terms o Prevent unreliable oral evidence from interfering with contract  People still lie under oat o This rule makes people think more about the contract  Contracts Subject to Statute of Frauds o Contracts that cannot be performed within one year from the date of their making o Promises made in consideration of marriage; prenups o Contracts to pay the debt of another party o Real estate


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