Lecture 7 Notes (10/21)
Lecture 7 Notes (10/21) FIN - 26074 - 001
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This 5 page Class Notes was uploaded by Olivia Zemanek on Sunday October 25, 2015. The Class Notes belongs to FIN - 26074 - 001 at Kent State University taught by Timothy D Ludick (P) in Summer 2015. Since its upload, it has received 71 views. For similar materials see LEGAL ENVIRONMENT OF BUSINESS in Finance at Kent State University.
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Date Created: 10/25/15
FIN 26074001 THE LEGAL ENVIRONMENT OF BUSINESS Lecture 7 Notes 1021 Returning to Consideration element 0 Many times after an agreement is made a party then decides they want to modify 0 For an existing contract to be modified BOTH parties must supply NEW consideration for that to happen 0 Court in satisfaction 0 Requires legitimate disputed debt and an offer accepted and parties agreeing to a modified amount 0 Releases 0 Letting go of a right or claim against another party 0 Concept of charitable subscription 0 Be aware of someone giVing a gift 0 A court will enforce promises someone makes to charities I Promissory estoppel 0 Creditor composition agreement 0 Existing debt someone owes to one or more parties AND debtor files bankruptcy which means discharged debt is voided out so they don t pay money 0 Creditor agrees to take lesser amount because of a person going to file bankruptcy Lecture left off last week talking about one of the elements of a contract specifically capacity and minors Although minors can avoid most contracts they CANNOT avoid ones with the military or loans On a side note The offerer of the contract DOES have the ability to take back an offer before a time limit is set That being said parties are able to enter into a contract with an offer that can expire General Contract Law states that the offer and acceptance must mirror each other Continuing with capacity there are two more circumstances other than minors that are recognized 0 Mentally incompetent 0 Some type of dysfunction in thinking that the CANT handle money affairs 0 Any agreement this type of person makes are VOID They are not enforceable agreements 0 Usually these people have guardians to make those kind of decisions I Incompetent in fact but not by law 0 They were incompetent when they entered into the contract 0 IndiViduals incompetent from intoxication by alcohol or drugs 0 Looked at with great suspicion by judiciary People could claim it as the reason they made a contract but no way of proving Could just be a way to get out of something O The level of intoxication has to be SEVERE 0 Also most alcohol is consumed voluntary The 4th element of a contract Voluntary consent 0 Courts recognize certain circumstances 0 When there is fraud I Some misrepresentation that induces another party to do something I Misrepresentation of a fact I Under fraud requirement that the misrepresentation of the fact was relied on by the other party and changed their economic status or view because of that fact I The party receiving the misrepresentation or lie has to act reasonably They could easily discover that that it was a lie I Latent fact that cannot be discovered A hidden defect When one party knows but the other does not 0 Mistakes Not all treated the same One party or both can make mistakes I Mistakes as to law I We are all presumed to know what the law is 0 If you do something not knowing that it is illegal it is not excused you are responsible to know I Mistakes of identity 0 For example when selling a car you could have a blue one and red one The person you are selling to could have thought you were selling the blue but you were selling the red I Mistakes of value 0 How much something is actually worth Selling something at a garage sale for 1 but the person who bought it ends up selling it for much more I Mistaken offer made and other party accepted I When writing an amount for 10000000 they could forget a 0 and could have been written as 1000000 0 Duress situations I Threat to physical or direct violence to that person or to immediate family They had accepted the offer because of the threat of violence Blackmail O Undue in uence I Person under psychological domination by another part enters a contract that a reasonable person would not enter 0 Example an elderly person who has multiple children wrote their will and left things to only one child and nothing to the others 0 Unconscionable I The agreement is unfair or one sided Provisions are shocking to the conscience or harsh The last element of a contract Legality O 1 An agreement agreeing to commit a crime I No court would enforce that promise O 2 Usury laws I Puts a limit on amount of interest that can be charges I If the interest is too high then the court wont enforce it 0 3 Contracts that interfere with justice I Something that promotes discrimination or biases or the contract is treated differently because of a race or religion etc 0 4 Contracts that have a con ict of interest I Individual has an economic interest in both sides od contract I Something illegal in it 0 5 Contracts that restrict trade I Resale price agreements 0 Let the market decide the price I Covenance not compete 0 Where this happens 0 Employment Some places won t allow you to work for a competitor I Must be a reasonable amount of time and within a reasonable location 0 Sale of a business I The purchaser is buying the place and other things but they are also buying REPUTATION They must keep up with it not bring it down 0 6 Exculpatory clauses I A statement in a contract that anticipates a future loss or event Basically saying that if that event occurs they are not liable for it 0 Examples parking lotsif damage to your car or is stolen not responsible coat room in a restaurantstolen or lost objects restaurant is not responsible I Courts will enforce some of these exculpatory clauses however if there is an injury or death they may reconsider O 7 Lack of required license I Licenses are required for a lot of things I Depends whether or not the licensing law is enforcing a profession or is the license revenue based To review all 5 elements MUST exist for a contract 1 Agreement 2 Consideration 3 Capacity 4 Voluntary consent 5 Legality Sometimes there is a 6th element Statute of frauds which has nothing to do with fraud 0 Requirement of a WRITING There has to be a signature by the parties sought to be bound There are 6 instances where writing is REQUIRED I Contract to answer for debt of a decedent A promise to pay for decedents debt 0 The only way that a family member can be liable for a dead person s debts is if they signed and promised that they would I Promise to pay for someone s debts I Not only dead but living too For example college debts or loans Sometimes you need a COSIGNER for loans 0 Contract that cannot be performed fully in one year 0 Antinuptial agreement or a prenuptial agreement 0 Contract that is made in anticipation of a pending marriage I When one has greater assets than the other 0 In the case of a divorce the one with greater assets would not be required to give any of their assets to the other 0 Contracts for sale of any matters in real estate 0 MAJOR EXCEPTION O Promissory estoppel if I 1 Nonowner is in actual possession of real estate I 2 If they paid some amount I 3 If they have made improvement to the property I Contracts for sale of GOODS that are more than 500 of personal property Does not apply to services Prole evidence rule I When there is a writing that writing cannot be contradicted by a party with an oral testimony Third parties 0 Under assignment I General rule all contracts can be assignedor a party can designate someone else to take their place Assigner will remain reliable and responsible O Exceptions I Contract for personal services cannot be assigned 0 When the service is unique or special like a painter or photography I Contract itself cannot be assigned 0 Like when apartment complexes say in the contract that you cannot sublet your apartment I When the assignment would increase liability beyond terms of agreement
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