Business Law Mid Term

Question 1

Contract:

Answer 1

A legally enforceable promise or set of promises, i.e., an agreement that can be enforced in court.

Contract law largely derives from the common law, although the Uniform Commercial Code (UCC) has modified the common law for contracts involving the sale or lease of goods

Question 2

Objective Theory of Contracts:

Answer 2

In contract law, intent is determined by what is called the objective theory of contracts, not by the personal or subjective intent (belief) of a party

Question 3

Objective facts that may be considered in objective Theory include:
(1)
(2)
(3)

Answer 3

(1) what the party said when entering into the contract
(2) how the party acted or appeared (intent may be manifested by conduct as well as by oral or written words)
(3) the circumstances surrounding the transaction

Question 4

Elements to form a valid and enforceable contract
(1)
(2)
(3)
(4)
(5)

Answer 4

(1) Agreement: An agreement to form a contract includes an offer and an acceptance.
(2) Consideration: Both sides must give or promise something of value
(3) Contractual Capacity: Both parties must be legally competent to enter into the agreement
(4) Legality: The contract’s purpose must be to accomplish some goal that is legal and not against public policy
(5) Contracts falling into certain categories must be in writing. (But outside of those categories, verbal contracts are valid and enforceable).

Question 5

Agreement:

Answer 5

A meeting of two or more minds in regard to the terms of a contract, through mutual assent.

Must represent serious intent - Serious intent is not determined by the subjective intentions, beliefs, and assumptions of the offeror but by what a reasonable person in the offeree’s position would conclude that the offeror’s words and actions mean

Question 6

Essential terms under an agreement usually include:
(1)
(2)
(3)
(4)

Answer 6

(1) the identity of the parties
(2) the identity of the object or subject matter of the contract, including, e.g., quantity of goods, work to be performed, specific identity of unique goods, etc
(3) the consideration to be paid
(4) the time of payment, delivery, or performance.

Question 7

Consideration:

Answer 7

Value given in return for a promise or performance.

Consideration must be:

(1) legally sufficient and
(2) bargained for by the party receiving it. Courts will generally not inquire into the adequacy of the consideration.

Question 8

Legally sufficient consideration may take the form of
(1)
(2)
(3)

Answer 8

(1) promising to do something that the promisee has no prior legal duty to do (e.g., promising to pay money for the promisor’s goods);
(2) performing an action that the promisee is not otherwise obligated to undertake (e.g., painting the promisor’s house); or
(3) refraining from exercising a legal right that the promisee is otherwise entitled to exercise (a forbearance) (e.g., dismissing a viable lawsuit against the promisor).

Question 9

The following are not considered legally sufficient consideration:
(1)
(2)

Answer 9

(1) Preexisting Duty: A promise to do (or refrain from doing) what one already has a legal duty to do (or refrain from doing) generally does not constitute legally sufficient consideration. Exception: a modification to a preexisting contract in response to unforeseen difficulties is generally considered enforceable.
(2) Past Consideration: Promises made in return for acts or events that have already taken place are unenforceable for lack of sufficient consideration.

Question 10

CONTRACTUAL CAPACITY:
(1)
(2)
(3)

Answer 10

(1) • In most states, minors (under the age of 18) lack the legal capacity to enter into a contract.
(2) Intoxication (to the point of not being able to understand the legal consequences of one’s behavior) can be grounds for voiding an otherwise valid contract.
(3) Persons who are mentally ill or incompetent lack the legal capacity to enter into a contract.

Question 11

Legality - A contract to do something that is prohibited by a statute is generally unenforceable, including:

(1)
(2)
(3)
(4)

Answer 11

(1) Contracts to commit a crime (including where the performance of the contract would be illegal
(2) Loan contracts requiring payment of interest above the legal maximum rate (usury).
(3) Gambling contracts (except where legal under state law).
(4) Contracts with professionals (e.g., attorneys, doctors, architects, etc.) lacking a required license.

Question 12

Pursuant to the Statute of Frauds, certain types of contracts must be evidenced by a signed writing in order to be enforceable, including:
(1)
(2)
(3)
(4)
(5)

Answer 12

(1) contracts involving an interest in real property (e.g., a land sale or a home mortgage);
(2) contracts that cannot, by their terms, be performed within one year after the date the contract was formed (e.g., a five-year employment contract);
(3) collateral promises, such as “co-signing” on a loan application.
(4) promises made in consideration of marriage (i.e., prenuptial agreements); and
(5) contracts for the sale of goods for $500 or more. (this comes from the UCC)

Question 13

Third-Party Rights: one who is not a direct party to a particular contract—normally does not have rights under that contract. The common law recognizes three exceptions:
(1)
(2)
(3)

Answer 13

(1) Assignment (of Rights): Most contract rights may be assigned (transferred to a new entity), unless the contract specifically bars assignments, but there are exceptions
(2) Delegation (of Duties): Most contract duties may be delegated (transferred to a new entity), unless the contract specifically bars delegation, but there are exceptions (such as where the contract is based on the special skills of an individual).
(3) Third-Party Beneficiary Contract: The original parties to a contract can agree that the contract performance should be rendered to or directly benefit a third person, who becomes an intended third party beneficiary of the contract with the legal right to sue the promisor directly for breach of the contract.

Question 14

Mistakes:

Answer 14

If the parties entered into a contract with different understandings of one or more MATERIAL facts relating to the subject matter of the contract, the contract may be rescinded under some circumstances.

However, if the mistake concerns the quality or market value of the object of the contract (“mistake of value”), the contract is usually enforceable.

Question 15

Mutual (Bilateral) Mistake of Fact:

Answer 15

If both parties are mistaken about a material fact underlying the agreement, either party may rescind the contract.

Question 16

Unilateral Mistake of Fact:
(1)
(2)

Answer 16

A mistake made by only one of the parties does not generally give the mistaken party any right to relief from contract, unless the mistake is material:

(1) the other party to the contract knew or should have known of the mistake; or
(2) the mistake involved an inadvertent math error (See cruise ship diamond case).

Question 17

A party’s contractual obligations under a contract can be terminated (discharged) in a variety of ways:
(1)
(2)
(3)
(4)

Answer 17

(1) Complete Performance (the party performs exactly as agreed)
(2) Substantial Performance (the party did not perform exactly as agreed, but the deviations from the contract are minor and delivered substantially the same benefits as agreed to). This is considered a minor breach of contract, which does not excuse the other party from its obligations. In contrast, a material breach of contract does excuse the other party from its obligations.
(3) Discharge by Agreement: Parties to a contract can agree to rescind, replace, or modify the contract, thereby discharging any remaining obligations under the original contract.
(4) Discharge by Operation of Law: A variety of circumstances can result in discharge of contractual obligations as a matter of law (such as bankruptcy, impossibility of performance, commercial impracticability, frustration of purpose, etc.)

Question 18

Punitive damages

Answer 18

almost never awarded in breach of contract cases

Question 19

Some contracts provide for liquidated damages:

Answer 19

a preset amount payable in the event of a breach. Liquidated damages provisions are generally enforced, unless determined to be unreasonable as an estimate of the actual damages likely to be suffered

Question 20

Equitable remedies include:
(1)
(2)

Answer 20

(1) Rescission: the cancellation of a contract in order to return the parties to their pre-contract position.
(2) Specific Performance: An equitable remedy that calls for the performance of the act promised in the contract.

Question 21

Tort:

Answer 21

A civil wrong, not arising from a breach of contract or other agreement. A breach of a legal duty, proximately causing another person harm or injury.

Protects people from others negligent actions, purpose is to make sure the victim is compensated for any losses caused by the wrong doers violation. Also discourages them from making the same violation in the future.

Derives from the common law, with some modifications by statute, and can vary from state to state

Question 22

Two Classifications of Torts:
(1)
(2)

Answer 22

(1) intentional torts

(2) unintentional torts

Question 23

Tort law recognizes two categories of damages:
(1)
(2)

Answer 23

(1) Compensatory damages, designed to reimburse the plaintiff for the actual value of the plaintiff’s injury or loss.
(2) Punitive damages, designed to punish the wrongdoer for particularly egregious conduct and to deter similar conduct in the future.

Question 24

Legislative Caps on Damages:

Answer 24

State statutes may limit the amount of damages that can be awarded to the plaintiff.

Question 25

Intentional Tort:

Answer 25

A wrongful act that was committed knowingly and with the intent to commit the act (not necessarily with the intent to do harm).

Question 26

False Imprisonment:

Answer 26

The intentional confinement of another person or restraint of another person’s activities without justification.

Question 27

Defamation:

Answer 27

Anything published or publicly spoken that injures another person’s character, reputation, or good name.

Question 28

The common law generally recognizes four acts that qualify as improperly infringing on another’s privacy:
(1)
(2)
(3)
(4)

Answer 28

(1) Intrusion in an individual’s affairs or seclusion in an area in which the person has a reasonable expectation of privacy;
(2) Publication of information that places a person in false light;
(3) Public disclosure of private facts about an individual that an ordinary person would find objectionable; and
(4) Appropriation: The use of a person’s name, picture, or other likeness for commercial purposes without his/her permission

Question 29

Fraudulent Misrepresentation (Fraud): The tort includes several elements:
(1)
(2)
(3)
(4)
(5)

Answer 29

(1) An intentional misrepresentation of material facts (more than mere “puffery”).
(2) An intent to induce another party to rely on the misrepresentation.
(3) A justifiable reliance on the misrepresentation by the deceived party.
(4) Damages suffered as a result of that reliance.
(5) A causal connection between the misrepresentation and the injury suffered.

Question 30

The tort requires (wrongful interference with a contractual relationship):
(1)
(2)
(3)

Answer 30

(1) A valid, enforceable contract between two parties.
(2) Knowledge of the contract by a third party.
(3) Intentional inducement by the third party of a breach of the contract.

Question 31

UNINTENTIONAL TORTS – NEGLIGENCE:

Answer 31

Failure to live up to a required duty of care that a reasonable person would exercise in similar circumstances, creating a risk of harm that results in an injury.

Violation of a government statute or regulation (such as slippling on a wet floor with no sign, crossing a street outside of cross-walk, exceeding the speed limit, failure to enclose a pool with a fence, etc.,) can also constitute negligence.

Question 32

DEFENSES TO NEGLIGENCE
(1)
(2)
(3)

Answer 32

(1) Assumption of Risk: A plaintiff who voluntarily enters a risky situation, knowing the risk involved, may not recover from the alleged tortfeasor.
(2) Contributory Negligence: In a minority of states (including Maryland), any negligence on the part of the plaintiff that contributed to his/her injury will bar him/her from recovering damages from the defendant—no matter how insignificant it is relative to the defendant’s negligence.
(3) Comparative Negligence: In most states, the doctrine of comparative negligence is used. Under this standard, a percentage of responsibility is assigned to both the plaintiff’s and the defendant’s negligence, with damages calculated accordingly. In many comparative negligence states, a plaintiff still cannot recover if determined to be more than 50% responsible for the injury.

Question 33

Commerce Clause has the power to regulate?

Answer 33

any commercial activity in the United States

Question 34

6 Types of Intentional Torts:
(1)
(2)
(3)
(4)
(5)
(6)

Answer 34

(1) False Imprisonment
(2) Defamation
(3) Invasion of Privacy
(4) Fraudulent Misrepresentation
(5) Wrongful Interference with Contractual Relationship
(6) Wrongful Interference with Business Releationship

Question 35

STARE DECISIS

Answer 35

IS A DOCTRINE THAT COURTS CONSIDER WHEN DECIDING WHETHER TO OVERTURN COMMON LAW PRECEDENTS – LEGISLATURES ARE FREE TO OVERTURN JUDICIAL DECISIONS WITHOUT RESTRICTION