Chapter 10 - Contract Impediments Flashcards
What are the three rules of consideration?
-Both parties must get something of measurable value from the contract. That thing can be money, boots, an agreement not to sue, or anything else that has real value
-A promise to give something of value counts as consideration. A promise to mow someone’s lawn next week is equivalent to actually doing the yard work when evaluating whether consideration exists.
-The two parties must have bargained for whatever was exchanged and struck a deal:
If you do this, I’ll do that.” If you decide to deliver a cake to your neighbor’s house without her knowing, that may be something of value, but since you two did not bargain for it, there is no contract, and she does not owe you the price of the cake.
What is an act?
Doing something for someone else that she is not legally required to do in the first place.
What is a forbearance?
The opposite of an act. The agreement NOT to do something he has a legal right to do.
What is a noncompete agreement?
A contract in which one party agrees not to compete with another in a stated type of business.
What makes a a noncompete valid?
To be valid, an agreement not to compete must be ancillary (part of a larger agreement) to a legitimate bargain. It also has to be of reasonable distance and time and scope of activity.
What are the two most common settings for a legitimate noncompetition agreement?
Sale of a business and Employment Relationship
A noncompete clause in an employment contract is generally reasonable-and enforceable- only to the extent necessary to protect what three things?
- Trade Secrets
- Confidential Information
- Customer lists developed over an extended period.
What is an Exculpatory Clause?
A contract provision that attempts to release one party from liability in the event the other party is injured.
What are four situations when an exculpatory clause is generally unenforceable?
- When it attempts to exclude an intentional tort or gross negligence
- When the affected activity is in the public interest, such as medical care, public transportation, or some essential service.
- When the parties have greatly unequal bargaining power
- When the clause is not clearly written and readily visible.
What is disaffirm?
To give notice of refusal to be bound by an agreement.
Who can cancel a contract in a voidable contract?
Only the party lacking capacity
What is Restitution?
Restoring an injured party to its original position.
When a minor dissaffirms a contract, what must he do?
He must return the consideration he has received, to the extend he he able.
When is it ruled that a person suffers from mental illness or defect and thus able to dissaffirm a contract?
If he is unable to understand the nature and consequences of the transaction
Normally a mentally impaired person creates a voidable contract, but in what case does a person create a void contract?
If a person has been adjudicated insane, then all of his future agreements are void. That means that a judge has made a formal finding that a person is mentally incompetent and has assigned that person a guardian.
What is Rescind?
To cancel a contract
What is Fraud?
Intending to induce the other party to contract, knowing the words are false or uncertain that they are true.
What is Misrepresentation?
A statement that is factually wrong
What three things must be shown for a misrepresentation to amount to fraud?
- The defendant know that his statement was false or he made the statement recklessly and without knowledge of whether it was false
- The false statement was material
- The injured party justifiably relied on the statement
What are two things that do not amount to fraud?
Opinions or puffery
What is innocent misrepresentation?
When a person makes a false statement while having a reasonable belief that she is telling the truth. They made the statement in a way that was not intentional or reckless.
What makes a misstatement material?
When it is important, not minor, and it likely significantly influenced the misled party.
What is Justifiable Reliance in Fraud?
That the injured party did rely on the false statement, and reasonably so
In the case of Fraud, what are the options for the injured party to remedy?
Choice of rescinding the contract
Suing for damages
sometime both
If an injured party relied on a statement that turned out to stem from innocent misrepresentation, what can they legally do?
They can rescind a contract
NOT get damages
What are some forms a Mistake can take?
- A basic error about an essential characteristic of the thing being sold.
- Erroneous prediction about future prices
- A mechanical error (like bidding 300 when you meant 300,000)
What is a Bilateral Mistake?
Occurs when both parties negotiate based on the same factual error
What is a Unilateral Mistake?
Occurs when only one party negotiate based on a factual error.
What is an Unconscionable contract?
A contract that is shockingly one-sided and fundamentally unfair
What is the Statute of Frauds?
Requires certain contract to be in writing
Under the Statute of Frauds, what 6 agreements must be in writing?
- Those with any interest in land
- Those that cannot be performed within one year
- Those that pay the debt of another
- Those made by an executor on an estate
- Those made in consideration of marriage
- Those for the sale of goods worth $500 or more.
What does “interest in land” refer to?
Means any legal right regarding land
What are two exceptions of agreements for an interest in land being in writing?
- Full performance by the seller
- Part performance by the Buyer
What must be in writing for a contract?
- Must be signed by the defendant
- Myst state with reasonable certainty the name of each party, the subject matter, and all the essential terms and promises
What does the UETA state?
The Uniform Electronic Transactions Act states that electronic contracts and signatures are as enforceable as those on paper
What does the E-SIGN Act declare?
The Electronic Signatures in Global and National Commerce Act declares that contracts cannot be denied enforcement simply because they are in electronic form or signed electronically.
What are the 4 common exceptions that still require a traditional, non electronic signature?
- Wills
- Adoptions
- Court Orders
- Notice of Foreclosures
The “peppercorn rule” deals with what?
Adequacy
