Chapter 2 - Business Law

Question 1

Implied Contract

Answer 1

Actions act as acceptance

Question 2

Quasi Contract

Answer 2

Understanding (Ordering at restaurant)

Question 3

Common Law vs. Statutory Law

Answer 3

Common Law: Intangible (services/real estate), judge made law, previous court decisions used

Statutory Law: Tangible goods (UNN-Uniform Commercial Code)

Question 4

6 Elements to a Contract

Answer 4

P - Proper Form

L - Lawful Object - Cannot sell illegal items

A - Acceptance - Unconditional, if condition placed then considered counter-offer; Can be accepted with words or actions; Mailbox Rule

C - Consideration - Promise for a promise, meeting of the minds; Past Consideration-Previous actions not used for present contract; Future Consideration- Promise to make a promise (not legally binding)

C - Competence - Person cannot be a minor or mentally incompetent

O - Offer - Has to be serious; definite terms; must be communicated to offeree

Question 5

Contract Offers ends when

Answer 5

Counter-offer made; Offeree rejects; Offeror revokes

Exception- Offeror agrees to keep offer for period of time; Offer is deemed open for reasonable amount of time

Question 6

Void / Voidable Contracts

Answer 6

Unenforceable by law (selling illegal drugs)

When one party has ability to void (contract with a minor)

Question 7

Statute of Contract Frauds (Must be in writing)

Answer 7

G - Goods - Sales of goods $500 or more

R - Real Estate Contracts

I - Impossible - Impossible to perform in one years time

P - Promise - Promise to answer for debt of another

E - Executor - Executor’s promise to be liable for debt of an estate

Marriage contract

Question 8

Elements of Fraud

Answer 8

M - Misrepresentation

R - Reliance

I - Intent to mislead (scienter)

D - Damages of Injury

Question 9

Gross Negligence or Constructive Fraud

Answer 9

M - Misrepresentation

R - Reliance

R - Reckless disregard for truth

D - Damages or Injury

Question 10

Types of Fraud

Answer 10

Inducement or Misrepresentation creates voidable contract

If Written contract different from verbal agreement can void contract

Question 11

Defenses

Answer 11

Undue Influence - Someone of authority (relative) influences party that has been wronged

Duress - Pressured to sign contract

Parole Evidence Rule - Car dealer doesn’t act on verbal promise and did not put in contract (evidence out side of 4 Corners of contract)

Question 12

Transferring/Delegating Contracts

Answer 12

Assignment (Ex: Mortgage- banks can transfer, most contracts freely assignable unless writing says otherwise

Cannot be assigned: Insurance contracts; Personal service contract requiring skill

Question 13

3rd Party Beneficiaries of Contracts

Answer 13

Intended Beneficiary - have privity (life insurance- named in contract)

Incidental Beneficiary - Not intended, no privity

Question 14

Contract Remedies

Answer 14

Actual/Compensatory - Get back what value of contract was; sometimes prohibitions placed

Liquidation Damages - Put in contract what damages will be (reasonable amount)

Punitive Damages - Purpose is to punish, used when there is fraud

Question 15

Agency

Answer 15

Working/making transactions on behalf of another person with a 3rd party.

Agent is working for Principal (Agent-Principal relationship)

Principal must give legal consent

Minors can appoint an agent

Have fiduciary duty to principal (acting in best interest of principal)

Question 16

Disclosed vs. Undisclosed Principal

Answer 16

Disclosed - 3rd party aware of who principal is. If 3rd party harmed, able to pursue principal

Undisclosed principal - Agent does not disclose seller. If breach of contract, 3rd party has option to pursue principal or agent.

Question 17

Agent/Principal Liabilities when dealing with 3rd party

Answer 17

If client surpasses agent to negotiate with 3rd part, client is liable

If agent spends more or agrees to transaction outside the range principal agreed to then agent is liable