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Business Law (Focus Areas) > Chapter 5 > Flashcards

Chapter 5 Flashcards

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1
Q

What is the most basic requirement of a contract?

A

The presence of an agreement.

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2
Q

How should the contract be entered into?

A

Voluntarily, involving a ‘genuine meeting of minds’.

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3
Q

What does voluntarily mean?

A

The parties should not have been forced or tricked.

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4
Q

A parties’ consent may be ___ by a number of factors.

A

Vitiated

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5
Q

What does vitiated mean? (2)

A

Negatively affected or made ineffective

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6
Q

What happens to a contract due to vitiating factors?

A

It becomes void or voidable.

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7
Q

What are the types of vitiating factors? (Im in dirty underwear)

A

Illegality, Misrepresentation, Incapacity, Duress, Undue influence

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8
Q

Which vitiating factors make a contract void and voidable?

A

Void- Illegality

Voidable- Misrepresentation, Incapacity, Duress, Undue influence

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9
Q

What happens when a contract is void?

A

It will automatically be treated as a nullity.

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10
Q

What does nullity mean?

A

The contract will be treated as if it never existed between the parties.

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11
Q

What happens when a contract is treated as a nullity? (2)

A

(1) All goods and money obtained under the contract cannot be recovered (2) The contract cannot be enforced.

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12
Q

What is a voidable contract?

A

It is a contract which is valid until it is terminated.

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13
Q

What can an injured party do with a voidable contract?

A

He can choose to terminate the contract or continue with it.

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14
Q

What happens if the injured party decides to continue with the contract?

A

If the injured party decides to continue with the contract and affirms the contract, the contract remains valid between the parties.

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15
Q

What happens if the injured party decides to terminate the contract?

A

The contract will be considered void from the very beginning.

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16
Q

All illegal contracts are ___ contracts.

A

Void

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17
Q

What makes a contract illegal? (2)

A

(1) Forbidden by statute (2) Unlawful according to common law

18
Q

What are contracts in restraint of trade?

A

These contracts restraint a person from carrying on a lawful profession, trade or business.

19
Q

What is the impact of contracts in restraint of trade?

A

They have an impact on economic interests of society.

20
Q

So what if contracts in restraint of trade have an impact on economic interests?

A

They are contrary to public policy. Thus, they are prima facie illegal and void.

21
Q

When can contracts in restraint of trade be enforced?

A

If it can be proven to be reasonable between the parties and in the public interest

22
Q

What if the illegal/offending clause is only one of the many?

A

The court may cancel the illegal/offending clause and enforce the other valid clauses.

23
Q

What is the first type of contract in restraint of trade?

A

Contracts of employment- require employee, after leaving present employment, to not compete against his present employer either by setting up a similar business on his own or working for a rival firm.

24
Q

What is the constraint in such contracts of employment?

A

Constraint on future employment.

25
Q

What is the second type of contract in restraint of trade?

A

Contracts on the sale of business. Buyers will often require the seller to promise that, in the future, he will not carry on a similar business in competition with the buyer.

26
Q

Why would the buyer require the seller to promise such a thing?

A

To prevent the seller from setting up a business nearby and attracting all his old customers away from the buyer.

27
Q

What is the third type of contract in restraint of trade? (4)

A

Suppliers of goods and services may sometimes agree among themselves to fix prices, restrict output, regulate methods of supply or otherwise, influence the market for their own products.

28
Q

What is the fourth/last type of contract in restraint of trade?

A

Retailers make similar agreements with suppliers where they promise to sell only the suppliers’ products

29
Q

Why would the supplier make such an agreement with the retailer?

A

To prevent the retailer from selling the suppliers’ competitors’ products.

30
Q

What is the first factor to show whether a restraint is reasonable?

A

Whether the person who would benefit from imposing the restriction had any legitimate interest in imposing it.

31
Q

What does legitimate interest mean?

A

Whether they had anything valuable which deserves protection.

32
Q

What are examples of legitimate interest? (2)

A

(1) trade secrets (2) confidential customer database

33
Q

What is the second factor to show whether a restraint is reasonable? Explain.

A

The nature of the restraint. How wide is the restraint, what the restraint stops someone else from doing.

34
Q

What is the third factor to show whether a restraint is reasonable?

A

Geographical area of operation of the restraint.

35
Q

What is the fourth/last factor to show whether a restraint is reasonable?

A

The duration that the restraint applies.

36
Q

What is a reasonable duration for a restraint?

A

A shorter restraint is easier to prove than a longer restraint.

37
Q

Considering all factors, what is a reasonable restraint?

A

The restraint, as a whole, should be no more than what is reasonably necessary to protect that particular interest.

38
Q

How should these factors be considered?

A

In the wider context of what is in the public interest.

39
Q

How does the Government treat employment contracts in restraint of trade? (what and why, 2)

A

Generally the government is NOT sympathetic as (1) it restricts a person’s right to earn his living, where, when and with whom he likes (2) the employee may have been persuaded to agree to the restraint because the employer is in a stronger bargaining position.

40
Q

How do these factors which show whether a restraint is reasonable weigh alongside each other?

A

Legitimate interest = Nature + Geography + Duration

Business Law (Focus Areas) (10 decks)

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