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Business Law > Contracts (part II) > Flashcards

Contracts (part II) Flashcards

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1
Q

Usury and usury contracts

A

Usury: Anything higher than the maximum legal interest rate.

(usury contracts are illegal)

This does not apply to:

  • Installment payments
  • Small loan associations
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2
Q

License Contracts

A

If there is no licence:

  1. Primarily designed to protect the public: Contract is void.
  2. Primarily designed for revenue raising: no effect
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3
Q

If you can’t sue for breach of contract

A

Sue for quasi contract under “unjust enrichment”

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4
Q

Contracts in Restraint of Trade

A

are illegal

  • exception: “anti competitive covenant” or “Covenant to not compete”
  • Courts will enforce this exception if it is:
    1. Ancillary
    2. Consideration
    3. Reasonable to time and space
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5
Q

Exculpatory Clause

A
  • Usually not Legal
  • Legal if:
    1. Language is clear and unequivocal
    2. Consideration
    3. Equal Bargaining Power
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6
Q

Limitation of Liability Clause

A
  • Limits the amount that can be recovered from a party in damages.
  • These are legal
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7
Q

Statute of Frauds

A

Oral contracts that must be evidenced by a writing. If these are not, the contract is unenforceable:

  1. Contract for sale of land
    a) easement b) lease) c) mineral rights d) dower
  2. Contract that cannot be completed within one year
  3. Promise to pay the debt or default of another:
    In order for the statute of frauds to apply there must be:
    a) oral promise
    b) made to the creditor
    c) Secondary Promise: 1. Surety 2. Guarantor
  4. Contracts made in consideration of marriage (marriage is given as consideration)
  5. Promises made by an executor or administrator to pay the debts of debtor’s estate out of his/her own pocket.
  6. Sale of goods $500 or more
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8
Q

Exceptions to the Statute of Frauds

A
  1. Exception to #1: Part Performance Doctrine:
    Majority View: If the buyer does the following, there is a contract:
    a) puts some money down b) buyer takes possession & c) makes substantial improvements
    Minority View (including Ohio): Court considers overall behavior of both parties
  2. Exception to #3: Primary Purpose:
    a) Primarily to benefit debtor
    b) Primarily to benefit self
    - If it is the second kind, then it is an exception.
  3. Exception to #4: Goods are Received and Accepted
  4. Exception to #4 Money is Received and Accepted
  5. Specially Manufactured Goods
  6. Admission in Court or in Pleadings
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9
Q

Surety

A

“I will pay the debtor’s debts if the debtor defaults”

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10
Q

Guarantor

A

“I will pay the debtor’s debts if the debtor defaults and the creditor is unable to collect from the creditor.” (best option)

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11
Q

Comakers

A
  • Both primarily liable and both jointly and severally liable
  • Right of contribution (can only recover 50%)(surety can recover 100%)
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12
Q

Statute of Frauds (Misconceptions)

A
  1. Statute of Frauds requires a written contract: Actually, written evidence can be a check, memorandum, invoice, etc.
  2. Both parties must sign: Nope. Only the defendant needs to sign. If both parties are merchants, then they must disaffirm the contract within 10 days of receiving it or else they have accepted it.
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13
Q

Third Party Contracts ( Situations where someone outside the contract can sue)

A
  1. Third party beneficiary contract
  2. Assignment: Transfer of Rights (ex. right to receive payment)
    Delegation: transfer of duty: ex: obligation to perform a task)

(You can assign tasks, delegate duties, or both)

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14
Q

What is the test of a third party beneficiary?

A

Was it within the contemplation of both parties at the time the contract was executed to directly benefit the third party?

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15
Q

Incidental Beneficiary

A

In contrast to an intended beneficiary, an incidental beneficiary just so happened to benefit from the contract.

Third party beneficiaries are intended beneficiaries.

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16
Q

The obligore cannot prevent the assignment of rights except when:

A
  1. Contract states otherwise
  2. Personal Contract
  3. Substantial change in performance
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17
Q

Thing that can go wrong in contract defenses (20)

A
  1. Breach of Contract:
  2. Fraud of Inducement
  3. Fraud of Execution
  4. Statute of Frauds
  5. Minor
  6. Concealment
  7. Duress
  8. Too Intoxicated
  9. Undue Influence
  10. Unconscionability
  11. Insanity
  12. Illegality
  13. Bilateral (mutual) mistake of fact
  14. Unilateral mistake of fact
  15. Lack of Consideration
  16. Discharge
  17. Misrepresentation
  18. Bankruptcy
  19. Statute of Limitations
  20. Lack of Agreement
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18
Q

Void and Voidable Contracts

A

Voidable Contracts:

Fraud of Inducement
Misrepresentation
Too Intoxicated
Insanity
Illegality
Unconscionability
Undue Influence
Bilateral (mutual) mistakes of fact
Concealment
Duress

Void Contracts:

Duress
Illegality
Fraud in the Execution 
Unconscionability
Minor
19
Q

Duty of Restoration

A

Must return whatever you’re able to return.

20
Q

Duty of Restitution

A

Must compensate owner for the loss.

21
Q

Unenforceable Contracts

No Contract

Discharge

A

Unenforceable Contracts:

Statute of Frauds
Minor
Duress
Unconscionability
Insanity
Illegality
Lack of Consideration
Fraud in the Execution
Bankruptcy
Statute of Limitations

No Contract:

Unilateral Mistake of Fact
Lack of Agreement

Discharge:

Discharge
Bankruptcy

22
Q

Why is the assignee in a weak legal position?

A
  1. Because the obligore is unable to stop the transfer of rights and duties
  2. The assignee is liable for any damage done by the assignor before the delegation of duties.
  3. If the obligore is not notified the rights and duties have been delegated, then they can still be discharged by paying the assignor.
23
Q

If someone assigns the same rights to two people, who gets the rights?

A

The first one to be assigned the rights, not the first one to notify the obligore.

24
Q

Ways to be Discharged From a Contract

A
  1. Performance
  2. By agreement
  3. Condition
  4. Implied Condition Subsequent
25
Q

Discharge by Performance

A

General Rule: Must totally perform.

In order to sue, you must:
A) Totally Perform
B) Substantially Perform or
C) Tender Payment

26
Q

Substantial Performance

A

The deviation must be both:

  1. Relatively Trivial
27
Q

Tender

A

Unconditional Offer (to pay, to perform, etc.

28
Q

Discharge by Agreement

A

a) Mutual Rescission (cancel by agreement)
Rescission: An equitable remedy which cancels the contract

b) Substitutable Agreement: A contract meant to replace the first.

c) Novation: Substitution of Parties:
All three parties agree that one party will replace another.

d) Waiver

e) Accorded Satisfaction: Substitution of Performance:
- Accord: the agreement to substitute one performance for another
- Satisfaction: completion of substitute performance

29
Q

Consideration rule for Common Law and Sales

A

Common Law Contract: If one party gives additional consideration, so does the other.
Sales Contract: If one party gives additional consideration, the other party does not have to.

30
Q

Discharge by Condition

A

Precedent: a contract (express or implied) that requires performance only in the event something else happens first.

Concurrent: a condition which should occur or be performed simultaneously with another condition.

Subsequent: You had an agreement, but after certain conditions are met, you don’t.

31
Q

Discharge by Implied Condition Subsequent

A

Doctrine of Impossibility: (one of the following)

a) Destruction of the subject matter
b) It is a personal contract and the party to perform dies
c) Subsequent Illegality

32
Q

Impracticability

A

In sales law, a contract can be discharged by impracticability if:

  1. There is a contract
  2. Then there is an unforeseeable event
  3. And the contract becomes at least 10x as expensive to perform.
33
Q

Legal Remedies in Case of Breach

A

Legal Remedy: Damages:

  1. Compensatory Damages:actual out of pocket expenses
  2. Consequential Damage: reasonably foreseeable loss
  3. Nominal Damages: $1.00
  4. Punitive or Exemplary Damages:
    - given to punish offender
    - rarely given in contract cases
  5. Liquidated Damages:
    - parties agree in advance
    - amount must be reasonable, otherwise it is a penalty and thus cannot be enforced.
34
Q

If there is Accord and Satisfaction…

A

The contract is Paid For

35
Q

Liquidated Debt

A

Undisputed Debt

36
Q

Unliquidated Debt

A

Disputed Debt

37
Q

If a partial amount is accepted for an unliquidated debt and the check says “paid in full”…

A

The contract is discharged

38
Q

Equitable Remedies in Case of Breach

A

Equitable Remedies:

  1. Injunction (usually for anti-competitive contracts)
  2. Rescission: for voidable contracts
  3. Specific Performance:
    - Something about the contract must be unique (real estate, priceless artifacts, etc.)
    - Item Must be Delivered
    - This never applies to services because of the 13th amendment
  4. Reformation: The court changes the contract to what the parties meant to say
39
Q

Silence as acceptance

A

Generally, silence is not acceptance unless there were prior dealings

40
Q

Parol Evidence

A

Oral (or written) statements made prior to or contemporaneously with the signing of a written contract are inadmissible if they would modify or contradict the terms of the written contract.

41
Q

Parol Evidence Rule

A

General Rule: Things said before the contract are inadmissible.

Exceptions:

  1. Contract is incomplete
  2. Contract is vague or unclear
  3. Surrounding Circumstances (e.g. fraud)
42
Q

Discharge by Frustration of Purpose

A

When an unforeseen event undermines a party’s principle purpose for entering into a contract, and both parties knew of this principle purpose at the time the contract was made.

43
Q

Anticipatory Breach

A
  • A breach that occurs after the contract was signed, but before performance is required (suppose someone says “I’m not going to pay you”)
  • Common Law: In the case of an anticipatory breach, the offended party can sue at that time or they can sue when the actual breach occurs
  • Sales: The offended party can notify the offending party that the contract is discharged. An anticipatory breach can be retracted anytime before the notification of discharge or before an actual breach occurs.
44
Q

Personal Satisfaction Contract

A
  • You don’t have to pay, until you are personally satisfied.

- It must be a genuine dissatisfaction.

Business Law (6 decks)

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