Contracts (part II) Flashcards
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
2
Q
License Contracts
A
If there is no licence:
- Primarily designed to protect the public: Contract is void.
- Primarily designed for revenue raising: no effect
3
Q
If you can’t sue for breach of contract
A
Sue for quasi contract under “unjust enrichment”
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
5
Q
Exculpatory Clause
A
- Usually not Legal
- Legal if:
1. Language is clear and unequivocal
2. Consideration
3. Equal Bargaining Power
6
Q
Limitation of Liability Clause
A
- Limits the amount that can be recovered from a party in damages.
- These are legal
7
Q
Statute of Frauds
A
Oral contracts that must be evidenced by a writing. If these are not, the contract is unenforceable:
- Contract for sale of land
a) easement b) lease) c) mineral rights d) dower - Contract that cannot be completed within one year
- 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 - Contracts made in consideration of marriage (marriage is given as consideration)
- Promises made by an executor or administrator to pay the debts of debtor’s estate out of his/her own pocket.
- Sale of goods $500 or more
8
Q
Exceptions to the Statute of Frauds
A
- 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 - 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. - Exception to #4: Goods are Received and Accepted
- Exception to #4 Money is Received and Accepted
- Specially Manufactured Goods
- Admission in Court or in Pleadings
9
Q
Surety
A
“I will pay the debtor’s debts if the debtor defaults”
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)
11
Q
Comakers
A
- Both primarily liable and both jointly and severally liable
- Right of contribution (can only recover 50%)(surety can recover 100%)
12
Q
Statute of Frauds (Misconceptions)
A
- Statute of Frauds requires a written contract: Actually, written evidence can be a check, memorandum, invoice, etc.
- 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.
13
Q
Third Party Contracts ( Situations where someone outside the contract can sue)
A
- Third party beneficiary contract
- 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)
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?
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.
16
Q
The obligore cannot prevent the assignment of rights except when:
A
- Contract states otherwise
- Personal Contract
- Substantial change in performance
17
Q
Thing that can go wrong in contract defenses (20)
A
- Breach of Contract:
- Fraud of Inducement
- Fraud of Execution
- Statute of Frauds
- Minor
- Concealment
- Duress
- Too Intoxicated
- Undue Influence
- Unconscionability
- Insanity
- Illegality
- Bilateral (mutual) mistake of fact
- Unilateral mistake of fact
- Lack of Consideration
- Discharge
- Misrepresentation
- Bankruptcy
- Statute of Limitations
- Lack of Agreement
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
- Because the obligore is unable to stop the transfer of rights and duties
- The assignee is liable for any damage done by the assignor before the delegation of duties.
- 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
- Performance
- By agreement
- Condition
- Implied Condition Subsequent
25
Discharge by Performance
General Rule: Must totally perform.
In order to sue, you must:
A) Totally Perform
B) Substantially Perform or
C) Tender Payment
26
Substantial Performance
The deviation must be both:
1. Relatively Trivial
27
Tender
Unconditional Offer (to pay, to perform, etc.
28
Discharge by Agreement
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
Consideration rule for Common Law and Sales
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
Discharge by Condition
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
Discharge by Implied Condition Subsequent
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
Impracticability
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
Legal Remedies in Case of Breach
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
If there is Accord and Satisfaction...
The contract is Paid For
35
Liquidated Debt
Undisputed Debt
36
Unliquidated Debt
Disputed Debt
37
If a partial amount is accepted for an unliquidated debt and the check says "paid in full"...
The contract is discharged
38
Equitable Remedies in Case of Breach
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
Silence as acceptance
Generally, silence is not acceptance unless there were prior dealings
40
Parol Evidence
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
Parol Evidence Rule
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
Discharge by Frustration of Purpose
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
Anticipatory Breach
- 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
Personal Satisfaction Contract
- You don't have to pay, until you are personally satisfied.
| - It must be a genuine dissatisfaction.
