F Chapter 12 Flashcards
Consideration
The value given in return for a promise. It is the fuel that makes a K run. Mutual exchange of legally sufficient and bargained for, a risk + award and reward and benefit.
Consideration is something for something…it is the why you did this, promised that, or did not do that other thing.
What are two types of consideration
Regular
Forbearance
Regular Consideration
Promise to do something on has no prior legal duty or obligation to do.
Forbearance
Promise to not do something one has a legal right or ability to do.
What are two nonvalid consideration
Pre-existing Duty
Past Consideration
Pre-existing Duty
There is no consideration where one is merely doing something one is already obligated to do.
This does not include “unforeseen difficulties” cases or where a new contract is created to override an older one.
Past Consideration
There is no consideration where one is making a promise in return for actions or events that have already taken place ( often for free).
Illusory Promise
A false promise such that there is no risk or obligation on the part of the one promising and therefore there is no consideration. Ex: “I promise to pay you if I feel that I should.”
Accord and Satisfaction
A mutual agreement to exchange lesser performance than that originally agreed upon. For an accord and satisfaction to happen, there must exist an un-liquidated ( disputed) debt. You cannot have an accord and satisfaction where the debt is not in dispute and is clear ( liquidated).
Check Cases
If A cashes or deposits the check without writing “under protest” next to his signature in the back of the check ( endorsement) A will cancel any remaining debt and B will be clear.
By writing “under protest” A only preserves his chance to seek the rest…he may still lose his effort, but at least he will have his day in court. Without that writing, he will not even be allowed in the door.`
Perfect Consideration Promise
Both sides get something and give something up. The perfect example would be A owes B $ 500 due on Dec 1, 2015 but both agree that if A pays B $ 300 today B will forgive the rest. A gives up time but saves $ 200 and B gives up $ but gets payment now.
Release
An agreement whereby one party gives up his rights to pursue a legal claim against another party. Need to be in good faith, written, and accompanied by consideration. Ex: A agrees not to sue B in exchange for $ 1,000.
Covenant not to sue
An agreement to substitute a contractual obligation for some other type of legal action based on a valid claim. Ex: I will not sue you if you paint my house.
Promissory Estoppel
= When A makes a clear promise on which B reasonably relies to his detriment, A may be bound to his promise, or at least may have to make some sort of restitution if he does not honor that promise. NY only tends to hold this in cases of charities and agreements in consideration of marriage.
Contractual Capacity
The ability to enter a valid, binding agreement. Usual examples are age, mental capacity, or intoxication cases.
Disaffirmance
A enters K before 18 and wants out any time before 6 months to a year after becoming 18
If A wants out, this is called disaffirmance
Emancipation
Child treated as a legal adult if
His parents or guardian give up legal control ( relinquish)
He is engaged in business as an adult or
He successfully petitions a court to divest his parents or guardian of legal control
What happens when a minor lies about their age
Some states still allow him to get out of the contract
Some states will not allow him to get out because he lied about his age and
Some states will allow him to get out but will subject him to tort liability for his lie
What are Necessaries / necessities
That which the minor needs to maintain his level and standard of life, such as medical care, housing, health care, food, education ( up to a certain level )etc. Minors cannot disaffirm such things but are only liable for the reasonable value of them or the agreed price, whichever is lower.
Contracts contrary to Statute
Criminal contracts Usury Unlicensed Gambling Usury
Contracts in Restraint to Trade
Contracts that tend to reduce competition for the provision of goods or services in a market (e.g., covenants not to compete).
Restrictive Covenants in the Sale of a Business
Many agreements for the sale of an ongoing business require the seller not to open a competing business within a specified area including the business being sold. To be enforceable, the geographic restriction must be reasonable, and must be effective only for a reasonable period of time after the sale is completed.
Restrictive Covenants in Employment Contracts
Many employment agreements, likewise, require the employee to refrain from working for a competitor or starting a new business in competition with the employer for a reasonable period of time, and within a reasonably defined geographic area, after the employment relationship ends.
When is a restrictive covenant permitted
ancillary to an otherwise enforceable contract. If it is not ancillary to an otherwise enforceable contract, or if the terms of the covenant are too restrictive, the covenant will be void.
Name 4 contracts contrary to public opinion
unconscionable Contracts
Procedural Unconscionability
Substantive Unconscionability
Exculpatory Clauses
Unconscionable Contracts
Contracts that contain terms that unfairly burden one party and unfairly benefit the other.
Procedural Unconscionability
Arises when one party to the contract lacks or is deprived of any meaningful choice regarding the terms of the contract due to inconspicuous print, unintelligible language, lack of opportunity to read the contract before signing, or lack of bargaining power. Unfair process
Substantive Unconscionability
Arises when the contract contains terms that deprive one party of the benefit of its bargain or of any meaningful remedy in the event of breach by the other party. Unfair content
Exculpatory Clauses
A contractual provision releasing a party from liability, regardless of fault. Usually not allowed in cases of efforts to avoid criminal or tort liability and closely viewed in cases of negligence.
a venue may print an exculpatory clause on tickets it sells for a concert, indicating that it is not responsible for personal injury caused by employees or others during the show.
Now name 4 other Contracts contrary to public opinion
(1) discriminate based on race, color, national origin, religion, gender, age, or disability;
(2) commit a tort;
(3) interfere with public service; and (4) delay, prevent, or obstruct legal process.
EFFECT OF ILLEGALITY
A contract that is contrary to statute or to public policy is, generally, void; and, therefore, unenforceable. In most cases, both parties to a void contract are considered to be equally at fault (in pari delicto), and therefore cannot enforce the contract against the other party.
Name 5 exceptions to Effect of illegality
Justifiable Ignorance Protected Classes Withdrawing from an Illegal Agreement Severability/Divisibility fraud, duress, or undue influence
Justifiable Ignorance
When one of the parties to an illegal contract has no knowledge or any reason to know that the contract is illegal, that party will be entitled to be restored to its pre-contractual situation.
A woman agrees to marry a man not knowing that he is already married; bigamy is illegal, the marriage is void, and she may sue him for damages
Protected Classes
When a statute protects a class of people, a member of that class may enforce an otherwise illegal contract, even though the other party cannot.
An airline pilot, forbidden by federal law from working overtime, nevertheless does so; she would be entitled to payment for the overtime worked
Withdrawing from an Illegal Agreement
If a party withdraws from a partial agreement before any illegality occurs, she may recover its value to her.
Ralph hires Jacob for $5,000 to arrange a bribe of a juror. Ralph has a change of heart; he can get his money from Jacob.
fraud, duress, or undue influence
A party induced to enter an illegal contract by fraud, duress, or undue influence may either enforce the contract or recover its value to her.
Severability/Divisibility
If the contract can be divided into legal and illegal parts, a court may enforce the legal parts but not the illegal ones.
A six-page employment contract contains two paragraphs of an illegal noncompete agreement. The illegal part is thrown out, but the legal parts are enforceable.
