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BUS 393 > module 4 - contracts > Flashcards

module 4 - contracts Flashcards

1
Q

what is a contract

A

it is a voluntary exchange of promises or commitments that are legally enforceable in courts

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2
Q

what is the benefit of contracts

A
  • allows parties to enter into an agreement (that both parties agree to) and is enforceable
  • makes sure that businesses cannot just walk out of an agreement
  • creates rules
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3
Q

what is needed for a valid contract

A

consensus, consideration, capacity, intention, legality (and clarity)

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4
Q

consensus?

A

in order to make a valid, enforceable contract, all parties must come to a consensus

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5
Q

key elements to consensus

A

parties/people involved, price, location, delivery times, etc.
- parties must agree to the fundamental elements of the agreement
- negotiated through offer and acceptance

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6
Q

consideration?

A

all parties of the contract are getting something of value

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7
Q

elements to consideration

A

has to be valuable to you,
- legal, no drugs
- possible
- specific
- new and not existing obligation
- not gratuitous or free
- if no real consideration, must be under seal

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8
Q

what is a seal (consideration)?

A

an indication of recognizing that you are not getting anything out of the contract, but are still legally obligated to give something to the other person

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9
Q

capacity?

A

must be legally able to enter into the contract
- rules protect parties from entering a contract with people they can take advantage of (due to age or mental capacity)

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10
Q

void vs. voidable

A

void: not having the criteria for a valid contract
voidable: party who is at a disadvantage can decided whether they want to go ahead with the contract

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11
Q

legality?

A

contract has to be regarding something that is legal
(parties can enter into contracts that are regarding something illegal, but courts will not enforce it)

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12
Q

what is unreasonable (legality)

A

anything that exceeds a reasonable expectation
- anything that would be beyond common sense
- e.g., employment contract says that after you quit, you cannot start a similar business for 5 years within BC
- difference between legal and reasonable
-

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13
Q

intention

A

is like consensus, but focus is on whether parties intended to enter into a legally binding agreement, based on an objective test

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14
Q

what is an objective test

A

would a reasonable person concluded that the parties intended to enter into a legally binding contract?

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15
Q

what are exclusion clauses

A

conditions used by one of the parties in the contract in order to control or limit liability

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16
Q

purpose of exclusion clauses

A

it is used by businesses to manage their risk/liability, done through terms referred to as waivers/disclaimers/clauses

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17
Q

what is allowed in an exclusion clause?

A

general principle is freedom of contract; parties can agree to exclusion clauses, unless they are unfair
(however, there are some situations where you HAVE to accept the clause)
- can be done if they are fair or considered valid

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18
Q

conditions for validity (exclusion clause)?

A
  1. does the exclusion clause apply to the situation ?
  2. if it does apply, was it unconscionable when it was created?
  3. are there public policy reasons to invalidate the exclusion clause?
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19
Q

what are disputes

A

issues that business people need to be aware of and evaluate what these mean, how to handle it, and avoid it - regarding their specific business

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20
Q

things that may lead to disputes…

A

exemption clauses, mistakes, misrepresentation, duress and undue influence

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21
Q

what is a mistake and three types

A

mistake typically occur about what was agreed to and what terms of contract mean
1. shared or common mistake
2. misunderstanding
3. unilateral mistake

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22
Q

what is a shared mistake

A

both/all parties thought a component of contract was valid or legal, when it is not

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23
Q

what is a unilateral mistake

A

where one party misinterprets agreement/fundamental part of contract that the other party thought was made clear (one-sided)
(e.g. students thought if they paid individually, they would get A grade, prof said EVERYONE must pay)

24
Q

what is a misunderstanding

A

less severe version of unilateral mistake, one party misinterprets a component of the agreement
(e.g. students thought A grade was for entire course, but A grade was just for final exam)

25
Q

what is misrepresentation

A

lying, false and misleading statements or omissions that (key words) INDUCE someone to enter a contract

26
Q

components of misrepresentation

A

innocent, negligent, or fraudulent

27
Q

negligent (misrepresentation)?

A

one party creates a component of the contract but doesn’t know if that component is allowed/valid
-e.g. prof says “if I fail the course, since it is mandatory, I will no longer be enrolled in Beedie” but he wasn’t sure about that

28
Q

innocent (misrepresentation)?

A

the maker of the statement had reasonably believed that what they had started was true
- e.g. prof says “most students would sign on to this contract”, but is just an assumption
- assumption about a fact

29
Q

fraudulent

A

most severe, when one party knows something is untrue, but says it anyways
- e.g. prof says we can deduct $100 of taxes as part of education expenses. untrue but claims it anyways

30
Q

what is duress

A

free will to bargain lost due to coercion, threat of violence, imprisonment, scandal, damage to property
- basically SILENCED (pressured to sign contract) due to ^^

31
Q

what is undue influence

A

not a threat of force or financial consequences, but rather an abuse of trust
- e.g. lawyers, doctors, guardians have a presumption of undue influence against them
^^ a sense of trust instilled in these individuals

32
Q

unconscionability

A

abuse of fairness
- law use this to invalidate contracts when there has been a significant degree of unfairness
- a br

33
Q

what is a mandatory arbitration clause

A

clause in a contract that requires two parties to arbitrate any dispute that may arise from the contract instead of taking the dispute to court.
-e.g., there is not option for a party to negotiate

34
Q

when is a contract over? (4 ways)

A

performance, breach including incomplete performance, frustration, agreement

35
Q

performance? (end of a contract)

A

you do what the contract requires
- includes substantial performance

36
Q

substantial performance?

A

when the contract is not entirely fulfilled
- e.g. you purchase a car and add on special wheels, but car comes in with regular wheels
- one part of the deal had been fulfilled, but not entirely
- law allows them a chance to fix it

37
Q

breach including incomplete performance? (end of a contract)

A

not performing obligations in much more significant ways
-e.g. the car is completely different (not just missing the wheels)
- key significance: incomplete performance, not substantial

38
Q

repudiation?

A

one party indicates/communicates to the other that they do not intend to follow the contract

39
Q

frustration?

A

the circumstance where events take place that are out of control of the parties
- e.g. the car was destroyed in a flood or damaged in transportation
- exemption: one party creates the problem through self-induced frustration

40
Q

force majeure?

A

events that are out of control of the parties
- e.g. the storm, or transportation accidents
- businesses usually include a clause for when this happens

41
Q

agreement? (end of a contract)

A

both parties choose to end contract or come up with another
- just deciding that the parties do not want to continue with this agreement

42
Q

what are the purpose of remedies in contracts

A

to put parties back into a position that is fair
-e.g. if it is an invalid contract, it puts parties back to the beginning
but if its a valid contract, it puts parties back into a positon to where the contract had been properly formed

43
Q

what are some general remedies for when problems occur with contracts?

A
  1. void or voidable
  2. rectification
  3. recession
  4. damages
44
Q

void or voidable? (general remedies)

A

void contract comes to an end (immediately (?)) and voidable contract comes to an end IF one of the parties had been harmed
- rules of duress/unconscionability decides if contract ends

45
Q

rectification? (general remedies)

A

fix contract so it continues

46
Q

recession?

A

return parties to original position if possible

47
Q

specific remedies for breach of contract

A
  1. damages
  2. specific performance
  3. injunction
  4. accounting
  5. quantum meruit
48
Q

specific performance? (specific remedies)

A

must do the thing in the contract

49
Q

injunction? (specific remedies)

A

stop something such as selling to someone else

50
Q

accounting? (specific remedies)

A

disclose financial records to determine damages

51
Q

quantum meruit? (specific damages)

A

give reasonable payment for service already performed

52
Q

what is the purpose of insurance contracts?

A

businesses can use insurance as a risk management technique to transfer risk to someone else (an insurer)

53
Q

what are the types of insurance contracts?

A

general liability insurance, liability insurance,

54
Q

what are some of the new kinds of liability insurance

A

climate change/hacker insurance

55
Q

general liability insurance?

A

car insurance, ICBC, life insurance, health insurance, condo insurance, flood/hurricane/earthquake insurance, etc.

56
Q

liability insurance?

A

insurance for employee or other business operations including negligence (not willful acts by the employee)
- insurance thereby helps deal with problems of vicarious liability and product liability

BUS 393 (4 decks)

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