Business Law Test 3

Contractual Capacity

Ability to understand that a contract is being made. Not understanding the full meaning of the contract does not mean you lack contractual capacity.

Factual Incapacity

Incapacity imposed because of the class or group to which a person belongs. Incapacity may exist when, because of a mental condition cause by medication, drugs, alcohol, illness, or age.

Status Quo Ante

Restores the parties back to where they were prior to the contract being formed.

Contracts Minors Cant Avoid

Educational Loans, Medical care, contracts made while running a business, a contract approved by a court, a contract made in performance of a legal duty, contracts relating to bank accounts, insurance policies, or corporate stock.

Reformation

Remedy by which a written instrument is corrected when it fails to express the actual intent of both parties because of fraud, accident, or mistake.

Exceptions to the rule of nonliability for nondisclosure

1)Unknown defect or condition 2) Confidential Relationship 3)Active Concealment

Confidential Relationship

Relationship in which, because of the legal status of the parties or their respective physical or mental conditions or knowledge, one party places full confidence and trust in the other.

Undue Influence

Influence that is asserted upon another person by one who dominates that person.

Exceptions to Effect of Illegality

Protection of one party and Unequal guilt.

In Pari Declicto

Equally guilty; used in reference to a transaction as to which relief will not be granted to either party because both are equally guilty of wrongdoing.

Good Faith

Absence of knowledge of any defects or problems.

Contract of Adhesion

Contract offered by a dominant party to a party with inferior bargaining power on a take- it or leave it basis.

Unconscionability

A provision in a contract that gives what the court believes is too much of an advantage over a buyer.

Procedural unconsionability

Has to do with matter of freedom of assent resulting from inequality of bargaining power and the absence of real negotiations.

Substantive Unconscionability

Forcuses on the actual terms of the contact itself. *A contact is so one-sided as to shock the conscience or are so extreme as to appear unconscionable.

Public Policy

Certain objectives relating to health, morals, and integrity of government that the law seeks to advance by declaring invalid any contract that conflicts with those objectives even though there is no statute expressly declaring such a contract illegal.

Blue Pencil Rule

Courts trim the restrictive covenant down to a scope they deem reasonable and require the parties to abide by that revision.

Usury

Lending money at an interest rate that is higher than the maximum rate allowed by law.

Services Contract

No writing is required if it can be performed within one year after the date of the agreement.

Statute of frauds

Statute that , in order to prevent fraud through the use of perjured testimony, requires that certain kinds of transactions be evidenced in writing in order to be binding or enforceable.

Statute of fraud not applicable

When no time for performance is specified by the oral contact and complete performance could "conceivably occur" within one year.

Intended beneficiary

Third person of a contract whom the contract is intended to benefit. Sometimes classified as a creditor beneficiary.

Third Party Beneficiary

Third person whom the parties to a contract intend to benefit by the making of the contract and to confer upon such person the right to sue for breach of contract.

Donee Beneficiary

The promisee's primary intent in contracting is to give a benefit. Such as giving life insurance to another person.

Assignment

A transfer of contractual rights to a third party. Can be given verbally or written. Takes effect the moment it is made.

Assignee

Third party to whom the assignment is made.

Uniform Consumer Credit Code (UCCC)

Protects consumer-debtors making payments to an assignor without knowledge of the assignment and imposes a penalty for using a contract term that would destroy this protection of consumers.

Nonassignable Rights

Assignments increasing the burden of performance, Contracts for personal services, and credit transactions.

Novation

Substitution for an old contract with a new one that either replaces an existing obligation with a new obligation or replaces an original party with a new party.

Delegation of duties

Transfer of duties by a contracting party to another person who is to perform them.

Condition Precedent

Event that if unsatisfied would mean that no rights would arise under a contract.

Condition Subsequent

Event whose occurrence or lack there of terminates a contract.

Concurrent Conditions

Mutual duties of performance under the contract are to take place simultaneously.

Time of performance

When time is not specified in the contract, and obligation to perform within a reasonable time is implied. When selling property, time is not regarded as of the essence when there has not been any appreciable change in the market or condition of the prope

Substantial Performance

Equitable rule that if a good-faith attempt to perform does not precisely meet the terms of the agreement, the agreement will still be considered complete if the essential purpose of the contract is accomplished.

Rescission

Action of one party to a contract to set the contact aside when the other party is guilty of a breach of the contract.

Substitution

Substitution of a new contract between the same parties.

Accord and Satisfaction

Agreement to substitute for an existing debt some alternative form of discharging that debt, coupled with the actual discharge of the debt by the substituted performance.

Waiver

Release or relinquishment of a known right or objections.

Discharge of Contract by Impossibility

To establish a party must show 1) the unexpected occurrence of an intervening act; 2) that the risk of the unexpected occurrence was not allocated by agreement or customer; and 3) that the occurrence made performance impossible.

Discharge of Contract from Death

Does not apply when the acts called for by the contract are of such a character that 1) the acts may be as well performed by others, such as the promisor's personal representatives, or 2) the contract's terms contemplate continuance of the obligations aft

Force Majeure

Uncontrollable events.

Discharge by Operation of Law

1) an alteration or a material change made by a party, 2) the destruction of the written contract with intent to discharge it, 3) bankruptcy 4) the operation of a statute of limitations, or 5) a contractual limitation.

Anticipatory Repudiation

Promisor's repudiation of the contract prior to the time that performance is required when such repudiation is accepted by the promisee as a breach of the contract.

Reservation of rights

Assertion by a party to a contract that even though a tendered performance is accepted, the right damages for nonconformity to the contract is reserved.

Compensatory Damages

Sum of money that will compensate an injured plaintiff for actual loss.

Nominal damages

Nominal sum awarded the plaintiff in order to establish that legal right have been violated although the plaintiff in fact has not sustained any actual loss or damages.

Punitive Damages

Damages, in excess of those required to compensate the plaintiff for the wrong done, that are imposed in order to punish the defendant because of the particularly wanton or willful character of wrongdoing; also called exemplary damages.

Direct Damages

Losses that are caused by breach of a contract.

Consequential Damages

Damages the buyer experiences as a result of he seller's breach with respect to a third party, also called special damages.

Liquidated Damages

Provision stipulating the amount of damages to be paid in the event of default or breach of contract.

American Rule

States that each party is responsible for its own attorneys' fees in the absence of an express contractual or statutory provision to the contrary.

Exculpatory Clause

Provision in a contract stating that one of the parties shall not be liable for damages in case of breach; also called a limitation of liability clause.

Real Property

Land and all rights in land

Personal Property

Property that is movable or intangible, or rights in such things.

Chose in action

Intangible personal property in the nature of claims against another, such as a claim for accounts receivable or wages.

Inter Vivos Gift

Any transaction that takes place between living persons and creates rights prior to the death of any of them. Takes effect when the donor 1) Expresses an intent to transfer title and 2) makes delivery, subject to the rights of the donee to disclaim the gi

Gift Causa Mortis

Gift, made by the donor in the belief that death was immediate and impending, that is revoked or is revocable under certain circumstances. 1) The donor does not die, 2) the donor revokes the gift before dying, or 3) the donee dies before the donor.

How is a contract which contains an ambiguity interpreted?

A contract is ambiguous when the intent of the of the parties is uncertain and the contract is capable of more than one interpretation. The courts consider the background of which the contract was made and how the dispute arose in settling ambiguous contr

When duties are delegated does the delegation free the delegator of the duties?

No, when the performance of the contract is standardized and non personal, the contracting party remains liable in the case of default of the person doing the work just as though no delegation had been made. If the performance of contract involves persona

commercial impracticability

This doctrine was developed to establish that a contract must be performed unless it's "absolutely impossible."& nbsp; The chapter is careful in showing that not all forms of impracticability excuse nonperformance of a contract. This type of discharge is

Explain the Parol Evidence Rule.

This rule states that prior agreements and statements (both oral and written) are prohibited from being introduced as evidence when a complete written contract exists. The exception to this is in a case involving clear proof of fraud, accident, a mistake

Statute of Frauds Neumonic

My Legs- Marriage, one Year, Land, Executor (or Estate), Guarantor, Sale.

Parol Evidence Rule

Rule that prohibits the introduction into evidence of oral or written statements made prior to the execution of a complete written contract, deed, or instrument.

Ambiguous

Having more than one reasonable interpretation. If a written contract is such the parole evidence may generally be admitted to clarify the meaning.

Sale of under $500

Statute of fraunds does not apply.