LENB exam 4

capacity

3rd element of a legal contract, the legal ability to enter into a binding contract

incapacity/incompetence

some sort of mental or physical defect that prevents a natural person from being able to enter into a legally binding contract

emancipation

when a minor's parents or legal guardians give up their right to exercise legal control over the minor, typically when the minor beings supporting themselves and move out

minors contracts are \___

voidable at the minor's option

what does a minor need to do to disaffirm their contracts?

manifest an intention to rescind the contract by words or actions, must avoid the whole contract not only portions of it

obligations of minors on disaffirmance

vary state to state, \n -must notify the competent party with the intent to disaffirm and return any consideration received under the contract \n -the minor returns what is left of the consideration even if damaged or destroyed, other party has no recourse

Exceptions to a Minor's Right to Disaffirm

1\. misrepresentation of age \n 2. liability for necessaries \n 3. insurance \n 4. loans

Liability of Minors for Necessaries

Minors can disaffirm contracts for necessaries, but they will still be held liable for the reasonable value of the necessary.

express ratification

Occurs when, after reaching age of majority, individual states (either orally or in writing) that they intend to be bound by contract entered into while a minor

implied ratification

Occurs when former minor takes action after reaching age of majority consistent with intent to ratify contract

full capacity - mental

a person suffers from mental problems yet still understands the nature of the contract and the obligations imposed by it, can enter into a binding, legal agreement

limited capacity - mental

a person suffers from a mental illness or deficiency that prevents them from understanding the nature and obligations of the transaction they are entering into

no capacity - mental

a person's mental deficiencies have resulted in them being adjudicated insane and a guardian has been appointed to them

intoxicated person

under the influence of alcohol or drugs

treatment of the capacity of intoxicated persons to enter into contracts

contracts of an intoxicated person are voidable by the intoxicated person if the other party had reason to know that because of the persons's condition, they were unable to understand the transaction

types of incapacity

infancy, insanity, intoxication

if the subject of a contract is illegal it is \___

void

unenforceable

When a contract, because of law, cannot be enforced by the courts - goes against generally accepted public policy

a contract that has an illegal subject is...

illegal and unenforceable

If a contract becomes illegal under a new statute, the contract is then \_________________

discharged under law

2 main purposes of licensing statutes

allow the government to regulate industries and who can perform the jobs as well as how many people and to protect the public's health, safety, and welfare

Usury

the lending of money at an exorbitant or unlawful rate of interest

gambling

Agreements in which parties pay consideration (money placed during bets) for the chance, or opportunity, to obtain an amount of money or property.

sabbath laws (blue laws)

laws prohibiting the performance of certain activities on Sundays, usually prohibits the sale of alcohol

anticompetitive agreements

agreements that restrain trade, are viewed as being harmful to consumers and thus against public policy

covenant not to compete (restrictive covenants)

An agreement not to compete against a party for a set period of time within a designated geographic area. must be a subordinate clause and not the main agreement otherwise it is unenforceable and void

covenant not to compete - sale of ongoing business

\-can't sell a business then open similar one close by \n -not in society's best interest \n -rules \n -same type of business \n - cannot be with in a certain geographic area for a certain amount of time

Covenants Not to Compete in Employment Contracts

\-Agreements not to compete (or noncompete agreements) may be included in employment contracts. \n -Employees cannot work for competitors or start competing businesses for a specified period of time after termination of employment. \n -Noncompete agreements are legal in most states if the specified period of time (of restraint) is not excessive and the geographic restriction is reasonable.

unconscionable

void of conscious, A term applied to a contract in which one party has so much more bargaining power than the other party that the powerful party dictates the terms of the agreement and eliminates the other party's free will.

Procedural Unconscionability

unconscionability that derives from the process of making a contract

possible factors of procedural unconscionability

hard-to-read print, excessive use of legalese language, or the ability of the signee to ask questions before they are required to sign

adhesion contract

A contract created by a party to an agreement that is presented to the other party on a take-it-or-leave-it basis. Such contracts are legal but are sometimes rescinded on the grounds of unconscionability and the absence of one party's free will to enter a contract.

Substantive Unconscionability

unconscionability that derives from one-sided, unjust, or overly harsh substance in a contract

substantively unconscionable examples

high differences between cost and price in a sales agreement; agreements in which one party gains vastly more than the other; agreements in which one party is prevented from having any sort of equal benefit; agreements in which one party has little to no legal recourse, according to the agreement; and portions of an agreement that are completely unrelated to anything having to do with either party's business risk

exculpatory clause

A clause that releases a contractual party from liability in the event of monetary or physical injury, no matter who is at fault.

test for unenforceable exculpatory clause

see if the enforcing party engages in a business directly related to the public interest ex. banks, transportation providers, and public utilities

lawful exculpatory clause

private business or individual that are not important to the public interest (nonessential)

in pari delicto

in equal fault - when both parties are equally responsible for the illegal agreement

exceptions to responsibilities of illegal agreements

1. 1. when a member of a protected class is involved in an agreement that contradicts a statute intended to protect the specific class \n 2.when there is a justifiable ignorance of facts \n 3. when one of the parties withdraws from an illegal agreement before the illegality occurred

justifiable ignorance of facts

one party's lack of knowledge regarding a provision of the agreement that would make it illegal

severable contracts

A contract that contains multiple parts that can be performed separately

indivisible contract

a contract that requires complete performance by both parties

are severable contracts or indivisible contracts at more of an advantage if there are illegal portions

severable, the court can declare the illegal parts void but enforce the remaining legal portions. indivisible contracts must be enforced or rejected in their entirety

Consideration

what a person will receive in return for performing a contract obligation

Hamer v. Sidway

Facts: A man promised his nephew that if he stopped drinking, smoking, and gambling until he was 21 that he would pay him $5000. When the nephew completed this agreement the uncle told him that he would hold onto the money and let it collect interest. When the uncle died Sidway, the executor to the uncles estate would not pay the money to Hamer, who now own the claim to the money, under the fact that he did not have consideration. \n \n Issue: did the original agreement show any consideration. in a agreement one must give up something. \n \n Decision: the court ruled in favor of Hamer because the legal rights given up by the nephew are enough to satisfy consideration.

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lack of consideration

For a promise to be enforced by the courts, there must be consideration.

promissory estoppel

exception to required consideration

3 conditions of promissory estoppel

1\. One party makes a promise knowing the other party will rely on it \n 2. The other party does rely on the promise \n 3. The only way to avoid injustice is to enforce the promise

Adequacy of Consideration

Court seldom considers adequacy of consideration - court does not weigh whether you made a good bargain - exception: if the court believes fraud or undue influence occurred, the court may look at adequacy of consideration

illusory promise

A situation in which a party appears to commit to something but really has not committed to anything. It is not a promise and thus not consideration.

past consideration

something that has been performed in the past and which, therefore, cannot be consideration for a promise made in the present

preexisting duty

a promise to do something that you are already obligated to do is not valid consideration

2 parts of preexisting duty

1. 1. performance of a duty you are obligated to do under the law is not good consideration \n 2. performance of an existing contractual duty is not good consideration

exceptions to preexisting duty

\-unforeseen circumstances

\-additional work

\-UCC - sale of goods

unforseen circumstances

events that a reasonable person would not be expected to anticipate

liquidated debt

debt for which the parties agree that the debt exists and on the amount of the debt

unliquidated debt

A debt for which the parties either dispute the fact that any money is owed or agree that some money is owed but dispute the amount.

accord and satisfaction

an arrangement between contracting parties whereby one of the parties substitutes a different performance for his or her original duty under the contract

accord and satisfaction requirements

\-Unliquidated debt \n -Creditor agrees to accept, as full payment, less than creditor claims owed \n -Debtor pays agreed-upon amount

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accord

promise to perform new duty

satisfaction

actual performance of new duty

contract

a promise or set of promises for the breach of which gives a remedy or the performance of which the law in some way recognizes a duty

agreement

first part of contract, consists of an offer made by the offeror and the acceptance of the offer made by the offeree

offer

element of the agreement, consists of the terms and conditions set by the offeror and presented to the offeree

acceptance

element of the agreement, consists of the agreement of the offeree to the terms of the offer in the contract made by the offeror

consideration

second part of contract, the bargained-for exchange, what each party gets in exchange for their promise under a contract

contactual capacity

third element of a contract, the legal ability to enter into a binding agreement

legal object

fourth element of a contract, the contract cannot be illegal or against public policy

lack of genuine assent

a defense to the agreement of a contract where the offeree claims that the offeror secured the agreement through improper means, such as duress, fraud, undue influence, or misrepresentation

2 primary sources of contract law

Case law and the Uniform Commercial Code (UCC)

Restatement of the Law, Contracts

A compilation of model contract law principles drafted by legal scholars. The Restatement is not law, helps generalize the law of contracts

Uniform Commercial Code (UCC)

A statutory source of contract law in the United States that is applicable to transactions involving the sale of goods. The UCC was adopted by all 50 state; it may be modified by each state to reflect the wishes of the state legislature.

UCC Article 2

governs contracts for the sale (exchange of price) of goods (tangible, movable objects)

bilateral contract

a promise exchanged for a promise

When is a bilateral contract formed?

when promises are exchanged

Zappos.com customer data security breach litigation

plaintiff argued that the defendant was not agreeing to anything and made no promise to its customers regarding dispute resolution to be done through arbitration. was decided against the defendant (zappos)

unilateral contract

promise in exchange for an act or performance

obligations under unilateral contract

the offeree is under no obligation to do the act called for by the offeror, the offeror may revoke the offer at any time before the performance but must hold it open for a reasonable amount of time

express contracts

a contract in which all the terms are clearly set forth in either written or spoken words

implied contract

a contract that arrises not from words of agreement but from the conduct of the parties

3 conditions for an implied contract

1\. Plaintiff provided some property or service to the defendant \n 2. The Plaintiff expected to be paid for such property or service \n 3. The defendant had the opportunity to reject the property or service but did not

quasi-contracts

a court-imposed contractual obligation to prevent unjust enrichment - ie. if you somehow benefit from something meant for someone else but didn't stop it, you are responsible for payment/reinbursment

valid

includes all four elements of the contract: agreement (offer and acceptance), consideration, contractual capacity, and legal object

unenforceable

a term applied to a contract that, because of a law, cannot be enforced by the courts

void

A term applied to a contract that is not valid because its object is illegal or it has a defect that is so serious that it is not a contract.

voidable

a term applied to a contract that one or both parties have the ability to either withdraw from or enforce

executed

A term applied to a contract whose terms have all been fully performed.

executory

a term applied to a contract in which not all of the terms have been fully performed

formal contracts

a contract that must have a special form or must be created in a specific manner

4 types of formal contracts

1. 1. contracts under seal \n 2. recognizances \n 3. letters of credit \n 4. negotiable instruments

contract under seal

a contract that has a seal certifying its legality, require no consideration to be legal, now usually identified with L.S. an abbreviation for locus sigilli

recognizance

an obligation in which a party acknowledges in court that they will perform some specified act and /or pay a price on failure to do so

letter of credit

a binding document that a buyer can request from a bank to guarantee that the payment for goods will be made to the seller

negotiable instrument

a written document signed by a person who makes an unconditional promise to pay a specific sum of money on demand or at a certain time to the holder of the instrument; an acceptable medium for exchanging value from one person to another

informal contract

any contract that is not a formal contract, requires no formalities

agreement begins when... and is what part of the contract.....

the offeror makes an offer to the offeree and is the first element of a contract

3 elements of an offer

intent, definite and certain terms, communication to the offeree

intent

the intended purpose or goal of an action, especially in a contract; 1st element of an offer

lucy v zehmer

Zehmer owned a piece of property that Lucy wanted to buy. One night at Zehmer's bar, Lucy made an offer which Zehmer allegedly accepted. He and Lucy both signed a napkin which had specific details concerning the price and title of the land. Zehmer also had his wife sign it. Zehmer later contended that he was joking and that he didn't really want to sell. Doesn't matter. Mental reservations that aren't manifested don't impair obligations he purports to take.

preliminary negotiations

an invitation to negotiate or an expression of possible interest in an exchange is not an offer