Chapter 12: Contracts and Sales Performance

Capacity

the capacity (age and mental capacity) to make contracts

Minors

a person who has not attained the age of contractual capacity (18 in most states)

Infants

a person who is a minor (below the age of 18)

Contract defense

refers to a situation, term, or event that makes an otherwise valid contract invalid

Voidable contract

a contract in which one party can choose not to honor (rejects) the contract

Misrepresentation

incomplete or inaccurate information provided by one party to another prior to contract execution

Rescission

setting aside of a contract as a remedy

Void contract

an agreement to do something illegal or against public policy; courts will not enforce it

Material fact

the type of information that would affect someone’s decision to enter into the contract

Puffing

an opinion about the subject matter of a contract

Fraud

the knowing and intentional use of false information or failure to disclose relevant information

Scienter

the knowledge that the information given is false

Three-day cooling-off period

the 72 hours after certain contracts when the buyer can rescind

Home Ownership and Equity Protection Act (HOEPA)

an act covering disclosure requirements and cancellation rights for home equity loans

Home solicitation sales

sales where sellers approach consumers in their homes

Consumer Financial Protection Act (CFPA)

increases disclosure requirements and gives CFPB authority over mortgage/equity loans

Duress

being physically forced or deprived of meaningful choice in entering a contract

Home Equity Loan Consumer Protection Act

an act covering disclosure and advertising requirements for home equity loans

Undue influence

when one party uses a close relationship to gain contractual benefit

Exculpatory clauses

clauses that hold a party harmless for their own conduct

Covenants not to compete

agreement not to compete with an employer

Confidential relationship

a relationship involving trust, confidence, and reliance

Conditions

events that must occur before performance is required

Unconscionable

highly unjust contract terms favoring the stronger party

Conditions concurrent

both parties perform at the same time

Conditions precedent

an event that must occur before performance is required

Conditions contemporaneous

both parties perform at the same time

Substantial performance

performance nearly equivalent to what was required

Impossibility

when a contract cannot be performed by anyone

Commercial impracticability

performance excused due to extreme difficulty or changed circumstances

Novation

replacing a party in a contract with a new one

Accord and satisfaction

agreement settling a disputed debt

Fair Credit Billing Act

regulates timing/content of credit card bills and allows disputes

Fair Debt Collection Practices Act (FDCPA)

regulates third-party debt collectors

Fair Credit Reporting Act (FCRA)

governs credit report rights and use

Garnishment

taking money from wages/accounts to satisfy a judgment

Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA)

stricter standards for bankruptcy filing

Judgment

official court decision including damages

Compensatory damages

money to restore a party to their pre-breach position

Third-party beneficiary

someone not in the contract but intended to benefit from it

Consequential damages

damages owed to third parties due to a breach

Incidental damages

costs associated with recovering damages

Liquidated damages

pre-set damages stated in the contract

Assignment

transfer of contract rights to a third party

Delegation

transfer of contract duties to another party

Letter of credit

bank guarantee of payment for a transaction

Bill of lading

receipt and contract for shipment showing ownership of goods