Chapter 15 & 16 Business Law

  • collateral promise

  • A secondary promise that is ancillary (subsidiary) to a principal transaction or primary contractual relationship, such as a promise made by one person to pay the debts of another if the latter fails to perform. A collateral promise normally must be in writing to be enforceable.

  • integrated contract

  • A written contract that constitutes the final expression of the parties’ agreement. If a contract is integrated, evidence extraneous to the contract that contradicts or alters the meaning of the contract in any way is inadmissible.

  • parol evidence rule

  • A substantive rule of contracts under which a court will not receive into evidence the parties’ prior negotiations, prior agreements, or contemporaneous oral agreements if that evidence contradicts or varies the terms of the parties’ written contract.

  • prenuptial agreements

  • An agreement made before marriage that defines each partner’s ownership rights in the other partner’s property. Prenuptial agreements must be in writing to be enforceable.

  • Statute of Frauds

  • A state statute under which certain types of contracts must be in writing to be enforceable.

  • adhesion contracts

  • A “standard-form” contract, such as that between a large retailer and a consumer, in which the stronger party dictates the terms.

  • bilateral mistake

  • A mistake that occurs when both parties to a contract are mistaken about the same material fact.

  • Duress

threats, violence, constraints, or other action brought to bear on someone to do something against their will or better judgment.

  • innocent misrepresentation

  • A false statement of fact or an act made in good faith that deceives and causes harm or injury to another.

  • latent defects

  • A defect that is not obvious or cannot readily be ascertained.

  • negligent misrepresentation

  • Any manifestation through words or conduct that amounts to an untrue statement of fact made in circumstances in which a reasonable and prudent person would not have done that which led to the misrepresentation. A representation made with an honest belief in its truth may still be negligent due to (1) a lack of reasonable care in ascertaining the facts, (2) the manner of expression, or (3) the absence of the skill or competence required by a particular business or profession.

  • Scienter

  • Knowledge by the misrepresenting party that material facts have been falsely represented or omitted with an intent to deceive.

  • undue influence

  • Persuasion that is less than actual force but more than advice and that induces a person to act according to the will or purposes of the dominating party.

  • unilateral mistake

  • A mistake that occurs when one party to a contract is mistaken as to a material fact.

  • voluntary consent

  • Knowing and voluntary agreement to the terms of a contract. If voluntary consent is lacking, the contract will be voidable.