Unit 3 Legal Enviornment

Elements of a contract 

1. Mutal Assent < offer acceptance 

2. Consideration 

3. Capacity of parties < minor incompetent intoxication 

4. Legality of object of contract 

Incapacity 

MINOR 

INTOXICATED PERSON 

MENTALLY INSANE 

DEGREE OF INCAPACITY 

Partial capacity  

No capacity 

Legal effect on contract 

Voidable  

Void 

Legally enforceable contract: if 1 party fails to perform as promised, the other party can use the court system to enforce the contract & recover damages or other remedy.  

Contract: is an agreement that is enforceable by a court of law or equity. 

Offeror: the party who makes an offer to enter into a contract. 

Offeree: the party to whom the offer is made. 

Defenses to enforcement of a contract (2x) 

1. Genuinesses of assault: the consent of the parties to create a contract must be genuine. If the consent is obtained by duress, undue influences, or fraud, there is no real consent. 

2. Writing & form: The law requires that certain contracts be in writing or in a certain form. Failure of such a contract to be in writing or to be in a proper form may be raised against the enforcement of the contract.  

Bilateral contract: a contract entered into by way of exchange of promises of the parties; a promise for a promise. 

Unilateral Contract: A contract in which the offeror’s offer can be accepted only by the performance of an act by the offeree; a promise for an act. 

Formal contract: A contract that requires a special form or method of creation. 

Informal contract: A contract that is fully enforceable and may be sued upon if breached.  

Voidable contract: A contract in which one or both parties have the option to void their contractual obligations. If a contract is voided, both parties are released from their contractual obligations. 

Unenforceable contract: A contract in which the essential elements to create a valid contract are met, but there is some legal defense to the enforcement of the contract. 

Executory contract: A contract that has not been fully performed by either or both sides. 

executed contract: a contract that has been fully performed on both sides; a completed contract. 

Express contract: An agreement that is expressed in written or oral words.  

Implied-in-fact contract: A contract in which an agreement between parties has been interfered from their conduct. 

Implied-in-law contract: An equitable doctrine whereby a court may award monetary damages to a plaintiff for providing work or service to a defendant, even though no actual contract existed. 

Agreement: The manifestation by two or more persons of the substance of a contract. 

Offer: The manifestation of willingness to enter a bargain. So made as suggested by another person and understanding that his assent to that bargain is invited and will conclude it. 

Objective theory of contracts: A theory that says the intent to contribute is judged by the reasonable person standard and not by the subjective intent of the parties. 

Consideration: Something of legal value given in exchange for a promise. 

Legal value: Support for a contractor when either the promise suffers a legal detriment or the promiser receives legal benefit. 

Illegal consideration: A promise to refrain from doing an illegal act. Such a promise will not support a contract.  

Infancy doctrine: Allows minors to cancel most contracts.  

Illegal contract: A contract that has an illegal object. Such contracts are void. 

CHAPTER 10  

Geuniness of assent: the requirement that a party's assent to a contract be genuine. 

PROVING FRAUD: 

1. the wrongdoer made a false representation of material fact. 

2. The wrongdoer intended to deceive the innocent party. 

3. The innocent party justifiably relied on the misrepresentation. 

4. the innocent party was injured. 

Scienter: knowledge that a representation is false or that is made without sufficient knowledge of the truth. 

Duress: a situation in which one party threatens to do wrongful acts unless the other party enters a contract. 

Statues of fraud: a state statute that requires certain types of contracts to be in writing. 

Assignor: A oblige who transfers a right 

Assignee: A party to whom a right has been transferred. 

BREACH OF CONTRACT 

1. Monetary damages: An award of money  

2. Compensatory damages: An award of money intended to compensate a non breaching party for the loss of the bargain. 

3. Consequential damages: foreseeable damage that arises from circumstances outside the contract. 

4. Liquidated damages: damages that parties will contract agree and defense should be paid if the contract is breach. 

Injuction: A court order that prohibits a person from doing a certain act. 

Arbitration: A nonjudicial, private resolution of a contract dispute. 

Chapter 17 

Securities and exchange commissions (SEC): the federal administrative agency that is empowered to administer federal securities law. 

Securities Exchange Act of 1934: A federal statute that primarily regulates trading in securities.  

Securites Act of 1934: a federal statute that regulates primarily issuance of securities by corporations limited partnerships and associations. 

What constitutes security under the Securities Act of 1993?  

What is the essential purpose of the Securities Act of 1993? What is the sentential purpose of the securities exchange Act of 1934? Govern the sales security of the 2^nd act. 

What is the SEC Rule 10b-5? A rule adopted by the SEC to clarify the reach of section 10B against the deceptive and fraudulent activities in the purchase and sale of securities. 

What is a short wing profit under section 16b? Requires that any profits made by a statutory insider on transactions involving short swing profits, that is, trades involving equity securities occurring within six months of each other belong to the corporation. 

Misappropriation theory: A rule that imposes liability under section 10 B and rule 10B5-1 on an outsider who misappropriates information about a company in violation of his or her fiduciary duty and then trades in the securities of that company.