Bus Law Today Ch. 8 Terms & Review 10Th Ed. Miller

Front 1

Contractual Capacity

Back 1

Contractual capacity is the legal ability to enter into a contractual relationship. The capacity required by the law for a party who enters into a contract to be bound by that contract.

Front 2

Emancipation

Back 2

In regard to minors, the act of being freed from parental control; when a child' parent or legal guardian relinquishes the legal right to exercise control over the child.

Front 3

Disaffirmance

Back 3

The legal avoidance, or setting aside, of a contractual obligation. To disaffirm, a minor must express, through words or conduct, his or her intent not to be bound to the contract. The minor must dissaffirm the entire contract, not merely a portion of it.

Front 4

Necessaries

Back 4

Necessities required for life, such as food, shelter, clothing, and medical attention.

Front 5

Ratification

Back 5

The acceptance or confirmation of an act or agreement that gives legal force to an obligation that previously was not enforceable.

Front 6

Usury

Back 6

Charging an illegal rate of interest. Almost every state has a statute that sets the maximum rate of interest that can be charged for various types of transaction, including ordinary loans.

Front 7

Covenant Not to Compete

Back 7

A contractual promise of one party to refrain from conducting business similar to that of another party for a certain period of time and within a specified geographical area.

Front 8

Employment Contract

Back 8

A contract between an employer and an employee in which the terms and conditions of employment are stated.

Front 9

Reformation

Back 9

A court-ordered correction of a written contract so that it reflects the true intentions of the parties.

Front 10

Unconscionable

Back 10

Unscrupulous or grossly unfair.

Front 11

Adhesion Contract

Back 11

A standard-form contract in which the stronger party dictates the terms; written exclusively by one party (the dominant party, usually the seller or creditor) and presented to the other (the adhering party, usually the buyer or borrower) on a take-it-or-leave-it basis.

Front 12

Exculpatory Clause

Back 12

A clause that releases a contractual party from liability in the event of monetary or physical injury, no matter who is at fault. Courts sometimes refuse to enforce such clauses because they deem them to be unconscionable (such as rental agreements for commercial property because they're contrary to public policy). They do enforce such clauses when they do not contravene public policy, are not ambiguous, and do not claim to protect parties from liability for intentional misconduct (like amusement parks).

Front 13

Scienter

Back 13

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

Front 14

Statute of Frauds

Back 14

A state statute that requires certain types of contracts to be in writing to be enforceable. They are:
(1) Contracts involving interests in land.
(2) Contracts that cannot by their terms be performed within one year from the day after the date of formation.
(3) Collateral contracts, such as promises to answer for the debt or duty of another.
(4) Promises made in consideration of marriage (prenuptial).
(5) Under the Uniform Commercial Code (UCC), contracts for the sale of goods priced at $500.00 or more.

Front 15

Statute of Frauds
(Collateral Promise)

Back 15

A secondary promise to a primary transaction, 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.

Front 16

Statute of Frauds
(Prenuptial Agreement)

Back 16

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

Front 17

Statute of Frauds
(Contract Involving Interests in Land)

Back 17

Ordinarily involves the entire interest in the real property including buildings, growing crops, vegetation, minerals, timber, and anything else permanently attached to the land (therefore, a fixture is treated as real property). Also includes the transfer of other interests in land, such as mortgages, easements, and leases.

Front 18

Statute of Frauds
(The One-Year Rule)

Back 18

A contract that cannot, by its own terms, be performed within one year from the day after it is formed must be in writing to be enforceable. Because disputes over such contracts are unlikely to occur until some time after the contracts are made, resolution of these disputes is difficult unless the contract terms have been put in writing.

Front 19

Statute of Frauds
(Exceptions)

Back 19

(1) Partial Performance
(2) Admissions
(3) Promissory Estoppel
(4) Special Exceptions under the UCC

Front 20

Statute of Frauds
(Oral Contract)

Back 20

A written memorandum (written or electronic evidence of the oral contract) signed by the party against whom enforcement is sought will also satisfy the writing requirement. The signature can be anywhere in the writing and can be initials only. A memorandum or note evidencing the oral contract need only contain the essential terms of the contract, not every term.

Front 21

Statute of Frauds
(Faxed or E-mailed)

Back 21

A faxed or e-mailed memo of the terms of an agreement could be sufficient if it showed that there was a meeting of the minds and that the terms were not just part of the preliminary negotiations.

Front 22

Statute of Frauds
(Sale of Goods)

Back 22

Under the UCC, in regard to the sale of goods, the writing need only state the quantity and be signed by the party against whom enforcement is sought.

Front 23

Statute of Frauds
(What Consitutes a Writing)

Back 23

A writing can consist of any confirmation, invoice, sales slip, check, fax or e-mail.

Front 24

Does a minor have the capacity to enter into an enforceable contract? What does it mean to disaffirm a contract?

Back 24

Minors’ contracts & disaffirmance

A minor can enter into any contract that an adult can en­ter into, except a contract prohibited by law for minors. Generally, a contract en­tered into by a minor is voidable at the minor’s option. Disaffirmance is the legal avoidance, or setting aside, of a contractual obligation. The minor can disaffirm the contract by indicating an intent not be bound to it.

Front 25

Under what circumstances will a covenant not to compete be enforced? When will such covenants not be enforced?

Back 25

Covenant not to compete

A covenant not to compete can be enforced:

1. If it is ancillary (secondary) to an agreement to sell an ongoing business, thus enabling the seller to sell, and the purchaser to buy, the goodwill and reputa­tion of the business.

2. If it is contained in an employment contract and is reasonable in terms of time and geographic area.

A covenant not to compete will be unenforceable if it does not protect a legitimate business interest or is broader than necessary to protect a legitimate interest. This is because such a covenant would unreasonably restrain trade and be contrary to public policy.

Front 26

What is an exculpatory clause? In what circumstances might exculpatory clauses be enforced? When will they not be enforced?

Back 26

An exculpatory clause releases a party from liability in the event of monetary or physical injury, no matter who is at fault. An exculpatory clause may be en­forced if a party seeking its enforcement is not involved in a business consid­ered important to the public interest. An exculpatory clause will not be en­forced if a party seeking its enforcement is involved in a business that is impor­tant to the public interest.

Front 27

What is the difference between a mistake of value or quality and a mistake of fact?

Back 27

A mistake as to the value of a deal is an ordinary risk of business for which a court normally will not provide relief. A mistake concerning a fact important to the subject matter of a contract, however, may provide a basis for relief.

Front 28

What are the elements of fraudulent misrepresentation?

Back 28

Fraudulent misrepresentation has three elements: (1) misrepresentation of a material fact must occur, (2) there must be an intent to deceive, and (3) the in­nocent party must justifiably rely on the misrepresentation. Also, to collect damages, a party must have been injured as a result of the misrepresentation.