Business Law Exam2

Front 1

Trademark

Back 1

A mark that identifies a product, or service. Obtain protection by registering with federal law.

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Copyright

Back 2

It's the exclusive right given by the federal statute to the creator of a literary or an artistic work to use, reproduce, and display the work.

The duration is the life of the creator plus 70 years.
Prevents the copying of the way an idea is expressed.

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Patents

Back 3

Enacted to promote the progress of science by securing for limited times to inventors the exclusive rights to their discoveries.

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Three types of patents

Back 4

a) utility patents: given to inventors of any new, useful process, machine, manufacture, or composition of matter.

b) Design patents: New, nonobvious ornamental features that appear in connection with an article of manufacture

c) Plant patents: protects inventors of asexually reproduced new varieties of plants.

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Trade secrets and reverse engineering

Back 5

Consists of any formula, device, or compilation of information that is used in one's business and it is what keeps their advantage over other businesses.

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Sources of contract law

Back 6

Common law governs all contracts, except when replaced by UCC (statutory law).

Necessary to ensure compliance with a promise.

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Definition of contract

Back 7

Promise or a set of promises for the breach of which the law gives a remedy.

A legally binding contract between 2 or more parties who agree on something.

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Objective theory of contracts (3)

Back 8

What is used to figure out the intent, and it determined by a reasonable person's standards, not by the party's inner or secret intent.

Uses 3 factors:

1) What the party said when entering into the contract
2) How the party acted or appeared
3) The circumstances surrounding the transaction

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Four factors needed for a contract

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1) Agreement: offer and acceptance

2) Consideration:something of legal value/benefit agreed between the parties to be exchanged

3) Contractual capacity: law must recognize that both the parties have characteristics of competency.

4) Legality:The purpose of the contract must be legal and not against public policy.

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Public policy

Back 10

Promises or actions that is against the interests of society as a whole.

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Unenforceable contracts (defenses against enforceability)

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a) Genuineness of assent: The consent of both parties must be genuine.

So any contract made due to fraud, undue influence, mistake or duress is not enforceable.

b) The contract need to be in whatever form the law requires, like if some contracts are required to be in writing -- it needs to be in writing for it to be enforceable.

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categorization of contracts (3)

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1) Contract formation

2) Performance

3) Enforceability

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Def of offeror/offeree

Back 13

Offeror: The party making the offer

Offeree: The party to whom the offer is made

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Bilaterial contracts

Back 14

It's a "promise for a promise". Offeree can simply accept by promising to perform.

Contract is formed the moment promises are exchanged.

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Unilateral Contracts

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It's a "promise for a act".

Offer can only be accepted by completing the contract performance.

Contract is formed the moment when the offer is formed.

Ex. contests, lotteries.

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Promisor/Promisee

Back 16

Promiser: the one making the promise

Promisee: the one to whom the promise was made.

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Traditional/Modern view of Unilateral contracts

Back 17

Traditional: it may be revoked anytime before acceptance.

Modern: it may not be revoked once the performance has began

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Formal/Informal contracts

Back 18

Formal: Contracts that require a special form or method of creation. Ex. Letters of credits

Informal: Includes all other contracts

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Expressed/Implied-in-fact contracts

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Expressed: terms of the agreement are fully stated in words, oral or written. Ex. lease for a house.

Implied: The conduct of the parties creates and defines the terms of the contract. Actions of the parties.

Some contracts can have a mix of both expressed and implied.

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Factors for Implied in law (quasi) Contracts (3)

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1) plaintiff benefited from some service or property

2) plaintiff expected to be paid, and defendant knew or should have known that payment was expected.

3)The defendant had a chance to reject services, and didn't.

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Contract Performance

Back 21

2nd way to classify contracts, according to the degree to which it has been performed.

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Executed contracts

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Classified under "contract performance".

It is a contract that has been fuly performed on both sides.

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Executory contracts

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"Contract Performance"

When a contract is performed at all by either party.

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Voidable contracts

Back 24

It is a valid contract that has been avoided at the option of one or both the parties.

The party with the "option" has the power to avoid (not have to do it) or ratify it (it is made valid again and both parties have to do it).

Ex. contracts made by minors/insane/intoxicated people

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Unenforceable contracts

Back 25

Is a contract that cannot be enforced because of certain legal defenses against it.

It is not because a party failed to satisfy a legal requirement, but it's unenforceable due to some statute or law. Ex. when some contracts are required to be in writing, and if they're not, they are not enforceable.

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Void contracts

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It is when a contract doesn't even exist. If one of the party was declared legally insane. Or if it was something illegal.

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Quasi Contracts

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These are implied-in-law contracts because they were made up by the courts to keep the interests of fairness and justice in check.

It cannot to enforced when the person gained the benefit because of misconduct, negligence, or mistake. The person who gained the enrichment was not aware and didn't have a chance to deny it.

But when an actual contract exists, this doesn't apply. Then the person can just sue the other.

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Plain meaning rule

Back 28

This is under "intrepretation of contracts". The contract is clear, and the court will enforce it as it is laid out.

The contract is looked upon by the "face of the instrument" -- written document alone.

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Extrinsic evidence

Back 29

Using any evidence not contained in the document. This cannot be used in plain meaning rule when the contract seems to be in reasonable language.

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Rules of interpretation (purpose)

Back 30

The purpose is to determine the party's intent by the words laid out on the contract.

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Rules of interpretation (8)

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1) Reasonably, lawful, effective meaning to be given to all of contracts' terms.

2) contract interpreted as a whole, and clauses are interpreted separately.

3)

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Agreement

Back 32

There needs to be an "offer" and "acceptance" and the parties should agree on the terms of the contract.

Needs to have consideration, capacity, and legality.

Forming an agreement holds both parties legally obligated to that contract.

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Offer

Back 33

Promise or commitment to do or refrain from doing some specialized thing in the future.

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Effective offer (3)

Back 34

1) Offeror must have intention to become bound by the offer

2) Terms of the offer must be reasonably certain, so a court or lawyers can figure it out.

3) The offer is communicated to the offeree

4) May specify offeree's identity

5) May specify manner of acceptance

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Intention

Back 35

First requirement for an effective offer. "Serious intent"

An offer's intention is determined from the objective theory of contracts (not subjective). So a reasonable person's standards.

Contracts made in obvious anger, frustration, or excitement doesn't constitute a contract.

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6 types of "not offers"

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1) expressions of opinions

2) statements of future intent

3) preliminary negotiations

4) agreements to agree

5) advertisements

6) auctions

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Expressions of opinions

Back 37

When a party expresses an opinion, not a contract because there was no intention to enter into a binding contract.

ex. doctor saying son's hand will probably heal in 4 days. It doesn't heal for a month. But not a breach of contract.

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Statements of future intent.

Back 38

2nd type of non contract.

It is a statement to enter into a contract at a future date and has no relevance now.

Ex. saying you plan to sell something for $. not a contract because a reasonable person would see that they're only thinking about it, and not promising anything.

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Preliminary negotiations

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3rd type of nonoffer

It's a request or invitation to negotiate. Ex. firms asking contractors to submit bids. They're just inviting them to submit their bids.

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Agreements to agree

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4th type of nonoffer

Traditionally, agreements to agree in the future date is not binding. It can be binding under the modern view if both parties had the intention of being bound to a contract.

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Advertisement

Back 41

5th type of nonoffer.

This isn't an offer, just inviting others to submit offers.

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Auctions

Back 42

6th type of nonoffer.

This isn't an offer, but are encouraging people to submit their offer. So the bidder (offeror), and the auctioneer (offeree).

The banging of the hammer means the offer is accepted by the offeree (auctioneer), but the offer can be revoked by the offeror before the hammer is hit.

Every time the auctioneer accepts a higher bid, the lower bid(offer) gets terminated. So if the highest bidder (offeror) withdraws their offer, there are no offers at the moment.

If auctions have reserves, the seller can choose to not sell the product before the announcement has been made. If there are no reserve, seller has to sell the product to the highest bidder.

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Definiteness of terms

Back 43

It's the second requirement of an effective offer after intention.

The offer's terms must be definite for a court or lawyers to know when it has been breached and provide the appropriate remedy.

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4 factors needed in a contract

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1) Identification of the parties

2) Identification of the object or subject matter of the contract (quantity, items),

3) The consideration to be paid

4) The time of payment, delivery, or performance.

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Communication

Back 45

It is the third requirement for an effective offer, after intent and definiteness of terms.

The offer needs to be communicated to the offeree before it can be accepted. Ex. you find a dog and return it to its owner without knowing of the reward. You are not entitled to the reward because you weren't aware of the reward.

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Termination of offer

Back 46

This can happen by the action of the parties in three ways: revocation, rejection, or counteroffer.

Front 47

Revocation

Back 47

First way an offer can be terminated.

When the offeror withdraws the offer, it can happen anytime before acceptance (exception irrevocable).
It can be done in 3 ways:

1) It is communicated in words

2) It is communicated in mail, which means the revocation is only effective when the offeree receives it (mailboxrule)

3) Or if offeror sells it to another person in presence of offeree (Indirect revocation)

If offer was made in public, it needs to be revoked in the same way the offer was displaced.

Front 48

Rejection

Back 48

The second way an offer can be terminated.

If the offeree rejects the offer, this terminates the offer.

If the offeree tries to accept the offer after, it is not longer an acceptance, but rather an offer back and now the former offeror has the option to accept or reject.

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Counteroffer

Back 49

Third way an offer can be terminated.

This is when the offeree rejects the original offer and then offers back another offer. If the offeree makes any alternation that is phrased in a "only if" or in conditional phrase, it is considered counter offer.

To accept an offer, the offeree has to follow the mirror image rule

Front 50

Irrevocable offers

Back 50

This is the exception to revokation of offers.

An offer is not revocable if meets 2 factors: option contracts or promissory estoppel

Front 51

Option contracts

Back 51

Option contracts are irrevocable for a certain period of time.

This is formed when the offeree offers a payment to the offeror in return for the offer being open for a particular time.

Takes away offeror's power to revoke during the time period specified.

The payment the offeror receives to keep the offer open is given up by the offeree if they decide not to purchase it after the time period expires.

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Promissory Estoppel (Offer)

Back 52

This is a doctrine which specifies that an offer cannot be revoked if the offeree had justifiably relied on it to their detriment.

Ex. If someone decides to continue their lease and not look for another place because they were promised that their rent will be reduced. The offeror cannot revoke this.

This also applies to unilateral offers. So after an offeree has put in substantial efforts and funds, the offeror cannot revoke it if it is detrimental to the offeree.

Front 53

The mirror image rule

Back 53

Requires that the offeree's acceptance match the offeror's offer exactly.

To change or alter something would be a counteroffer, which will terminate the offer.

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Termination of contract (operation of law) VOID

Back 54

This is when the offer/contract is terminated because of law.

a) Lapse of time
b) destruction of subject matter of offer
c) death/incompetence of offeror/offeree
d) illegality

Front 55

Lapse of time

Back 55

First factor which can terminate an offer by the operation of law.

An offer can get terminated after the specified time has expired. The time period starts when the offeree receives the offer.

If no time period is specified, a reasonable period of time is used depending on the subject matter.

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Destruction of Subject Matter

Back 56

The second factor that could terminate a offer due to operation of law.

The offeror doesn't have to tell the offeree about the termination.

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Death or Incompetence of Offeror or Offeree

Back 57

The third factor that could terminate a offer due to operation of law.

The death of offeror/offeree terminates the offer. Unless the offer is irrevocable, the death will terminate it.

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Supervening Illegality

Back 58

The fourth factor that could terminate the offer due to operation of law.

If the court decides that something in the contract is now illegal, it now automatically terminates the contract.
Ex. Court passes a law that says it's illegal to have interest rates more than 10%. There was an offer for a loan with 15% interest, so now that is automatically terminated.

Front 59

Acceptance

Back 59

It is the voluntary act by the offeree that shows agreement to the terms of the offer. This can be done with words or by conduct.

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Unequivocal (leaving no doubt) acceptance

Back 60

The offeree has to follow the mirror image rule and thus agree completely to the terms of the offer without adding any new conditions.

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Wording and acceptance

Back 61

Sometimes the wording is what makes something either an acceptance or a counteroffer.

ex. I accept, but i wish we could have gotten a better price" -- this is still an acceptance because it is not conditional.

"I will accept, only if we can get a 90 days credit" -- that is not an acceptance, because it adds conditions previously not present in the contract.

"I accept. Please send me the written contract" -- acceptance

"I accept, if you send me the written contract" -- not acceptance

Front 62

Acceptance (silence)

Back 62

Usually silence cannot be considered as acceptance because it's not fair for the offeree to make a affirmative move with any consideration.

However, if the offeree does get a service or benefit and does nothing to reject or stop it -- they did accept the offer by silence.

Ex. watching a stranger mow the lawn, but not doing anything to stop it. This creates an acceptance through "implied-in-fact" contract.

Silence is also acceptable if the two parties have had previous dealings before, which indicates that silence is acceptance, and saying might be for something out of the ordinary.

Front 63

Notice of acceptance

Back 63

Whether an offeror needs to be notified about the offeree's acceptance?

In a bilaterial, it is necessary because it is a "promise for a promise", so communication is necessary because a contract is formed when the promises are made.

In a unilateral, not necessary to convey acceptance because it will be evident through the performance done by the offeree.

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Mailbox rule

Back 64

Under this rule, if mail is an authorized form of communication...

Then the acceptance becomes valid when it is sent (not received by offeror). Revocation becomes valid when received by the offeree (not sent).

Exceptions are when people are dealing with instantaneous modes of communication. Or email (Uniform Electornic Transaction Act) is used instead of mailbox.

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Express authorization

Back 65

This is when an offeror specifies an exact means of communication. The offeree is bound to that if they accept the offer.

Ex. if it says, must be sent through overnight delivery. It must be followed through, or the contract doesn't exist because it wasn't exactly followed.

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Reasonable mode of communication

Back 66

When mode of communication is not specified, the offeree can choose to send the acceptance in a mode that is reasonable.

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Exceptions for authorized means

Back 67

1) If the offeree fails to properly send the acceptance by messing up the email or fax number. It's not effective unless received by offeror

2) If the offer specifies when the acceptance will be effective. A conditional acceptance specified. Ex. effective 48 hours after shipped through overnight FedEx. Ex. acceptance is only effective when offeror receives it.

3) If offeree send rejection letter, but then changes their mind and sends out a acceptance letter. Mailbox rule thrown out and whatever the offeror receives first is the valid one.

Front 68

Consideration (2 parts)

Back 68

It is defined as the value (cash) given in return for a promise. This is needed for a contract to be enforceable.

The two parts that are needed are:
a) legally sufficient value must be given in exchange for the promise
b) there must be a bargained-for exchange

Front 69

Legally sufficient value

Back 69

This is the first requirement needed for consideration.

It can be any one of the three

a) A promise to do something that the person otherwise has no legal duty to do (giving money, or giving up to sue)

b) a performance of an action that the person otherwise has no legal duty to do.

c) refraining from an action that one has a legal right to (forbearance)

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Forbearance

Back 70

This is one of the factors that can be considered legally sufficient value.

It is refraining from an action that one otherwise can legally undertake.

Front 71

Bargained-for exchange

Back 71

This is the second requirement needed for consideration. A promise for a promise, a bargain is what differentiates contracts from gifts.

Front 72

Adequacy of consideration (courts)

Back 72

Courts don't decide whether an exchange was fair, or whether it was to the market value of items.

Freedom of contracts allow parties to freely decide what something is worth.

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Grossly Inadequate consideration

Back 73

This might indicate to the court that there might have been fraud, durees, or undue influence was used. It might also be determined that the 2nd requirement of "Consideration" which is "bargained-for" exchange was lacking.

Ex. an elderly person selling a Mercedes for $500, when market value is $50,000

It may be considered unenforceable because it is unconscionable.

Front 74

Lack of consideration (3)

Back 74

Three types that might look like consideration, but are not!

1) Pre-existing duty
2) Past consideration
3) Illusory promises

Front 75

Pre-existing duty

Back 75

One type of Lack of Consideration.

A promise to do what one already has a legal duty to do does not constitute as a legally sufficient consideration.

Ex. police can't get reward for catching a criminal who had a bounty on his head.

Front 76

Exception to pre-existing duty

Back 76

Unforeseen difficulties are when someone with a pre-existing duty encounters a unforeseeable difficulties that could not have been foreseeable.

Ex. paying a contractor more because there were unforeseeable difficulties. even though the contractor had a pre-existing duty to finishing that project with the money, the new agreement to pay more money can be seen as valid because of the unforseeable difficulties encountered.

Front 77

Past Consideration

Back 77

Second type of lack of consideration.

When a promise is made for actions that took place and were completed is the past is not consideration. Thus, it becomes an unenforceable contract.

The "promise" offered it not really a promise because there is no consideration, thus it is just a gift and thus unenforceable.

Front 78

Illusory Promises

Back 78

Third type of lack of consideration.

This is when there is enough uncertainty in the consideration back that there is no binding promise between the parties. Ex. if you work hard and profits remain high, bonuses -- if management thinks it's good!
This is so uncertain because it is just based on the discretion of the management and thus not certain and not specific -- so no binding.

Front 79

Option to cancel clause

Back 79

This is when the contract says "can cancel anytime". This is illusory promise because there is no liabality to the cancelling party and thus can execute it at any time.

However, if had said "can cancel anytime after performance had begun and after giving 30 days notice" -- this would be an enforceable contract.

Front 80

Rescission

Back 80

When the two parties decide together to mutually cancel the cntract and the parties can go back to their positions before the contract was made.

Front 81

Different kinds of settlements of claims

Back 81

1) Accord and satisfaction

2) Release and covenant not to sue

Front 82

Accord and satisfaction

Back 82

Debtor's offer of payment and a creditor's acceptance of a lesser amount than originally owed.

There needs to be an accord (when both parties undertake to agree on something satisfactory for both parties). Satisfaction is next (when it is actually executed)

For this to occur, the amount of debt must be in dispute.

After satisfaction has occurred, cannot sue the debtor for the rest of the amount.

Front 83

Liquidated debts

Back 83

When the specified amount is known to both parties.

Ex. signing a lease to pay back a certain amount each month.

Accord and satisfaction is not possible because no dispute in amount of debt.

But it payments are missed, the the debtor just sends in some money and says that's enough and that's all she'll pay. It's not satisfaction because the lender receives no consideration and thus can sue the debtor for the rest of the money.

Front 84

Unliquidated debts

Back 84

There is a dispute over how much is owed, thus accord and satisfaction can be exercised.

So even when the debtor pays a less than owed amount, by agreeing upon a lessor amount, the debt can be eradicated. Loaner later cannot sue for the rest of the amount.

Parties give up a legal right to contest the amount in dispute, thus consideration is given.

Front 85

Release

Back 85

One party forfeits the right to pursue a legal claim against the other party.

After the terms of a release has been agreed upon, further damages cannot be collected.

Front 86

3 factors needed for a valid release

Back 86

1) it must be given in good faith

2) stated in signed writing

3) accompanied by consideration

Front 87

Covenant not to sue

Back 87

It just means that if the other party says they will cover for the damages they inflicted, no need to sue. But if the amount is not followed through, they can still be sued for further damages.

Front 88

Restriction (to Consideration)

Back 88

Consideration isn't needed for the following three types:

1)Promises that induce detrimental reliance, under the doctrine of promissory estoppel

2)promises to pay debts that are barred by a statue of limitations

3) Promises to make charitable contributions

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Promissory Estoppel

Back 89

It is also called detrimental reliance.

This is one of the exceptions to having consideration

a) clear and definite promise
b) promisor should have expected that the promisee would rely on the promise
c) Promisee reasonably relied on the promise by acting or refraining from some act
d) Promisee's reliance was definite and resulted in substantial detriment
e) Enforcement of the promise is necessary to avoid injustice

Front 90

Statute of Limitations

Back 90

Requires that the creditor must sue for the amount owed to them within a specified period to recover.

So if the creditor doesn't sue in time, he can't recover. However, if after the time period, debtor promises to pay the money back (the creditor doesn't need consideration).

And so this promise by the debtor to pay creditor even after time period because binding.

Front 91

Charitable donations

Back 91

People who make pledges to charitable places need to follow through because these organizations would have a detrimentally relied on these promises and thus worked into their budget and built or started building things with it.

Front 92

Contractual capacity

Back 92

the fourth thing needed to have a valid contract.

This is to see if the parties have a legal ability to enter into a contractual relationship.

Front 93

Minors

Back 93

Minors have the contractual ability to enter into contracts that is legal for their age (no tobacco/alcohol), but they have the right to disaffirm (avoid) the contract at their option.

To disaffrim the contract, the minor just has the show their intent through words or action that they are bound by the contract anymore.

Also when disaffirming, the entire contract must be disaffirmed, not just part of it.

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Emancipation

Back 94

When a child's parent/guardian lets go of their legal right to exercise control over their child's life.

A child can become emancipated from their parents through the court system, or just leaving home to support themselves can be considered emancipated.

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Obligation to disaffirm (minor)

Back 95

What a minor must do to disaffirm

majority: a majority of states just ask that the minor return the goods, if it is in their possession to receive the refund.

minority: but a minority of states are not saying that minor should pay for the depreciated value, not the purchase cost to receive compensation back.

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RESTRICTIONS (exceptions to minor's disaffirmation)

Back 96

Minors cannot disaffirm out of contracts such as marriage, credits, or army contracts.

a) misrepresentation of age
b) contracts for necessaries
c) insurance and loans
d) ratification
e) parents' liabilities

Front 97

Misrepresentation of age

Back 97

In most states, the minor can still get out of the contract.

But in more states, minors who lied about their age now lose their power to disaffirm. Because it is an unjust enrichment along with misrepresentation.

Also some states don't allow minors to disaffirm if the contract has been fully executed, unless the consideration is completely returned.

Front 98

Contracts for necessaries

Back 98

A minor who enters into a contract for necessaries, can still disaffirm it, but they might still be held responsible for the value of the goods.

To be held liable for value of goods, three factors must be met:
1)item contracted for must be necessary for the minor's subsistence

2) the value of the necessary item must be up to a level required to maintain a minor's standard of living or financial and social status.

3) minor must not be under the care of a parent or guardian who is required to supply this item.

If the three factors are not met, the minor can disaffirm without any liability

Front 99

Insurance and loans

Back 99

Another restriction to minor's disaffirmation.

If insurance and loans are allowed to be disaffirmed by minors, it can be detrimental to the society as insurance companies will stop insuring minors.

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Ratification

Back 100

Another factor which is an exception for a minor's disaffirmation.

This is an act of accepting and giving legal right to an obligation that was unenforceable before.

Front 101

Expressed and implied ratification

Back 101

Expressed ratification: an individual after reaching a majority age states orally or in a written form that they want to continue with the contract.

Implied ratification: The minor after reaching majority age indicates that they want to continue with the contract. Ex. still paying the amount owed.

Front 102

Executory vs. executed

Back 102

To be able to disaffirm after a reasonable time reaching a majorty age... it matters on two things (executory and executed).

A contract that has been executed (fully performed by both sides) is usually not allowed to be disaffirmed as it is already ratified.

A contract that is executory (yet to be complete) can be considered for disaffirmation

Front 103

Parent's liability

Back 103

parents are not liable for the contracts their minor children make on their own, however, if they had cosigned with their children, they are held liable even if the minor decides to disaffirm it.

Front 104

RESTRICTION to parents' liability

Back 104

Parents can be held liable if they had failed to exercise proper parental control over the children, and because of their negligence, the child had posed a reasonable harm to another.

Ex. a child drive a car in the freeway and causing injury to another. The parent must have exercised better supervision over their children.

Front 105

Intoxication

Back 105

Another factor that can make a contract unenforceable.

A contract entered into by an intoxicated person can either be voidable (if it can be proven that the person was reasonably intoxicated to the level where they lost their ability to for contractual capacity) or it can still be considered valid (if it cannot be proven that they were reasonably intoxicated) and thus it will be enforceable.

Courts look at the objective indications of agreement when dealing with intoxicated parties.

Front 106

Disaffirming (intoxication)

Back 106

Just like in the case of minors, intoxicated people can disaffirm the contract within a reasonable time of being sober.

The former intoxicated person must also return all consideration received.

However, if there contract involved necessities, then under (quasi contracts, just like minors) are required for to return consideration for the benefit received.

Front 107

Ratification (intoxication)

Back 107

Intoxicated person may ratify a contract either by implied or expressed ratification.

implied ratification occurs if the contract isn't disaffirmed within a reasonable amount of time after becoming sober. (just like if the minor doesn't disaffirm a contract within a reasonable amount of time after being a major).

Expressed ratification would be if the person continues to use the consideration received in exchange of contract.

Front 108

Mental incompetence

Back 108

It was the another factor that would make a contract unenforceable. These contracts can be void, voidable, or valid depending on the circumstances of the situations.

Only mentally incompetent people who were declared so by the court can only have VOID contracts, all other categories like minors/intoxicated have voidable contracts with the option on the minors/intoxicated person's side.

Front 109

Void contracts (Mental incompetence)

Back 109

A contract cannot even exist (void) if a court deems a person mentally incompetent and thus has appointed someone as their guardian. only the guardian can make their contracts.

Front 110

Voidable contracts (mentally incompetence)

Back 110

This is when a court has NOT declared them to be mentally incompetent, but at the time the contract was formed, the person was not incompetent.

The contract can be voided on the option of the "sometimes" mentally incompetent person. And like minor/intoxicated persons, they must return all consideration received as a result of the contract.

Also if there was a necessaries that they received (quasi contracts) will tell them to pay reasonable consideration for the benefit they received.

Ex. someone making a contract when going through a bad episode of schizophrenia .

Front 111

Valid contracts (mentally incompetence)

Back 111

A contract entered into by a mentally incompetent person NOT declared by court can still be valid IF at the time the contract was made, they had contractual capacity.

If a usually mentally incompetent person has "lucid interval" which gives them temporary restoration of sufficient intelligence, judgment, and will.

Front 112

Legality

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Last factor for what makes a contract valid and enforceable. the others are agreement (offer and acceptance), consideration, capacity, and now legality.

This contract is also the only one that can be VOID from the beginning if the contracts calls for something illegal. Contracting with someone the curt declared mentally incompetent is the other one that can have a void contract from the beginning.

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Types of contracts that can be contrary to statute (6)... and thus be void

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1) Contracts to commit a crime
2) Usury
3) Gambling
4) Online Gambling
5) Sabbath(Sunday) laws
6) Licensing statutes

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Contracts to commit a crime

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So any contract to commit a crime, selling weapons, releasing confidential information.

If something is made illegal after a contract to do such thing is already entered into -- the contract is considered to be discharged by law.

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Usury

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Every state has a maximum amount of interest that can be charged on loans.

In some states, if the maximum is exceed, the creditor can only collect the principle plus the maximum allowed by law. or just the principal.

However, this doesn't apply to corporate transaction and for people who otherwise could not get a loan.

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Gambling

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All states regulate this. Some states allow it, Louisiana, Michigan, Nevada, and New Jersey.

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Sabbath Law

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This dates back to colonial times where contracts made on Sunday can be illegal and thus void. Called blue laws.

These can be ratified, it continued on weekdays. Some states outlawed this because it's unconstitutional -- freedom of religion

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Licensing Statutes

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Licenses are required by some professionals, for them to legally certified (physicans, stockbrokers etc).

Depending on what the contract is for, contracting with an unlicensed persons for a licensed work is usually not enforceable.

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4 ways CANNOT reoke an offer before acceptance`

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1) Firm offer (2-205)

2) OPtion

3) Promisory esptopol

4) IF state follows substantial performance.

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Need 207

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put info

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Adjudication by court

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Court rules you are mentally insane. All contracts are VOID.