Chapter 12 Flashcards
(197 cards)
1
Q
The function of contract law
A
- Contracts create expectations as to how parties to agreements will conduct themselves in the future
- If a party to a vlid contract does not carry out a promise, a court will enforce the contract and provide some form of relief or remedy to the non-breaching party
- Contract law provides stability and predictability and is the foundation upon which more specialized areas of the law are built
2
Q
Definition of a Contract
A
An agreement that can be enforced by law between two or more parties who promise to perform or refrain from performing some act how or in the future
3
Q
Define Promises Made
A
A breach of the promises leads to liability because the parties have duties to each other prescribed by the terms of the agreement (CONTRACTUAL PROMISES ARE DUTIES)
4
Q
A contract is an agreement…
A
but not all agreements are contracts
5
Q
Objective Theory of Contracts
A
The apparent intention of a party to enter into a contract is determined by the objective (measurable), outward manifestation of his or her assent as it would be interpreted by a reasonable person
6
Q
Objective Factors
A
- Words: written or spoken
- Actions: observable
- Circumstances: can shed light on words and actions
7
Q
Weston v Cornell University
A
Leslie Weston had an offer from Cornell University “with tenure” but tenure would have to be confirmed
- Weston was not awarded tenure
- Cornell gave Weston a two-year extension “associate professor without tenure”
- Weston sued Cornell (claimed breach of contract)
- Court held that the original contract was modified (Weston lost - no breach of contract)
8
Q
4 Requirements of a Valid Contract
A
- Agreement
- Consideration
- Contractual Capacity
- Legality
9
Q
Agreement
A
The mutual assent and agreement of the parties must be evidenced by an offer and an acceptance
10
Q
Consideration
A
Legally sufficient and bargained - for consideration must be exchanged for contractual promises
11
Q
Contractual Capacity
A
Each party to a contract must be recognized as being legally competent to enter into contracts
12
Q
Legality
A
The purpose and subject matter of the contract must not be contrary to law or public policy
13
Q
What are examples of diminished capacity?
A
Minors
Intoxication or mental deficiency
14
Q
Defenses to the Enforceability of a Contract
A
- Voluntary Consent - consent must be voluntary and not based on mistake, fraud, undue influence or duress
- SOME contracts must be writing and signed by the party being sued
15
Q
Offeror
A
The party making an offer to enter into a contract
16
Q
Offeree
A
The party who, if interested in the offer, may accept the contract
17
Q
Types of Contracts
A
Bilateral v Unilateral
Express v Implied
Executed v Executory
Formal v Informal
Enforceable v Unenforceable
18
Q
Bilateral Contract
A
Reciprocal promises are exchanged by the parties so that the promise of one party is exchanged for the promise of the other A PROMISE FOR A PROMISE
19
Q
Example of Bilateral Contract
A
Hailey will sell her watch for $100. I want to buy and tell her I will. When will the agreement be formed: the moment you say I will buy your watch. If either fails to perform - the other could sue for breach.
20
Q
Unilateral Contract
A
One party makes a promise in exchange for the other party’s actually performing some act or refraining from performing some act A PROMISE FOR AN ACT
21
Q
Example of Unilateral Contract
A
Hailey (the offeror): “After you build me a sense, I will pay you $1000”
- “If,” “When,” and “After”
- Promising to build a fence does not form the contract because of “after”
- Once you’ve done the action the contract is formed (the offer is not accepted, the contract is not formed until the action has been performed by the offeree)
22
Q
What are the most common uses of a unilateral contract?
A
Contests
23
Q
Express Contract
A
The terms of the agreement are fully and explicitly stated in oral or written words
24
Q
Implied Contract
A
The terms of the agreement are inferred from the conduct of the parties
25
What are the three steps to establish an implied contract?
1. The plaintiff has to furnish a service or good
2. The plaintiff expected to be paid AND defendant should have known that
3. The defendant had an opportunity to reject the goods or services and didn't do that
26
Examples of Implied Contract
You go to the doctor's office, you know that you are supposed to pay them
27
You lease a house, tenants are expected to mow the lawn. A random guy is mowing the lawn. Now the guy is asking for $35. Do you owe him the $35?
- He would argue that he expected to be paid and you should have known
- He would argue that you could have stopped him: you saw him and didn't stop him
- Legally: this technically fits an implied contract - you owe him the $35
28
You lease a house, tenants are expected to mow the lawn. A random guy is mowing the lawn. Now the guy is asking for $35. Do you owe him the $35? (what if you weren't home?)
You had no awareness, you didn't have the opportunity to reject the service and that wouldn't be considered an implied contract
29
Executed Contracts
When every action is performed
30
Executory Contracts
Before all actions are performed
31
Valid Contract
A contract that results when the elements necessary for contract formation (agreement, consideration, contractual capacity, and legality are present)
32
A valid contract may be...
Enforceable or unenforceable
33
Unenforceable Contract
A valid contract rendered unenforceable by some statute or law
34
Why is a valid contract unenforceable?
By a statute or a law rather than a legal defense
35
Voidable Contract
A valid contract exists but one or more of the parties has the option of avoiding his or her contractual obligation (the party with the option can elect to void the contract or ratify it)
36
Void Contract
Agreement has no legal effect and is not really a contract. No legal obligation exists on the part of either party
37
What would make a contract a void contract?
A party is mentally incompetent or the purpose of the contract was illegal
38
Agreement
Evidence by an offer or an acceptance
39
What are the requirements of an offer?
1. Serious intent
2. Reasonably certain and definite terms
3. Communication
40
Intention
The offeror must manifest his or her objective, serious intention to be bound by the terms of the offer
41
Lucy v Zehmer
Zehmer owned the Ferguson Farm (family farm that he didn't intend to sell)
- Mr. Zehmer: "I bet you wouldn't give me $60,000 for that land"
- Later the men take out a napkin and write down terms and details and sign the contract
2 ISSUES
- Whether or not serious intent was present is on the part of Mr. Zehmer
- Mr. Zehmer claims that he was too intoxicated to know what he was doing
- Mr. Zehmer loses!
42
What are situations in which intent may be lacking?
1. Expressions of opinion
2. Statements of intention to make an offer in the future
3. Preliminary negotiations, requests to negotiate
4. Invitations to bid
5. Advertisements, catalogues, circulars, and price lists
6. Live and online auctions
43
Invitations to Bid
Hailey wants to build a pool. She researches companies and asks Sunshine Pools and The Pool Guy for bids. Hailey becomes the offerree. The homeowner is not the offeror!
44
Agreements to Agree - traditional view
Agreements to agree to the material terms of the contract at some future date were not considered to be binding contracts
45
Agreements to Agree - modern view
Agreements to agree may be enforceable if it is clear that the parties intended to be bound by the agreements - emphasis is on intent rather than on form
46
Preliminary Agreements
Can constitute a binding contract if the parties have agreed on all essential terms and no disputed issues remain to be resolved
47
Definiteness of Terms
An offer must have reasonably definite terms so that a court can determine if a breach has occurred
48
What are requirements for definite terms?
1. Include the parties
2. Identify the subject matter of the contract
3. Needs consideration
4. Time of payment, delivery, or performance - could be left out and still be a valid offer
49
Courts are willing to supply missing reasonable terms when the parties have clearly manifested their intent to form a contract, BUT
when the parties have tried to use a term, but the meaning is vague, courts will NOT supply a "reasonable" term in its place
50
Communication
1. The offeror must have the intention of making the terms known to the offeree and those terms must be received by the offeree
2. The offeree must have knowledge of the terms of the offer
3. An offer may be made to a specific offeree to whom it is communicated
51
Can offers be public?
Yes
52
Example of Communication
A lost puppy. Hailey posts posters with the name, address and reward. I find the puppy. I don't see the poster. I identify the puppy's owner by the address of the tag. I have no knowledge that there is a reward. Legally, I am no entitled to a reward because I never received the knowledge of the reward, I was never communicated with.
53
Termination by Actions of the Parties
Revocation
54
Who revokes an offer?
The offeror
55
When should an offer by revoked by the offeror?
At any time before acceptance
- expressly
- or, by acts that are inconsistent with the existence of the offer and are made known to the offeree (implied)
56
A revocation is effective when...
Received
57
Define received
available for your review - you don't actually have to have looked at it
58
Irrevocable Offers
1. Options Contracts
2. Rejection of the offer by the offeree
3. Counteroffer by the offeree
59
Options Contracts
An option contract is separate contract that exists when an offeror has promised to hold the offer open and the offeree has given consideration for this promise of the offeror
60
Example of an Option Contracts
Clause within standard real estate offer contract. Money exchanged for days to think about the offer. *buyer can walk way from the contract, but the seller CANNOT (irrevocable from the standpoint of the offeror) 2 Requirements: TIME AND MONEY
61
How long is an option contract irrevocable for?
The period of time stated, or a reasonable period of time (usually 3-5 days)
62
What if one of the parties dies or becomes incapacitated during the option period?
If either party dies, it doesn't change irrevocable contracts, Executor of Estate finishes the deal, "So irrevocable that it survives death" - exception to the general rule
63
Rejection of the Offer by the Offeree
1. Offeree demonstrates his or her intention not to accept offer
2. Rejection is effective when received
3. An inquiry made by an offeree is distinguishable from a rejection and does not terminate offer
64
Hailey is offering to sell her your car to you. Asking price is $20,000. I say it is way too much for a 2016 Tahoe...
I reject the offer
65
Hailey is offering to sell her your car to you. Asking price is $20,000. I say "is there any wiggle room, would you consider a lower price?"
This is a question, a question is not acceptance.
66
Counteroffer by the Offeree
A counteroffer is a rejection of an offer and the simultaneous making of a new offer; the original counteroffer may be accepted by the original offeror
67
A counteroffer...
Terminates the original offer
68
Mirror Image Rule:
1. Offeree's acceptance must exactly match the offeror's offer
2. A communication from the offeree which contains a material change in addition to the terms of the original offer is a counteroffer, which terminates the original offer
69
A counteroffer is a violation of which rule?
The mirror image rule
70
Termination by Operation of Law
1. Lapse of time
2. Destruction of the subject mater of the offer
3. Death or incompetency of the offeror or offeree
4. Supervening illegality of the proposed contract as a result of legislation or judicial decision
71
Termination-Lapse of Time
If the duration of an offer is stated in the offer, the offer terminates after expiration of the stated period of time
If the duration of the offer is not stated in the offer, the offer lapses after a reasonable time
72
Termination- Destruction of Subject Matter
Dealing with just the offer stage
Hail, Hurricane, Tornado
73
Acceptance
The offeree accepts the offer when the offeree unequivocally manifests his or her willingness and intention to assent to the terms of the offer, must be unequivocal (mirror image rule)
74
Silence as Acceptance
Ordinarily, the offeree must exhibit his or her agreement to be bound with words or other overt conduct. The law recognizes actions not words, implied contract, or similar prior dealings (past relationship is evidence of acceptance now)
75
Exceptions to Acceptance
The offeree accepts the benefit of the offered services or goods when the offeree had an opportunity to reject the offered services or goods and know that such services or goods were offered with the expectation of compensation or there were similar prior course of dealings
76
Communication of Acceptance
Unilateral v. Bilateral
77
Unilateral Contract
Contemplated, acceptance is affected when the performance is completed; notification of the acceptance is not necessary (a promise for and action)
78
Bilateral Contract
Contemplated, acceptance is effective when the offeree gives the requisite promise (a promise for a promise)
79
Mode and Timeliness of Acceptance in Bilateral Contracts
1. An acceptance is timely if it is sent prior to the termination of the offer
2. Authorized means of acceptance
80
Mailbox Rule (Time)
Evidence of when it was sent
An acceptance is timely if it is sent prior to the termination of the offer
81
Authorized means of acceptance (Mode)
1. Express means of acceptance - contained in the offer, if instructions are not followed correctly, it could lead to no contract
2. Implied means of acceptance - offeree can accept by any reasonable means, often means offeree can use the same or a faster means
82
Acceptance is effective when...
Sent by the offeree
83
Revocation is effective when...
Received by the offeree
84
Acceptance will not be effective until the acceptance is received by the offeror,
IF the acceptance is sent in a manner that is not expressly or impliedly authorized (exception to the rule)
85
Online Offers
Under the control of the seller exclusively (clear and specific terms) - lose bargaining power
86
Online Acceptances
Click-On Agreements, Browse-Wrap Terms
87
Click-On Agreements
Click a box "I agree" or "I accept", if terms are available, then there is binding acceptance
88
Browse-Wrap Terms
Take an action download - not viewed as binding acceptance
89
E-SIGN Act (Federal Law)
No contract, record, or signature may be denied legal effect solely because it is in electronic form. Parties must have agreed to use electronic signatures. Contract must be in a form that can be retained and reproduced.
90
Exceptions to the applicability of E-SIGN Act: Contracts that cannot be created electronically
1. Court papers
2. Divorce decrees
3. Evictions
4. Foreclosures
5. Health insurance terminations
6. Prenuptial agreements
7. Wills (in TX requires 2 witnesses, a notary, and a "ceremony")
91
E-SIGN Act says if a state has adopted UETA without modification...
Then that state law stands. If state has modified UETA, the E-SIGN prevails if state law is inconsistent with it
92
UETA (state law)
1. E-signature: "an electronic sound, symbol, or process attached to or logically associated with a record and executed or adopted by a person with the intent to sign the record"
2. Record: "information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form"
3. Applies only to electronic records and signatures "relating to a transaction"
93
Consideration
"The price of the promise"
1. Legally sufficient consideration
2. Bargained-for exchange
94
Legally sufficient consideration exists when...
1. The promise incurs a legal detriment
2. The promisor receives a legal benefit
3. Or, both
95
How can a promisee incur legal detriment in one of 2 ways?
- By doing or promising to do something that he or she (the promisee) had no prior legal duty to do; or
- By refraining or promising to refrain from doing something that he or she (the promisee) had no prior legal duty to refrain from doing
96
A legal benefits received by...
A promisor if the promisor received something to which he or she is not entitled, but for the contract
97
Is it necessary for an economic or material loss be incurred by the promisee or an economic or material benefit be received by the promisor?
No, it doesn't have to be valuable for you
98
Hamer v. Sidway (1891)
- In 1891 there were no laws determining the legal age for drinking gambling, etc.
- Uncle and Nephew, uncle believes in righteous living, no drinking, no smoking, etc.
- Uncle promises 15 year old nephew "if you live righteously until you're 21 I will pay you $5,000"
- Nephew lives well, the uncle leaves the money in an account for him
- Nephew gets into gambling debt after 21, he signs over the account to his creditor
(Mr. Hamer = Creditor) (Mr. Sidway = Uncle's Executor)
The issue: was there consideration present between nephew and uncle?, giving up the right to something that you are legally allowed to do, in exchange for the money = legally sufficient = consideration = contract
99
Hamer v. Sidway - what if the nephew were 15 modern day?
Not consideration. Not a contract. Could be considered a gift. You already have a duty not to drink. Doing something that the law already says you're not allowed to do is not consideration.
100
Hamer v. Sidway - what if you're 21 and you wait until you're 30?
You have a contract and consideration, it is legal to drink when you're 21
101
What distinguishes a contract from a gift?
A gift is one sided (lack of consideration)
102
Bargained-for exchange
2-way street (each of us are getting something out of a deal)
Doesn't mean that it has to be a "good" deal
103
Pre-existing Duty Rule - Not legally sufficient
Doing something that one already has a legal duty to do or promising to do what one already has a legal duty to do is not legally sufficient consideration for another person's promise
104
Example of Pre-Existing Duty (legally sufficient)
$100,000 reward for finding a criminal. A sheriff captures the criminal. The sheriff has a pre-existing duty to capturing criminals, so he is not entitled to the reward
105
Pre-existing Duty Rule - Contract
If a party is already is already bound by a contract to perform a certain duty, that duty cannot serve as consideration for a second agreement
106
Example of Pre-Existing Duty (grades)
Hailey refuses to turn in her grades until she is paid an additional $1,000 (considered contortion). Implied part of the contract, she cannot negotiate after the fact, she is expected to turn in her grades, the department is not legally required to pay Hailey extra money (Agreement alone is not enough to form a contract)
107
Exceptions to the Preexisting Duty Rule
Unforeseen Difficulties, Rescission/New Contract
108
Unforeseen Difficulties
Confined to construction situations (job is bid and started, unforeseen event causes price to increase)
109
Rescission and New Contract
Both parties decide to walk away from the contract (undoing of the contract) parties can come back later and renegotiate
110
Past Consideration
Is not consideration "now or in the future"
Hailey says because of our hard wok this year we will get a bonus, classified as a gift, action in the past-promise in the future.
111
Non-compete Agreements: new employee v. existing employee
You agree to not to compete with employer while working or for a reasonable amount of time after termination, if you have already been working for the company-not consideration, new employee contract you are in a valid contract
112
What is an example of a valid non-compete agreement signed by an existing employee?
If the existing employee is offered stock options in exchange for a signature
113
Illusory Promises
Promises that depend solely upon the whim or wish of the promisor are not enforceable
114
Examples of illusory promises
"If profits continue to be high..."
"If management thinks you're deserving..."
115
Settlements of Claims
Settlements of claim must be supported by legally sufficient consideration = contracts
(Accord/Satisfaction, Release, Covenant not to sue)
116
Accord and Satisfaction
Unliquidated debts between creditor and debtor may be settled by the debtor offering to pay and creditor accepting less than creditor originally claimed - creditor agrees to take less or the debtor agrees to pay more, the creditor cannot come after the debtor for the remainder of the money
117
What are the 3 requirements for release?
1. Given in good faith
2. Signed
3. Consideration
118
Covenant Not to Sue
An agreement to substitute a contractual obligation for some other type of legal action based on a valid claim
119
Promissory Estoppel
(detrimental reliance) used with promises which are otherwise Unenforceable; like promises without consideration, a fix to harshness of contract law, a person reasonable and detrimentally relied on the existence of a promise. Party will be stopped/prevented from saying that there was never a contract.
120
What are 5 elements generally required for Promissory Estoppel?
1. Clar and definite promise
2. Promisor expected the promisee to rely on the promise
3. Promisee reasonably relied on the promise by acting or refraining from some act
4. Promisee's reliance is definite and resulted in substantial detriment
5. Enforcement of the promise is necessary to avoid injustice
121
What is an example of a promissory estoppel?
Pledge to donate to a charity
122
Capacity
Legal ability to enter into a contractual relationship; capacity is lacking or questionable with minors, intoxicated personas and the mentally incompetent
123
Is capacity ordinarily presumed?
Yes
124
Emancipation
The act of removing minority status from minors prescribed by statutes (ex: you get married before the age of 18, join the military, providing for yourself)
125
What is the general rule for capacity?
Minors can enter into any contract that adults are allowed to enter into, so long as its not illegal for the minor (ex: a contract to purchase alcohol would be illegal)
126
Do parents have the right to minor's earnings or control?
Yes
127
Are parents liable for breaches of contract entered into by a minor and NOT liable for tors committed by a minor?
No
128
Do minors have the right to disaffirm?
Yes
129
Disaffirmance in General
1. Words or conduct can be used by minor to express intent not to be bound
2. Minors have the the right to walk away for 2 years after attaining the age of majority
3. A minor must be all in or all out of the contract
4. The contract is voidable by the minor, but not by the adult
130
Why is a contract voidable by a minor and not by the adult?
The law is designed to protect the minor - the law is unfair to discourage adults from doing deals with minors
131
Minor's obligation on disaffirmance
1. If a minor disaffirms, each party must take restitution by returning the consideration received from the other party
2. Majority of states say - minor must only return goods that are in minor's possession or control (even if the goods are damaged, the minor has the right to disaffirm)
3. Some states say - if the goods are damaged, the minor is required to compensate adult with a "reasonable" amount
132
Example of majority states on disaffirmance (Texas)
16 year old pays $5,000 for a car. After driving it for a year, he crashes it. The law says that he can take the recked car back to the dealership and get back all of the $5,000.
133
Example of minority states on disaffirmance (Tennessee)
16 year old pays $5,000 for a car. After driving it for a year, he crashes it. Minor is not entitled to ALL of his money back, damages are assessed.
134
What if the minor misrepresented their age? (disaffirmance)
It doesn't matter in most states
135
What if the minor bought "necessaries" like food? (disaffirmance)
Minor is allowed to disaffirm, but in ALL states they are liable for a reasonable amount
136
Intoxication
A condition in which a person's normal capacity to think or act is inhibited by alcohol or some other substance
137
How do courts measure intoxication?
Objective indications
A contract is voidable if: it was made by a person who was so intoxicated that his or her judgement was impaired and he or she did not comprehend the nature of the transaction and the legal consequences of entering into the contract
138
How is intoxication relevant to the Lucy v. Zehmer case?
Objectively Zehmer's actions do not say that he was intoxicated: you cannot just claim intoxication
He included terms, title provision, lot number, etc.
139
Example of intoxication
Mary has a $10,000 diamond necklace that she inherited from her grandmother at a party she sells it for $10. The next morning she realizes, court doesn't care if you get a "good deal" BUT major discrepancy in price can help prove intoxication
140
A contract may be disaffirmed while a person is intoxicated or within a reasonable time after he or she becomes sober
Restitution must be made and an intoxicated person must pay the reasonable value for necessaries that were furnished
141
What are the 2 classes of mentally incompetent individuals?
1. Those who are adjudicated incompetent (judged by a court of law)
2. Those who are not adjudicated but whose judgement is impaired because he/she cannot comprehend the nature of the transaction or the legal consequences of the transaction
142
What are the cases of adjudicated incompetents?
- Mental Diseases
- Guardianship
- Later in life and cannot take care of themselves
143
Can adjudicated incompetents enter into a contract?
No, they have NO capacity to do contracts and any contract attempted by them is VOID unless the guardian ratifies it
144
Do courts take adjudicating an individual incompetent lightly?
No, the individual receives a court-appointed attorney with a certificate in guardianship law
145
Mentally incompetent people who are not adjudicated
Impaired because he/she cannot comprehend the nature of the transaction or the legal consequences of the transaction
146
How are mentally incompetent people that are not judged in court judged?
By objective factors, if the test is proven, the contract is voidable by them
147
Lucid intervals
Coyming in and out of competent
The contract made during a lucid interval is VALID
148
When does ratification occur?
After the incompetent period and during a lucid interval; or by a gaudian
149
A contract for necessaries may be disaffirmed, but the mentally incompetent party is...
liable for the reasonable value of the necessaries furnished
150
Legality
1. Contracts Contrary to Statute (crimes, usury, gambling, licensing)
2. Contracts Contrary to Public Policy (restraint of trade, unconscionable contracts, exculpatory clauses, discriminatory contracts)
151
Contracts to Commit Crimes
Agreements are void
(If the purpose/performance of the contract becomes illegal because of the enactment of a statute after the contract has been entered into, the parties are discharged from their obligations by operation of law
152
Could a contract be partially illegal?
A contract could be total or partially illegal - if only a clause is illegal it could be separated and the rest of the contract could be enforced
153
Example of a contract to commit crimes
If I sell you marijuana in Texas and you never pay me - the court will not hear a case because selling weed in Texas is illegal
154
Usury
Fix the maximum lawful contract rate of interest that can be charged for a loan of money, the rate varies from state to state and over time
155
What is the typical usury rate?
10-12%
156
What are exceptions to usury?
1. The borrower is a corporation
2. The borrower just needs a small loan (less than $10,000) - rooted in risk
157
Gambling
The creation of risk and distribution of property by chance among persons who have given consideration in order to participate
In general: gambling contracts are illegal and thus VOID
158
All states have statutes that regulate gambling, but in a few states...
Gambling is lawful
159
I am a Texas resident. I incur gambling debts in Las Vegas and I don't pay. What if I am sued in Texas?
Case is dismissed and the contract is not enforceable in Texas. BUT, by long arm jurisdiction you could be sued in Nevada.
160
In Texas is gambling allowed?
Lottery and racing is allowed, casinos on state land are illegal
161
Licensing Statutes
All states have statutes that require licenses to be obtained in order to engage in certain trades, professions, or business
162
Enforceability of contracts made by unlicensed persons
1. Some statutes are void and unenforceable
2. If the purpose of the statute is regulatory contracts are void and unenforceable
3. If the purpose of the statute is revenue raising, the contract is enforceable
163
Regulatory licensing statutes
Protect the public from unauthorized practitioners (CPA's, doctors, lawyers) requirements include certifications that are rooted in education and testing
164
Revenue raising licensing statutes
Pay a fee to raise government revenue
165
Example of revenue raising licensing statute
A bartender must be 18 years old and pay a fee to serve. Not trying to protect the public from "unauthorized bartending" - revenue raising
166
Contracts Contrary to Public Policy
An agreement which injures an established interest of society or which has a negative effect on society is void and will not be enforced
167
Contracts in Restraint of Trade (Addresses Anti-Trust Laws)
If two or more parties enter into an agreement in which they exchange mutual promises not to compete with each other and their only objective is to restrict competition, the agreement is VOID because it is against a strong, public policy favoring, free, fair competition
168
What is an exception to contracts in restraint of trade?
The covenant not to compete is ANCILLARY (secondary) to an otherwise enforceable contract and is REASONABLE in TIME, GEOGRAPHIC AREA, and SCOPE
169
How are non-competes enforced?
With injunctions to stop you from working
170
The seller of a business agrees not to open another competing store within the area of the store that he is selling. The reasonableness of an ancillary covenant not to compete is determined by the nature of...
the business, the period of duration, and geographic area covered
171
A covenant that an employee will not start a competing business for a certain period after termination of employment, such covenant is legal so long as..
the time period and geographical area restrictions are reasonable
172
California ______ enforcement of non-compete agreements
Prohibits
173
Texas requires additional ________ in exchange for signing the non-compete agreement to be enforceable
Consideration
174
Unconscionable Contract
My be unconscionable if a party who is receiving an unusually greater benefit has superior bargaining power (a "take it or leave it" situation)
175
Unconscionable
SHOCKINGLY unfair
176
Exculpatory Clauses
Statements in contracts that release a party from liability in the even of monetary or physical injury no matter who is at fault
177
Exculpatory clauses often violate public policy/unenforceable
1. Employment contracts relieving employer of liability for employee's on-the-job injury
2. Rental of commercial property
3. Residential property leases
178
Exculpatory Clauses are sometimes enforced if
1. They are reasonable
2. Do not violate public policy
3. Do not protect parties from liability for intentional misconduct
4. language used is unambiguous
5. parties have relatively equal bargaining positions
179
Examples of exculpatory clauses that can be enforced
Health clubs, amusement parks, ski resorts, ski-diving, etc.
180
Discriminatory Contracts
Contracts in which party promises to discriminate based on race, color, national origin, religion, gender, etc. (contrary to both statute and public policy and are unenforceable)
181
Form
In order to be enforceable, some contractual promises must comply with the Statutes of Fraud (by in writing, and signed by the party against whom the promises are being enforced)
182
Does the law require both parties to sign?
No
183
Defenses to enforceability of a contract
1. Form
2. Voluntary consent
184
Contracts that fall under Statute of Frauds
1. Interests in land
2. One year rule
3. Collateral promises
4. Prenuptial agreements
5. UCC for sale of goods
185
Contracts involving Interests in Land
Real property or other interests in land
186
Real property
Leases (except in month-to-month arrangements), prenuptial agreements (spouses own everything in communion)
187
The "one-year" rule
Contracts that CANNOT be performed within one year are under the Statute of Frauds (hardest rule to analyze)
188
Possibility of performance
Is the action possible
189
Even if performance actually takes more than on year, an _____ ______ is enforceable as long as performance was POSSIBLE within one year
oral contract
190
Collateral Promises
Secondary promises to answer for the debt or duty of another - Promise must be made directly to the creditor to be a collateral promise
191
Guarantor Example of Collateral Promises
If the guarantor makes the promise directly to the debtor than it is not a collateral promise, the promise must be made to the creditor
192
Estate Example of Collateral Promises
Executor of estate uses estate assets to pay the deceased' debts, not the executor's
193
Promises made in consideration of marriage
Unilateral promises to pay money or give other property in exchange for promises to marry (Prenuptial)
194
Uniform Commercial Code, contracts for the sale of goods for a price of ____ or more
$500
195
Exceptions to the Writing Requirements of the Statutes of Frauds
1. Partial Performance
2. Admissions
196
Partial Performance
some other kind of proof that the contract was there (evidence that the deal was made)
197
Admissions
A party admits that the contract is present
