Business Law Exam #1

Term Definition Law A system of social control that recognizes/enforces rights and duties. Prohibits gov intrusion into private matters. Right The capacity vested in one individual or controlling the actions of others with the assent and assistance of the gov. Duty Requires an individual to conduct himself in a particular manner. Substantive Law That aspect of law which creates, defines, and regulates rights and duties. ex. constitutions Procedural Law The method by which a litigant enforces a legal right and obtains a legal remedy for the infringement of that right. Civil Law The dispute involves 2 private parties (plaintiff and defendant). Plaintiff may request money damages against the defendant for the invasion or infringement of a legally protected interest. Common Law Law made by judges ("case law") Legislative Law 'Enacted law' created by a legislative body. Ex. constitution, treaties Administrative Law Law crated by administrative agencies; involves public health, safety & welfare Restatement of Law Orderly rewriting (restatement) of US common law. Ex. restatements of contracts Legal Analysis How to read and glean legal info to form a decision rendered by a court (one judge or a panel of judges) Legal Analysis determines… who is suing who for what? the legal issue, the courts decision/holding, the courts rationale Action at Law (part of common law) Plaintiff seeks money damage Action at Equity (part of common law) Plaintiff does not seek money damages; money will not resolve the dispute Specific Performance Compels a party to perform their duties under a contract Injunction Court orders a party to do something or refrain from doing something Reformation of contract Court corrects a mistake in the contract Rescission of a contract Court decides a contract unenforceable or invalidates the contract Contracts are a type of ______ law Private… but contract law is part of substantive and private law Private Law Law involving relationships among individuals and legal entities (corporations, partnerships) Contract Law Injured party imposes civil liability on defendant (not personal injury) & infringement/violation of legally protected interested arises when parties come to an agreement & 1 or both parties have not lived up to the
obligations stated in the agreement. Law of enforceable promises is also known as…. Contract Law *Contract A promise or set of promises for which the law provides a remedy if promise is broken or the performance of which the law recognizes a duty. State Common Law Law made by judges, law set forth in judicial opinions. Also called "case law" A compilation of state common law is called Restatement of Contracts Sources of contract law State common law & statutory law (the UCC) When is a contract governed by the UCC? When it involves the sale of goods When is a contract governed by common law (or what is specific to the case)? When it involves services or some other transaction; also real estate. Goods All things movable and existing at the time of the identification to the contract Mixed contracts Involve both goods and services… depends on which aspect predominated whether to govern by common law or UCC Formation Was a contract created Breach Was a contract violated Legally enforceable contract: general rule A promise/set of promises creates a legally enforceable contract where the parties INTEND to conclude a binding agreement and the MATERIAL TERMS are certain enough for the court to provide a remedy if the agreement isn't performed 4 requirements of a legally enforceable contract 1) mutual assent "meeting of the minds" – offer & acceptance 2) consideration – benefit in exchange for detriment 3) Legal purpose – does not violate statute or public policy 4) Legally Capable Parties – not mentally incompetent or a minor Benefit party must receive something that he was not ordinarily entitled to receive Detriment party must give up something that he was not ordinarily required to give up Void ab initio Non-existent from the very beginning Blue Laws sales transactions prohibited on Sundays or similar days of worship Restrictive Covenants – business purchase Buyer of an existing business doesn't want seller to start similar business immediately after sale and in close proximity to business being sold Restrictive Covenants – employment contracts Protect trade secrets, pricing strategies, customers lists; can include provision that limits former employees ability to seek employment with direct competitor. Unconscionable Contract (or provision) An agreement which no man in his senses, not under delusion, would make on one hand, and which no fair and honest man would accept on the other. Express Contract Terms of the agreement are declared by the parties either in written form or by oral communication. Implied Contract Parties intent to form contract is determined from the conduct of the parties. "Actions speak louder than words." Ex. buyer orally agrees to buy and seller delivers and buyer keeps delivery Implied in Fact Contract Objective conduct of the parties is relied upon by the court to
determine if the parties intended a contract. Implied in Law Contract (quasi contract) Not really a contract – a party has conferred a benefit on another and no compensation has been given in return, which generally means that no money has exchanged hands. *Unilateral Contract One party makes a promise inviting performance by the other party. If other party performs, the original promise is legally enforceable. *Bilateral Contract Both parties exchange promises to do some future act. One party promises to do or refrain from doing something in exchange for a promise form the other party to do or refrain from doing something. *Void Contract One which never came into legal existence; void ab intiio; one of the requirements of legally enforceable contract is missing. *Voidable Contract Differs from void contract because voidable contract actually exists; one requirement (usually mutual assent) has been compromised or undermined. Ex. mutual assent was not voluntary choice Executory Contract A future act needs to be done before promises become legally enforceable. ex. your 6% commission from selling real estate isn't enforceable until sale occurs Executed Contract Fully performed; transaction is complete at the moment the arrangement has been made. Promissory Estoppel provides a legal mechanism for a party to enforce a promise or have legal redress (compensatory damages) when that promise fails as a contract. Requirements of Promissory Estoppel 1) Individual makes promise which he should anticipate action or forbearance to act 2) reliance by recipient was reasonable 3) would be unjust/unfair not to enforce promise Must all contracts be in writing to be enforceable? Not necessarily; express oral contract = express written contract Which contracts must be in writing to be legally enforceable? Contract involving real property and contracts for the sale of good where contract price is $500 or more. Mutual Assent "Meeting of the minds"; foundation of a legally enforceable contract; objective Mutual Assent "Meeting of the minds"; foundation of a legally enforceable contract; objective Offeror Party making the offer Offeree The recipient of the offer Offeree The recipient of the offer Offer Manifestation of an intentional willingness to enter into a bargain /contract When is revocation legally effect? When communicated to offeree Who is in control of the offer? Offeror Offer + Acceptance = Mutual Assent When is revocation legally effect? When communicated to offeree *Requirements of a valid offer Intentional, definite, communicated Offer + Acceptance = Mutual Assent *Requirements of a valid offer Must be: communicated, actually received, intentional, definite, have sufficiently definite promise Firm Offer In UCC; irrevocable offer; pertains to merchants only; reasonable period of time cannot be over 3 months What if offer does not state specific expiration date? Remains open for "reasonable period of time" which is determined by ordinary business practices Option Law in Common Law; keep offer open for a specific period of time. Firm Offer In UCC; irrevocable offer; pertains to merchants only; reasonable period of time cannot be over 3 months **When is acceptance effective? Upon dispatch, unless offer specifies otherwise, unauthorized means of communication are used, or rejection is received first Mirror Image Rule Acceptance cannot deviate from the terms of the offer; any deviation means no acceptance or mutual assent Variant Acceptance Offeree's acceptance form does not exactly mirror the terms/conditions stated in the original form sent by the Offeror. Additional Term If Offeror does not specifically object to an additional term, the additional term becomes part of the contract. Ex: if offer doesn't specific delivery terms Mailbox rule If offer states that acceptance be expressed in writing, acceptance is legally effective when acceptance letter is placed in the mail. Battle of the Forms provision Variant acceptance/language in acceptance varies from language in the offer. That variance doesn't necessarily defeat the existence of mutual assent, which does not defeat existence of mutually informed contract *communicated offer + communicated acceptance = Mutual Assent (contract is formed) *Duress Any wrongful or unlawful act or threat that overcomes the free will of a party to a contract. Person of ordinary firmness fact specific; person’s age, gender, physical, mental and economic condition. Duress by improper threat Economic duress; pressure, intimidation, threat of public disgrace; contract is voidable. Exception: opportunity to consult with legal counsel. Physical Duress Actual physical harm or threat of physical harm used to compel mutual assent (also called threat by physical compulsion); contract is void *Undue Influence Improper urgency or persuasion;, contract is voidable Fraud (Fraudulent Misrepresentation) Anything calculated to deceive; any suppression of the truth; the knowing communication of misrepresentation Mistake Unintentional act, omission or error arising from ignorance, surprise or misplaced confidence. Fiduciary A person charged with the duty to act primarily for the benefit of another; act with upmost loyalty and trust for other person. (husband/wife, attorney/client, doctor/patient, accountant/client) *Fraud in the Execution Party is deceived as to the true nature of the agreement itself or its
essential terms. Contract is void. *Fraud in the Inducement Party is aware of agreement and its contents but was induced to
enter into contract based upon a misrepresentation. Contract is voidable. *Negligent misrepresentation party is careless in obtaining and communicating information. *Innocent misrepresentation party exercises care but does misrepresent a material fact; no deceitful intent. Unilateral mistake one party to contract has false information about material aspects of contract; one-sided. Mutual Mistake Both parties to contract are mistaken about terms of agreement or have pre-supposed certain facts. Either party may void the contract.

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