Final Exam (BCOR 2301) 2023 Questions and Answers

Final Exam (BCOR 2301) 2023 Questions and Answers Consideration The value given in return for a promise or performance in a contractual agreement. 1. Something of LEGALLY SUFFICIENT VALUE must be given in exchange for the promise. 2. There must be a BARGAINED-FOR-EXCHANGE. Legal Sufficient Value Something of value in the eyes of the law; may be: - Promise [to do something] e.g. pay supplier upon receiving goods - Performance [of an action otherwise not obligated to] e.g. providing acct. services - Forbearance [refraining from doing something] e.g. purchasing from another supplier Hamer v. Sidway Facts: A man promised his nephew that if he stopped drinking, smoking, and gambling until he was 21 that he would pay him $5000. When the nephew completed this agreement the uncle told him that he would hold onto the money and let it collect interest. When the uncle died Sidway, the executor to the uncles estate, would not pay the money to Hamer because he did not have consideration. Issue: Did the original agreement show any consideration? In an agreement one must give up something. Decision: The court ruled in favor of Hamer because the legal rights given up by the nephew are enough to satisfy consideration. Bargined-For-Exchange The basis for a bargain struck between or among the contracting parties. Distinguishes contracts from gifts. Consideration: Adequacy Involves "how much" consideration is given; measuring whether bargain was fair. See Freedom of Contract. Freedom of Contract Fundamental public policy recognizing one's ability to enter freely into contractual arrangements. Examples where Consideration is lacking: Preexisting Duty Rescission Past Consideration Illusory Promise Preexisting Duty A duty that one is already legally obligated to perform and, thus, that is generally not recognized as a legal detriment. Does not constitute legally sufficient consideration; prevents against extortion. Rescission A remedy whereby a contract is canceled and the parties are returned to the positions they occupied before the contract was made. Past Consideration Promises made in return for actions or events that have already taken place are unenforceable. Bargained-for-exchange is missing. e.g. companies which attempt to impose a non-compete covenant upon an existing employee Illusory Promise A statement that looks like a promise but is actually only an illusion of a promise due to its conditional nature or its otherwise lack of a firm commitment. Accord and Satisfaction A common means of settling a disputed claim, whereby a debtor offers to pay a lesser amount than the creditor purports to be owed. See Accord and Satisfaction. Accord Agreement under which one party promises to give or perform, and the other party to accept, in satisfaction of a claim, something different from what the parties originally agreed. Satisfaction Performance (usually payment) which takes place after the accord is executed. Liquidated Debt A debt whose amount has been ascertained, fixed, agreed on, settled, or exactly determined. Unliquidated Debt A debt that is uncertain in amount. Release A contract in which one party forfeits the right to pursue a legal claim against the other party. Genererally binding if: 1. Given in good faith. 2. Stated in a signed writing. 3. Accompanied by consideration. Promissory Estoppel An equitable doctrine that prevents the promisor from revoking the promise when the promisee justifiably acts in reliance upon the promise to his detriment. "If you fall, I will catch you..." Promissory Estoppel Requirements 1. There must be a clear and definite promise. 2. Promisor should have expected promisee would rely on the promise. 3. Promisee reasonably relied on the promise by acting or refraining from some act. 4. Promisee's reliance was definite and result in substantial detriment. 5. Enforcement of the promise is necessary to avoid injustice. Contractual Capacity The legal ability to enter into a contractual relationship. Contractual Capacity: Minors 18yrs old is the cutoff. A minor can enter into any contract that an adult can, provided that the contract is not one prohibited by law for minors. A contract is voidable at the option of the minor. Disaffirmance The legal avoidance, or setting aside, of a contractual obligation. Must be whole contract; minor can disaffirm even after coming of age (18). Exceptions to a Minor's Right to Disaffirm - Marriage contracts - Contracts to enlist in the military - Contracts entered into by a minor engaged in business as an adult - Contracts for necessaries: basic needs such as food, clothing, shelter, and medical services Ratification The acceptance or confirmation of an act or agreement that gives legal force to an obligation that previously was not enforceable. See Express or Implied Ratification. Express Ratification Occurs when, after reaching age of majority, individual states (either orally or in writing) that he/she intends to be bound by contract entered into while a minor. Implied Ratification Takes place when the minor, on reaching the age of majority, indicates an intent to abide by the contract. Reformation A court-ordered correction of a written contract so that it reflects the true intentions of the parties. Usary Charging an illegal rate of interest. Contractual Capacity: Intoxicated Persons Intoxication refers to condition in which a person's normal capacity to act or think is inhibited by alcohol or some other drug. Must prove intoxication to void contract; very rare for contracts to be avoid based on objective test. Contractual Capacity: Mentally Incompetent Persons Contracts made by mentally incompetent persons can be void, voidable, or valid. Void (i.e., not valid): Court has previously determined that a person is mentally incompetent and appointed a guardian to represent the person-Only guardian can enter into binding contract on that person's behalf. Voidable: A court has not previously judged a person to be mentally incompetent and the person did not know he or she was entering into the contract or the person lacked the mental capacity to comprehend its nature, purpose, and consequences. Can only be voided by the mentally incompetent person; not other party. Valid: if person was competent when contract was formed. Lucid intervals: temporary periods of sufficient intelligence, judgment, and will Legality To be enforced, contract must be formed for a legal purpose. If the object or performance of a contract is rendered illegal by statute after the contract has been formed, the contract is considered to be discharged (made illegal). e.g. Craigslist advertisement to purchase a kidney. Federal law prohibits the sale of human organs. - Offer: purchase kidney for $250,000 -- Would not be enforceable Covenant Not to Compete 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. Unconscionable Contracts or Clauses A contract or clause that is void on the basis of public policy because one party was forced to accept terms that are unfairly burdensome and that unfairly benefit the stronger party. See Procedural & Substantive Unconscionability. Procedural Unconscionability Involves inconspicuous print, unintelligible language, or the lack of an opportunity to read the contract or ask questions about its meaning e.g. adhesion contract: a standard form contract in which the stronger party dictates the terms on a take it-or-leave it basis