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NIU MGMT 217 - Contract law

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1. Misrepresentation2. Mistakea) Mistake of material fact, not valueb) Types of mistake(1) Mutual mistake(2) Unilateral mistake(a) Only one of the parties is mistaken(b) Usually not a valid defense, unless non-mistaken party knowingly takes advantage of the mistake.c) Issues of Mistake(1) Allocation of Risk(a) Parties should anticipate problems and allocate the risk.(b) Where risk of loss is not allocated courts may impose the loss on the party is the best position to avoid the mistake.(2) Mistake of fact or mistake of value?B. Consideration1. Promise for a promise2. Legal valuea) Does the promise have value in the eyes of the law.b) Promises that lack value(1) Preexisting duty(2) No legal rightC. Capacity1. Minors2. The mentally incompetenta) Adjudicated incompetentb) Mentally infirm3. Intoxicated individualsD. Legality1. Contracts that violate statutes2. Public policya) Contracts that restrain trade(1) Covenants not to compete(a) Legitimate employer interest?(b) Covenant reasonable, i.e. not overly restrictive?(2) Sale of a businessb) Unconscionable contracts(1) Contracts that are so fundamentally unfair they shock the conscience of the court.(2) Excessively harsh terms (usually not enough by itself)(3) Unequal bargaining powerc) Exculpatory clauses(1) Must be clear and conspicuous(2) Usually enforced for non-essential businessesA. Writing Issues3. The Statute of Fraudsa) Generally, oral contracts are enforceable, but the Statute of Frauds requires that certain contracts be in writing, or that there is written evidence of their existence.b) Contracts that require a writing(1) Contracts involving the transfer of real estate(2) Promises to pay the debts of another(3) Contracts that by their terms cannot be completed within 1 year(4) Contracts for the sale of goods for $500 or more.c) Sufficient writing(1) Identifies parties(2) Identifies the nature of the contract(3) Signed by the party to be charged (sued)E. Implied Ks at Law1. Promissory estoppela) Detrimental relianceb) Justifiable reliance2. Quantum meruita) Trying to prevent unjust enrichmentb) A party may not, however, force a contract upon another.II. Performance, Breach, and RemediesA. Performance1. Conditionsa) Precedentb) Subsequent2. Complete performance v. Substantial performanceB. Breach1. Anticipatory2. Material v. immaterialC. Excused Performance1. Agreement2. Operation of Lawa) Bankruptcyb) Statute of Limitationsc) ImpossibilityD. Remedies1. Money damagesa) Compensatory (and incidental)b) Consequentialc) Liquidatedd) Nominal2. Mitigation of damages3. Equitable remediesa) Rescissionb) Restitutionc) Specific performance(1) Available only for rare or unique items.III. Sales Law (Contracts for the Sale of Goods)A. Application1. Goods2. Some special requirements for merchantsB. Formation of a Contract for the Sale of Goods1. Mutual Assenta) Offer(1) Less definite(2) Firm offer rule(a) Made by a Merchant; and(b) In Writingb) Acceptance(1) Code rejects the mirror image rule(2) Intent to be bound2. Considerationa) Modification of a pre-existing contract does not require considerationb) Good faithC. Statute of Frauds1. Contracts for $500 or more2. Exception: Specially manufactured goods.D. Performance Issues1. Tendera) When a party is ready, willing and able to perform the terms of the bargainb) Place of tender: Seller’s business2. Perfect Tender Rulea) Seller’s tendered goods must conform exactly to the terms of the contract. Any deviation allows the buyer to reject the goods, or make a partial rejection.b) Exceptions(1) Cure(2) AgreementMGMT 217 1st Edition Lecture 11Last Lecture Outline:1. Misrepresentation-same as fraud, except scienter is not required2. Mistakea) Mistake of material fact, not valueb) Types of mistake(1) Mutual mistake-both parties are mistaken (India/London cotton case)(2) Unilateral mistake(a) Only one of the parties is mistaken(b) Usually not a valid defense, unless non-mistaken party knowingly takes advantage of the mistake.c) Issues of Mistake(1) Allocation of Risk(a) Parties should anticipate problems and allocate therisk.(b) Where risk of loss is not allocated courts may impose the loss on the party is the best position to avoid the mistake.(2) Mistake of fact or mistake of value?Consider the following cases:Farmer A agrees to sell Farmer B a cow. Farmer A stated that the cow was barren. Farmer B purchased the cow anyway and later the cow was impregnated and had a calf. These notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.Should Farmer A be able to void the contract and get the cow back?Seller agrees to sell a stone to buyer for $1.00. Later it is discovered the stone was really a diamond. Neither party knew at the time of the sale that the stone was a diamond.If Seller sues to avoid the contract, what result?B. Consideration1. Promise for a promise- Promises of gifts are not enforceable2. Legal valuea) Does the promise have value in the eyes of the law.b) Promises that lack value(1) Preexisting duty(2) No legal rightC. Capacity-party must understand the seriousness nature of the bargain, parties who m,ay lack capacity include:1. Minors2. The mentally incompetenta) Adjudicated incompetentb) Mentally infirm3. Intoxicated individualsD. Legality1. Contracts that violate statutes2. Public policya) Contracts that restrain trade(1) Covenants not to compete(a) Legitimate employer interest?(b) Covenant reasonable, i.e. not overly restrictive?See, Comedy Club v. Improv West (Covenant restricts comedy Club from opening clubs in the U.S. until 2019.)(2) Sale of a businessb) Unconscionable contracts(1) Contracts that are so fundamentally unfair they shock the conscience of the court.(2) Excessively harsh terms (usually not enough by itself)(3) Unequal bargaining powerConsider the following:Williams went to the Walker-Thomas Furniture Store and purchased furniture on credit. A few months later, Williamreturned to the store and purchased additional furniture on credit. During each purchase, Williams signed a revolving credit agreement, which provided that no furniture was paid off until all furniture was paid off. A fewmonths later Williams missed a payment, and pursuant to the terms of the credit agreement Walker-Thomas repossessed the furniture. Williams claims the contract is unconscionable. Result?c) Exculpatory clauses` -clauses that attempt to relieve a party of liability due to


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