Sarah [email protected] to Business LawLesson 4 Progress Evaluation4.1 What are the steps necessary for disaffirmance of a contract by a minor? How do thesediffer from the steps necessary for intoxicated and mentally incompetent people?The 3 three steps necessary for disaffirmance of a contract by a minor are:1. The minor must express the intent to disaffirm.2. The minor must only fulfill the duty of restoration, but not the duty of restitution.3. The contract must be a type of contract for which disaffirmance is allowed.These differ from the steps necessary for intoxicated and mentally incompetent people because a minor must only fulfill the duty of restoration and not restitution while and intoxicated person and mentally incompetent person both fulfill the duty of restitution. The contract must be a type of contract where disaffirmance is allowed which is only a step for a minor and not the other two.4.2 What is the difference between limited and no competence? How does it affect the need and ability to disaffirm a contract?Limited competence is a situation where one or more parties are minors, highly intoxicated or mentally incompetent (without adjudication). The result of limited competence is that the contract is voidable by any person with a legal disability. No competence is a situation where one or more parties have been adjudicated mentally incompetent. The result of no competence is that the contract is void; it may not be enforced by any party. Disaffirmance is not necessary to avoid liability.4.3 Smith buys a new car from Jones while in a totally delusional period, thinking that he is CIA agent buying a fully equipped special ops vehicle that goes 300 m.p.g., flies like a plane and converts to a submarine when needed. At one point he drives it right into the ocean, thinking it will automatically convert to a submarine. He has the car partially repaired so that it drives, but it still has some body damage. Smith is placed on medication by his doctor, returns to normalcy, and drives the car for two months afterward before he realizes it is not what he wants. He takes it to the dealer and says he wants to cancel the deal. What does the law require? What potential problems could Smith have in getting out of the contract?Since Smith bought the care while he was incompetent he can avoid the contract through disaffirmance. Through implied ratification he can ratify the contract since he was in a delusional period when he bought the car and had been mentally stable for a period of time before he wanted to void the contract. However, because he waited 2 months before he decided that he wanted to ratify the contract and that is longer than the reasonable time, he may have problems getting out of the contract.4.4 Name the categories of illegal contracts and the categories of contracts which are against public policy. What is the difference between the illegality and against public policy? Does this affect the ability to enforce the contract?Illegal contracts categories are: usury laws, gambling without a license, blue laws violations, contracts by unlicensed professionals, and contracts to perform illegal acts.Contracts against public policy are exculpatory contracts, agreements in restraint of trade,and contracts requiring one party to commit a tort.Contracts involving illegality or violating public policy are typically void. They may not be ratified by either party, and a court should dismiss any lawsuit which is based on a contract wither illegals or violating public policy. There is one exception to the rule that an illegal contract is void. The exception is for classes of people which are protected by the criminal statute. For example, child labor laws are designed to protect minors from being injured while employed. If a minor contracts to do illegal dangerous employment, the minor will still be paid, however the adult hiring the minor will suffer the criminal consequences. 4.5 (10 Points) Name and define the five types of contacts which are voidable because of a lack of reality of consent. Give an example of each stating how each of the elements of required proof are satisfied. (Cited from the lesson commentary.)1. Mutual Mistake of Material Fact: two types that may result in availability of a rescission remedy.- Mutual Mistake- mistake of fact by both parties to the contract. Three requirements for proving this. First must be a mistake of both parties to the transaction. Second, a mutual mistake of fact must be material at handand third, it must be as to a fact that can be verified in the past or present.Ex: If two parties are walking on campus and see what they believe is a Prada bag (first step) lying on a bench and it costs $1000 (2 step) but the real cost of the bag is $2000, this was a mutual mistake of material fact (3 step).- Unilateral mistake- mistake by only one party to the contract, not grounds for rescission of contract, but under certain circumstances will be groundsfor rescission. Two requirements for proving this is first, a mistake of material fact by one party of the contract and second, the non-mistaken party must be aware of the mistake.2. Material Misrepresentation: 3 types, each with accompanying available remedies. - Innocent Misrepresentation-only remedy is rescission. This is a misrepresentation without fault. An example would be if I have no reason to believe that the odometer in my car was ever rolled back, and I tell you that the 30,000 mileage is accurate, I am guilty only of innocent misrepresentation if the previous owner did lower the miles. - Negligent Misrepresentation- This has two available remedies, the victim of negligent misrepresentation can choose between the damages caused bythe misrepresentation or rescission. This occurs when a party makes a statement without exercising due care to ensure that the statement is true. For example, if an appropriate standard of care to discover the accuracy ofthe odometer mileage is to hire a service to do a title history check, and a car dealership does not do so in circumstances which would give some reason to believe that the odometer is not accurate, the car dealership has probably committed negligent misrepresentation.- Fraudulent Misrepresentation- The injured party can receive rescission on one hand, or actual damages plus punitive damages on the other. Fraudulent misrepresentation is a false statement made with the