BCOR 320 1nd Edition Lecture 21 Chapter 10 Contract Impediments Consideration The central idea of consideration is simple contracts must be a two way street If one side gets all the benefit and the other side gets nothing then an agreement lacks consideration and is not an enforceable contract There are three rules of consideration Both parties must get something of measureable value from the contract That thing can be money boots an agreement not to sue or anything else that has real value A promise to give something of value counts as consideration A promise to mow someone s lawn next week is the equivalent of actually doing the yardwork when evaluating whether consideration exists The two parties must have bargained for whatever was exchanged and struck a deal If you do this I ll do that Legality A contract that is illegal is void and unenforceable For example A gambling contract is illegal unless it is specifically authorized by state statute A court will not assist either party in an illegal agreement even if its refusal leaves one party clearly shortchanged Restraint of trade To be valid an agreement not to compete must be ancillary to a legitimate bargain Sale of a Business When a non compete agreement is ancillary to the sale of a business it is enforceable if reasonable in time geographic area and scope of activity Employment 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 A non compete clause in an employment contract is generally enforceable only to the extent necessary to protect trade secrets confidential information and customer lists developed over an extended period Exculpatory Clause Part of a contract that attempts to release you from liability for injury to another party Generally unenforceable when it attempts to exclude an intentional tort or gross negligence the affected activity is in the public interest such as medical care public transportation or some essential service the parties have greatly unequal bargaining power it is not clearly written and readily visible Unconscionable contracts An unconscionable contract is one that a court refuses to enforce because of fundamental unfairness The two factors that most often led a court to find unconscionability were oppression meaning that one party used its superior power to force a contract on the weaker party and surprise meaning that the weaker party did not fully understand the consequences of its agreement Capacity Capacity is the legal ability to enter into a contract Minors under age 18 and those with mental impairment usually lack capacity A voidable contract may be canceled by the party to the contract who lacks capacity MINORS In some cases lack of capacity creates a void contract PERSONS ADJUDGED INCOMPETENT BY COURT Minors Disaffirmance A minor generally may disaffirm a contract that is he may notify the other party he refuses to be bound by the agreement The minor also has the option of filing a suit to rescind the contract that is to have a court formally cancel it Restitution A minor who disaffirms a contract must return the consideration he has received to the extent he is able Mentally impaired person Definition A person with mental illness or defect who is unable to understand the nature and consequences of a transaction Generally creates only a voidable contract Intoxication When an intoxicated person makes a contract it is voidable Misrepresentation and fraud Innocent misrepresentation means the owner believes the statement to be true and has a good reason for that belief Fraudulent misrepresentation means the owner knows that the statement is false To rescind a contract based on misrepresentation or fraud a party must show three things 1 there was a false statement of fact The maker intended to induce someone to contract The maker knew the statement was false or was uncertain it was true NOT Puffery exaggerated sales talk 2 the statement was fraudulent or material and 3 the injured person justifiably relied on the statement Plaintiff remedy If the maker s statement is fraudulent the injured party generally has a choice Rescission of the contract or Suit for damages Would this include punitive damages