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WVU BCOR 320 - Chapter 10

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BCOR 320 1nd Edition Lecture 21 Chapter 10: Contract ImpedimentsConsideration: 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 oneparty 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. EmploymentThese 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 ofits 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. RestitutionA 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


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