L201 Final Exam

  1. statute of frauds
    a statute that provides that no lawsuit may be brought to enforce certain classes of contracts unless there is a written note or memorandum signed by the party; an otherwise valid contract can become unenforceable if it does not comply with the formalities required by law; require certain kinds of contracts to be evidenced by writing, an exception to the general rule which an oral contract will not suffice; only applies to executory contracts, if an oral contract has been completed by both parties and does not comply it does not have to be re-done; if an executory contract does not comply it is unenforceable but if one has benefitted from the contract one can recover the value of the benefit in an action based on quasi-contract (unjust enrichment)
  2. Types of contracts within the statute of frauds:
    • 1. Collateral contracts in which a person promises to perform the obligation of another person
    • 2. Contracts for the sale of an interest in real estate, interest in land
    • 3. Bilateral, executory contracts that cannot be performed within a year from the date of their formation
    • 4. Contracts for the sale of goods for a price of $500 or more
    • 5. Contracts in which an executor or administrator promises to be personally liable for the debt of an estate
    • 6. Contracts in which marriage is the consideration, contracts other than mutual promises to marry
    • ...
    • (some states require written evidence of other contracts in addition to those listed above)
  3. collateral contract
    one in which one person (the guarantor) agrees to pay the debt or obligation that a second person (the principal debtor) owes to a third person (the obligee) if the principal debtor fails to perform; a contract in which one person agrees to pay the debt of another if the principal debtor fails to pay; ex. Grandpa(guarantor), Sam(principal debtor), and Bank(obligee); must be in writing to be enforceable; primary contract between principal debtor and obligee, collateral agreement between obligee and guarantor
  4. main purpose or leading object rule
    exception. no writing is required where the guarantor makes a collateral promise for the main purpose of obtaining some personal economic advantage; technically collateral is treated like an original contract because the person promising to pay the debt of another does so for the primary purpose of securing some personal benefit
  5. specific performance
    a contract remedy whereby the defendant is ordered to perform according to the terms of the contract; the part performance doctrine will not permit the vendee to collect damages for breach of contract, but it will permit him to obtain the equitable remedy which is this
  6. UCC: Alternative means of satisfying the statute of frauds in sale of goods contracts
    • 1. confirmatory memorandum between merchants
    • 2. part payment or part delivery
    • 3. admission by defendant of an oral contract in pleadings or court
    • 4. specially manufactured goods (made a substantial beginning on goods they cannot otherwise sell)
  7. promissory estoppel
    enables some parties to recover under oral contracts that the statute of frauds would ordinarily render unenforceable; reliance was foreseeable to the person making the promise and if injustice can be avoided only by enforcing the promise
  8. parol evidence rule
    written or spoken statements that are not contained in the writing contract cannot be enforced; when parties enter a written contract that they intend as a complete integration (a complete and final statement of their agreement), a court will not permit the use of evidence of prior or contemporaneous statements to add to, alter, or contradict the terms of the written contract; does not apply to oral contracts or unfinished contracts (partially integrated); does not apply to statements made after the contract was written
  9. merger clause (also known as an integration clause)
    provide that the written contract is the compete integration of the parties' agreement
  10. admissible parol evidence (exceptions)
    • 1. additional terms in partially integrated contracts
    • 2. explaining ambiguities (no contradictions)
    • 3. circumstances invalidating contract (illegal ext.)
    • 4. existing condition (a future, uncertain event that creates a duty to preform) if left out of the contract it is still enforceable
    • 5. subsequent agreements (modifications after)
  11. voidable
    contracts induced by misrepresentation, fraud, mistake, duress, or undue influence; the persons consent was not real
  12. rescind
    cancel; the person whose consent was not real has the power to cancel the contract and is entitle to the return of anything he gave the other party, and must also return anything he has received from the other party
  13. ratifies
    ratification of a voidable contract means that a person who had the right to rescind has elected not to do so; ends the right to rescind
  14. scienter
    in cases of fraud and deceit, the word means knowledge on the part of the person making the representations, at the time when they were made, that they were false. In an action for deceit, scienter must be proved.
  15. requirements for rescission on the ground of misrepresentation
    • 1. an untrue assertion of fact was made (past or existing fact, not opinion, promise, or future) (concealment and nondisclosure count!)
    • 2. the fact asserted was material or the assertion was fraudulent (a fact will be considered material if it it likely to play a significant role in inducing a reasonable person to enter the contract or if the person asserting the fact knows that the other person is likely to rely on the fact)
    • 3. the complaining party entered the contract because of his reliance on the assertion (if the complaining party knew that the assertion was false or was not aware that an assertion has been made, there has been no reliance)
    • 4. the reliance of the complaining party was reasonable (not if he relies on an assertion that is obviously false or not to be taken seriously)
    • 5. injury (only required in tort actions in which the plaintiff is seeking to recover damages for deceit)
  16. doctrine of mistake
    prevents unexpected and unbargained for losses that result when the parties are mistaken about a fact central to their contract; ex. diamond that both parties thought was tourmaline; a prediction about facts that might occur in the future do not count as a mistake
  17. requirements for a mutual mistake
    • both parties mistaken about same fact...
    • needed for avoidance of the contract:
    • 1. the mistake relates to a basic assumption on which the contract was made (identity, existence, quality, or quantity of the subject matter)
    • 2. the mistake has a material effect on the agreed-upon exchange (not just different exchange than expected by unbargained for exchange)
    • 3. the party adversely affected by the mistake does not bear the risk of the mistake (ex. accept property "as is" is accepting the risk)(also conscious awareness that knows the he does not know everything is not grounds for rescinding the contract)
  18. requirements for unilateral mistake
    • only one of the parties makes a mistake about a basic assumption on which he made the contract; these contracts are harder to avoid, in addition to proving the elements for a mutual mistake one must show either one of the following...
    • 1. The nonmistaken party caused or has reason to know of the mistake or
    • 2. It would be unconscionable to enforce the contract
  19. duress
    • overpowering of the will of a person by force of fear; coercion; one type if physical compulsion to enter a contract like grabbing someones hand and making them sign the contract which makes the contract void; another type is when a person is induced to enter a contract by a threat of physical, emotional, or economic harm, and the contract is then voidable at the option of the victimized person; elements of duress in order to rescind a contract...
    • 1. the contract was induced by an improper threat (good faith dispute does not count)
    • 2. the victim has no reasonable alternative but to enter the contract
  20. undue influence
    • unfair persuasion of susceptible individual; elements of undue influence...
    • 1. The relationship between the parties is either one of trust or confidence or one in which the person exercising the persuasion dominates the person being persuaded
    • 2. The persuasion is unfair (rushed into it, no access to outsiders for advice, unusual time and place)
  21. capacity
    the ability to incur legal obligations and acquire legal rights; classes of people who are considered to lack capacity: minors, persons suffering from mental illnesses, or defects, and intoxicated persons. they have the right to escape contracts that they enter during incapacity; people whose capacity is impaired have the right to end the voidable contract
  22. dissaffirm
    a party's exercise of his power to avoid a contract entered before the party reached the age of majority, a minor's cancellation of his contract; any words or acts that effectively communicate the minor's desire to cancel the contract can count;
  23. emancipation
    the termination of a parent's right to control a child and receive services and wages from him
  24. ratification
    the act of affirming the contract and surrendering the right to avoid the contract; can be done effectively only after the minor reaches majority; expressed or implied
  25. public policy
    a widely shared view about what ideas, interests, institutions, or freedoms promote public welfare; for example there are strong public policies favoring the protection of human life and health, free competition, and private property.
  26. regulatory
    the purpose of the legislation is to protect the public against dishonest or incompetent practitioners
  27. legal remedy or remedy at law
    award of money damages that will compensate the injured party for his losses; type of contract remedy
  28. equitable remedies
    an example is specific performance; type of contract remedy
  29. restitution
    requires the defendant to pay the value of the benefits that the plaintiff has conferred on him; type of contract remedy
  30. expectation interest
    contract remedies for breach of contract protect this; obtaining the objective or opportunity gain that he bargained for and "expected"; protected by formulating a remedy that will place the promisee in the position he would have been in if the contract had been performed as promised
  31. reliance interest
    contract remedies for breach of contract protect this; interest in being compensated for losses that he has suffered by changing his position in reliance on the other party's promise; involves a loss to the promisee that does not benefit the promisor
  32. restitution interest
    contract remedies for breach of contract protect this; interest in recovering the amount by which he has enriched or benefited the other; involves a loss to the promisee that does not constitute an unjust enrichment to the promisor; allows a party who has preformed or partially performed her contract and has benefited the other party to obtain compensation for the value of the benefits that she has conferred
  33. limitations on recovery of damages in contract cases
    • 1. a party can recover damages only for those losses that he can prove with reasonable certainty
    • 2. a breaching party is responsible for paying only those losses that were foreseeable to him at the time of contracting
    • 3. Plaintiffs injured by a breach of contract have the duty to mitigate (avoid or minimize) damages
  34. loss in value
    starting point in calculating compensatory damages; measuring the expectation interest;
  35. consequential damages or special damages
    compensation for losses that occur as a consequence of the breach of contract; damages that do not flow directly and immediately from an act but rather flow from the results of the act; damages that are indirect consequences of a breach of contract or certain other legal wrongs; examples include personal injury, damage to property, and lost profits
  36. incidental damages
    collateral damages that result from a breach of contract, including all reasonable expenses that are incurred because of the breach; damages that compensate a person injured because of the breach; damages that compensate a person injured by a breach of contract for reasonable costs he incurs as an attempt to avoid further loss
  37. nominal damages
    very small damage awards that are given when a technical breach of contract has occurred without causing any actual or provable economic loss; typically vary from 2 cents to a dollar
  38. liquidated damages
    a contract that expressly provides that a specific sum shall be recoverable if the contract is breached
  39. punitive damages
    damages awarded in addition to the compensatory remedy that are designed to punish a defendant for particularly reprehensible behavior and to deter the defendant and others from committing similar behavior in the future
  40. equitable remedy
    cases in which money damages are not adequate to fully compensate; primary remedies are specific performance and injuction
  41. specific performance
    court orders the breaching party to perform his contractual duties as promised; generally requires a showing that the subject of the contract is unique or at least that no substitutes are available; sale of land is the most common
  42. injuction
    court order requiring a person to do something (mandatory) or ordering a person to refrain from doing something (negative)
  43. specific restitution
    defendant is required to return the exact property conferred on him by the plaintiff
  44. substitutionary restitution
    a court awards the plaintiff a sum of money that reflects the amount by which he benefited the defendant; ex. quasi contract remedies
  45. discharge
    released from all his obligations under the contract
  46. unconditional or absolute
    duty to perform does not depend on the occurrence of any further event other than the passage of time
  47. condition precedent
    uncertain, future event that affects a party's duty to perform; ex. someones duty to buy a house might be conditioned on the bank's approving the loan by a certain date, if the condition does not occur their is no duty so the contract is discharged; plaintiff bears the burden of proving the occurrence of a condition precedent
  48. concurrent conditions
    the contract calls for the parties to perform at the same time, each person's performance is conditioned on the performance by the other
  49. condition subsequent
    future, uncertain event that discharges the duty to perform; the duty to perform arises but is discharged if the future, uncertain event occurs; the defendant bears the burden of proving the occurrence of a condition subsequent
  50. express condition
    condition that is specified in the language of the parties' contract; ex. subject to, on condition that, if, when, while, after, and as soon as; conditioned on personal satisfaction with the work apply reasonable person standard
  51. implied-in-fact condition
    not specifically stated by the parties but is implied by the nature of the parties' promises
  52. constructive condition
    conditions that are imposed by the law rather than by the agreement of the parties; in contracts in which one of the parties is expected to perform before the other (building a house and paying)
  53. strict performance
    standard of performance that requires virtually perfect compliance with the contract terms; ex. promises to pay money, deliver deeds, and promises to deliver goods
  54. substantial performance
    lower standard of performance that is applied to duties that are difficult to perform without some deviation from perfection if performance of those duties is not an express condition; ex. build buildings, construct roads, cultivate crops
  55. material breach
    serious breach; the promisor's performance fails to reach the level of performance that the promisee is justified in expecting under the circumstances; the injured party has the right to withhold his own performance and is discharged from further obligations and may cancel the contract and sue for damages; recovery: quasi contract or partial performance of a divisible contract( 2 services and does 1 and can recover for the other 1)
  56. nonmaterial breach
    not serious enough to be material; the nonbreaching party may sue for only those damages caused by the particular breach and cannot cancel the contract
  57. anticipatory repudiation/anticipatory breach
    the promisor indicates before the time for his performance that he is unwilling or unable to carry out the contract; constitutes a material breach of contract that discharges the promisee from all further obligation under the contract; the nonbreaching party is justified in withholding his own performance and suing for damages right away, without waiting for the time for performance to arrive
  58. impossibility
    excuses for nonperformance; the event that causes this must be entirely unforeseeable; ex. illness or death of the promisor(unless the duty can be delegated another), supervening illegality, and destruction of the subject matter of the contract(no fault of the promisor; exception of there is a substitute)
  59. impractibility
    excuses nonperformance; a promisor must be able to establish that the event that makes the performance impracticable occurred without his fault and that the contract was made with the basic assumption that the event would not occur
  60. agency
    • two-party relationship in which one party (the
    • agent) is authorized to act on behalf of, and under the control of, the other party (the principal);
    • fiduciary relationship that arises when one person (a principal) manifests assent to another person (an agent)

    • that the agent will act on the principal's behalf and be subject to the
    • principal's control.
  61. authority
    agent's ability to affect his principal's legal relations
  62. actual authority
    based on the principal's manifested consent that the agent may act for and bind the principal; consent must be communicated to the agent
  63. apparent authority
    based on the principal's manifested consent that the agent may act for and bind the principal; consent must be communicated to the third party; arises when the principal's behavior causes a third party to believe reasonably that the agent is authorized to act in a certain why
  64. express authority
    (type of actual authority); created by the principal's actual words (whether written or oral) to the agent
  65. implied authority
    (type of actual authority); an agent generally has implied authority to do whatever it is reasonable to assume that the principal wanted him to do; relevant factors include the principal's express statements, the nature of the agency, the acts reasonably necessary to carry on the agency business, and the acts customarily done when conducting that business
  66. general agent
    is continuously employed to conduct a series of transactions; ex. a general manager, project supervisor
  67. special agent
    is employed to conduct a single transaction or a small, simple group of transactions; ex. buying or selling a few objects on a one-shot basis
  68. gratuitous agent
    agent who receives no compensation for his services; same power to bind their agents with the same authority
  69. subagent
    an agent of an agent; a person appointed by an agent to perform tasks that the agent has under taken to perform for his principal
  70. fiduciary duties
    duties that the agent owes the principal; these exist because agency is a relationship of trust and confidence
  71. disclosed principal
    if a third party knows or has reason to know that the agent is acting for a principal and knows the principals identity
  72. unidentified principal/partially disclosed
    if the third party knows or has reason to know that the agent is acting for a principal, but lacks the knowledge or reason to know the principal's identity, ex. a principal may tell her agent to keep her identity secret to preserve her bargaining position, such as when a national retailer tried to buy land on which to build a large store
  73. undisclosed principal
    the third party lacks knowledge or reason to know both the principal's existence and the principal's identity
  74. respondeat superior
    a doctrine that says a principal who is an employer is liable for torts committed by agents who are employees and who commit the tort while acting within the scope of their employment; makes the principal liable both for an employee's negligence and for her intentional torts
  75. direct liability
    (tort liability of principal) principal himself is at fault, does not need to be in scope of employment, does not even need to be an employee; examples of principals direct liability for negligence include giving the agent improper or unclear instructions, failing to make and enforce appropriate regulations to govern the agent's conduct, hiring an unsuitable agent, failing to discharge an unsuitable agent, furnishing an agent with improper tools, instruments, or materials, and carelessly supervising an agent; misrepresentations
  76. Occupational Safety and Health Act
    imposes a duty on employers to provide their employees with a workplace and jobs free from recognized hazards that may cause death or serious physical harm. They must inform their employees and train them on any dangers.
  77. The Family and Medical Leave Act
    covered employers are entitled to a total of 12 workweeks of leave during any 12-month period for 1. the birth of a child and the need to care for that child 2. the adoption of a child 3. the need to care for a spouse, child, or parent with serious health condition and 4. the employee's own serious health condition. Usually the leave is without pay. The employee must get the same job or equivalent when returning. A revision added 12 weeks of leave because of any "qualifying exigency" arising from the fact that the employee's spouse, son, daughter, or parent is on active military duty or have been notified of an impending call on active duty status.
  78. Social Security
    FICA imposes a flat percentage tax on all employee income below a certain base figure and requires employers to pay a matching amount to help ensure their employees' financial security after employment ends. This provides benefits to family members of deceased workers, disability benefits, and medical and hospitalization benefits for the elderly.
  79. Unemployment Compensation
    vary from state to state but those who voluntarily quit work without good cause, are fired for bad conduct, fail to actively seek suitable new work, or refuse such work are ineligible for benefits.
  80. ERISA
    (Employment Retirement Income Security Act) does not require employers to establish or fund pension plans and does not set benefit levels but it tries to check abuses and to protect employees' expectations that promised pension benefits will be paid
  81. The Fair Labor Standards Act
    regulates wages and hours by entitling covered employees to a specified minimum wage whose amount changes over time, and a time-and-a half rate for work exceeding 40 hours per week; also forbids oppressive child labor (below the age of 14, ages 14-15 unless in specific occupation, and ages 16-17 where it is hazardous)
  82. Collective Bargaining and Union Activity
    Union labors used to be illegal criminal conspiracies, but now there are many laws against discriminating against unions.
  83. Equal Pay Act
    forbids sex discrimination regarding pay. there must be equal effort, equal skill, equal responsibility, and similar working conditions;
  84. Title VII
    prohibits discrimination based on race, color, religion, sex, and national origin in hiring, firing, job assignments, pay, access to training and apprenticeship programs, and most other employment decisions
  85. disparate treatment
    (Title VII) situations in which an employer has treated an individual differently because of the person's race, sex, color, religion, or national origin. first, the plaintiff must show prima facie case (a case strong enough to create a presumption of discrimination and to require a counterargument from the defendant). then, the employer must prove the decision was legitimate, nondiscriminatory reasons. the plaintiff then must show, she applied and was qualified, is a member of a protected class, and was rejected, and the employer attempted to fill the job. then the employer rejects and the plaintiff must show discrimination actually occurred.
  86. disparate impact/adverse impact
    used when the alleged discrimination affects many employees; employer uses a particular employment practice that causes a disparate impact on the basis of race, color, religion, sex, or national origin. the employer will lose unless they show the practice is job related for the position in question and consistent with business necessity. the plaintiff must show there is an alternative practice that is less discriminatory
  87. Section 1981
    forbids public and private employment discrimination against blacks, people of certain racially characterized national origins such as Mexicans, and ethnic groups such as gypsies and jews; also prohibits retaliation against employees who complain about racial discrimination; damages are greater than Title VII so many include this in their claim
  88. Age Discrimination in Employment Act
    prohibits age-based employment discrimination against employees who are at least 40 years of age
  89. Americans with Disabilities Act
    prohibits discrimination against qualified individuals with a disability because of that disability the court also takes into account how much it would cost to make accommodations for that persons disabilities
  90. Executive Order 11246
    forbids race, color, national origin, religion, and sex discrimination by certain federal contractors
  91. Doctrine of Employment at Will
    rule that says either party can terminate an employment contract of indefinite duration. The termination can occur at any time and can be for good cause or no cause
  92. Exculpatory clause
    provision in a contract that purports to relieve one of the parties from tort liability. Sometimes courts refuse to enforce them because a party can contract away his liability of negligence and will not have the incentive to use care to avoid hurting others and sometimes the person signing doesn’t have a choice but to sign this.
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L201 Final Exam
IU Jane Mallor L201 Exam 3