Defective agreements

Question 1

What are the types of defective agreements?

Answer 1

1. Mistake
2. Fraud

Question 2

What are the classifications of mistakes and how are they enforeable?

Answer 2

1. Unilateral - one party makes a mistake
   -Mistaken party receives no remedy and the agreement in enforceable
   -Exception: non-mistaken party is actually aware of the mistake
2. Mutual - both parties make a mistake
   -Agreement is void, not enforceable
   -No remedy if the mistake concerns value, quality, price

Question 3

What is classified under fraud defective contracts

Answer 3

1. Intentional and reckless misrepresentation of material fact
2. Manner of communication
3. Non-intentional?

1.Duress
2. Undue influence

Question 4

What is intentional and reckless misrepresentation of material fact?

Answer 4

-The other party justifiable relies that it is fact
-Contract is void

Question 5

What are the manners of communication under the fraud defective agreements

Answer 5

-Express misrepresentation: a bold face lie
-Concealment
-Silence when there is a duty to speak
-If asked for detail and you say nothing; reply is expected and there is no informationT

Question 6

There are non intentional cases that fall under defective agreements. what are they?

Answer 6

Innocent misrepresentation -The party making the statement believes it is the truth and has no reason to think otherwise
-Justifiable reliant
-Contract is still void (not enforceable)

Question 7

What is duress and how are those contracts handled?

Answer 7

Destroying the other party’s free will to contract by means of threat or harm
-Voidable

Question 8

What is undue influence and how are those contracts handled?

Answer 8

Destroying the other party’s free will to contract by means of trust
-Family, trusted professionals
-You may have acted/ contracted differently had they been someone else
-Voidable

Question 9

What are the contracts that violate statutes or public policy?

Answer 9

1. Prohibited by a statute - crime (all crimes are statutory)
2. Prohibited by common law - torts (all torts are common law)
3. Usury
4. Unlicensed operators
5. Covenant not to compete
6. Restraint of trade
7. Obstructing justice

Question 10

What is a statute and who are they created by?

Answer 10

A statute is a written law passed by a legislative body (ex. congress)

Question 11

What does usury mean?

Answer 11

The illegal action of lending money at an unreasonable high rate of interest

Question 12

What type of interest rates are available under usury law to lend money?

Answer 12

1. Interest rates
   -Prime rate: the best available rate
   -Legal rate: for if a rate was not established at the time of contract
   -Usury rate: maximum rate allowed by the law
2. If the usury rate exceeds the maximum:
   -Contract is void
   -Or a quasi contract will be created by the courts to ease the burden of the usurious rate (court may agree to give prime rate, no interest, or other remedy)

Question 13

What are the exceptions under the usury law?

Answer 13

1. Large dollar amounts
2. Real property loans
3. Business loans
4. Pawn brokers

Question 14

Who sets the statute for receiving a license

Answer 14

The state
1. This protects the consumer
-Ex. a person without a license performs a service. The service contract is void. Remedy - cannot collect for services, possible criminal sanction per the statute
2. Municipality may require fees to license a business for the privilege of doing business
-Without this type of license: these contracts can be valid but subject to fine (civil fine) and potential criminal charges

Question 15

What is a covenant?

Answer 15

A contract

Question 16

What does a covenant do?

Answer 16

1. May violate public policy
   -No competition in exchange for money
   -If the request is a full stop the contract is void (bare covenant) (this is restricting the ability to make a living)

Question 17

What are the exceptions for a covenant contract?

Answer 17

1. The purchase of a business
2. Employment agreements
   -When employment is terminated (must have a reasonable time and a reasonable area
3. Business trade secrets
   -NDAs
   -What is the secret (is it a trade secret) and how is it supported by consideration? (If a change is made to your employment contract, how is the change supported by consideration?

Question 18

What are the remedies for a covenant contract

Answer 18

Contract is unenforceable
1. Courts may reform the contracts to make it more reasonable
-Reasonable time: varies (ex. beauty shop. Like 6mo? How frequently does average client get services
-Reasonable area: where you draw clients from

Question 19

What falls under the restraint of trade?

Answer 19

Monopoly laws
1. Is the company/ person the only provider of a certain good/ service
2. Oligopoly: 2-5 business/ people
3. An attempt to control a good/ service. Includes:
-monopoly
-incentives
-divided territory
-price fixing
4. Sherman antitrust act
5. Clayton act

Question 20

What is the Sherman Antitrust Act?

Answer 20

Originated from the sale of oil
-Oil was tied up in trusts in order to regulate/ fix the sale of oil

Question 21

What is the Clayton act?

Answer 21

Prohibits one or a few people/ companies from trying to monopolize

Question 22

What are the remedies under restraint of trade?

Answer 22

1. Contract is void
2. Criminal penalties
3. Monetary damages
   -Treble (x3)
4. Injunction

Question 23

What is an injunction?

Answer 23

An authoritative warning or order
-Making restitution (recompensate) to an injured party

Question 24

What does it mean to obstruct justice?

Answer 24

To pay a witness
-Cannot pay a witness to appear or not appear in court
-Cannot pay a witness based on the outcome of a trial. (exception: expert witness - someone who is an expert in a given field)