Ch 8 Non Enforcement Contracts

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Department
Management and Organizational Studies
Course
Management and Organizational Studies 2275A/B
Professor
Frederick King
Semester
Fall

Description
Non-Enforcement Contracts 10/24/2012 7:55:00 PM Chapter 8 The Importance of Enforcing Contract  Once negotiators reach an agreement that appears to contain their consensus on the essential elements of a bargain, a contract is formed  The law endeavors to achieve a balance between two competing goals: o It must prevent people from pulling out of deals because they have found better opportunities else where o It must remedy situations where an apparently valid contract fails to reflect the real agreement of both or is fundamentally unjust  Voidable contract – a contract that, in certain circumstances, an aggrieved party can choose to keep in force or bring to an end  The hit man contract – considered never to have existed due to the illegality of the actions – void contract  Void Contract – a contract involving a defect so substantial that it is of no force or effect Contracts Based on Unequal Relationships  Legal Capacity – the law assumes that individuals and properly constituted organizations have the legal capacity to form contracts o Minors – the age of majority is the age at which a person is recognized as an adult for legal purposes  Contracts with minors are usually voidable  Ontario’s age of majority is 18  Because minors may have to provide their own welfare in certain circumstances, there are exceptions to the general common law rule of immunity from liability o Mental Incapacity – in order for a contract to be formed freely and voluntary by both parties, both must be able to understand the nature and consequences of their agreement – disability, drunk, high  Duress – contracts that are made as a result of one of the parties being threatened with physical activity are obviously not enforceable o Economic duress – the threat of economic harm that coerces the will of the part and result in contact – mostly in commercial dealings  Undue Influence – unfair manipulation that compromises someone’s free will o Actual Pressure – arises because one party has exerted unfair influence on the other – the party who seeks relief must show that the influence existed and resulted in the agreement in question o Presumed Pressure – sometimes the relationship between the parties already exists giving presumption that the ensuing agreement was brought about by one party’s unfair manipulation of the other  Unconscionability – where one party stands in a position of being able to take advantage of someone and causes that person to enter into an unfair or improvident agreement, and unconscionable contract is the result o Proof of unconscionability involves a 2-step process:  Proof of inequality between the parties  Proof of an improvident bargain or proof of an exploitation  Falls on the other party to prove the deal was fair o An Improvident Bargain – the party seeking to have the contract set aside must also be able to demonstrate that its terms greatly advantaged one party over the other, there must be proof of substantial unfairness Misrepresentations and Important Mistakes  Misrepresentation of Relevant Facts o Parties involved in negotiating a contract are usually not
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