BALW 20150 Lecture 9: Lecture 3/9/17

8 Pages
Unlock Document

University of Notre Dame
Bus Admin - Business Law
BALW 20150
Knox Tracy

Legality Ratification vs. Disaffirmance Ratification—accepting an obligation that was previously unenforceable Disaffirmance—setting aside a legal obligation Neither party is bound You can disaffirm even while you are still under the in capacity Express or implied Timing issues Only the incapacitated person has the right to ratify or disaffirm the contract, the other person is at the will of the incapacitated One requirement to have an enforceable contract is that the object of the contract must be lawful Contracts with an illegal object are void and therefore unenforceable— law treats them as if they never existed There are two key categories of illegality: Contracts contrary to statutes Federal and state legislatures have enacted statutes that prohibit certain types of conduct Examples: Usury Laws Gambling Statutes Sabbath Laws Licensing Statutes—look at the purpose of the license to determine if it is void, ex. Enter into contract with unlicensed plumber is void Regulatory Statute Revenue-Raising Statute Contracts contrary to public policy Contracts that have a negative impact on society or that interfere with the public’s safety and welfare Examples: Immoral Contracts Contract over trading the custody of a child—void, involves the welfare of a child Contracts in Restraint of Trade Reduce competitive forces within the free market system Exculpatory Clauses An agreement where you give up claims for someone’s actions or their negligent conduct Non-ex. Skiing—luxury Ex. Lease on apartment—necessity Covenant Not to Compete Cannot compete with a business or a person in a certain industry— gives up their right to earn a living in a certain business Covenants not to compete that are ancillary to a legitimate sale of a business or employment contract are lawful if they are reasonable in three aspects: (1) The line of business protected (2) The geographical area protected (3) The duration of the restriction Effect of Illegality Since illegal contracts are void, the parties cannot sue for nonperformance Neither party can enforce Generally no restitution, i.e., the court will leave the parties where it finds them—as if they had never met Blue penciling—allows judges to strike illegal language from the agreement and enforce whatever is left Exceptions to the General Rule Certain situations are exempt from the general rule of the effect of finding an illegal contract: (1) Innocent persons who were justifiably ignorant of the facts that made the contract illegal (2) Persons who were induced to enter into an illegal contract by fraud, duress, or undue influence (3) Persons who entered into an illegal contract withdrawn before the illegal act is performed (4) Persons who were part of a protected class—if the statute is intended to protect you Probably the most significant exception Protected class is entitled to restitution Doctrine of Unconscionability Sides of a contract are so one-sided to one of the parties that it shocks the conscience Some lawful contracts are so oppressive or manifestly unfair that they are unjust. Procedural Unconscionability Substantive Unconscionability Procedurally unconscionable: The parties possessed severely unequal bargaining power The dominant party unreasonably used its unequal bargaining power The adhering party had no reasonable alternative Substantively unconscionable: Terms so unfair they “shock the conscience” Assent Voluntary assent by the parties is necessary to create an enforceable contract. Contracts are unenforceable if parties have actually consented to the contract but their assent is not genuine Genuineness of assent is an issue in the areas of: Mistake A mistake occurs where one or both of the parties have an erroneous belief about the subject matter or some other material aspect of the contract. Mistakes may be either: Unilateral When one party is mistaken about a material fact regarding the subject matter of the contract Generally, the mistaken party will not be permitted to rescind the contract The contract will be enforced on its terms Situations where the contract may not be enforced: One party makes a unilateral mistake of fact and the other party knew (or should have known) that a mistake was made—mistaken party can resend the contract A unilateral mistake occurs because of a clerical or mathematical error that is not the result of gross negligence (leaves out a comma or makes a slight of hand)—allow the mistaken party to resend the contract Mutual Mutual Mistake of Fact A mistake made by both parties concerning a material fact that is important to the subject matter of the contract (when the parties are talking about two different things/subject matters) The contract may be rescinded on the ground that no contract has been formed because there has been no “meeting of the minds” between the parties Mutual Mistake of Value A mistake that occurs if both parties know the object of the contract, but are mistake as to its value The contract remains enforceable by either party because the iden
More Less

Related notes for BALW 20150

Log In


Don't have an account?

Join OneClass

Access over 10 million pages of study
documents for 1.3 million courses.

Sign up

Join to view


By registering, I agree to the Terms and Privacy Policies
Already have an account?
Just a few more details

So we can recommend you notes for your school.

Reset Password

Please enter below the email address you registered with and we will send you a link to reset your password.

Add your courses

Get notes from the top students in your class.