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Business/Para 18 Spring 2012

Preparation hints for Exam #3

General Hints

1. Exam 3 will cover chapters 10, 11, and 12, and 13 plus the associated lectures and key concepts from chapter 9 that are also covered elsewhere.

2. You must bring a Scantron answer form, and a number 2 pencil to the exam. Please make sure your Scantron answer form is not three-hole punched, folded, or wrinkled, because I won't accept it if it is.

3. Closed book, closed notes. NO ELECTRONICS.

4. Specific Hints: Not everything that is listed below will be on the test. And there may be questions on the test on topics that are not listed below. However, the items below are among the most important lessons of this portion of the course and have a higher than average probability of appearing on exam 3.

The following items are from chapter 9: (*items tested from this Chapter also come from other chapters)

1)

The meaning of the following terms and expressions: agreement, consideration, legality, capacity, contract, bilateral contract, unilateral contract, valid contract, unenforceable contract, option contract, voidable contract, void contract, promissory estoppel, the common law, the Uniform Commercial Code.

The following items are from Chapter 10 and relevant portions of Chapter 9:

2)

The meaning of the following terms and expressions: intent, definiteness of terms, offer, offeror, offeree, agreement, bilateral contract, unilateral contract, promissory estoppel, the Uniform Commercial Code, invitation to bargain, price quote, gap-filler provisions (UCC), revocation, firm offer, rejection, counteroffer.

3)

The four essential elements of a contract.

4)

Know which types of contracts are governed by the UCC and which types are governed by the common law.

5)

The fact that a revocation of an offer is effective when received, except in California where

it

is effective upon dispatch.

6)

The fact that an offer and rejection are effective when received, not when dispatched.

7)

The fact that an acceptance is effective when dispatched, not when received (mailbox rule).

8)

The general rule that an advertisement is not considered an offer, but instead is considered

a request or solicitation for offers.

9)

The general rule that putting an item up for auction is not considered an offer, but instead is considered a request or solicitation for offers.

10) The two requirements contained in the UCC for when the courts will recognize the existence of a contract even though it has some open terms.

a) The parties have intended to make a contract, and

b) There is a reasonably certain basis for giving an appropriate remedy.

11) The meaning of the expressions implied warranty of merchantability and implied warranty of fitness for a particular purpose as defined in the UCC.

12) The four ways offers may be terminated and what they mean:

a) By revocation

b) By rejection

c) By expiration

d) By operation of law

13) The general rule that an offeror may revoke an offer any time before it has been accepted.

14) The two ways offers may be terminated by operation of law:

a) Death or mental incapacity of the offeror.

b) Destruction of the subject matter.

15) The common law mirror image rule.

16) The effect of additional or different terms contained in the acceptance of a contract governed by the common law (mirror image rule applies). The effect of additional or different terms contained in the acceptance on a contract governed by the UCC.

17) Medium and manner of acceptance (controlled by offer; if offer is silent, “reasonable”).

18) Promissory estoppel and that it can be a substitute for consideration.

19) The three required elements a plaintiff must prove in order to win a case under the doctrine of promissory estoppel.

The following items are from chapter 11:

20) The meaning of the following terms and expressions: consideration, forbearance, detriment, promisor, promisee, adequacy of consideration, illusory promise, good faith, past consideration, preexisting duty, letter of intent.

21) The types of things that can function as consideration.

22) The general rule that courts do not consider the adequacy of consideration.

23) The general rule that past consideration cannot function as consideration.

24) The general rule regarding preexisting duty: that a promise to do something the promisor is already obligated to do is not valid consideration.

25) That additional work is an exception to the general rule regarding the common law rule against modification of contracts (based upon preexisting duty rule).

26) The common law’s treatment of rescission and substitution as sometimes a way around the general rule regarding preexisting duty.

27) The UCC’s rules regarding modification of existing contracts and whether those modifications need to be supported by consideration the way they do under the common law.

The following items are from chapter 12:

28) The meaning of the following terms and expressions: insurable interest, ancillary, usury, noncompetition agreement, exculpatory clause, unconscionable contract, and adhesion contract.

29) The basic rule that a gambling contract is illegal unless it is specifically authorized by state statute.

30) The basic rule that anyone taking out an insurance policy on the life of another must have an insurable interest in that person, or else it will be treated as “mere wager” and therefore void.

31) The fact that when a licensing requirement is designed to protect the public, any contract made by an unlicensed worker is unenforceable.

32) The fact that when a licensing requirement is designed merely to raise revenue, a contract made by an unlicensed person is generally enforceable.

33) The fact that for an agreement not to compete to be valid and enforceable, it must be ancillary to a legitimate bargain.

34) The fact that the two most common types of contracts in which legitimate non-competition agreements are found are contracts for the sale of a business and contracts for employment.

35) The four requirements of a valid non-compete agreement in connection with the sale of a business:

a) The non-compete agreement must be ancillary to an agreement to sell the business.

b) It must be reasonable in time.

c) It must be reasonable in geographic area.

d) It must be reasonable in scope of activity.

36) What the general parameters are for 35 b), c), and d) above.

37) That exculpatory clauses may be enforceable to waive ordinary negligence but not for recklessness or intentional torts.

38) That exculpatory clauses are generally not enforceable for essential public services.

The following items are from chapter 13:

39) The meaning of the following terms and expressions: capacity, minor, voidable contract, disaffirm, rescind, restitution, ratification, necessaries, mental impairment, mental illness, mental defect, intoxication, misrepresentation, innocent misrepresentation, fraudulent

misrepresentation, (sales) puffery, materiality, fraud, justifiable reliance, mistake, bilateral mistake, unilateral mistake, duress, economic duress, and undue influence.

40) The two groups of people who usually lack legal capacity: minors and those with a mental impairment.

41) The general rule that a minor may disaffirm a contract up until the time he/she reaches the age of majority, and for a reasonable time thereafter.

42) Exceptions to the general rule above:

a) Necessaries: The minor MUST pay the reasonable value of the necessaries, which is usually less than the contractually agreed-upon price.

b) Misrepresentation of age: a few states will still permit the minor to disaffirm, but many states will not.

43) The fact that the merchant (non-minor) to a contract has NO right to disaffirm, even upon learning that the other party was a minor.

44) The fact that a contract can be ratified by words (orally or in writing) or with action (such as continuing to make loan payments or exercising dominion over the property).

45) The fact that getting an adult co-signer on your contract will protect you as the merchant from being taken advantage of under the law by a minor.

46) The general rule that, when one party is so intoxicated that he cannot understand the nature and consequences of the transaction, the contract is voidable.

47) The four situations in which nondisclosure of a fact amounts to misrepresentation.

48) The basic rule that if the partiescontract is based on an important (mutual) factual error, the contract is voidable by the injured party.

49) The two things a party must demonstrate in order to rescind a contract for unilateral mistake.

50) The basic rule that if one party makes an improper threat that causes the victim to enter into a contract, and the victim had no reasonable alternative, the contract is voidable under the doctrine of duress.

51) The two things an injured party must prove in order to rescind a contract based on undue influence.