Using Legal Language

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Chapter 11 Contract Requirements
1.
A contract containing consideration occurs when one person says to another,
"I'll sell you my car for $400," and the other replies, "I'll buy it."
2.
When one person says to another, "I'm going to give you my car as a gift,"
and the other replies, "Fine, I'll accept it," no consideration exists, and the agreement is
not binding.
3.
In a bilateral contract, consideration is found in the promises made by each
party. In a unilateral contract, it is found in the promise of one and the act of the other.
4.
Contracts that must be in writing to be enforceable are: (a) contracts that are
not to be completed within a year, (b) promises to answer for the debt or default of
another, (c) contracts for the sale of an interest in real property, (d) contracts in which
marriage is the consideration, (e) promises by personal representatives of estates to pay
debts of the estate personally, (f) promises to leave something to someone in a will, and
(g) with four exceptions, contracts for the sale of goods of $500 or more.
5.
The writing necessary to satisfy the statute of frauds must: (a) identify the
parties to the contract, (b) state the terms of the contract, (c) identify the locus if land is
involved, (d) state the price, and (e) be signed by the person against whom enforcement is
sought.
6.
The law assumes that when a contract is reduced to writing, all of its terms
are contained in the writing. Consequently, under the parol evidence rule, oral evidence
of prior or contemporaneous negotiations between the parties is not admissible in court to
alter, vary, or contradict the terms of a written agreement.
7.
When both parties are mistaken about an important aspect of an agreement, a
bilateral (mutual) mistake occurs, and the contract is voidable. When only one of the
parties makes a mistake, a unilateral mistake occurs, and the contract cannot be avoided.
8.
The elements of fraud are: (a) a misrepresentation of a material, existing fact,
(b) made with knowledge of its falsity, (c) made with the intent that it be relied on, (d)
that it was reasonably relied on, and (e) damages.
9.
An unconscionable contract is one that is so harshly one-sided and unfair that
it shocks the conscience of the court and will not be enforced.
10. Usury, gambling, and Sunday contracts are illegal and void in many states.
Understanding Legal Concepts
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Checking Terminology
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Using Legal Language
The smooth talking salesperson promised to pay for a free cataract operation for an
elderly woman who was almost blind. The salesperson was the promisor and the elderly
woman was the promisee; however, because the elderly woman promised nothing in
exchange for the cataract operation, she suffered no detriment. For this reason, no
consideration occurred, and the agreement was a(n) nudum pactum. Had the promise
been in writing and put under seal by the use of the letters "L.S." (which stands for locus
sigilli), it would have been binding in some states.
The sales person also committed fraud or deceit when he lied to the elderly woman. He
talked her into buying some worthless land with a shack on it by telling her that the locus
was beautiful high ground when it was actually swamp land. The type of fraud was fraud
in the inducement, because the salesperson's lie induced the woman to enter into the
contract. Because the salesperson was not in a position of trust, the wrongful act was not
undue influence, and it was not duress because the woman's free will was not overcome
by threats of physical harm. It was fraud in esse contractus, however, when the
salesperson told the woman that she was signing a second copy of the contract when she
was actually signing a check for $10,000. The writing that the woman signed met the
requirements of a(n) memorandum and, for that reason, was sufficient to satisfy the
statute of frauds. Because it was drawn up by the seller to the seller's advantage and
offered to the woman on a take-or-leave-it basis, the court might consider the contract to
be a(n) adhesion contract. In addition, the court might consider the contract to be
unconscionable because the woman agreed to buy a shack on an acre of worthless
swamp land for $250,000. Under the terms of the contract, she was to pay $100,000 in
cash and sign a note for the balance at 50 percent per annum interest, which is usury.
Although the parol evidence rule does not allow prior oral statements by the parties into
evidence in court to alter the terms of a written agreement, an exception exists when
fraud is committed. In addition, because both parties were mistaken as to the existence of
the subject matter when they signed the contract (the shack on the property had burned
down two days before the contract was signed), the contract was voidable. The mistake
was a(n) mutual mistake, which is also known as a(n) bilateral mistake not a(n)
unilateral mistake.
Puzzling Over What You Learned
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Caveat: Allow squares for spaces between words and punctuation (apostrophes, hyphens, etc.) when filling in crossword.
Across
3. A defense available when no consideration is contained in an agreement.
8. The charging of a greater amount of interest than is allowed by law.
10. A mark, impression, the word "seal," or the letters "L.S."
11. Place; locality.
13. The overcoming of a person's free will by the use of threat or physical harm.
16. Approve.
17. Another name for a bilateral mistake.
Down
1. Misrepresentation of a material, existing fact knowingly made.
2. Overcoming a person's free will by misusing a position of trust.
4. One-sided contract that must be accepted as is.
5. Fraud that induces another to enter into a contract.
6. In equal fault.
7. Annulled, canceled, or made void.
9. So harshly one-sided and unfair as to shock the court's conscience.
12. Another name for deceit.
14. The writing that is necessary to satisfy the statute of frauds.
15. A merchant's written promise to hold an offer open for the sale of goods.
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