- Minor
Minor person who has not reached the age of majority. Infancy doctrine - A doctrine that allows minors to disaffirm (cancel) most contracts they have entered into with adults. Disaffirmance - The act of a minor to rescind a contract under the infancy doctrine. Disaffirmance may be done orally, in writing, or by the minor's conduct. Competent party's duty of restitution If a minor has transferred money, property, or other valuables to the competent party before disaffirming the contract, that party must place the minor back into status quo. Minor's duty of restoration - As a general rule, a minor is obligated only to return the goods or property he or she has received from the adult in the condition it is in at the time of disaffirmance. Ratification - The act of a minor after the minor has reached the age of majority by which he or she accepts a contract entered into when he or she was a minor. Necessaries of life - Food, Clothing, shelter, medical care, and other items considered necessary to the maintenance of life. Minors must pay the reasonable value of necessaries of life for which they contract. Emancipation - The act or process of a minor's voluntarily leaving home and living apart from his or her parents.
Mentally Incompetent Persons
Legal insanity - A state of contractual incapacity, as determined by law Adjudged insane - Declared legally insane by a proper court or administrative agency. A contract entered into by a person adjudged insane is void. Insane but not adjudged insane Being insane but not having been adjudged insane by court or administrative agency. A contract entered into by such person is generally voidable. Some states hold that such a contract is void. Intoxicated person - A person who is under contractual incapacity because of ingestion of alcohol or drugs to the point of incompetence Illegal contract - A contract that has an illegal I object. Such contracts are void. Usury law - A law that sets an upper limit on the interest rate that can be charged on certain types of loans.
Sabbath law - A law that prohibits or limits the carrying on of certain secular activities on Sundays, Also called a Sunday law or a blue law Contact contrary to public - a contract that has a negative impact on society or that interferes with the public's safety and welfare. Immoral contracts - that is, contracts whose objective is the commission of an act that is considered immoral by society Gambling statutes - Statutes that make certain forms of gambling illegal Effect of Illegality - A doctrine which states that the courts will refuse to enforce or rescind an illegal contract and will leave the parties where it finds them. Persons who can assert an exception are: 1. Innocent persons who were justifiably ignorant of the law or fact that made the contract illegal. For example, a person who purchases insurance from an unlicensed insurance company may recover insurance benefits from the unlicensed company. 2. Persons who were induced to enter into an illegal contract by fraud, duress, or undue influence. For example, a shop owner who pays $5,000 "protection money" to a mobster so that his store will not be burned down by the mobster can recover the $5,000. 3. 3. Persons who entered into an illegal contract withdrawn before the illegal act is performed. For example, if the president of New Toy Corporation pays $10,000 to an employee of Old Toy Corporation to steal a trade secret from his employer but reconsiders and tells the employee not to do it before he has done it, the New Toy Corporation may recover the $10,000. 4. Persons who were less It fault than the other party for entering into the illegal contract. At Common law, parties to an illegal contract were considered in pari delicto (in equal fault). Some states have changed this rule and permit the less-at fault party to recover restitution of the consideration they paid under an illegal contract from the more-at-fault party. In pari delicto - A situation in which both parties are equally at fault in an illegal contract. Contract in restraint of trade A contract that unreasonably restrains trade. Licensing statute A statute that requires a person or business to obtain a license from the government prior to engaging in a specified occupation or activity Regulatory statute - A Licensing statute enacted to protect the public Revenue-raising statute - A licensing statute with the primary purpose of raising revenue for the government Exculpatory clause - A contractual provision that relieves one (or both) of the parties to a contract from tort liability for ordinary negligence
Unconscionable contract A contract that courts refuse to enforce all or part of because it is so oppressive or manifestly unfair as to be unjust Elements of Unconscionability: 1. The parties possessed severely unequal bargaining power. 2. The dominant party unreasonably used its unequal bargaining power to obtain 3. The adhering party had no reasonable alternative.
Ch 13
Genuineness of assent- the requirement that a party's assent to a contract be genuine. Unilateral mistake- a case in which only one party is mistaken about a material fact regarding the subject matter of a contract. Mutual mistake of fact- a mistake made by both parties concerning a material fact that is important to the subject matter of the contract. Mutual mistake of value- a mistake that occurs if both parties know the object of the contract but are mistaken of its value. Fraudulent misrepresentation- an event that occurs when one person consciously decides to induce another person to rely and act on a misrepresentation. FRAUD Scienter- knowledge that a representation is false or that it was made without sufficient knowledge of the truth. Fraud in the inception- fraud that occurs if a person is deceived as to the nature of his or her act and does not know what he or she is signing. Fraud in the inducement- Fraud that occurs when the party knows what he or she is signing but had been fraudulently induced to enter into the contract. Fraud by concealment- Fraud that occurs when one party takes specific action to conceal a material fact from another party. Innocent misrepresentation- fraud occurs when a person makes a statement of fact that he or she honestly and reasonably believes to be true even though it is not. Undue influence- a situation where one person takes advantage of another persons mental, emotional, or physical weakness and unduly persuades that person to enter into a contract. The persuasion by the wrongdoer must overcome the free will of the innocent party. Duress- one party threatens to do a wrongful act unless the other party enters into a contract.
Economic duress- one party to a contract refuses to perform his/her contractual duty unless the other party pays an increased price, enters into a second contract with the threatening party, or undertakes a similar action.
Chapter 14
Statute of frauds- a statute that requires certain types of contracts to be in writing. Contracts that must be in writing- 1. contracts involving interests in land 2.one year rule 3. collateral contract 4. promises made in consideration of marriages 5.sale of goods more than 500$ 6.real estate 7. finders fee contracts 8.promises to write a will Real property- the land itself, as well as buildings, trees, soil, minerals, timber, plants, crops, and other things permanently affixed to the land. Mortgage- an interest in real property given to a lender as security for the repayment of the loan. Lease- the transfer of the right to use real property for a specific period of time. Life estate- an interest in land for a persons lifetime; upon that persons death the interest will be transferred to another party. Easement- a right to use someone else's land without owning or leasing it. Part performance- an equitable doctrine that allows the court to order an oral contract for the sale of land or transfer of another interest in real property to be specifically performed if it has been partially performed and performance is necessary to avoid injustice. One-year rule- a rule which states that an Executory contract that cannot be performed by its own terms in one year of its formation must be in writing. Guaranty contract- a promise in which one person agrees to answer for the debt if the primary debtor does not. Guarantor- person who agrees to pay the debt if the primary debtor does not. UCC statute of frauds- goods of 500$ OR more must be in writing Equal dignity rule- a rule that says that agents contracts to sell property covered by the statute of frauds must be in writing to be enforceable. Promissory estoppel- an equitable doctrine that permits enforcement of oral contracts that should have been in writing. It is applied to avoid injustice.
Promissory estoppel requirements (3)- (1) the promise induces action of forbearance of action by another, (2) the reliance on the oral promise was foreseeable, and (3) injustice can be avoided only by enforcing the oral promise. Integration- the combination of several writings to form a single contract. Incorporation by refrence- integration made by express refrence in one document that refers to and incorporates another document within it. Merger clause- a clause in contract that stipulates that it is a complete integration and the exclusive expression of the parties agreement. Parole evidence- any oral or written words outside the four corners of a written contract. Parole evidence rule- a rule that says if a written contract is a complete and final statement of the parties agreement, any prior or contemporaneous oral or written statements that alter, contradict, or are in addition to the terms of the written contract are inadmissible in court regarding a dispute over the contract. There are several exceptions to this rule.
Chapter 15
Privity of contract - The state of two specified parties being in a contract Assignment - The transfer of contractual rights by l the oblige to another party Assignor - The obligee who transfers a right. Assignee - The party to whom a right has been transferred. Rights That Call and Cannot Be Assigned 1. Personal service contracts - Contracts for the provision of personal services are generally not assignable. 2. Assignment of future rights - Usually, a person cannot assign a currently nonexistent right that he or she expects to have in the future. 3. Contracts where assignment would materially alter the risk - A contract cannot be assigned if the assignment would materially alter the risk or duties of the obligor. 4. Assignment of legal action - Legal actions involving personal rights cannot be assigned.
Effect of all Assignment of Rights
Where there has been a valid assignment of rights, the assignee "stands in the shoes of the assignor." That is, the assignor is entitled to performance from the obligor. The unconditional assignment of a contract right extinguishes all the assignor's rights, including the right to sue the obligor directly for nonperformance.
Chapter 16
There are three levels of performance of a contract: complete, substantial, and inferior. Complete Performance - A situation in which a party to a contract renders performance exactly as required by the contract. Complete performance discharges that party's obligations under the contract. Substantial Performance - Performance by a contracting party that deviates only slightly from complete performance. o Substantial Performance occurs when there has been a minor breach of contract. o Minor breach - A breach that occurs when a party renders substantial performance of his or her contractual duties. o If the breaching party does not correct the breach, the non-breaching party can sue to recover damages by: (1) Deducting the cost to repair the defect from the contract price and remitting the balance to the breaching party or (2) Suing the breaching party to recover the cost to repair the defect if the breaching party has already been paid. Inferior performance - A situation in which a party fails to perform express or implied contractual obligations and impairs or destroys the essence of the contract. o A material breach of a contract occurs when a party renders inferior performance. o Material breach - A breach that occurs when a party renders inferior performance of his or her contractual duties. o The nonbreaching party may either (1) Rescind the contract and recover restitution or (2) Affirm the contract and recover damages. Anticipatory breach - A breach that occurs when one contracting party informs the other that he or she will not perform his or her contractual duties when due. o This type of material breach can be expressly stated or implied from the conduct of the repudiator. o Where there is an anticipatory repudiation, the nonbreaching party's obligations under the contract are discharged immediately. o The nonbreaching party also has the right to sue the repudiating party when the anticipatory Breach occurs; there is no need to wait until performance is due. Monetary damages - An award of money. Several types of monetary damages may be awarded. These include compensatory, consequential, liquidated, and nominal damages. Compensatory damages - An award of money intended to compensate a nonbreaching party for the loss of the bargain. Compensatory damages place the nonbreaching party in the same position as if the contract had been fully performed by restoring the "benefit of the bargain." o Mitigation - A nonbreaching party's legal duty to avoid or reduce damages caused by a breach of contract.
Consequential damages - Foreseeable damages that arise from circumstances outside a contract. To be liable for these damages, the breaching party must know or have reason to know that the breach will cause special damages to the other party. Liquidated damages - Damages to which parties to a contract agree in advance should be paid if the contract is breached. o A liquidated damages clause is considered a penalty if actual damages are clearly determinable in advance or if the liquidated damages are excessive or unconscionable. o If a liquidated damages clause is found to be a penalty, it is unenforceable. The nonbreaching party may then recover actual damages. Nominal damages - Damages awarded when the nonbreaching party sues the breaching party even though no financial loss has resulted from the breach. Nominal damages are usually $1 or some other small amount. Enforcement of Remedies If the breaching party refuses to Fay the judgment, the court may: Writ of attachment - A writ of attachment orders the sheriff or other government officer to seize property in the possession of the breaching party that he or she owns and to sell the property at auction to satisfy the judgment. Writ of garnishment - A writ of garnishment orders that wages, bank accounts, or other property of the breaching party that is in the hands of third parties be paid over to the nonbreaching party to satisfy the judgment. Federal and state laws limit the t amount of the breaching party's wages or salary that can be garnished. Rescissions and restitution restore the parties to the positions they occupied prior to the contract. Rescission - an action to undo a contract. It is available where there has been a material breach of contract, fraud, duress, undue influence, or mistake Restitution - The return of goods or property received from the other party to rescind a contract. If the actual goods or property is not available, a cash equivalent must be made. Equitable Remedies Equitable remedies are available if there has been a breach of contract that cannot be adequately compensated through a legal remedy. The most common equitable remedies are specific performance, reformation, and injunction.
Specific performance - A court orders the breaching party to perform the acts promised in the contract. Specific performance is usually awarded in cases were the subject matter is unique, such as contracts in Involving land, heirlooms, and paintings. Reformation - A court rewrites a contract to express the parties' true intentions. It is usually used to correct clerical errors. Injunction - A court prohibits a party from doing a. certain act. Injunctions are available in contract actions only in limited circumstances. Torts Associated with Contracts A party who can prove a contract-related tort, however, may also recover tort damages. Generally, punitive damages are not recoverable for breach of Contract. They are recoverable, however, for certain tortuous conduct that may be associated with the nonperformance of a contract. These actions include fraud, intentional conduct, and other egregious conduct. Intentional interference with contractual relations - A tort that arises when a third party induces a contracting put to breach the contract with another party. The following elements must be shown: o A valid, enforceable contract between the contracting parties o Third-party knowledge of this contract o Third-party inducement to breach the contract Convenant of good faith and fair dealing - An implied covenant under which the parties to a contract not only the parties to a contract not only contract but are also required to act in "good faith" and deal fairly in all respects in obtaining the objective of the contract.
Chapter 47
Personal Property
There are two kinds of property: real property and personal property. Real property Land and property that is permanently attached to it. o For example, minerals, Crops, timber, and Buildings that are attached to the land are generally considered real property.
Personal property that is permanently affixed to land or buildings is called a fixture. Such property, which includes things like heating systems and storm windows, is categorized as real property. Personal property - Tangible property such as automobiles, furniture, and equipment, and intangible property such as securities, patents, and copyrights. Personal property can be either tangible or intangible. Tangible property - All real property and physically defined personal property such as buildings, goods, animals, and minerals. Intangible property - Rights that cannot be reduced to physical form, such as stock certificates, certificates of deposit, bonds, and copyrights.
o
Acquiring Ownership of Personal Property
By Possession or Capture By Purchase or Production By Gift
Gift - a voluntary transfer of property without consideration. The lack of consideration is what distinguishes a gift from a purchase. There are three elements of a valid gift: o 1. Donative intent o 2. Delivery o 3. Acceptance Donor - A person who gives a gift. Donee - A person who receives a gift. Gift inter vivos - A gift made during a person's lifetime that is an irrevocable present transfer of ownership. Gift causa mortis - A gift that is made in contemplation of death. A Gift causa mortis is established when: o (1) The donor makes a gift in anticipation of approaching death from some existing sickness or peril, and o (2) The donor dies from such sickness or peril without having revoked the gift. o A gift causa mortis can be revoked by the donor up until the time he or she dies. o A gift causa mortis takes precedence over a prior conflicting will. Uniform Gift to Minors Act and Revised Uniform Gift to Minors Act Acts that establish procedures for adults to make gifts of money and securities to minors.
By Will or Inheritance By Accession
Accession - occurs when the value of personal property increases because it is added to or Improved by natural or manufactured means.
o o o
Accession that occurs naturally belongs to the owner. 1. (e.g., a colt that is born to a mare belongs to the mare's owner). If the improvement was made wrongfully, the owner acquires title to the improved property and does not have to pay the improver for the value of the improvements. If the improvement was mistakenly made by the improver, the courts generally follow these rules: 1. If the improvements can be easily separated from the original article, the improver must remove the improvements and pay any damages caused by such removal. 2. If the improvements cannot be removed, the owner owns title to the improved property and does not have to pay the improver for the improvements.
By Confusion
Confusion occurs if two or more persons commingle fungible goods (i.e., goods that are exactly alike, such as the same grade of oil, grains, or cattle). Title to goods can be acquired by confusion.
By Divorce
Mislaid, Lost, and Abandoned Personal Property
Mislaid property - occurs when its owner voluntarily places the property somewhere and then m inadvertently forgets it. It is likely that the owner will return for the property upon realizing that it was misplaced. o The owner of the premises where the property is mislaid is entitled to take possession of the property against all except the rightful owner. o This right is superior to the rights of the person who finds it. o Such possession does not involve a change of title. Lost property - Property is considered lost when its owner negligently, carelessly, or inadvertently leaves it h somewhere. o The finder obtains title to such property against the whole world except the true owner. Estray Statute - Most states have enacted estray statutes that permit a finder of mislaid or lost property to clear title to the property if: 1. The finder reports the found property to the appropriate government agency and then turns over possession of the property to this agency. 2. Either the finder or the government agency posts notices and publishes advertisements describing the lost property. 3. 3. A specified time (usually a year or a number (If years) has passed without the rightful owner's reclaiming the property. Abandoned Property - Property is classified as abandoned if (1) an owner discards the property with the intent to relinquish his or b.er rights in it or (2) an owner of mislaid or lost property gives up any further attempts to locate it.
Bailments
Bailment - A transaction in which in owner transfers his or her personal property to another to be held, stored, delivered, or for some other purpose. Title to the property does not transfer. Bailer - The owner of property in a bailment. Bailee - a holder of goods who is not a seller or 0 buyer (e.g., a warehouse or common carrier)
Elements Necessary to Create a Bailment
1. Personal property. Only personal property can be bailed. The property can be tangible (e.g., automobiles, jewelry, animals) or intangible (e.g., stocks, bonds, promissory notes). 2. Delivery of possession. Delivery of possession involves two elements: (1) The bailee has exclusive control over the personal property. (2) The bailee must knowingly accept the personal property. 3. Bailment agreement. The creation of a bailment does not require any formality. Bailment for the Sole Benefit of the Bailor - A gratuitous bailment that benefits only the bailor. The bailee owes only a duty of slight care to protect the bailed property. Bailment for the sole benefit of tile bailee - A gratuitous bailment that benefits only the bailee. The bailee owes a duty of utmost care to protect the bailed property. Mutual benefit bailment - A bailment for the mutual benefit of the bailor and bailee. The bailee owes a duty of ordinary care to protect the bailed property. Type of Bailment For the sole benefit of the bailor For the sole benefit of the bailee For the mutual benefit of the bailor and bailee Duty of Care Owed by Bailee Slight Great Ordinary Bailee liable to Bailor for Gross negligence Slight negligence Ordinary negligence
Duration and Termination of Bailments
Bailment for a fixed term - A bailment that terminates at the end of the term or sooner, by mutual consent of the parties. Bailment - at will A bailment without a fixed term can be terminated at any time by either party. Common Carrier The person shipping the goods is the shipper or consignor (the bailor). The transportation company is called the common carrier (the bailee). The person to whom the goods He to be delivered is called the consignee. Type of Bailee Warehouse company Limitation on Liability May limit the dollar amount of liability by offering the bailor the right to declare a higher value for the bailed goods for an additional charge. Strictly liable except for: May limit the dollar amount of 1. Act of God liability by offering the bailor the 2. Act of a public enemy right to declare a higher value 3. Order of the government for the bailed goods for an 4. Act of the shipper additional charge. 5. Inherent nature of the goods Strictly liable State innkeepers' statutes limit the liability of an innkeeper for others' negligence. Liability Ordinary negligence
Common carrier
Innkeeper
Real Property
Real properly - The land itself as well as buildings, trees, soil, minerals, timber, plants, and other things permanently affixed to the land. Subsurface rights - rights to the earth located beneath the surface of the land. Fixtures - Goods that are affixed to real estate so as to become part thereof.
Estates in Land
Estate - Ownership rights in real property the bundle of legal rights that the owner has to possess, use, and enjoy the property.
Freehold estate - An estate where the owner has a present possessory interest in the real property. The two types of freehold estates are estates in fee and life estates.
Estates in Fee
Fee simple absolute - A type of ownership of real property that grants the owner the fullest bundle of legal rights that a person can hold in real property. If a person owns real property in fee simple, his or her ownership: - Is infinite in duration (fee) - Has no limitation on inheritability (simple) - Does not end upon the happening of any event (absolute) Fee simple defeasible - A type of ownership of real property that grants the owner all the incidents of a fee simple absolute except that it may be taken away if a specified condition occurs or does not occur. Life estate - An interest in land for a person's lifetime; upon that person's death, the interest will be transferred to another party.
Concurrent Ownership
Co-ownership - A situation in which two or more persons own a piece of real property. Also called Concurrent ownership. Joint tenancy - A form of co-ownership that includes the right of survivorship. This means that upon the death of one of the co-owners (or joint tenants), the deceased person's interest in the property automatically passes to the surviving joint tenants. Any contrary provision in the deceased's will is ineffective. Tenancy in common - A form of co-ownership in which the interest of a surviving tenant in common passes to the deceased tenant's estate and not to the cotenants. Tenancy by the entirety - A form of co-ownership of real property that can be used only by married couples. Community property - A form of ownership in which each spouse owns an equal one-half share of the income of both spouses and the assets acquired during the marriage. Condominium - A common form of ownership in a multiple-dwelling building when the purchaser has title to the individual unit and owns the common areas as a tenant in common with the other condominium owners. Cooperative - A form of co-ownership of a multiple-dwelling building in which a corporation owns the building and the residents own shares in the corporation.
Future Interests
Future interest - The interest that the grantor retains, for himself or a third party. The two forms of future interests are reversion and remainder. Reversion - A right of possession that returns to the grantor after the expiration of a limited or contingent estate.
Remainder - Aright of possession that returns to a third party upon the expiration of a limited or contingent estate
Transfer of Ownership of Real Property
Sale - The passing of title from a seller to a buyer for a price. Also called a conveyance. Deed - A writing that describes a person's ownership interest in a piece of real property. Grantor - The party who transfers an ownership interest in real property. Grantee - The party to whom an interest in real property is transferred. Recording statute - A slate statute that requires a mortgage or deed of trust to be recorded in the county recorder's office of the County in which the real property is located. Quiet title action - An action brought by a party seeking an order of the court declaring who has title to disputed property. The court "quiets title" by its decision. Marketable title - Title to real property that is free from any encumbrances or other defects that are not disclosed but would affect the value other property, Also called good title. The three most common ways of assuring marketable title are as follows: - Attorney's opinion - An attorney examines an abstract of title and renders an opinion concerning the status of the title. The attorney may be sued for ally losses caused by his or her negligence in rendering the opinion. - Torrens system - The Torrens system is a method of determining title to real property in a judicial proceeding at which everyone claiming an interest in the property may appear and be heard. After the evidence is heard, the court issues a certificate of title to the person who is determined to be the rightful owner. - Title insurance - The best way for a grantee to be sure that he or she has obtained marketable title is to purchase title insurance from an insurance company. The title insurer must reimburse the insured for any losses caused by undiscovered defects in the title. Each time a property is transferred or refinanced, a new title insurance policy must be obtained. Tax sale - A method of transferring property ownership that involves a lien on property for unpaid property taxes. If the lien remains unpaid after a certain amount of time, a tax sale is held to satisfy the lien. Adverse possession - A situation in which a person who wrongfully possesses someone else's real property obtains title to that property if certain statutory requirements are met. To obtain title under adverse possession, the wrongful possession must be: - For a statutorily prescribed period of time. In most states, this period is between 10 and 20 years. - Open, visible, and notorious. The adverse possessor must occupy the property so as to put the owner on notice of the possession. - Actual and exclusive. The adverse possessor must physically occupy the premise. The planting of crops, grazing of animals, or building of a structure on the land constitutes physical occupancy. - Continuous and peaceful. The occupancy must be continuous and uninterrupted for the required statutory period. Any break in normal occupancy terminates the adverse possession. This means that the adverse possessor may leave the property to go to work, to the store, on a vacation, and such. The adverse possessor cannot take the property by force from an owner. - Hostile and adverse. The possessor must occupy the property without the express or implied permission of the owner. Thus, a lessee cannot claim title to property under adverse possession.
Nonpossessory Interests
Nonpossessory interest - A situation in which a person holds an interest in another person's property without actually owning any part of the property. Easement - A given or required right to make limited use of someone else's land without owning or leasing it. There are two types of easements: - Easement appurtenant - A situation created when the owner of one piece of land is given an easement over an adjacent piece of land. - Easement in gross - An easement that authorizes a person who does not own adjacent land to use another's land. License - A document that grants a person the right to enter upon another's property for a specified and usually short period of time. (e.g., hunting lease) Profit - A document that grants a person the right to remove something from another's real property.