BUS311_chapter_05

BUS311_chapter_05 - Contracts Capacity Genuine Assent the...

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CHAPTER 5 Section 5.1 Valid, Voidable, Unenforceable, and Void Agreements A fter±determining±that±an±offer±and±acceptance±are±valid,±and±that±there±is±valid± consideration,±each±party±to±the±contract±must±have±the± capacity ±to±enter±into±a± binding±contract±and±must±give±his±or±her±genuine±assent±to±enter±into±a±binding± agreement.±To±put±it±another±way,±the±parties±must±fully±understand±that±they±are±entering± into±a±contract,±and±they±must±willingly±enter±into±a±contractual±relationship±with±each± other.±To±use±a±simple±example,±if±Felipe±holds±a±gun±on±Heather±to±persuade±her±to±sell± him±her±car,±there±may±be±offer,±acceptance,±and±consideration,±but±the±contract±is±defec - tive±due±to±lack±of±mutual±assent.±Heather±was±not±truly±agreeing±to±sell±her±car;±she±just± wanted±to±avoid±getting±shot. In±this±chapter±we±will±examine±a±number±of±impediments±that±might±invalidate±what±oth - erwise±appear±to±be±valid±contracts.±These±include±lack±of±capacity,±defective±assent±issues± (mutual±mistake±of±material±fact,±duress,±undue±influence,±fraud),±illegality,±and±having±an± oral±agreement±in±one±of±the±few±situations±in±which±the±law±requires±a±writing. But±first,±it’s±time±for±some±more±terminology! 5.1 Valid, Voidable, Unenforceable, and Void Agreements valid contract ±is±one±that±meets±all±legal±requirements.±It’s±what±people±generally± aim±for±when±they±seek±to±make±a±contract.±Sometimes,±though,±it’s±not±what±they± end±up±with. voidable contract ±results±from±lack±of±either±capacity±or±genuine±assent.±Voidable±means± that±at±least±one±of±the±parties,±and±sometimes±both,±can±get±out±of±the±contract±without± being±liable±for±breach,±generally±because±of±some±circumstance±present±when±the±contract± was±made.±Contracts±made±by±minors±(people±under±a±statutory±age)±are±voidable±at±the± option±of±the±minor.±Contracts±made±under±duress±or±undue±influence,±or±contracts±that± involve±fraud±by±one±party,±are±voidable±at±the±option±of±the±victim.±However±if±the±victim± wishes±to±go±through±with±the±contract,±he±or±she±can±hold±the±“bad±guy”±to±the±deal.±Sup - pose±that±Heather,±in±the±above±example,±discovers±that±Felipe±actually±contracted±to±pay± more±than±market±value±for±her±old±car.±If±she±decides±to±forgive±him±for±the±whole±gun± thing±and±hold±him±to±the±contract±rather±than±voiding±it,±she±can.±Lastly,±a±contract±made± when±there±was±a±mutual±mistake±of±material±fact±is±voidable±at±the±option±of±either±party.
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BUS311_chapter_05 - Contracts Capacity Genuine Assent the...

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