Chapter 12

1. Chapter 12 Void and Voidable Agreements

2. What makes an agreement void or voidable? • because it violates the law as stated in constitutions, statutes, or court opinions • because sometimes one of the parties lacks capacity to contract or failed to give consideration • because one of the parties failed to genuinely assent to the agreement • genuine assent exists when consent is not clouded by fraud, duress, undue influence, or mistake • disaffirmance refusal to carry out or to comply with the terms of a voidable contract, with out any liability to pay damages

3. What types of agreements are illegal? • agreements to commit crimes or torts • agreements that obstruct legal procedures • compounding a crime accepting something of value for a promise not to prosecute a suspected criminal • agreements that injure public service • agreements made without a required competency license • agreements that restrain trade unreasonably

4. agreements to pay usurious interest • maximum rate of interest the highest rate of interest that state law permits lenders of money to change • small loan rate of interest a high rate of interest that the state permits licensed loan companies and pawnbrokers to charge on small loans • agreements that involve illegal gambling, wagers, or lotteries • wager a bet on the uncertain outcome of an event • agreements that affect marriage negatively

5. What is fraud? • Fraud false representation or concealment of a material fact • all of the following elements must be present for fraud to exist • the false representation or concealment of a past or present fact must be deliberate • personal opinion are not statements of fact and should not be taken serious • the misrepresented or concealed fact must be material • material fact fact that influences a decision

6. the person making the false representation must know it is false or make it recklessly without regard to its possible falsity • the misrepresentation must be made with the intention of influencing the other person to act upon it • the misrepresentation or concealment must induce action and cause injury to the other party

7. What is duress? Undue influence? • duress if one person compels another to enter into it through coercion or by illegal imprisonment • undue influence one person insidiously, or by wrongful persuasion and control over the free will of another, gets the other to make a contract that is unfavorable

8. Two types of mistakes. • Unilateral mistake one of the parties has an erroneous idea about the facts of a contract • mutual mistake or bilateral mistake both parties are wrong about some important facts

9. When can a minor disaffirm a voidable contract? • A minor can disaffirm a voidable contract any time while still a minor or within a reasonable time after reaching majority • After reaching majority, a person may ratify a voidable contract made while a minor • ratification the approval of a voidable contract in its entirety

10. Can minors disaffirm contracts for necessaries? • Necessaries goods and services that are reasonably required to maintain one’s life-style • An article must meet all of the following requirements for necessaries before a minor for a minor or parent can be held responsible for payment • the item must be reasonably required • the item must be actually furnished • the item must be reasonably suitable to the age and social and economic status of the minor • the item must not be otherwise furnished