1. What are the benefits of using a worst case scenario approach in drafting contracts? The benefits of using a worst case scenario include protecting the interests of the organizations in case of a breach of contract.
2. Explain the concepts of agreements, consideration, capacity, and legality in formation of contracts. A) An agreement consists of an offer and acceptance. An offer to sell equipment for $300 is a communication of an offer. If one agrees to pay the price for the equipment there is an acceptance. B) Consideration involves the exchange of value. One party gives up something of value in exchange for the other party’s value. If there has been an exchange of promises, there can be no contract until there is an exchange of value. C) Capacity means the legal competence of the parties to the contract to enter into a contractual relationship. For example, minors are usually not bound by contracts since the law makes a presumption that a minor lacks the legal competence to enter into contracts. D) Legality means that, to be enforceable, the subject matter of the contract must not violate state or federal law.
3. Are oral contracts generally enforceable? When are oral contracts not enforceable? Give some examples from a sport setting to illustrate Statue of Frauds principles. Oral contracts are generally enforceable although the parties involved may have trouble defining the terms of the contract as nothing is in writing. Oral contracts are not enforceable when the deal with: agreements for the sale of land or an interest in land, contracts for the sale of goods priced at $500 or more, and contracts that cannot be performed within one year of the formation of the contract.
4. What are the remedies available in breach of contract actions? What is the usual remedy? What are the limitations upon using specific performance? The remedies available in breach of contract situations are compensations damages, specific performances, liquidated damages, penalty provisions, rescission, restitution, and promissory estoppel. The usual remedy is compensatory damages. The limitation of using specific performance is that it does not apply to service contracts.
5. What is the principle of mitigation of damages? The principle of mitigation of damages states a nonbreaching party must act reasonably to lessen the consequences of the breach.
6. Contrast actual authority with apparent authority. When can third party use apparent authority to bind an organization to a contract? Actual authority is when a principal has conveyed to the agent what his limits of authority may be. Apparent authority is when an agent has conveyed to a third party that the agent has authority to act even though the agent has no actual authority. A third party can bind an organization to a contract if the organization acting as principal takes no action towards the agent.
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