Business Law Flashcards
Contract Elements:
“CLAIMS”
Consideration
Legality
Agreement (offer & acceptance)
Individuals
Meeting of the minds
Signature
Who is the OFFEREE?
The party to whom the offer is made.
Is an advertisement an offer?
No. It is an invitation to a consumer to make an offer.
Does SILENCE acceptance of an offer?
No, silence does NOT act as acceptance.
Offers, counteroffers, revocations, and rejections must be _______ in order to be effective.
RECEIVED
What is an option contract?
When an offer is made in writing and supported by consideration. The payment is made in order to keep the offer open. The seller can’t sell it to anyone else until the option expires. Not refunded, however it is assignable.
What terms must be defined in a contract?
- price
- parties
- time (closing)
- method of payment
Under the rules for selling a BUSINESS, REAL ESTATE, or SERVICES, the mirror image rule applies. What does this mean?
Terms of acceptance must exactly mirror the terms of the offer. If acceptance varies, it is considered a counteroffer.
When is considered the effective date of acceptance?
Acceptance only has to be sent (not received) in order to form a contract.
“Mailbox rule”
*Note: the offeror can state in the offer that acceptance must be received in order to be effective
When you see a question on the exam about OFFER and ACCEPTANCE, what are the 2 things you need to determine?
1) Does the mailbox rule apply?
2) Does the contract contain specific intructions for acceptance?
If yes, look for when acceptance was received.
If received by due date = contract
If received after (late) = counteroffer
What is a bilateral contract?
A promise for a promise.
Offer is made, only have to promise to form contract.
I promise to pay you $1000, if you promise to paint my kitchen by 7/31.
What is a unilateral contract?
Acceptance by performance / Offer for a reward.
I promise to pay you $1000, if you paint my kitchen by 7/31.
A contract is bilateral if it calls for acceptance to be in the form of a ______.
Promise.
Who creates a QUASI CONTRACT? Why do they create it?
The court creates a quasi contract to prevent one side from receiving something that they’re not entitled to.
an EXECUTORY contract is NOT _____ _____
fully performed
An EXECUTED CONTRACT is
fully performed, complete
4 elements of FRAUD
- Material misrepresentation / omission
- Scienter / intent
- Justifiable reliance
- Damages
Difference between void and voidable?
A contract is voidable if a mistake is discovered and therefore has the right to cancel.
It is not void, the other party can still execute the contract.
Example of void: illegal contract
Is misrepresenting an immaterial fact FRAUD?
NO, must be material.
What does entering a contract under DURESS mean?
Threatening / physically forcing someone
What does entering a contract under UNDUE INFLUENCE mean?
Using one’s position to take advantage of a person in a close and personal relationship.
What is CONSIDERATION that must be exchanged for a legal contract?
- Money, goods, services
- Legal detriment (giving up one’s rights)
- Does NOT have to be equal/even
In what situations is consideration not present?
- if someone is just fulfilling a pre-existing legal duty
- if someone is just fulfilling a moral obligation
To form a contract both sides need some form of ______
consideration
Can a contract be based on past consideration?
No, past performance is NOT viewed as consideration and would NOT support a new contract.
MODIFICATION of an existing contract. What does it require?
-Both sides need NEW consideration
Exception to consideration on BOTH sides exists for whom?
Charities.
Can be enforced by the charity even if the charity promised nothing in return.
What are the 3 categories of persons who lack the capacity to enter a legal contract?
- Minors (unless necessary received)
- Insane persons
- Intoxicated persons
A contract that involve something illegal are void or voidable?
VOID
If someone performs a SERVICE on the exam, make sure that they are ______ in order to get paid?
required licensing.
Can’t collect even if they performed the service.
If someone has a CPA license, but lacks a Revenue ID license, can they still get paid?
Yes, as long as they have their CPA license.
Statute of Frauds - what is the ORGIES acronym that states the items that need to be signed by the person expected to perform?
Certain contracts need to be in writing:
One yr - impossible to complete within a yr Real estate - house/land/building Guaranty Investment securities Executor of will Sale of goods - $500+
If someone performs a service on the exam, what should you look for to see if they can collect for the service?
Do they have the required REGULATORY LICENSE?
What is a REVENUE LICENSE?
Just a tax ID number.
Different from a REGULATORY license.
Can still recover for services without a revenue license.
Under the Statute of Frauds, the sale of goods requires a contract to be in writing if it is over $____.
$500
Under the Statute of Frauds, can someone back out of a contract if they have signed?
NO
Parole evidence rule
Parole evidence rule:
Excludes oral evidence that exists prior to the written contract. Written contract stands in court.
Can a right to get paid be assigned to a 3rd party? Does it need to be in writing?
Yes, rights are assignable. Assignment can’t increase any other party’s risk to be valid. Does NOT need to be in writing.
3rd party beneficiary rule - what rights do they have?
Although they paid nothing, they can sue to enforce the contract. (as long as they were part of the contract from the beginning)
**think parent’s life insurance for kids
Can an incidental beneficiary sue?
No, only intended beneficiaries explicitly stated in the contract can sue.
What is an anticipatory repudiation?
Any expression of unwillingness or inability to perform a contract before the performance is due. BREACH OF CONTRACT. Can sue immediately.
What does death excuse in terms of a contract? What does it not excuse?
Performance of services is EXCUSED.
Sale of real estate NOT EXCUSED. (estate makes sale)
Remedies for contract breach (2):
- Monetary damages (most common award)
- Equitable relief (other than money)
What are punitive damages?
- Punishment for breach
- Hardly ever awarded in breach of contract because it is for “pain and suffering”
Liquidated damages are what?
Damages agreed to at the time of contract.
Not automatic - Court enforces unless too severe or punitive
-think security deposits
What is an injunction?
Agreement not to compete.
What is a covenant not to compete?
Contract to sell a business prohibiting the seller from competing with buyer.
(must be reasonable to be enforecable)
Can you obtain specific performance award for services contract breach?
No
