Business Law- Contracts Flashcards
CONTRACTS: What are the sources of contact law?
Common Law (real estate, services which include employment)
Uniform Commercial Code (sale of goods)
Always ask the question, are you under common law or commercial code.
T/F: UCC is codified among all states?
True.
Common law is not codified. The law wants to ensure people knew what they were doing under these contracts.
What are the three types of contracts?
1) Express Contracts (written or oral): Negotiation that has been discussed or written
2) Implied or implied in fact: No formal agreement. Go into a doctors office, but it is implied that they will help and you will pay.
3) Quasi- Contract: Not contracts, no one has reached an agreement. You shouldn’t enjoy someone’s labor and no one pays.
Difference between bilateral contracts versus unilateral contract.
Bilateral= Promise for a promise Unilateral= Action for a promise
Difference between Executed VS Executory VS Partially Executed/Partially Executory
Executory= final contract where no one has done anything on both sides.
Executed: Executory contract has been performed by both sides
Partially Executed/Partially Executory: One side has performed and the other has not.
What are valid contracts?
Final contracts, no illegal subject matter
What are void contracts?
Final contract, but the subject matter is illegal or because of formation issues (duress)
What are voidable contracts?
There is a final contract, there is a problem with the capacity with one of the parties (intoxication, age, mental capacity)
What are the four elements to a contract? All ingredients need to be there for it to be valid.
1) Officer
2) Acceptance
3) Consideration
4) Absence of defenses (duress, undue influence)
Difference between offer under UCC and Common Law
1) UCC subject matter
2) Common Law- Have to have ALL THE DETAILS
How does an offer end?
1) Rejection- Effective upon receipt
2) Counteroffer- Common law has to be the mirror image
3) Revocation- any time prior to acceptance
4) Death of the offeror- Cannot charge the estate
5) Bankruptcy
6) Illegal
What is an options contract?
Options contract- Separate agreement to keep an offer open. Consideration required and is irrevocable. Death does not terminate this offer, it will remain.
UCC- Acceptance with additional terms. What is the difference between Non-Merchant’s and Merchant’s
Non-Merchant: Contract without additional terms
Merchant: Contract with additional terms unless it is limited to certain terms, material, or objection
T/F: Conditional acceptance is never an offer?
TRUE
If you see the word “IF” in an an acceptance to an offer, what does that mean?
IT IS A COUNTER OFFER
T/F: Do we care about the amount for consideration?
Nope, we don’t care. You just have to pay it.
For a consideration to be valid, there has to be two components, what are those components?
Benefit and Detriment
Define consideration:
Doing what you’re free not to do or not doing what you’re free do.
Right to sue, is consideration.
Are charitable subscriptions enforceable?
Yes, even though one side doesn’t have any detriment.
What is a preexisting obligation?
You cannot get more money for something you are already obligated to do.
Modification differences between UCC and Common Law
UCC- Good Faith (they don’t have to agree, but if they do, the modification is valid)
Common Law- Additional Consideration (both have to give up detriment)
What is a liquidated date? Can you negotiate your way out of a liquidated debt?
Everyone knows the amount, when it’s due. You cannot negotiated your way out.
What is an unliquidated debt?
Both parties understand there is a debt owed, but can’t agree on the amount. They can negotiate on the amount.
Define Statute of frauds?
Contracts that need to be in writing to be enforceable.
Statute of frauds: What type of land transactions need to be in writing?
Options, contracts, leases, mortgages
What is partial performance?
Partial performance for land contracts, willingness to enforce an oral agreement:
1) Possession of the land
2) Made improvements
3) Made payments
Under paying the debts for another, what needs to be in writing? (Examples)
Original vs collateral (guaranteeing your own property)
Executor
Bankruptcy discharge
Define the one year rule?
Contracts not to be performed within one year, measured from time of agreement.
Explanation: Measure from the time they enter the contract, not the time the contract will run.
Sales- Contracts for the sale of goods need to be in writing if it over what amount.
$500
What is the UCC exception to the statute of frauds?
Confirmation memo. Sending an email of an oral contract.
Any admission under oath that there was a contract
What is the parol evidence rule?
ANSWER:
1) Do you have a complete contract
2) No ambiguities
3) Final Written Form
No evidence that took place before the agreement.
Minors less than 18- are the contracts voidable?
True, they are voidable contracts. They can disaffirm the contract at any time for a reasonable time after they reach the age of majority.
All they have to do is return the consideration that they have.
After majority, they can say nothing or ratify that they accept the contract and it becomes enforceable.
The mental capacity of an individual is not there, what the classification of the contract
Void- if dictated by the court
Run-of-the-mill insane- it is voidable (don’t understand the consequences of the contract, did not understand the effect of the contract)
If you are drunk, is that a defense to a contract?
Yes, it has to be to the point of mental incapacity. It is voidable.
If you make a unilateral mistake, is there defense?
No, not to unilateral mistake. If there is no way the other party would know.
If the other party should have known, then there is a defense.
What is conditions precedent?
Event required to occur before you can perform (if your client doesn’t give you the information to complete the audit, you can never be in breach of the contract)
What is the doctrine of substantial performance?
1) Is it for practical purposes just as good?
2) Was it done in good faith?
3) Can party be compensated?
Under UCC, can you reject a good?
YES, IF THERE IS ANYTHING, ANYTHING WRONG, YOU CAN REJECT IT.
When can you be discharge from performance?
When conditions fail
When parties agree to be discharged
What is NOVATION?
Original parties to the contract, release one party to ANOTHER party.
If the statute of limitations runs out, can the non-breaching party sue?
Nope
What is impossibility?
Subjective VS Objective Test
You physically CANNOT complete it!!
This is a very very high standard
What is impracticability?
EVENTS that have happened that NEITHER PARTY anticipated when they entered into the contract.
What happens if the matter of the contract becomes illegal?
It is void
What can you do if the other party breaches?
1) . Recision- Returns parties to original position
2) Nominal- Technical Breach
3) Compensatory- Return parties to SAME POSITION AS IF THERE WERE NO BREACH
What are incidental damages:
Cost, lawyer fees, minimal expenses, extra inspection
What are consequential damages
Damages to the third party. The seller has not delivered on time and there are daily penalties for not delivery on time. If a vendor was responsible for you being delayed, then you can pass the cost to your vendor.
What is specific performance?
Used against seller in LAND contracts
UCC- Rare or unique product
What are the three types of beneficiaries?
Creditor, donee, incidental
If a named beneficiary is to receive money from a life insurance company, who can the beneficiary sue?
They can sue against the life insurance company but they cannot proceed against the parent’s estate.
If a named creditor beneficiary is to receive money (doctor’s office), who can the beneficiary sue?
They can sue against the patient or insurance company. If the insurance company doesn’t pay, they will come after the patient.
Can an insured individual go after the medical insurance company?
Yes! it is an existing contract obligation.
Does an incidental beneficiary have rights?
Nope!
