Business Law Exam 2 Flashcards
A type of contract that arises when a promise is given in exchange for a promise
Bilateral Contract
An agreement that can be enforced in court; formed by two or more parties, each of whom agrees to preform or to refrain from performing some act now or in the future
Contract
A contract that has been completely performed by both parties
Executed Contract
A contract that has not yet been fully performed
Executory Contract
A contract in which the terms of the agreement are fully and explicitly stated in words, oral or written
Express Contract
Evidence that relates to a contract but is not contained within the document itself, including the testimony of the parties, the testimony of the witnesses, and additional agreements and communications. A court may only consider this when a contract term is ambiguous and the evidence does not contradict the express terms of the contract.
Extrinsic Evidence
A contract that by law requires a specific form, such as being executed under seal, to be valid
Formal Contracts
A contract formed in whole or in part from the conduct of the parties (as opposed to an express contract)
Implied Contract
A contract that does not require a specified form or formality in order to be valid
Informal Contracts
A theory under which the intent to form a contract will be judged by outward, objective facts as interpreted by a reasonable person, rather than by the party’s own secret, submissive intentions. Objective facts might include what a party said when entering into the contract, how a party acted or appeared, and the circumstances surrounding the transaction.
Objective Theory of Contracts
A person to whom an offer is made
Offeree
A person who makes an offer
Offeror
A person’s assurance that he or she will or will not do something
Promise
A person to whom a promise is made
Promisee
A person who makes a promise
Promisor
A fictional contract imposed on parties by a court in the interests of fairness and justice; usually, quasi contracts are imposed to avoid the unjust enrichment of one party at the expense of another
Quasi Contracts
A valid contract rendered unenforceable by some statute or law
Unenforceable Contract
A contract that results when an offer can be accepted only by the offeree’s performance
Unilateral Contract
A contract that results when the elements necessary for contract formation (Agreement, Consideration, contractual capacity, and legality) are present.
Valid Contract
A contract having no legal force or binding effect
Void Contract
A contract that may be legally avoided (Canceled) at the option of one of the parties
Voidable Contract
(1) In contract law, the offeree’s notification to the offeror that the offeree agrees to be bound by the terms of the offeror’s proposal. (2) In negotiable instruments law, the drawee’s signed agreement to pay a draft when presented.
Acceptance
A meeting of two or more minds in regard to the terms of a contract; usually broken down into two events - an offer by one party to form a contract, and an acceptance of the offer by the person to whom the offer is made.
Agreement
Terms and conditions of use that are presented to an Internet user at the time a product, such as software, is downloaded but that need not be agreed to before the product is installed or used.
Browse-warp Terms
An agreement that arises when a buyer, engaging in a transaction on a computer, indicates his or her assent to be bound by the terms of an offer by clicking on a button that says, for example, “I agree”, sometimes referred to as a click-on license or a click-warp agreement
Click-on Agreement
An offeree’s response to an offering which the offeree rejects the original offer and at the same time makes new offer
Counteroffer
A contract that is entered into in cyberspace and is evidenced only by electronic impulses (such as those that make up a computer’s memory), rather than, for example, a typewritten form.
E-contracts
As defined by the Uniform Electronic Transactions Act, “an electronic sound, symbol, or process attached to or logically associated with a record and executed or adopted by a person with the intent to sign the record.”
E-signature
A provision in a contract designating the court, jurisdiction, or tribunal that will decide any disputes arising under the contract
Forum-selection Clause
A rule providing that an acceptance of an offer becomes effective on dispatch
Mailbox Rule
A common law rule that requires, for a valid contractual agreement, that the terms of the offeree’s acceptance adhere exactly to the terms of the offeror’s offer
Mirror Image Rule
A promise or commitment to perform or refrain from performing some specified act in the future
Offer
A contract under which the offeror cannot revoke his or her offer for a stipulated time period and the offeree can accept or reject the offer at any time during this period. The offeree must give consideration for the option to be enforceable
Option Contract
An agreement between a seller and a buyer who frequently do business with each other on the terms and conditions that will apply to all subsequently formed electronic contracts
Partnering Agreement
According to the Uniform Electronic Transactions Act, information that is either inscribed on a tangible medium or stored in an electronic or other medium, and that is retrievable
Record
In contract law, the withdrawal of an offer by an offeror. Unless an offer is irrevocable, it can be revoked at any time prior to acceptance without liability.
Revocation
An agreement whose terms are expressed in a document located inside a box in which goods (usually software) are packaged; sometimes called a shrink-wrap license
Shrink-wrap license
An agreement for payment (or other performance) between two parties, one of whom has a right of action against the other. After the payment has been accepted or other performance has been made, the “accord and satisfaction” is complete, and the obligation is discharged
Accord and satisfaction
Generally, the value given in return for a promise or a performance. Must be present to make the contract legally binding, must be something of legally sufficient value and must be bargained for
Consideration
An agreement to substitute a contractual obligation for some other type of legal action based on a valid claim.
Covenant Not To Sue
Barred, impeded, or precluded
Estopped
A debt that is due and certain in amount
Liquidated Debt
Something given or some act done in the past, which cannot ordinarily be consideration for a later bargain
Past Consideration
A doctrine that applies when a promisor makes a clear and definite promise on which the promise justifiably relies. Such a promise is binding if justice will be better served by the enforcement of the promise
Promissory Estoppel
A contract in which one party forfeits the right to pursue a legal claim against the other party
Release
A remedy whereby a contract is canceled and the parties are returned to the positions they occupied before the contract was made; may be effected through the mutual consent of the parties, by their conduct, or by court decree
Rescission
A debt that is uncertain in amount
Unliquidated debt
The age at which an individual is considered legally capable of conducting himself or herself responsibly and is entitled to vote. In contract law, the age which one is no longer an infant and can no longer disaffirm a contract
Age of Majority
The legal ability to enter into contracts; the threshold mental capacity required by law for a party who enters into a contract to be bound by that contract
Contractual Capacity
A contractual promise to refrain from competing with another party for a certain period of time and within a certain geographic area. Although covenants not to compete restrain trade, they are commonly found in partnership agreements, business sale agreements, and employment contracts. If they are ancillary to such agreements, covenants not to compete will normally be enforced by the courts unless the time period or geographic area is deemed unreasonable.
Covenant Not To Compete
The legal avoidance, or setting aside, of a contractual obligation
Disaffirmance
In regard to minors, the act of being freed from parental control; occurs when a child’s parent or legal guardian relinquishes the legal right to exercise control over the child. Normally, a minor who leaves home to support himself or herself is considered emaciated
Emancipations
A clause that releases a contractual party from liability in the event of monetary or physical injury, no matter who is at fault.
Exculpatory Clauses
Necessities required for life, such as food, shelter, clothing, and medical attention; may include whatever is believed to be necessary to maintain a person’s standard of living or financial and social status
Necessaries
The act of accepting and giving legal force to an obligation that previously was not enforceable
Ratification
A court-ordered correction of a written contract so that it reflects the true intentions of the parties
Reformation
A contract or clause that is void on the basis of public policy because one party is forced to accept terms that are unfairly burdensome and that unfairly benefit the dominating party
Unconscionable
A contract or clause that is void on the basis of the public policy because one party is forced to accept terms that are unfairly burdensome and that unfairly benefit the dominating party
Unconscionable
Charging an illegal rate of interest
Usury
A “standard-form” contract, such as that between a large retailer and a consumer, in which the stronger party dictates the terms
Adhesion Contracts
A mistake that occurs when both parties to a contract are mistaken about the same material fact
Bilateral Mistake
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Duress
A false statement of fact or an act made in good faith that deceives and causes harm or injury to another
Innocent Misrepresentation
A defect that is not obvious or cannot readily be ascertained
Latent Defects
Any manifestation through words or conduct that amounts to an untrue statement of fact made in circumstances in which a reasonable and prudent person would not have done that which led to the misrepresentation. A representation made with an honest belief in its truth may still be negligent due to (1) a lack of reasonable care in ascertaining the facts, (2) the manner of expression, or (3) the absence of the skill or competence required by a particular business or profession
Negligent Misrepresentation
Knowledge by the misrepresentation party that material facts have been falsely represented or omitted with an intent to deceive
Scienter
Persuasion that is less than actual force but more than advice and that induces a person to act according to the will or purposes of the domination party
Undue Infuence
A mistake that occurs when one party to a contract is mistaken as to a material fact
Unilateral Mistake
Knowing and voluntary agreement to the terms of a contract. If it is lacking, the contract will be voidable
Voluntary Consent
A second promise that is ancillary (subsidiary) to a principal transaction or a primary contractual relationship, such as a promise made by one person to pay the debts of another of the latter fails to preform. Normally must be in writing to be enforceable.
Collateral Promise
A written contract that constitutes the final expression of the parties’ agreement. If a contract is integrated, evidence extraneous to the contract that contradicts or alters the meaning of the contract in any way is inadmissible
Integrated Contract
A substantive rule of contracts under which a court will not receive into evidence the parties’ prior negotiations, prior agreements if that evidence contradicts or varies the terms of the parties’ written contract
Parol Evidence Rule
An agreement made before marriage that defines each partner’s ownership rights in the other partner’s property. Prenuptial agreements must be in writing to be enforceable
Prenuptial Agreements
A state statute under which certain types of contracts must be in writing to be enforceable
Statute of Frauds
An assertion or action by party indicating that he or she will not perform an obligation that he or she is contractually obligated to perform at a future time
Anticipatory Repudation
The failure, without legal excuse, of a promisor to perform the obligations of a contract
Breach of Contract
A doctrine under which a seller may be excused from performing a contract when (1) a contingency occurs, (2) the contingency’s occurrence makes performance impracticable, and (3) the nonoccurrence of the contingency was a basic assumption on which the contract was made
Commercial Impracticability
Conditions in a contract that must occur or be performed at the same time; they are mutually dependent. No obligations arise until these conditions are simultaneously preformed
Concurrent Conditions
A possible future event, the occurrence or nonoccurrence of which will trigger the performance of a legal obligation or terminate an existing obligation under a contract
Condition
A condition in a contract that must be met before a party’s promise becomes absolute
Condition Precedent
A condition in a contract that operates to terminate a party’s absolute promise to perform
Condition Subsequent
(1) The termination of an obligation. such an occurs when the parties to a contract have fully performed their contractual obligations. (2) The termination of a bankruptcy debtor’s obligation to pay debts.
Discharge
The release of a debtor from all debts that are provable, except those specifically excepted from discharge by statue.
Discharge in Bankruptcy
A court-created doctrine under which a party to a contract will be relieved of his or her duty to perform when the objective purpose for performance no longer exists (due to reasons beyond that party’s control).
Frustration of Purpose
A doctrine under which a party to a contract is relieved of his or her duty to preform when performance becomes impossible or totally impracticable (through no fault of either party)
Impossibility of Performance
An agreement between the parties to cancel their contract, releasing the parties from further obligations under the contract. The object of the agreement is to restore the parties to the positions they would have occupied had no contract ever been formed.
Mutual Recission
The substation, by agreement, of a new contract form an old one, with the rights under the old one being terminated. Typically, there is a substitution of a new party who is responsible for the contract and the removal of an original party’s rights and duties under the contract.
Novation
In contract law, the fulfillment of one’s duties arising under a contract; the normal way of discharging one’s contractual obligations
Performance
An unconditional offer to perform an obligation by a person who is ready, willing, and able to do so
Tender
