Business Law I: Contracts I

Question 1

Contract Definition

Answer 1

An agreement supported by consideration between two or more persons with competent capacity for a legal purpose

Question 2

Sources of Contract Law

Answer 2

1. UCC

2. Common Law

Question 3

Statute Definition

Answer 3

An act of legislature that declares, proscribes, or commands something; a specific law, expressed in writing

Question 4

UCC vs Common Law

Answer 4

1. UCC applies to sale of goods (tangible personal property)

2. Common Law applies to service and real estate contracts

Question 5

Express Contract

Answer 5

A contract formed wholly by oral and/or written words

Question 6

Implied/implied-in-fact contract

Answer 6

A contract formed, at least in part, based on the conduct of the parties or based on the factual circumstances

Question 7

Quasi-/implied-in-law contract

Answer 7

A contract imposed by the courts or by law when some performance has gone forward, even though there is no express/implied contract

Question 8

Bilateral contract

Answer 8

A type of contract in which both sides make a promise. A promise is made by one party in exchange for a promise from the other party. *Most contracts are bilateral contracts

Question 9

Unilateral Contract

Answer 9

A type of contract in which one side makes a promise in exchange for an action or performance from the other side

Question 10

Executed Contract

Answer 10

A contract that has been fully performed by both parties to that contract

Question 11

Executory Contract

Answer 11

A contract that has not yet been fully performed by the involved parties

Question 12

Partially executed contract

Answer 12

A contract that has been performed in part… One side has performed the contractual obligation

Question 13

Valid contract

Answer 13

A contract that has been legally formed and meets the necessary requirements for formation

Question 14

Void contract

Answer 14

A contract that lacks a legal purpose or is in violation of the law… cannot be enforced by the courts b/c enforcement would violate public policy and encourage illegal conduct

Question 15

Voidable contract

Answer 15

An otherwise valid contract that can be set aside b/c one party has protection under the law (fraud in formation or minors)

Question 16

Unenforceable contract

Answer 16

An otherwise valid contract that cannot be enforced b/c of a statutory or other legal defense (courts will not enforce, but parties still can)

Question 17

Parties to a contract (2)

Answer 17

1. Offeror: party who makes the offer

2. Offeree: party w/ right to accept the offer

Question 18

Requirements for formation of a contract (4)

Answer 18

1. Offer
2. Acceptance
3. Consideration
4. No defenses

Question 19

Requirements of a valid offer (3)

Answer 19

1. Present Intent
2. Definite Terms
3. Communication of the offer

Question 20

Termination of offer: Revocation

Answer 20

An offer can be revoked at any time prior to acceptance

Question 21

Irrevocable Offer: Options (3)

Answer 21

1. Offeror cannot withdraw the offer during the option period
2. Offeree has right (not requirement) to accept during option period
3. Offeree’s rejection during option period does not end the option

Question 22

Irrevocable Offer: Merchant’s Firm offer (8)

Answer 22

UCC Article 2

1. in writing
2. made by a merchant
3. states that it will be kept open (max 3 months)
4. does not require consideration
5. once 1-4 are present, offeree holds irrevocable offer for time stated
6. if parties want more than 3 months, consideration required
7. if offeror is nonmerchant, common law applies, consideration required
8. valid firm offer is just like common-law option (cannot be revoked and ends only upon expiration)

Question 23

Contract Rejection

Answer 23

offer is terminated at any time prior to acceptance (verbal/writing) - rejection is effective when RECEIVED

Question 24

Counteroffer

Answer 24

when made any time prior to acceptance is a form of rejection

Question 25

Acceptance: Unilateral offer

Answer 25

takes place upon completion (total performance) of the act required by the offer

Question 26

Acceptance: Bilateral offer

Answer 26

acceptance (promise) must be absolute, unequivocal, unconditional, and communicated to the offeror

Question 27

Common Law Mirror Image Rule

Answer 27

contracts involving real property and services… any deviation in the terms of acceptance constitutes a counteroffer, not an acceptance

Question 28

Acceptance under UCC Article 2

Answer 28

Depends on merchant/nonmerchant

1. for both, a definite expression of acceptance that does not change any terms
2. for nonmerchants, if definite statement of acceptance followed by additional terms, a contract is formed w/o additional terms
3. for merchants, if definite statement of acceptance followed by additional terms, contract is formed WITH additional terms