Ch 5/6/7 - Contracts I

Question 1

contract

Answer 1

an agreement between two parties that is enforceable in a court of law

Question 2

objective standard test

Answer 2

test based on how a “reasonable person” would view the matter

Question 3

equal bargaining power

Answer 3

the legal assumption that parties to a contract are able to look out for their own interests

Question 4

offer

Answer 4

promise to perform specified acts on certain terms

Question 5

invitation to treat

Answer 5

an expression of willingness to do business

Question 6

standard form contract

Answer 6

a “take it” or “leave it” contract, where the customer agrees to a standard set of terms that favors the other side

Question 7

offeror

Answer 7

the person who makes an offer

Question 8

offeree

Answer 8

the person to whom an offer is made

Question 9

revocation

Answer 9

the withdrawal of an offer

Question 10

option agreement

Answer 10

an agreement where, in exchange for payment, an offeror is obligated to keep an offer open for a specified time

Question 11

lapse

Answer 11

the expiration of an offer after a specified or reasonable period

Question 12

rejection

Answer 12

the refusal to accept an offer

Question 13

counteroffer

Answer 13

the rejection of one offer an proposal of a new one

Question 14

acceptance

Answer 14

an unqualified willingness to enter into a contract on the terms in the offer

Question 15

consideration

Answer 15

price paid for a promise

Question 16

gratuitous promise

Answer 16

promise for which no consideration is given

Question 17

pre-existing legal duty

Answer 17

legal obligation that a person already owes

Question 18

promissory estoppel

Answer 18

doctrine whereby someone who relies on a gratuitous promise may be able to enforce it

Question 19

rebuttable presumption

Answer 19

legal presumption in favor of one party that the other side can seek to rebut or dislodge by leading evidence to the contrary

Question 20

express term

Answer 20

provision of a contract that states a promise explicitly

Question 21

rules of construction

Answer 21

guiding principles for interpreting or constructing the terms of a contract

Question 22

implied term

Answer 22

provision that is not expressly included in a contract but that is necessary to give effect to the parties’ intention

Question 23

entire contract clause

Answer 23

term in a contract in which the parties agree that their contract is complete as written

Question 24

contractual quantum meruit

Answer 24

awarding one party a reasonable sum for the goods or services provided under a contract

Question 25

parol evidence rule

Answer 25

rule that limits the evidence a party can introduce concerning the contents of the contract

Question 26

condition subsequent

Answer 26

an event or circumstance that, when it occurs, brings an existing contract to an end

Question 27

condition precedent

Answer 27

an event or circumstance that, until it occurs, suspends the parties’ obligations to perform their contractual obligations

Question 28

limitation of liability clause

Answer 28

term of a contract that limits liability for breach to something less than would otherwise be recoverable

Question 29

exemption clause

Answer 29

term of a contract that identifies events causing loss for which there is no liability

Question 30

liquidated damages clause

Answer 30

term of a contract that specifies how much one party must pay to the event of breach