Ch. 6 - Contracts

Question 1

contract

Answer 1

(aka agreement) an enforceable voluntary agreement between two parties. may be written, oral, partly written, and partly oral. Offer + acceptance + consideration = contract. Contract must have lawful purpose, parties must have legal capacity to contract and intend to create legal obligations. Commencement of performance by both parties of an unexecuted contract provides proof of an enforceable contract.

Question 2

Enforceability

Answer 2

refers to the likelihood that a court would enforce the rights of a party or award a remedy in the event of a dispute. Enforceable contracts are ones a court upholds. Some contracts may be unenforceable due to flaws in the contract or in its formation or due to events subsequent to contract creation.

Question 3

Voidable contract

Answer 3

contract may become voidable due to duress, frustration, impossibility, mistakes, misrepresentation, and unconscionability. can be terminated or ended by a party that is not in breach of the contract, but that party may also choose to continue with the contract.

Question 4

Offers and Rejections

Answer 4

a rejection is an express or implied refusal to accept an offer that must be communicated to be effective. if an offeree rejects an offer or counter-offer, they cannot later accept it unless the offeror revives it. Offeror is entitled to specify the mode of acceptance.

Question 5

General duty of good faith in contracts

Answer 5

recently in 2014, contracting parties have a duty of honest performance, which requires the parties to be honest with each other in relation to the performance of their contractual obligations. Also, a party shall not interfere with performance by the other party.

Question 6

Post acceptance rule

Answer 6

When regular mail is used as the mode of acceptance by the offeror, acceptance is deemed to have been communicated when the communication is placed into the mail system.

Question 7

Consideration

Answer 7

something of value, however small, has been given or promised by each party to the contract. each party to the contract must give and receive consideration for a contract to be enforceable. consideration given by each party doesnt have to be of equal value. amendments of a contract must be supported by new (fresh) consideration

Question 8

letter of intent and its problems

Answer 8

a document that sets out the basic terms of a business arrangement in advance of agreeing to all detailed contractual terms. Problems:

1) not all parties may be clear that the preliminary agreement is unenforceable
2) both parties may commence performance without creating a formal contract
3) if a letter of intent is worded in such a way to suggest that it is accepting an offer or a bid, without creating additional conditions that must be met, then this letter would be more properly considered an acceptance rather than a letter of intent

Question 9

Mistake

Answer 9

a misunderstanding with respect to a term of a contract. to make a contract voidable, a mistake must:

1) be material & significant
2) be mutual
3) existed at the time the agreement was made

Question 10

Misrepresentation

Answer 10

an untrue factual statement that is made by one party that induces the other party to enter into a contract. Three categories:

1) innocent
2) negligent
3) fraudulent - intended to deceive or mislead with a statement that was known to be false

Question 11

Duress

Answer 11

improper pressure, threats, or coercion used to induce a party to enter into a contract. in order for duress to exist, the part claiming duress must prove that they had no real choice but to comply with the other party’s demands.

Question 12

Unconscionability

Answer 12

a contract that is so unfair, oppressive, or one-sided that it would be offensive for the court to enforce it. Rare.

Question 13

Frustration

Answer 13

(aka impossibility) occurs when an unforeseen event occurs that makes the performance of the contract either impossible or of no value. must not be a risk originally allocated to the one of the parties. Rare. force majeure clauses are often included in contracts for relief of events beyond the parties’ control.

Question 14

Amendment

Answer 14

change of alteration to a contract. like a mini-contract that must have offer, consideration and acceptance and parties with legal capacity, are voidable.

Question 15

Waiver & Estoppel

Answer 15

a waiver of rights occurs when by word or conduct a party ceases to enforce some of their contractual rights. waived rights are subject to estoppel, where the other party in the contract starts relying on the representation or action of the first party rather than on the contract. e.g. if landlord consistently allows rent paid on the third, landlord is estopped from requiring payment on 1st of the month unless reasonable written notice is given.

Question 16

quantum meruit

Answer 16

applies when one party should compensate the other party that performed work. For it to apply, there must be no valid contract in place that applies to the work. similar to change directive in construction contracts.