Chapter 10: Nature and Terminology of Contracts Flashcards
What is the function of Contract Law
To provide stability, predictability and certainty for both buyers and sellers in the marketplace.
What is the definition of a Contract?
A contract is a legally binding agreement bewteen two or more parties who agree to perform or to refrain from performing some act now or in the future.
Definition: The Objective Theory of Contracts
A party’s intention to enter into a legally binding agreement, or contract, is judged by outward, objective facts as interpreted by a reasonable person, rather than by the party’s own secret, subjective intentions.
What are the 3 objective facts?
1) What the party said when entering into the contract. 2) How the party acted or appeared (intent may be manifested by conduct as well as by oral or written words) and 3) the circumstances surrounding the transaction.
What are the 4 requirements of a valid contract?
Agreement, Consideration, contractual capacity, and legality
Define: Agreement
Includes an “offer” and an “acceptance”. One party must offer to enter into a legal agreement, and another party must accept the terms of the offer.
Define: Consideration
Any promises made by the parties to the contract must be supported by legally sufficient and bargained-for consideration (Something of value received or promised such as money, to convince a person to make a deal)
Define: Contractual Capacity
Both parties entering into the contract must have the contractual capacity to do so; the law must recognize them as possessing characteristics that qualify them as competent parties
Define: Legality
The contract’s purpose must be to accomplish some goal that is legal and not against public policy
Define: Bilateral Contracts
If the offeree can accept simply by promising to perform. “A promise for a promise”
Define: Unilateral Contracts
If the offer is phrased so that the offeree can accept the offer only by completing the contract performance
Define: Offeror
The party making the offer
Define: Offeree
The party to whom the offer is made
At what point does a unilateral contract become irrevocable?
Once the performance has begun
Define: Formal Contracts
Contracts that require a special form or method of creation to be enforceable.
What are some examples of “Formal Contracts”
Checks, drafts, promissory notes, and certificates of deposit.
Define: Informal Contracts or “Simple Contracts”
Contracts that no special form is required.
Define: Express Contracts
The terms of the agreement are fully and explicitly stated in words, oral or written. (example, a signed lease for a house)
Define: Implied Contracts
The conduct of the parties, rather than their words, creates and defines the terms of the contract.
What are the requirements for an Implied Contract to be held in court?
The plaintiff furnished some service or property, the plaintiff expected to be paid for that service or property, and the defendant knew or should have known that payment was expected, and the defendant had a chance to reject the services or property and did not.
Define: Executed Contract
A contract that has been fully performed on both sides.
Define: Executory Contract
A contract that has not been fully performed by the parties.
Define: Valid Contract
Has the elements necessary to entitle at least one of the parties to enforce it in court.
What are the elements in a “Valid Contract”
An agreement, support by legally sufficient consideration, parties who have the legal capacity to enter into the contract, and a legal purpose.
Define: Voidable Contract
a valid contract but one that can be avoided at the option of one or both of the parties.
Define: Unenforceable Contracts
A contract that cannot be enforced because of certain legal defenses against it.
Define: Void Contract
No contract at all. It produces no legal obligations on any of the parties.
Define: Quasi Contract
Contracts that are “implied in law”, and are not actual contracts. They are fictional contracts that courts can impose on the parties “as if” the parties had entered into an actual contract.
What is the “Plain Meaning Rule”?
If a contract’s words appear to be clear and unambiguous, a court cannot consider “extrinsic evidence”, however, if the terms are unclear or ambiguous, extrinsic evidence may be admissible to clarify the meaning of the contract.
