Chapter 10: The Formation of Traditional and E-Contracts Flashcards
Contract Law
Determines 1) which contract rules are to be enforced, and 2) which promises must be kept.
Promise
Declaration by Promisor to do / not do something.
Promisee
Person to whom promise is made.
Has right to expect or demand that something will / will not happen.
_______________ are simply _____________ put into __________ or ____________ form.
Contracts; promises; oral; written
Contracts distinguish between ___________ __________________ and agreements that are _______________ __________________.
moral obligations; legally binding
Contracts decide which ______________ are acceptable when there is a ___________ in contract (mental competency, age, etc…)
excuses; breach
Contract
Promise or set of promises for which legal remedy will be provided in the breach of them, but performance of them is considered a duty.
When do contractual disputes usually arise?
when one party fails fulfill future performance.
Punishments for failure to fulfill future performance
1) party who made contract may be subject to court sanctions.
2) party has to pay damages for failure to fulfill future performance.
3) party may be forced to fufill promised act
______________ is of the upmost importance in the creation of contracts.
Intent
Objective Theory of Contracts
Determines whether there was intent to make a legally binding agreement/contract based on objective facts including…
1) what the party said when entering into contract.
2) how the party acted / appeared.
3) circumstances under which contract was made.
Requirements for a valid contract
- Agreement
- Consideration
- Contractual Capacity
- Legality
Agreement
mutual understanding, between parties, regarding terms of a contract.
- Includes Offer and Acceptance.
- Party must offer to enter legal agreement, and other party must accept (terms of) offer.
Consideration
- Legally sufficient/bargained-for consideration promised to party for a promise [in a bilateral contract], or performance [in a unilateral contract] (i.e. money).
Contractual Capacity
Legal ability to enter into contract.
- Law must recognize each party as exemplifying qualities necessary to qualify as competent parties.
Legality
Contract’s goal must be legal / not against public policy.
Defenses to the Enforceability of a Contract:
1) ________________ ________________
- (____________, ______________, ____________ __________ ≠ consent)
2) ____________.
- Contract must be in the ______________ required __________ to be enforceable.
Voluntary Consent; fraud; duress; undue influence; Form; legally; form
Statute of Frauds
legislation requiring some contracts be in written form to be enforceable
How are contracts classified?
according to how and when they’re formed.
Offeror
person making offer (to enter into legal agreement)
Offeree
person to whom offer is being made.
Bilateral Contract
Offeree simply has to PROMISE to perform.
“Promise in exchange for a Promise.”
(no act has to be carried out yet: ex. you promise to pay $200 to your friend on Friday for their phone. Your fried promises to give you the phone after they’ve relinquished the $200.)
Unilateral Contract
Offeree can only accept contract by performing an act.
“Promise in exchange for an act.”
With unilateral contracts, the contract is formed not at the moement a ______________ is made, but the moment the _________ is ______________.
promise; act; performed
Formal Contract
Contracts that require specific form to be enforceable.
(i.e. checks, promissory note, etc…)
Informal Contracts
Contracts that don’t require specific form to be enforceable.
-(more so focuses on the substance of the contract than the medium in which it exists).
Express Contract
Contract where terms of agreement are explicitly stated, in writing or orally.
Implied Contract
Contract implied from conduct of the parties.
3 Requirements for Implied Contract
1) Plaintiff provides good / service.
2) Plaintiff expected to be paid for good/service and defendant should have paid / are known payment was expected.
3) Defendant could’ve rejected good/service but did not.
Executed Contract
Contract that has been fully performed by both parties.
Executory Contract
Contract that has not been fully performed on both sides.
If there’s a contract that has been fully _______________ on one side, and has not been fully ______________ on the the other side, then the former side is _________________ while the latter _______________, but the contract as a whole is considered _______________.
performed; performed; executed; executory; executory
Valid Contract
Contract that forms as long as they’re following the necessary requisites of 1) Agreeement, 2) Consideration, 3) Contractual Capacity, and 4) Legality.
Voidable Contracts
Valid contracts that can be avoided by one or both parties.
If the contract is ________________ by one or both parties, then it’s _________________. if it’s ratified, both parties must perform their legal ____________________.
avoided; unenforceable; obligations
Unenforceable contracts
Valid contracts rendered unenforceable because they violate a statute or law.
Void Contract
A contract having no legal force or binding effect
“no contract at all.”
Crossword Puzzle:
Type of contract that consists of two or more parts (duties) and calls for corresponding performances of each part (duty) by the parties (respectively).
Divisible Contract
Agreement
mutual understanding, between parties, regarding terms of a contract.
on the basis of offer and acceptance: one party offers to enter into legal agreement, other party must accepts terms of offer.
Offer
Promise/Commitment to do/ refrain from doing specific action in the future
3 Elements Necessary for an offer to be effective
1) Offeror must have serious intention of being bound by offer.
2) Offer must be certain /definite, so parties & court can ascertain terms of contract.
3) Offer must be clearly communicated to offeree.
If any offer made by the _____________ is not _____________, meaning it doesn’t pass the _______-and-___________-_________ test, then the ______________’s acceptance of the offer does not create an actual ______________.
offeror; serious; serious-and-objective-intent; offeree’s; agreement
3 Ways an offer can be terminated
1) Revocation
2) Rejection
3) Counteroffer
Revocation
Offeror withdraws their offer [from offeree].
Unless offer is irrevocable, offeror can witdraw offer w/o liability only BEFORE offeree accepts [otherwise, liability will be imposed].
Option Contract (Irrevocable)
contract in which offeror leaves offer open for specified period of time, for which they recieve payment from the offeree.
Offeror cannot close offer during specified time in which it’s supposed to be left open.
Rejection
Offeree rejects offer made to them, in words or by conduct.
Counteroffer
Simoultaneously rejecting initial offer, and proposing new offer [to offeror, who will now become the offeree]
Mirror Image Rule
Common law rule, where offeree accepts the exact offer made by the offeror [mirroring the offer].
Crossword Puzzle:
What is meant by “Reasonable Period”?
The time in which an offer is left available if no termination period is specified.
Acceptance
Voluntary act by offeree showing consent to terms of offer.
Unequivocal Acceptance
offeree accepting exact terms of offer [Mirror Image Rule]
Silence as Acceptance
offeree’s silence constitutes as acceptance of an offer.
Mailbox Rule
Contract is formed the moment the offeror sends the contract to the offeree, for acceptance, through a mode of communication implicitly/explicitly authorized by offeree.
Consideration must be 1) something of ___________ _____________ __________ in exchange for a promise, and 2) must be a ___________ -______ exchange.
legally sufficient value; bargained-for
3 Criterion for an Item of “Legally Sufficient Value”
- Promise to do something one has no legal duty to do.
- Performing act one has no obligation to undertake.
- Refraining from performing an act that one has legal right to undertake. (forebearance)
Requirement for Item of “Bargained Exchange”
Item must be given from Promisor, to Promisee, in exchange for Promisee’s 1) Promise, 2) Performance, or 3) Promise of Performance.
Recission
Unmaking of a contract to return to the parties to where they were before the contract was created.
Past Consideration
Act done in the past that DOES NOT qualify as consideration for a bargain in the future.
What is the Age of Majority?
The age a minor must be, in nearly all states, for contractual purposes: 18
Minor’s emancipation
Parent / Legal guardian relinquishes right to control over minor to minor themselves.
MInors are allowed to enter into any ____________ that an ___________ can, as long as the _____________-_______________ of the contract is not prohibited by law as it pertains to minors: __________, _________, ___________ etc…
contract; adult; subject; drugs; smoking; alcohol
Dissaffirmance
Legally setting aside / avoidance of contractual obligation
If a minor does not wish to be bound by the _____________ stated in a _____________, they must express their _____________ to not bound by it, in ___________ or through ___________.
obligations; contract; intent; word; conduct
Intoxication: when a person enters a contractual agreement while _________________, the contract is considered _________________ (meaning it can be _______________),or _______________, meaning it’s _____________. If the person is sufficiently ________________, even if it is by their own means, they have the option of _________________ the contract while _______________, and hours thereafter once they’re ___________. However, if the party to the contract, despite their drunkeness, knew the _______________ of entering into the contract, then it is _______________.
intoxicated; voidable; avoided; valid; enforceable; intoxicated; dissaffirming; intoxicated; sober; consequences; enforceable
Mental Incompetence: a contract made by one who legally qualifies as _______________ ____________________, is ___________ , _____________, or ______________. Only a ___________ _____________ can enter into any _____________ obligations on _____________ of the ____________ _______________ party. Any contract formed by someone whom the court has __________________ considered ________________ ___________________ is _________.
mentally incompetent; void; voidable; valid; legal guardian; legal; behalf; mentally incompetent; PREVIOUSLY; mentally incompetent; void
______________ requires that _______________ not violate state for federal ______________ law, and if it does, then, the _______________ is rendered _______________ and therefore ____________.
Legality; contract; statutory; contract; void; unenforceable
Usury
charging a loan interest rate above the lawful maximum.
Crossword Puzzle:
Generally held to be illegal and involves three elements of prize, chance, and consideration.
Lottery Contracts
(lottery –> random selection = chance)
States have generally deemed _______________ contracts illegal. Forms of _____________ allowed include: ___________-____________, ____________ ______________ machines, __________-______________ bingo, _____________ etc…
gambling; horse-racing; video poker; charity-sponsored bingo; lotteries
States generally deem contracts involving ______________ _______________ (including people _____________ as ____________, _____________, ______________) illegal and _______________.
unlisenced practitioners; unlisenced; attorneys; physicians; architects; unenforceable
Covenant not to Compete
Contract wherein two parties agree not to compete against one another for specified period of time, within certain geographical location.
Unconscionable Contract or Clause
void because they’re terms are too burdensome / grossly unfair to one party, while the stronger party was the beneficiary.
Crossword Puzzle: In what area can an agreement ‘not to compete’ be enforceable?
Business
Reformation
court ordered reform of a contract (covenant not to compete) which reflects the true intentions of each party.
What’s the problem w/ reforming contracts (specifically covenants not to compete).
The judge automatically becomes a party to the contract.
(even if his/her intentions were good [trying to make sure geographical location and time in which contract was enforced was appropriate])
Exclupatory Clause
Releases party from contract w/o liability when they face monetary or physical injury, NO MATTER WHO IS AT FAULT.
E-Contract
Contract that is formed electronically.
Must follow all the same requirements as a paper contract: Agreement, Consideration, Contractual Capacity, Legality
Click-On Agreement
Online buyer accepts terms of offer the moment they click “I Accept” or “I Agree.”
Shrink Wrap Agreement
An agreement whose terms are on a document, inside a box in which goods are packaged.
With the Shrink Wrap Agreement, a ________________ is formed the moment the box is ______________.
contract; opened
Browse-Wrap Terms
Terms of use presented when an online buyer downloads a product wtihout asking for the buyers explicit agreement.
E-Signature is defined as an electtronic ___________, ____________, or ______________ attached to or ______________ associated with a _____________ or adopted by a person with the ____________ to sign the _______________.
sound; symbol; process; logically; record; intent; record
Record
Information…
1) Inscribed in a tangible medium
OR
2) Stored in an electronic medium
3) is retrievable
Promisory Estopple
Offeror is prohibited from denying (revoking) promise, BECAUSE offeree now forms reliance on the offeree being left open for an allotted period of time.
Illusory Promise
Contract that is unenforceable because only one party is legally bound to perform.
