Chapter 10: The Formation of Traditional and E-Contracts Flashcards
1
Q
What is a promise
A
A declaration by a person(promiser) to do/not do a certain act.
As a result, the promisee has a right to expect or demand that something will or will not happen in the future
2
Q
Are oral/written contracts legally binding
A
yes
3
Q
Contract law reflects …
A
social values, interests, and expectations at a given point in time
Shows what kinds of promises our society thinks should be legally binding
4
Q
moral obligations vs legall binding promises
A
moral obligations -such as promises to take a friend to lunch
promises that are legally binding- such as a promise to pay for merchandise purchased
5
Q
What promises are contrary to public policy
A
Promises that are against the interests of society as a whole-therefore invalid)
6
Q
What governs contract law
A
Common law governs all contracts expect when it has been modified or replaced by statutory law such as the Uniform Commercial Code (UCC), or by administrative agency regulations
7
Q
what is a contract?
A
a promise or set of promises for the breach of which the law gives remedy or the performance of which the law in some way recognizes as a duty
8
Q
the simple definition of contract lol
A
a contract is an agreement that can be enforced in court
and is formed by 2 or more parties who agree to perform /refrain from performing some act now or in the future
9
Q
When do contract disputes arise
A
when there is a promise of future performance
10
Q
If the contractual promise is not fulfillied…
A
the party who made it is subject to the sanctions of a court
and
the party may be required to pay damages for failing to perform the contractual promise may be required to perform the promised act
11
Q
What element is important in determining if a contract has actually been formed
A
the element of intent
12
Q
The objective theory of contracts
A
theory in which the intent to form a contract will be judged by outward, objective facts as interpreted by a reasonable person, rather than by the parties own subjective actions
13
Q
objective facts fir tge objective theory of contracts are
A
What the party said when entering into the contract
How the party acted or appeared (intent may be manifested by conduct as well as by oral or written words).
The circumstances surrounding the transactions
14
Q
What are the 4 requirements that must be met before a valid contract exists
A
-Agreement
-consideration
-contractual capacity
-legality
15
Q
What is an agreement
A
Agreement to form contract which includes offer and acceptance
one party must offer and the other has to accept
16
Q
consideration
A
For a contract to be valid, any promises made by the parties must be supported by consideration—something of value that is exchanged or promised, like money, to persuade someone to agree to the deal.
17
Q
Contractual capacity
A
Both parties entering into the contract must have the contractual capacity to do so
18
Q
Types of contracts
A
Bilateral
unilateral
formal
informal
express
implied
18
Q
legality
A
The contracts purpose must be to accomplish some goal that is legal and not against public policy
19
Q
Contract formation and how they can be classified
A
can be classified according to how and when they are formed
20
Q
bilateral
A
-Promise for a promise
-can accept offer by promising
-contract comes into existence once promise is exchanged
21
Q
offerer vs oferee
A
The one making the offer and the one whom would be accepting the offer
22
Q
Javier and ann case example
A
javier offers to buy annes iphone for 200 dollars and he tells ann that he will pay her the 200 after he gets paid on friday, ann accepts this offer and promises to give him the smartphone when he pays her
23
Q
unilateral contract
A
-Offeree can only accept the offer by completing the contract performance
-agreement and contract formed when the contract is performed not when the promises are exchanged
24
Reese and cecilia case
reese told cecilia if cecilia drives her car from NY to LA reese will give her 1000 dollars. Only when Cecilia completes this act, does she fully accept reeses offer to pay 1000. If she chooses not to accept the offer to drive the car to Los Angeles, there are no legal consequences.
25
Formal contract
-Contracts that require a special form or method of creation (formation) to be enforceable
-Ex- negotiable instruments which include checks, drafts, promissory notes, and certificates of deposit
26
Informal contracts
-Include all the other types of contracts
-No special form is required (expect for certain types of contracts that must be in writing- as the contracts are usually based on their substance rather than their form)
-Typically business people put their contracts in writing to ensure that there is some proof of a contracts existence incase disputes arise
27
express contracts
The terms of the agreements are fully and explicitly stated in words whether it is oral or written
Ex- a signed lease for an apartment (written contract), or calling someone and both parties agree verbally to something(oral contract)
28
implied contract
Contracts that are implied and not by words or written
29
what conditions must bet met for an implied contract to arise
-The plaintiff furnished some service/property
- plaintiff expected to be paid for that service or poverty and the defendant knew or should have known that payment was to be expected
-The defendant had a chance to reject the services or property and did not
30
contract performance
Contracts are classified according to the degree in which they have been performed
31
executed contracts
A contract that has been fully performed on both sides
32
executory contract
a contract that has not been fully performed by the parties
33
Valid contracts may be...
Enforceable, voidable, and unenforceable
34
Voidable contracts
valid contract that can legally be avoided at the option of one or both of the parties
The party having the option can elect to avoid any duty to perform or ratify (make valid) the contract
35
True or false- if the contract is avoided (in a voidable contract) both parties are released from it, if it is ratified both parties must perform their receptive legal obligations
true
36
examples of voidable contracts
Contracts made by minors, mentally incompetent persons, and intoxicated persons
Additional contracts entered into under duress, fraudulent conditions, or undue influence are void
37
Unenforcable contracts
Contract that cannot be enforced because of certain legal defenses against it bc of a statute or law
ex-for some specific contracts they must be in writing and if they are not they will not be enforceable expect in certain exceptional circumstances
38
void contracts
A contract having no legal force or binding effect.No contract at all
None of the parties have any legal obligations if a contract is void
For example, a contract can be void bc the purpose of the contract was illegal
39
Agreement is an essential-
element for contract formation
40
Agreement
the parities must agree on the terms of the contract and manifest to eiach othe their mutual assent (agreement) to the same bargain
41
offer
promise or commitment to do or refrain from doing some specified action in the future
42
Under common law what 3 elements are necessary for an offer to be effective
The offeror must have a serous intention to become bound by the offer
The terms of the offer must be reasonably certain or definite so that the parties and the court can ascertain the terms of the contract
The offer must be communicated to the offerree
43
Intention
first requirement for an effective offer is serious intent from the offeror
44
what is serious intent determined by
what a reasonable person in the offeree position would conclude that the offers words and actions meant
45
Offers made in obvious anger, jest, or undue excitement ...
do not meet the serious-and-objective-intent test because a reasonable person would realize that a serious offer was not being made.
46
Because offers made without serious intent are not effective...
Even if someone agrees it does not create an agreement
47
Lucy v zehmer case
Lucy had been trying to buy the Ferguson Farm from A.H. Zehmer and his wife for several years. Despite Zehmer's claim that he was intoxicated and joking when he agreed to sell his farm, the Virginia Supreme Court ruled that the contract was valid. The court determined that Zehmer’s outward actions, including drafting and signing the agreement, showed serious intent, making the sale enforceable. The Zehmers were ordered to complete the sale to Lucy
48
Expressions of opinion
expression of opinion is not an offer.
49
Statements of future intent
A statement of intention to do something in the future( exs“I plan to sell my stock)—is not an offer.
50
Preliminary negotiations.
A request/invitation to negotiate is not an offer. (“I wouldn’t sell my car for less than $10,000”)
51
Invitations to bid
When a government entity or private firm needs to have construction work done, it invites contractors to submit bids. (bids are not offers until accepted)
52
Advertisements and price lists
representations made in advertisements/price lists, including those on websites, are treated not as offers to contract but as invitations to negotiate.
53
Live and online auctions
a seller “offers” goods for sale through an auctioneer, but this is not an offer to form a contract
54
Definiteness of terms
-second requirement for an offer involves the definiteness of its terms’
-offer must have reasonably definite terms so that a court can determine if a breach has occured and give an appropriate remedy.
55
Definiteness of terms requiremnets
-The identification of the parties.
-The identification of the object or subject matter of the contract (also the quantity, when appropriate), including the work to be performed, with specific identification of such items as goods, services, and land.
-The consideration to be paid.
-The time of payment, delivery, or performance.
56
Offer can be terminated by action of 3 ways
revocation, rejection, or counteroffer
57
Revocation
Offeror's act of revoking the offer
Unless offer is irrevocable, the offeror can revoke the offer as long as revocation is communicated to the offeree before the offeree accepts
revocation becomes effective when the offeree or the offeree’s agent (a person acting on behalf of the offeree) actually receives it.
58
Irrevocable offers
Some offers can be irrevocable
Ex- option contract where the offeror agrees to keep offer open for a set period for payment so bc of this the offeror cannot revoke the offer
ex-Alex agrees to lease a house from Meredith the property owner. The lease contract includes a clause stating that Syrus is paying an additional $10,00 for the option to purchase the property within a specified period of time. If Alex decides not to purchase the house after the specified period has lapsed, he loses the $15,000, and Meredith is free to sell the property to another buyer (but meredith cant backout until alex decides
59
Rejection
If the offeree rejects the offer by words or conduct
Any later attempt by the offeree will be viewed as a new offer
Ex- izzie offers to buy georges phone for $500 and george says is that the best or can u do $600. A reasonable person would conclude that george has not rejected the offer but has merely made an inquiry about it.
60
Counteroffer
Rejection of the original offer and the making of a new offer
61
Mirror image rule
Requires the offeree's acceptance to match the offerors offer exactly
Any changes or additions in the terms automatically terminates original offer and creates counter offer
The offeror is not obligated to accept the counteroffer, but if they do a contract is formed
62
4 terminations by operation of law
Lapse of time
Destruction of the specific subject matter of the offer
Death or incompetence of the offeror or offeree
Supervening illegality of the proposed contract
63
Lapse of time
Offer terminates automatically by law when the period of time specified in the offer has passed
Time period begins to run when the offeree receives the offer not when it is formed or sent
If there is no specified time for acceptance, the offer terminates at the end of a reasonable period of time
This depends on subject matter, business/market conditions, and other relevant circumstances
63
Supervening legality
A statute/court decision that makes an offer illegal automatically terminates the offer
Jo offers to Alex $10,000 at an annual interest rate of 15 percent. Before Alex can accept the offer, a law is enacted that prohibits interest rates higher than 12 percent. Jo’s offer is automatically terminated.
If the statute is enacted after Alex already accepted the offer, a valid contract is formed, but the contract may still be unenforceable.)
64
Acceptance
voluntary act by the offeree that shows consent to the terms of the offer
65
Destruction, Death, or Incompetence
Offer terminated if the specific subject matter of the offer is destroyed before accepted
Ex- meredith's house destroyed
Notice of destruction is not required for the offer to terminate
offreees power of acceptance also terminated when the offeror or offeree dies or is legally incapacitated unless it is irrevocable
Supplies whether or not the other party had notice of the death/incompetence
66
Silence as acceptance
Silence cannot constitute acceptance even if the offeror states “if u stay silent that means you accept the offer”
offeree is not required to actively reject an offer unless some consideration has been provided.
67
Mailbox rule
Acceptance is effective once the offeree sends/delivers their communication of acceptance via whatever mode authorized by the offeror
Ex- if mail is the authorized mode, acceptance is when its dispatched not when received
Does not apply to instantaneous communication methods (face-to-face, phone, text, video conferencing, or email).
Email is considered sent when it leaves the sender's control or is received by the recipient.
For electronic transactions, email acceptance is effective when sent, replacing the traditional mailbox rule.
68
When is silence an acceptance
Some instances the offeree does have a duty to speak as their silence will operate as an acceptance
Ex- when the offeree has had prior dealings with the offeror
69
Authorized means of acceptance
Acceptance can be authorized explicitly by the offeror or implied by the situation
If an unauthorized means is used, acceptance is not effective until received by the offeror
Express authorization- when the offeror specifies a mode of acceptance (overnight delivery), and the contract is formed once the offeree uses the specified method.
If no mode is specified, acceptance can be made by any reasonable means
70
Elements of consideration
Something of legally sufficient value must be given in exchange for the promise
There must be a bargained for exchange
71
Agreements that lack consideration
-Preexisting duty
-illusory contracts
71
Consideration
usually defined as values (cash ex) given in return for a promise(bilateral) or performance (unilateral)
72
To be legally sufficient
There must be considered value ex ->
A promise to do smth that they had no prior legal duty to do
Performance of an action that one is otherwise not obligated to undertake
The refraining from an action that one has a legal right to do (forbearance)
72
Bargained for exchange
Item of value must be given or promised by the promisor in return for the promisor's promise, performance, or promise for performance
73
Preexisting duty
A promise to do smth that one is alr legally obligated to do does not count as legally sufficient consideration
If a party is already bound by a contract to perform a duty, that duty cannot be used as consideration for a second contract.
74
Ajax example
If ajax contractors begin building an office and after a month they demand an extra 75,000 and if its not paid they will stop working and since the owner can't find anyone else to do it they agree to may. This agreement is unenforceable because ajax has a preexisting duty to complete the building under the contract and it is missing consideration
75
unforeseen difficulties
Exception can be made if unforeseen difficulties arise during contract performance that were not anticipated when the contract was formed
If the court finds that contract modification is fair bc of the circumstances they may allow the adjustment
Ex- if ajax encounters expected rocks and requests more money this could be fair, but if the rocks were ina common area and should have been anticipated, then the preexisting duty may still apply
76
Rescission
Allows 2 pirates to mutually agree to cancel their contract
Valid as long as the contract is still executory on both parties
When parties rescind and form a new contract, the new contract may be invalid if the court finds its based on the preexisting duty
77
Illusory promises
If the contracts terms are uncertain that the promise has not clearly committed to anything the promsie is considered illusory and lacks consideration and is therefore unenforceable
Ex- if scott says to us if sales are good we all get a 1 dollar raise, this is illusory or no promise at all bc if sales are good depends on scoots opinion.
78
Contractual capacity
for a contract to be deemed valid, the parties must have contactual capacity
The legal ability to enter into a contractual relationship
Minors
79
Termination of minority status can be achieved thru
Marriage
Emancipation
80
Minor contracts
Minors CAN enter contracts like adults expect those prohibited by law such as buying alc
but - contracts made by minors are voidable by the minor by disaffirmance (expressed intent, through words or conduct)
An adult in a contract cannot escape their obligations however UNLESS the minor disaffirms
81
Intoxication
When alc or drugs impair a person's ability to think/act normally
Contracts made by intoxicated ppl are voidable or valid
If a person is sufficiently intoxicated to lack mental capacity, the contract may be voidable, even if the intoxication was voluntary.
If the intoxicated person understood the legal consequences of the agreement, the contract will be enforceable.
Courts rarely allow contracts to be voided bc of intoxication
82
Mental incompetence
Contracts made by mentally incompetent persons can be void, voidable, or valid
If a court has previously determined that a person is mentally incompetent-any contract made by that person is void and does not exist
Only guardian appointed by court can represent a mentally incompetent person and enter contracts on their behalf
if a court has not previously judged a person to be mentally incompetent but they were incompetent at the time the contract was formed, the contract may be voidable.
Voidable if the person was unaware of entering into the contract/ lacked the mental capacity to comprehend its nature, purpose, and consequences.
larry who sold his stock less than the value
A contract can be valid if the mentally incompetent person had capacity when the contract was made, as some may experience lucid intervals—periods when they can understand and make decisions.
83
Legality
A contract to do something that is prohibited by federal/ state law is illegal and void thus unenforceable
Contract to commit a tortious act—such as an agreement to engage in fraudulent misrepresentation—is contrary to public policy and therefore illegal and unenforceable.
84
Contracts Contrary to Statute
Statutes set rules on what can be included in contracts- contracts that violate these rules are illegal.
-Contatcs to commit crime
-usary
85
Contracts to commit a crime
Contracts involving illegal activities (e.g., selling drugs) are unenforceable
If a statute makes the contract's object illegal after the contract is formed, it is considered discharged by law.
86
Contracts Contrary to Public Policy
Contracts that, despite being made btw priv parties, are not enforceable due to their negative impact on society.
Ex- selling a child, prohibiting marriage, etc
86
Usury
Charging interest above the maximum legal rate set by state statutes
A lender who makes a loan at an interest rate above the lawful maximum commits usury.
Exceptions may exist for business transactions and higher-interest loans for borrowers unable to secure funds otherwise.
87
Contracts in Restraint of Trade
Agreements that restrict competition in the market
May violate antitrust statutes
88
Procedural Unconscionability
Fine print that is hard to read.
Complex legal language (legalese).
Lack of opportunity to understand or ask questions about the contract.
88
Substantive Unconscionability
actual terms of the contract being harsh or oppressive
88
Unconscionable Contracts or Clauses
Unconscionable contracts are so unfair or oppressive that they are void due to public policy such bargins are deemed unconscionable
