Chapter 12 Flashcards
Contract law deals with
the formation and keeping of promises.
Contract
An agreement that can be enforced in court formed by two parties.
Objective theory of contracts
Theory under which the intent to form a contract will be judged by outward, objective facts rather than by the party’s own subjective intentions.
Requirements of a valid contract
- Agreement
- Consideration
- Contractual Capacity
- Legality
Agreement
A meeting of two or more minds in regard to the terms of the contract.
Consideration
Exchange of items between parties
Contractual Capacity
Possess the characteristics that qualify them as competent parties
Legality
Contract must be legal
Defenses to enforcing a contract
- Voluntary Consent
- Form
Voluntary Consent
Consent of both parties must be voluntary.
Form
The contract must be in the form that the law requires.
Bilateral Contract
A type of contract that arises when a promise is given in exchange for a promise.
- Comes into existence the moment the promises are exchanged
Unilateral Contract
A contract that results when an offer can be accepted only by the offeree’s performance.
- Formed at the moment the contract is performed
Formal Contract
A contract that by law requires a specific form, such as being sealed, to be valid.
Informal Contract
A contract that does not require a specified form in order to be valid.
Express Contract
Contract in which the terms of the agreement are fully and explicitly stated in words, oral or written.
Implied Contract
A contract formed in whole or in part from the conduct of parties.
Valid Contract
A contract that results when the elements necessary for contract formation are present.
Unenforceable Contract
A valid contract rendered unenforceable by some statute or law.
Voidable Contract
A contract that may be legally avoided at the option of one of the parties.
Void Contract
A contract having no legal force or binding event.
Offer
Promise or commitment to perform or refrain from performing some specified act in the future.
Intention
Serious intent is determined by what a reasonable person in the offeree’s position would conclude that the offeror’s words meant.
Revocation
The withdrawal of an offeror by an enforcer.
The power of the offeree to transform the offer into a binding, legal obligation can be terminated by operation of law through
- Lapse of time
- Destruction of the specific subject matter
- Death or incompetence of the offeror or offeree
- Supervening illegality of the proposed contract
Lapse of time
The offer terminates when the period of time specified has passed.
Acceptance
The offeree’s notification to the offeror that the offeree agrees to the terms of the proposal.
Silence cannot constitute acceptance unless
the offeree has had prior dealings with the offeror.
E-contract
A contract that is entered into cyberspace and is evidenced only by electronic impulses.
Click-on agreement
An agreement that arises when a buyer indicates their assent to be bound by the terms of an offer by clicking on a button that says, “I agree”.
Shrink-wrap agreement
An agreement whose terms are expressed in a document located inside a box in which the goods (usually software) are packaged.
Under the E-SIGN Act, an E-document can be as enforceable as a paper one with the exception of
documents such as court papers and divorce decrees.
Consideration must be something of value in the eyes of the law and may consist of
- A promise to do something that one has no prior legal duty to
- Forbearance
Forbearance
The act of refraining from exercising a legal right.
Agreements that lack consideration
- Preexisting Duty
- Past Consideration
Preexisting Duty
A promise to do what one already has a legal duty to do does not constitute legally sufficient consideration.
Past Consideration
Something given, or some act done in the past, which cannot ordinarily be consideration for a later bargain.
Accord and Satisfaction
An agreement of payment between two parties, one of whom has a right of action against the other.
- In the accord, one party undertakes to give or perform, and the other to accept, in the satisfaction of claim, something other than that of which the parties originally agreed on.
Release
A contract in which one party forfeits the right to pursue a legal claim against the other party.
Promissory Estoppel
A doctrine that applies when a promiser makes a clear and definite promise on which the promisee justifiably relies.
Disaffirmance
The legal avoidance/setting aside of a contractual obligation.
Usury
Charging an illegal rate of interest.
Licensing Statutes
All states require members of certain professions to have licenses.
Contracts in restraint of trade
Anticompetitive agreements are unenforceable because they’re contrary to public policy.
Covenant not to compete
A contractual promise to refrain from competing with another party for a certain period of time and within a certain geographic area.
Unconscionable Contracts or Clauses
A contract or clause that is void on the basis of public policy because one party is forced to accept terms that are unfair.
Exculpatory Clause
A clause that releases a contractual party from liability in the event of monetary or physical injury no matter who is at fault.
Statute of Frauds
A state statute under which certain types of contracts must be in writing to be enforceable.
If a contract cannot be performed within one year it
must be in writing.
