Chapter 12, Formation of traditional and E-Contracts Flashcards
How is intent of contract determined? (3 ways)
Objective theory
- What was said when entering into contract
- How the party acted
- The circumstances surrounding the transaction
What are the 4 requirements of a legal contract?
Agreement - offer & acceptance
Consideration - something of value is received or promised
Contractual Capacity - Must be competent parties
Legality - purpose of contract must accomplish goal not against public policy
Meeting of the minds
When 2 parties objectively look like they want to enter into a legal obligation
3 Elements of an offer
intention -offeror must have intention to become bound by the offer
definite -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.
communication-The offer must be communicated to the offeree.
Type of contract that involves holding an offer open for X amount of time in return for payment
An option contract
-Can’t be revoked
These 2 types of contracts are not covered by article 2
Real-estate and services contracts
Acceptance of an offer must be Unequivocal (and communicated)
the mirror image rule
Definiteness of an offer includes 4 terms
Identification of parties
The identification of the object or subject matter
The consideration to be paid
The time of payment, delivery, or performance
The Mailbox rule
Under this rule, if the authorized mode of communication is the mail, then an acceptance becomes valid when it is dispatched (placed in the control of the U.S. Postal Service)—not when it is received by the offeror
Consideration
the value given in return for a promise or a performance. The consideration, which must be present to make the contract legally binding, must be something of legally sufficient value and must be bargained for.
In consideration, there 3 elements of a “legally sufficient value
A bargain for someone to do something
A PROMISE to do something that one has no prior legal duty to do.
Forbearance - The act of refraining from exercising a legal right
The preexisting duty rule
If a party is already bound by contract to perform a certain duty, that duty cannot serve as consideration for a second contract.
Implied in fact contracts
Determine what parties are agreeing to by conduct
3 Types of Contractual incapacity
Minority
intoxication
insanity
3 options incapacitated parties can do
1) Disaffirm (void) the contract prior to achieving capacity
2) Disaffirm the contract for a reasonable time after achieving capacity
Affirm (ratify) the contract after achieving capacity
3) Affirm (ratify) the contract after achieving capacity
Promissory Estoppel
A doctrine that applies when a promisor makes a clear and definite promise on which the promisee justifiably relies. Such a promise is binding if justice will be better served by the enforcement of the promise.
Implied-in-Law Contracts (Quasi-Contract)
Defendant receives benefit at plaintiffs expense with circumstances that would make it unjust for defendant not to pay
Only incapacitated parties can void a contract
word up
The transfer of contractual rights to a third party is known as
assignment of rights
The transfer of contractual duties to a third party is known as a.
delegation of duties
Unique personal services cant be delegated
2 types of third party beneficiaries
Intended - made for the benefit of 3rd party..CAN SUE
incidental - CANT SUE
Statute of Frauds
A state statute under which certain types of contracts must be in writing to be enforceable.
When a stronger party dictates terms, take it or leave it, the contract is known as an _____ contract
Adhesion
Rescission and Restitution
an action to cancel a contract and return the parties to the positions they occupied prior to the transaction.
Bilateral Mistakes allow the contract to be rescinded by either party.
Unilateral Mistakes are enforceable unless:
Other party knew mistake was made
Mistake was made inadvertently and without gross negligence
fraudulent misrepresentation consists of the following elements
- misrepresentation of a material fact
- with knowledge of falsity
- an intent to deceive
- justifiable reliance
- damage
____ _____ arises from relationships in which one party can greatly influence another party, thus overcoming that party’s free will.
Undue influence
Discharge by performance includes
Complete - No breach, contract discharged
Substantial - duty to perform continues, party can recover damages
material breach - no further duty to perform, party can sue immediately for breach
Personal Satisfaction
Discharge by agreement includes
Rescission - Cancellation of contract
Novation - alterations to agreement, substitution of parties
settlement agreement - Involved parties who agree to settle dispute, once performed, both parties discharged
accord and satisfaction -the parties agree to accept performance that is different from the performance originally promised.
Discharge by Operation of Law
These circumstances include material alteration of the contract, the running of the statute of limitations, bankruptcy, and the impossibility or impracticability of performance
Material Alteration of the Contract
Changes to contract without consent, innocent party can seek discharge
discharge in bankruptcy
The release of a debtor from all debts that are provable, except those specifically excepted from discharge by statute.
Impossibility
No fault, both parties relieved of duty to perform
commercial impracticability
a seller may be excused from performing a contract when
(1) a contingency occurs,
(2) the contingency’s occurrence makes performance impracticable
(3) the nonoccurrence of the contingency was a basic assumption on which the contract was made.
Commercial impracticability usually involves an event that increases the cost or difficulty of performance.
frustration of purpose
frustration of purpose typically involves an event that decreases the value of what a party receives under the contract.
Types of Damages from breach of contract
Compensatory (to cover direct losses and costs).
Consequential (to cover indirect and foreseeable losses).
Mitigation of damages
The non breaching party has an obligation to reduce severity of damages
liquidated damages - only enforceable if they are not construed as a penelty
An amount, stipulated in the contract, that the parties to a contract believe to be a reasonable estimation of the damages that will occur in the event of a breach.
The equitable remedy of Reformation
Reformation allows a court to rewrite the contract to reflect the parties’ true intentions.
Appropriate for mutual mistakes of fact
Consideration modification under the UCC
A modification of a contract for the sale or lease of goods does not require consideration as long as it is made in good faith.
Firm Offers under the UCC
- Applies to sale of goods
- Applies if the seller is a merchant
- Applies if the offer to hold open is in writing
- Held open for 3 months
Types of Statute of Frauds
- contracts involving interests in land - ownership interest in land
- contracts that by their terms cannot be performed within one year - one year from when they’re entered into
- collateral or secondary promises - Personal representative who agrees to pay debts of decedent
- promises made in consideration of marriage - Prenuptial agreement
sale of goods for $500 or more - services do not apply
