Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

CPCU 530 > Chapter 2 > Flashcards

Chapter 2 Flashcards

1
Q

List the four categories of contracts.

A

1) Bilateral/unilateral
2) Executed/executory
3) Express/implied
4) Voidable/void

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

What is agreement based on?

A

1) Offer

2) Acceptance

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

What are the four elements of a contract?

A

A Contract Considered Legal

1) Agreement
2) Competent parties
3) Consideration
4) Legal purpose

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

What fifth element do some scholars add to a contract?

A

Genuine mutual assent

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

What are the three elements of an offer?

A

1) Expressed intent to contract
2) Definite terms
3) Communication to offeree

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

How is an offer distinguished?

A

Intent is irrelevant. What maters is reasonable man’s interpretation of words/actions Did this evidence contractual intent?

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

What are the 5 ways an offer may be terminated?

A

1) Time lapse
2) Operation of law (illegality destruction, death/insanity)
3) Rejection
4) Counteroffer
5) Revocation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

What are the 3 exceptions to revocation at will?

A

1) Option contract (keep offer open for certain time period)
2) Irrevocable/firm offer (for certain period of time) to buy or sell goods by merchant.
3) Unilateral offers can’t be revoked once performance has been started by offeree.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

What are the three elements of an acceptance?

A

1) Unconditional and unequivocal acceptance
2) By the person to whom the offer was made
3) Communicated to the offeror by appropriate word or act

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

What can demonstrate acceptance of a unilateral contract?

A

Offerree’s performance, forebearance, substantial performance.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Revocations are effective when ____. Acceptances are effective when _____.

A

received / sent

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

If a party is incompetent his ____ contracts are valid until rescinded and his ______ contracts are invalid until ratified.

A

executed / executory

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

What can a minor not use his minority to avoid?

A

1) Court approved contracts (employment)
2) Contracts required by law (child support)
3) Educational loans
4) Business contracts
5) Contracts for necessaries (unless under care of his parents)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

When is a parent liable for a minor’s contract?

A

1) Acted as parents agent
2) Parents cosigned
3) Contract is for necessaries and is under parents’ care

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

If a person isn’t adjudicated insane but wants to avoid contract based on insanity, how can he avoid contracts?

A

Prove

1) Didn’t realize was forming a contract
2) did not understand consequences of contract’s formation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

How are contracts with drunk people handled?

A

May avoid if:

1) Unaware forming contract
2) Other party caused intoxication to get contract signed

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

What is consideration?

A

is the thing of value given or done in a contractual exchange. For consideration to create a valid contract, the promisor must receive a legal benefit or the promise must suffer a legal detriment.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

What are five types of valid consideration?

A

1) Valuable consideration
2) Forbearance
3) Present consideration
4) Future consideration
5) Binding promise

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

Can good consideration (love and affection) support a contract?

A

No, but can support an executed gift.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

What is the following an example of? Is it a binding contract?

John told Sam, “When I buy a new car, I’ll give you my truck.” John bought a new car but did not give Sam the truck.

A

A gratuitous promise. It is not binding because there is no consideration.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

When will courts force consideration to be fair or adequate?

A

in contracts involving fraud, exchange of identical items, unconscionability, or legally required consideration

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

What is the following an example of?

In a settlement contract, an injured person might promise to refrain from suing in exchange for the other party’s promise to pay a sum of money.

A

forbearance

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

What are the exceptions to consideration having to be present or future?

A
  • Promises to pay a debt that was unenforceable because:
    1) One of the parties was a minor
    2) The promisor is bankrupt
    3) The payment period has expired
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

Is a promise to buy all requirements or sell all outputs binding?

A

Yes.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q

What are the three types of invalid consideration?

A

1) Past consideration
2) Promise to perform an existing obligation
3) Compromise and release of claims

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
26
Q

A promise to perform an existing obligation is not valid consideration except …..?

A

1) Changed conditions significantly alter the underlying contract a promise for of additional compensation may be enforceable
2) Under the UCC, modifications to a contract for the sale of goods requires no consideration.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
27
Q

When is partial payment by a debtor sufficient

consideration to discharge a debt?

A

a. bona fide (good faith) disputes about debts with uncertain amounts,
b. discounts for prepayment of debts,
c. accord and satisfaction–an agreement (accord) to substitute a slightly different performance and performance of that substitute agreement (satisfaction), and /or
d. a composition agreement from a group of creditors that combine and agree to accept a percentage of the debt.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
28
Q

What are two contracts which don’t require consideration?

A

1) Promissory estoppel

2) gifts to charity

29
Q

If a contract is illegal at the outset and the law changes, can it become legal?

A

No

30
Q

What happens if a contract is legal at the outset but later becomes illegal due to a supervening illegality?

A

the contract is void for future performance, but the parties may recover the value of any performance under the contract while it was still legal.

31
Q

What are the nine types of illegal contracts?

A
  1. commission of crimes or torts-
  2. acts harmful to the public interest (ex. bribe public
    officials, sell government contracts)
  3. usury- (Business loans are not subject to usury laws.)
  4. gambling
  5. unlicensed practice of a profession (except if the purpose of licensing is to raise public revenues, the contract is valid. (Example: building permits, product license taxes.)
  6. restraint of marriage Example: A promise not to marry before age 21.
  7. disclaimers of liability
  8. restraint of trade
  9. unconscionability
32
Q

What can bailment contracts restrict? (with regard to exculpatory clauses)

A

May restrict amount of liability but cannot restrict liability.

33
Q

When may illegal contracts be enforceable?

A
  1. enforcement would protect the party the law was designed to protect,
  2. the parties were not in pari delicto (Latin for ‘in equal fault’)–one party was under duress or fraudulently induced,
  3. the contract is severable (easily divisible into legal and illegal parts), or
  4. one party wishes to repent from an illegal executory contract.
34
Q

What can a person fradulently induced to contract do?

A
  1. seek rescission (cancellation of the contract) or

2. sue for damages under tort law (called an action in deceit).

35
Q

What are the six elements of fraud?

A
  1. False statement–a representation of a past or existing fact made orally, in writing, or by conduct,
  2. of material fact–a fact that influences the decision,
  3. knowingly made–with intent to deceptively induce to contract or with reckless indifference to the truth,
  4. with intent to deceive
  5. on which the other party justifiably relied
  6. to his detriment–damage, injury, or financial loss.
36
Q

Which elements of fraud does a person seeking recession need to provide? How about seeking damages?

A

First 5 / All six

37
Q

What does an insurer have to prove to have a policy voided due to concealment?

A
  1. the insured knew that the fact was material and

2. the insured concealed the fact with the intent to defraud.

38
Q

What effect does a unilateral mistake have on a contract’s validity?

A

Has no effect on validity unless the other party was aware of the mistake.

39
Q

What effect does a bilateral mistake have on a contract’s validity?

A

Allows either party to have the contract voided.

40
Q

What is the parole evidence rule?

A

It prohibits courts from hearing oral evidence that contradicts the contract’s terms except in limited situations such as interpretation of ambiguities or unilateral mistakes of fact.

41
Q

What is the key element to proving duress?

A

Did the threat cause sufficient fear to force the victim into the contract?

42
Q

This is presumed to exist in a contract where the dominating party in a confidential relationship receives greater benefits than the dominated party.

A

undue influence

43
Q

What are the four elements of innocent misrepresentation?

A
  1. reasonable reliance on
  2. an active misstatement of
  3. a material fact
  4. believed to be true by both parties
44
Q

Which contracts are required to be in writing by the statute of frauds?

A

1) transfer interest in real estate
2) bilateral contracts which can’t be performed within one year of formation.
3) promises to guaranty the debt of another
4) contracts in consideration of marriage
5) promises by an estate’s administrator or executor to pay the estate’s debt from his own funds
6) contracts to sell goods worth over $500

45
Q

When might oral contracts to transfer real estate be enforced?

A

If the buyer takes possession and makes substantial improvements on it in reliance on the oral contract.

46
Q

What are the three purposes of the parol evidence rule?

A
  1. to carry out the parties’ intention,
  2. to make contracts certain and definite, and
  3. to prevent fraud and perjury.
47
Q

What are four exceptions to the parol evidence rule?

A
  1. incomplete contracts–Parol evidence may be introduced to show how they were to have been
    made complete.
  2. ambiguities–Parol evidence may clarify the parties’ intent.
  3. fraud, illegality, or mistake–Oral evidence may be introduced to establish or to correct flaws.
  4. condition precedent not met–Parol evidence may show that a seemingly valid contract is not
    valid.
48
Q

What are the nine maxims of construction?

A

1) Plain meaning - ordinary words plain meaning and technical words, technical
2) Intent
3) Entire and divisible contracts - try to interpret as divisible to avoid being harsh
4) clerical errors/omitions
5) contradictory terms handwriting … typing … printing
6) ambiguity …against drafting party
7) Parties’ own interpretation
8) Legal and fair interpretations
9) trade using and course of dealing (prior dealings/trade customs)

49
Q

What are the two situations where third parties have enforceable rights?

A
  1. Assignment–transfer of rights sometimes coupled with the delegation of duties.
  2. Third party beneficiary contracts–one of the original contracting parties entered into the contract for the express purpose of benefiting the third party.
50
Q

An assignor can can assign any contract term right to an assignee unless? (6 items)

A
  1. assignment is restricted by the contract,
  2. assignment is restricted by law,
  3. the contract is for personal services,
  4. assignment materially increases the burden or risk of the obligor,
  5. the contract performance is subject to the assignor’s personal satisfaction, or
  6. the assignor wishes to assign the damages of a personal injury (but not a property damage) suit before the judgment has been quantified.
51
Q

What are three types of third party beneficiaries?

A
  1. Creditor beneficiaries–The contract’s completion satisfies a debt to the creditor.
  2. Donee beneficiaries–The contract’s completion results in a gift to the donee.
  3. Incidental beneficiaries–The contract’s completion results in a benefit to a third party which
    was immaterial to the original parties’ contractual intents.
52
Q

What are four characteristics of a beneficiary contract?

A

1) There is a binding contract between the promisor and the promisee.
2) The contracting parties intend that the third party benefit from the contract.
3) The contract states to whom performance is due.
4) The beneficiary is always subject to any defenses the promisor has against the promisee.

53
Q

What are the six ways a contract can be terminated?

A

1) performance
2) agreement
3) substitution
4) impossibility
5) fraudulent alteration
6) contractual conditions

54
Q

Performance of a contract cannot be done.

A

Objective impossibility

55
Q

This means the promisor will not perform even though performance is conceivable.

A

Subjective impossibility

56
Q

This discharges a contract when unforeseeable and uncontrollable circumstances would deprive the promisor of the benefit of return performance.

A

Frustration

57
Q

This discharges a contract when the performance of a contractual duty would be unreasonably difficult.

A

Impracticability.

58
Q

Filing a notice of loss is a condition precedent to being paid for an insurance claim is an example of _____ ________.

A

Condition precedent

59
Q

The condition that an insured must sue within one year from the date of a loss is an example of _______ ___________.

A

condition subsequent

60
Q

What does anticipatory breach, based on a clear expression of intent not to perform under an executory, bilateral contract allow for?,

A

immediate action for remedy by the innocent party.

61
Q

What is the result of material breach (based on willfulness, the extent of performance, and the extent of benefit) ?

A

excuses performance by the nonbreaching party and allows immediate action for remedies.

62
Q

These damages put the injured party in the same position he’d be in if the other party had performed, are usually sought.

A

compensatory damages

63
Q

These damages are recoverable for any loss resulting from the breach that the defendant should have foreseen at the time the contract arose.

A

consequential damages

64
Q

These damages are awarded in excess of contractual damages for an insurer’s breach of its duty of good faith and fair dealing or for its intentional infliction of emotional distress based on its outrageous conduct.

A

Extracontractual damages

65
Q

What is a seller’s remedy if the seller resells the goods at less than the original contract price?

A

damages

66
Q

When is contract price a remedy?

A

1) the buyer received and kept the goods,
2) the goods were destroyed after the buyer assumed the risk of loss, and/or
3) the buyer wrongfully rejected delivery and the goods could not be sold after reasonable effort.

67
Q

What is the is normal remedy for breach of contracts to sell unique items (real estate, fine arts … when monetary damages are inadequate?)

A

specific performance

68
Q

A court order that a party must do or refrain from doing something. Contracts for unique personal services, never subject to the remedy of specific performance, are partially remedied by injunction.

A

injunction

CPCU 530 (10 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions