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CPCU 530 > Chapter 2: Contract Law > Flashcards

Chapter 2: Contract Law Flashcards

1
Q

Types of Contracts

A

A contract must have four elements of be legally enforceable:

  • Agreement
  • Capacity to contract
  • Consideration
  • Legal purpose
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2
Q

Types of Contract

A
  • Bilateral or Unilateral
  • Executed or Executory
  • Express or Implied
  • Void or Voidable
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3
Q

Requirements of an Offer

A
  • Intent to contract
  • Definite terms
  • Communication to the other party
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4
Q

Intent to Offer

A

Examples of statements that are not offers:

  • Social invitations
  • Predictions
  • Offers made in excitement or jest
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5
Q

Duration and Termination

A

Factors to consider:

  • Lapse of time
  • Operation of law
  • Offeree’s rejection
  • Counteroffers
  • Offeror’s revocation
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6
Q

Requirements of a Valid Acceptance

A
  • The acceptance must be made by the offeree
  • The acceptance must be unconditional and in equivocal
  • The offeree must communicate the acceptance to the offeror by appropriate word or act
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7
Q

Capacity to Contract

A

Parties who may lack capacity to contract include:

  • Minors
  • Insane persons
  • Intoxicated persons
  • Artificial entities (such as insurers) that are restricted by law or corporate charter from entering into certain contracts
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8
Q

Insane Person’s Contract

A

Two classes of insane people:

  • Those adjudged insane
  • Those who claim insanity or mental incompetence
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9
Q

Insane Persons’ Contracts

A

A person claiming insanity but not adjudged insane must prove one of the following:

  • The person did not know that a contract was forming
  • The person did not understand the legal consequences of acts purporting to form the contract
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10
Q

Insane Persons’ Contracts

A

The party to a contract with an insane person can enforce the contract by providing the facts:

  • The sane party lacked knowledge of the insanity
  • The contract benefits the insane person
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11
Q

Intoxicated Persons’ Contracts

A

Contract may be voidable if:

  • The person did not know that a contract was forming
  • The person did. It understand the legal consequences of acts purporting to form the contract
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12
Q

Consideration

A

Consideration necessary to make a promise enforceable can be one of the following:

  • A return policy
  • An act performed
  • A forbearance from acting
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13
Q

Types of Consideration

A
  • Valuable consideration
  • Forbearance
  • Present consideration
  • Future consideration
  • Binding promises
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14
Q

Present and Future Consideration

A

Most jurisdictions enforce a new promise to pay an existing obligation that has become unenforceable for one of the following reasons:

  • One of the parties is a minor
  • The promisor is bankrupt
  • The time for payment has ended
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15
Q

What is Not Valid Consideration?

A
  • Past consideration
  • Promises to perform existing obligations
  • Compromise and release of claims
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16
Q

Exceptions to the Consideration Requirement

A
  • Promissory estoppel

- Charitable subscription

17
Q

Types of Illegal Contracts

A
  • Contracts to commit crimes or torts
  • Contracts harmful to the public interest
  • Usury contracts
  • Wagering contracts
  • Contracts with unlicensed practitioners
  • Contracts to transfer liability for negligence
  • Contracts in restraint of marriage
  • Contracts in restraint of trade
  • Unconscionable bargains
18
Q

Enforceability of a Contract

A

Genuine Assent:

  • Fraud
  • Mistake
  • Duress
  • Undue influence
  • Innocent misrepresentation
19
Q

Fraud

A

The plaintiff must prove six elements:

  • A false representation
  • of a material fact
  • knowingly made
  • with intent to deceive
  • on which the other party has placed justifiable reliance
  • to his or her detriment
20
Q

Fraud

A

If fraud is proved, the plaintiff can seek one of two remedies:

  • The plaintiff may seek rescission
  • The plaintiff can sue for damages in a tort action, usually called an action in deceit
21
Q

Statue of Frauds

contracts that must be in writing and signed

A
  • Contracts for the sale of land or any interest in land
  • Contracts that cannot be performed within one year
  • Contracts to pay another’s debt
  • Contracts in consideration of marriage
  • Contracts by executors of decadents’ estates to pay estate debts from executors’ own funds
  • Contracts for the sale of goods for $500 or more
22
Q

Parole Evidence Rule

when a contract is in writing, it supersedes any oral contract

A

Serves three purposes:

  • To carry out the parties’ presumed intention
  • To achieve certainty and finality as to the parties’ rights and duties
  • To exclude fraudulent and perjured claims
23
Q

Contract Interpretation

A
  • Plain meaning
  • Effectuation of intent
  • Entire or divisible contracts
  • Clerical errors and omissions are corrected
  • Contradictory terms are prioritized
  • Ambiguities are interpreted against the writer of the document
  • Parties’ own interpretations are considered
  • The court seeks a legal and fair interpretation
  • Trade usage, course of dealings, and performance are considered
24
Q

Contradictory Terms

A

Courts apply this system of priorities:

  1. ) Handwriting prevails over typewriting
  2. ) Typewriting prevails over printing
  3. ) Words prevail over figures
25
Q

Third-Party Contractual Rights

A

Third parties have rights in two situations:

  • An assignment of a contract, by which one party transfers rights arising under a contract to a third party
  • Third party beneficiary contracts, in which one party contracts with another party to confer a benefit on a third party
26
Q

Third Party Beneficiaries

A

Types of third party beneficiaries:

  • Creditor beneficiaries (enforceable rights)
  • Donee beneficiaries
    (enforceable rights)
  • Incidental beneficiaries
    (no enforceable rights)
27
Q

Termination of a Contract

A
  • Performance
  • Agreement of the partied
  • Substitution
  • Impossibility
  • Fraudulent alterations
  • Contractual conditions
28
Q

Breach of Contract

A

Types of breach:

  • Repudiation
  • Anticipatory breach
  • Material breach of contract
29
Q

Anticipatory Breach

A

Two requirements must be present:

  • The contract is an executory, bilateral contract entailing mutual and dependent conditions
  • The promise has made a clear expression of his or her intention not to perform
30
Q

Remedies for Breach

A

Damages;

  • Compensatory
  • Consequential
  • Punitive
  • Extracontractual
  • Liquidated
31
Q

Remedies for Breach

A

Equitable remedies;

  • Specific performance
  • Injunction

CPCU 530 (10 decks)

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