Chapter 20 Key Terms & Definitions

Question 1

Acceptance

Answer 1

A promise to accept an offer

Question 2

Assignment

Answer 2

A transfer of rights from one party of a contract to another. The rule of privity of contract does not apply under this scenario.

Question 3

Breach

Answer 3

A breach of contract occurs when one party to the contract fails or refuses to fulfill his or her obligations as contained within the contract

Question 4

Condition subsequent

Answer 4

A clause in a contract that describes a future event that must occur for the contract to be cancelled

Question 5

Consideration

Answer 5

Something of value exchanged between parties to a contract

Question 6

Contract

Answer 6

A legally enforceable agreement made between two or more parties

Question 7

Damages

Answer 7

Damages are an award of money made by the court designed to put the innocent party in the position he or she would have been had the contract been performed

Question 8

Duress

Answer 8

A threat or act, whether aimed at personal property or a person, that induces or causes another person to perform some act against his or her will

Question 9

Frustration

Answer 9

Frustration occurs when an event outside of the control of the parties to a contract makes performance of the contract impossible

Question 10

Injunction

Answer 10

A court order that prohibits a party from doing something or acting in a certain manner

Question 11

Legal capacity

Answer 11

Parties must be approximately equivalent in bargaining power and must meet minimum standards in regard to maturity and intellect to be deemed to have the legal capacity to enter into a contract

Question 12

Legal relationship

Answer 12

The intention of the parties entering into an agreement to form a legally binding agreement

Question 13

Legality requirements

Answer 13

Every contract must meet certain legality requirements. It must have a legal purpose. To be considered legal this purpose cannot violate any law, statute, or public policy. In addition, there are other legality requirements which may be required to be met under specific circumstances.

Question 14

Material alterations

Answer 14

A change in a contract substantial enough to change the legal meaning and interpretation of a contract

Question 15

Misrepresentation

Answer 15

A false statement that causes or helps to cause a party to enter into a contract

Question 16

Mistake

Answer 16

A misunderstanding about a fundamental term or condition of the contract

Question 17

Offer

Answer 17

A promise made by one party to another to do something

Question 18

Operation of law

Answer 18

The Bankruptcy and Insolvency Act states that upon discharge of the bankruptcy contracts contained within the bankruptcy are discharged

Question 19

Option to Terminate

Answer 19

A written clause in a contract that allows a party to terminate the contract whenever he or she decides, based on meeting the conditions of the option

Question 20

Performance

Answer 20

Completing the obligations under a contract

Question 21

Privity of contract

Answer 21

The doctrine of privity in contract law creates a situation in which only the parties to a contract may enforce it. A contract cannot confer rights or impose obligations on any individual except those parties in the contract.

Question 22

Quantum meruit

Answer 22

Latin for “as much as is deserved” and is an amount determined by a court, where the contract stipulates that an amount of consideration will be paid but where the amount of that consideration has not been stipulated in the contract

Question 23

Rescission

Answer 23

An order designed to put the parties to a contract in the position they would have been in had the contract never been made

Question 24

Right

Answer 24

Discharge by right occurs when there is a clause written into the contract that provides one or both parties with the option to cancel the contract before performance

Question 25

Specific performance

Answer 25

An order requiring the defendant to perform a specific task, usually the major condition of the contract