Chapter 4 Flashcards
Contacts have 2 functions which are:
Performance
Risk Allocation
Are all promises contracts?
No, promises must have legal requirements to be a contract
Expressed v. Implied Contracts
Expressed Contracts
-written or oral contracts
Implied Contracts
- inferred from conduct of parties
- Ex: sitting in barbers chair and you know you have to pay at the end
Quasi Contracts
-not true contract
- RARELY ever win in court
- judge fills out missing element
- prevents unjust enrichment
Ex: Keith Swim doesn’t pay you after you do his yardwork because you don’t have a yardwork permit
Unconditional Contracts
- must perform duty
- no matter what
3 Types of Conditional Contracts
Conditional Subsequent
- contract begins immediately
- contract ends if specified event happens
Conditional Precedent
-contract begins if/when specified event occurs first
Conditional Concurrent
-contract doesn’t begin until other party does something
-you don’t have to perform until they perform or vice versa
Ex: buying a house
Unilateral v. Bilateral Contracts
Bilateral Contracts
-offeree is a promisor
-offerer is a promisor
Ex: You promise to paint my house and I promise to pay you
Unilateral Contracts
-only offer is a promisor
-offeree accepts the contract by 100% of job
Ex: You complete all 20 things on Keith Swim’s yard work to-do list
How does enforcement differ from Unilateral Contracts and Bilateral Contracts?
Unilateral
-enforced once offeree fully completes job
Bilateral
-enforced once promise is made by offeree
Executed Contracts vs. Executory Contracts
Executed Contract
-contract is 100% done
Executory Contract
-contract not fully completed by 1 or both parties
Partially Executed Contract
Valid Contract, Void Contract, Voidable Contract, and Unenforceable Contracts
Valid Contract
- legal
- enforceable by law
Void Contract
- illegal
- not enforceable by law
Voidable Contract
- 1 or both parties can terminate contract
- can terminate with no liability
Unenforceable Contract
-contract was once legal and enforceable
-no longer legal and enforceable
-can be sued for time when Unforceable Contract was once legal
Ex: law changes
Most common type of law suit in American Court System filed?
Breach of Contract
Who makes Contract Law
- determined by states
- vary from state to state
- becoming more uniform
6 Elements to a contract
Mutual Agreement Consideration Capacity Legality Genuine and real assent to the contract Some contracts must be in writing
Element of a contract - Mutual Agreement
What are the two elements of a Mutual Agreement
Offer
Acceptance
Explain the parts to an offer
Intent
-must intend to bind other party to legal obligation
Definite Terms and Conditions
- clearly stated
- must define contract length (quantity)
Communicated to the Offeree
-offeree must know about reward to receive money for return of lost dog
5 ways an Offer can be terminated
Revocation
- offeror takes back his offer
- ONLY if offeree hasn’t accepted yet
Rejection
-offeree says no
Lapse of time
-Option Contract (promise to keep contract open to a person for a specified amount of time… can’t sell to someone else)
Counteroffer
Termination by law
- law makes contract illegal
- offeree goes insane or dies
What is the term for when a law makes a contract illegal
Intervening illegality
Explain the element of a contract called Consideration
- something of value given up in exchange for another
- Legal Detriment
- Legal Benefit
- courts do not care if Fair Trade or not
What are the two parts of Consideration element of a contract?
Legal Detriment
- promise to give up a legal right
- or refrain from act
Legal Benefit
- legal right to something
- is acquired through the promise
All minors can void out of a contract except for contracts concerning these 4 things:
Enlistment in the Military Necessities Marriage Contracts Statues -banking, insurance, public transportation, student loans
Illusory Promises
- fake promise
- looks like both parties are binded but only one is
Ex: I promise to give you supplies for your business on the 31st of each month and you promise to pay me $1500 each month
Some months I won’t have to perform, but you must pay EVERY month
Does a minor owe restitution when they Disaffirms (gets out) of contract
Depends
-no restitution owed
- can have to pay restitution by returning item loaned
- minor doesn’t have to pay for missed payments though
What does minor Ratification mean
Means a minor stays in contract when they turn 18
- ratifies by continuing performance (Ex: keep making payments)
- can ratify orally
Misrepresentation of Age by a minor - What happens when they want out of contract
- states usually allow them to disaffirm
- growing trend to keep minor binded to contract
Intoxicated People - Contract Capacity
- if drunk during contract
- can void out when sober
- hard to prove DRUNK
- have to be so drunk you did not even understand what you were doing
Adjudicated Insane and Unadjudicated Insane
Adjudicated Insane
- person previously proved to be insane
- insane person can void contract anytime
Unadjudicated Insane
- person proved to be insane after they enter contract
- insane person can ratify (continue) contract
- insane person can void contract
- insane person owe restitution if void contract
Two types of contracts that violate Legality element of a Contract
Unconscionable Contract
-contract that is grossly unfair to one party over other
Exculpatory Agreement
-contract that releases party from consequence resulting from negligence or wrongful acts
EX: Airline is not responsible if their pilot gets drunk and plane goes down and everyone dies
Explain Genuine and Real Assent to the Contract
Parties must freely and voluntarily enter into a contract
Mistake
Fraud
Duress
Undue Influence
Concerning Genuine and Real Assent to the Contract
What happens if there is a Mistake
Unilateral Mistake (one party is mistaken)
- court offers no relief to mistaken party
- mistaken party CANNOT void
- given no fraud took place
Bilateral Mistake (both parties mistaken) -Mutual mistake of value --- no relief
- Mutual mistake on material fact(wording) in contract)
- either party can void contract
- relief is given to either party depending on mistake
Explain Fraud and the 4 ways it’s classified
Misrepresentation
Intent to deceive other party
Justifiable Reliance on misrepresented Information
Innocent party Injury
Explain Duress
Forcing someone to sign a contract against their will
Ex: breaking their leg
Undue Influence
-mentally taking control of another’s mind
Ex: Having sex with 99 year old man so he puts you in his will
5 ways contracts are required to be written under the Statue of Frauds
- items over $500
- if promise cannot be performed within a year
- if there is transfer of interest in real property
- promise to obligations of others (promise to someone’s work that is already required by them)
- promise made in contemplation of marriage
Parole Evidence Rule
Orally evidence cannot be used to contradict written evidence
4 exceptions to Parole Evidence Rule
Oral evidence can be used IF:
- oral evidence is explaining an agreement that was made to change material fact of contract
- oral evidence is explaining an ambiguous/incomplete part of the contract
- oral evidence is being used to prove that the contract itself is VOID or VOIDABLE
- oral evidence is used to fill in the gaps
Breach of Contract/Incomplete Performance
Explain Substantial Performance and Material Breach
Substantial Performance
- job is mostly done but not fully
- still get paid for job (Payment - Damages for Incomplete work)
Material Breach
- performance on job is TOTALLY wrong
- innocent party gets out of contract free
- guilty party responsible for damages
5 Ways to Terminate a contract
Rescission
Novation
Accord and Satisfaction
Discharge by Impossibility
Repudiation
Explain Accord and Satisfaction - Ways to terminate a contract
When neither parties can agree on the amount the other owes them
I think I owe you $200 and you think I owe you $300
Example of Accord
-I offer you $250
Example of Satisfaction
- you accept my $250
- terminates the contract
- ONLY for unliquidated debt
NOTE:
If my debt to you was liquidated (I actually owe you $300)…. then you can still sue for other $50
If my debt to you was unliquidated (no way to tell the amount I owe you)… then you can’t come after me in court
Recission
- both parties agree to terminate contact without performance
- restitution owed
Novation
- one party completely thrown out of contract
- thrown out party REPLACED
- new contract created
Accord and Satisfaction
- ONLY for unliquidated debt
- parties agree to get out of contract
- parties accept partial performance from eachother
Repudiation
- party notifies other in advance they will not perform
- innocent party can wait and see
- innocent party can treat contract as breached
- innocent party can VOID out
What is a another name for Monetary Damages?
Legal Damages
What type of damages do torts and contracts have?
Contracts
- Monetary Damages
- equitable Damages
- NO PUNITIVE DAMAGES
Torts
- monetary damages
- equitable Damages
- punitive damages
4 ways a contract can be discharged by Impossibility
- subject matter of contract (ex: building) is destroyed
- one party of a person service dies (person cannot be replaced)
- change in law makes contract illegal
- performance becomes commercially impractical (too expensive now)
Which of the following is the most common when there is a breach of contract?
Compensatory Damages
Monetary Damages
Equitable Remedies
Monetary Damages
3 types of Legal Damages or Monetary Damages
Compensatory Damages
-make victim whole again
Consequential Damages
- cover cost incurred by victim resulting from the breach
- after the breach costs that come up
Liquidated Damages
- damages specified in contract before it start
- receive these if other person breaches the contract
4 Types of Equitable Remedies
Rescission and Restitution
- undo/cancel existing contract
- if money has already been paid from one party to other than –> Restitution is owed
Reformation
-rewrites contract to make it say what it was supposed to say
Specific Performance
- court requires party to perform a certain way
- RARE cause courts don’t want to supervise it
Mitigation of Damages
-requires innocent party to reduce damages they are currently incurring
EX: You rent out a house to Joe. Joe breaches the contract when he doesn’t pay rent and moves out. Joe owes you Consequential Damages (money you could be receiving right now if he didn’t breach). The court orders you to find a new tenant to keeps Joe’s damages he will pay to you down
What are the 4 types of Agencies?
Agency by Agreement
Agency by Ratification
Agency by Apparent Authority (Agency by Estoppel)
Agency by Operation of the Law
Agency by Ratification
- agent is not working with principal
- agent enters into agreement anyway with 3rd party
- if alleged principal accepts agents actions(called ratification, then principal bound to contract with 3rd party
- if alleged principal denies agent’s actions, then agent is bound to contract with 3rd party
Agency by Apparent Authority (Agency by Estoppel)
- agent is not working with principal and has no authority
- agent acts like he is working with principal
- 3rd party can bind Principal to contract even though they didn’t know about agent who was acting like he worked for the principal
- principal has to convince 3rd party that agent is capable of representing them
- principal can get in trouble if they don’t stop rogue agent if they know about him
Agency by Agreement
- written or oral
- if written, then it has Power of Attorney
Agency by Operation of Law
-in emergencies
-law implies relationship
Ex: babysitter signs off for kid to have surgery when parents are not there
What is a disclosed, Partially disclosed, and Undisclosed agreement?
Partially Disclosed
- 3rd party knows agent represents a principal
- 3rd party does not know principal
Disclosed
- 3rd party knows agent represent principal
- 3rd party knows principal
Undisclosed
- 3rd party only knows agent
- does NOT know agent represents a principal
Who is liable in a Partially Disclosed and Disclosed conract
If agent has Actual Authority
- principal liable to 3rd party
- agent not liable for anything
If agent has Apparent Authority
- principal still liable to 3rd party
- agent is liable to principal for disobeying
Who is liable in an Undisclosed Contract
If agent has Actual Authority
- principal liable to 3rd party
- principal must indemnify agent
If agent has No authority
-principal not liable
