Chapter 4: Contracts Flashcards
Contract
Based on promises voluntarily made
What are the 5 elements of a contract?
Offer, Acceptance, Consideration, Capacity, Legality
Unilateral Contract
Promise for an act (reward for finding a lost dog)
Bilateral Contract
Promise for a promise (painter painting house); Can sue if they don’t follow through
Expressed Contract
Stated in direct terms; Can be written or oral (ex: I will see you my car for $1,000)
Implied Contract
Arises by implication of law (ex: implied that you will pay when going to doctor)
Valid Contract
Satisfies all requirements of an enforceable agreement
Voidable Contract
Binds one party but gives other option to withdraw (Children)
Void Contract
Element of contract has no legal force or effect (illegal contract, gambling debt)
Unenforceable Contract
Satisfies elements of a valid contract but won’t be enforced by the court (sale of land)
Offer
Proposal by one party to another manifesting an intention to enter into a valid contract
Elements of an Offer
Intent to contract, Definite terms, Offer must be communicated
Advertisements
Merely an invitation to negotiate, never an offer because merchant never has unlimited supply of product
How long does an offer stay open?
Can be revoked at anytime before its acceptance, or can be terminated my own terms
Acceptance
A manifestation by the offer to be bound by the terms of the offer
Counteroffer
Rejects the original offer and becomes a new offer that the other person can accept or reject
Postal Reorganization Act
Unsolicited product sent in the mail is a gift; silence can not constitute acceptance
Auction With Reserve
Auctioneer is merely inviting people to make offers, and no contract is formed until the gavel is struck
Auction Without Reserve
The highest bidder obtains the item regardless of the bid
Sealed Bid
Rules are similar to auction; request for bid is merely an invitation to negotiate and the bid is an offer
Mailbox Rule
Acceptance on dispatch and revocation on receipt
Phone Call
Fastest mean of communication is okay
Consideration
Both sides must give up something and receive something in return for their promises
Quid Pro Quo
Bargain for exchange (must be of legal value); Can also be a benefit
Illusory Promise
One in which the act of performance is left solely up to one party (ex: I will buy as many books from you as I want at 10/book)
Moral Obligation
Insufficient to support consideration (ex: a parent promises to give child money out of love, does not legally have to)
Past Consideration
A current promise to pay for something in the past
Pre-exisiting Duty
Builder can not demand more money for building a house because he has not done more than what he was contracted to do
Pre-existing Obligation
Builder asks for more money to build house but promises to add storm windows
Co-Signer
Person signing onto an agreement if you don’t have enough credit on your own
Surety
Whoever signs the document is agreeing to be primarily liable of debt (if you fold, bank can go directly after parents and sue)
Guarantor
Person is secondarily liable (if you default, bank has to go after you first and then they can go after parents)
Gift
Not grounds to sue
Adequacy of Consideration
Can be unequal unless fraud, undue influence, or duress
Undue Influence
Because of your relationship with a person, they put their guard down because they trust you
Capacity
A party who does not have capacity to contract lacks mutual assent to bargain
Insane People
Lack capacity; Must return product in same condition received
Children
Lack capacity; Must return what is left of product
What is the exception to capacity?
Necessary (food, shelter medical care)
Legality
An illegal contract is one that calls for the performance of a crime, tort, or is against public policy
Statue of Frauds
Certain types of contracts must be in writing and be signed
Elements of Statue of Frauds
Contract cannot be performed in one year, Sale or lease of land, Liable for debt of another, Sale of goods over $500
Exceptions to Statue of Frauds
Specially made goods (business cards), Goods received by buyer, Person admits oral contract, Unjust enrichment
Electronic Signature in Global and National Commerce Act
Electronic Signature is valid
Uniform Commercial Code
Purpose is to make uniform laws involving commercial transactions involving sales, banking, and secured transactions (excludes real estate)
Which article deals with the sale of goods?
Article Two
Merchant
Person who deals with goods of that kind
Entrustment
The giving of possession of goods to a merchant who deals with goods of that kind
What does Section 2-403 say about Joe getting his ring back?
The customer who bought the ring gets is because Joe gave the diamond to the merchant; Want merchants to be able to transfer products in ordinary course of business; Protects customer in good faith
What happens if a repairman sells a car to a different person?
He can’t do this because he is not a merchant and the customer would not have been given certificate of ownership
Risk of Loss
Section 2-508 governs who has the risk of loss in the absence of an agreement
Shipment Contract
When contract requires seller to ship goods, risk of loss passes to buyer when conforming goods are delivered to carrier (what seller wants)
Destination
When contract requires seller to deliver the goods to a specific destination, risk of loss will not pass until the goods are delivered to that destination (what buyer wants)
Bailment
The delivery of personal property by the owner to another person (third party) to hold
Bailee
The third person holding the goods
Who has the risk of loss when goods are being shipped?
When subject to bill of landing, risk passes to buyer upon receipt of documents
Who has the risk of loss when the goods are in possession of the third party?
If goods not covered by documents of title, risk passes to buyer when bailee tells the buyer that the buyer has the right to possession
Who has the risk of loss when the seller has the good and the buyer is to pick them up at store?
If the seller is a merchant, risk passes to the buyer only on recipe of the goods
What happens if a good is damaged while a merchant is holding the item you bought?
If they offer to hold the product for you, they are responsible if something goes wrong
What happens if the good you purchased from a neighbor gets stolen?
Buyer has risk of loss because they bought from a non-merchant
Requirement of Good Faith
Under the Uniform Commercial Code, every contract imposes an obligation of good faith
What happens if an element of the contract, such as price, is missing?
Code mandates that the price will be what is reasonable at the time of delivery
What does the Code say about consideration?
If merchant says that they will keep an offer open for a week, it must stay open for that long
Click-wrap License
Agreement provided by the distributor or manufacturer of software which is contained in the packaging of the product and contains non-negotiable terms and conditions imposed by seller; Accept before you install
Shrink-wrap License
Buy box at store with plastic around it; By ripping plastic off and installing disk, you are agreeing to terms and conditions; By using it, you are agreeing to terms
