Chapter 7: Contract Flashcards
contract
- A legally enforceable agreement to do or not to do a specified thing
- Restatement of contracts: a promise or a set of promises for the breach of which the law gives a remedy, or the performance of which the law in some way recognizes as a duty.
promisor
who makes a contractual promise
promisee
to whom a contractual promise is made
when contract is breached
- no punitive damages are awarded.
- nonperforming party must pay money damage or perform promises.
goods
tangible, movable personal property
Uniform Commercial Code (UCC)
a uniform code drafted by National Conference of Commissioners of Uniform State laws governing the conduct of business sales, warranties, other commercial matters
sale
a contract in which title of property passes from seller to buyer. Possession usually transfers at time of sale.
offeror (contract)
who makes an offer
offeree (contract)
to whom an offer is made by the offeror
method of expression (contract)
- express contract
- implied in fact
- both
express contract
an agreement stated in words, spoken, or written
implied in fact
contractual agreement manifested by conduct or body language
quasi contract ~ implied in law contract.
not a true contract, but an obligation imposed on one party to prevent unjust enrichment of another.
parties bound (contract)
- bilateral contract
- unilateral contract
bilateral contract
both parties exchange promises
unilateral contract
potential agreement where no one is legally obliged to fulfill unless requested act has been performed.
Legal effect (contract)
- valid
- void
- voidable
- unenforcable
valid
an agreement that complies w all requisites of the law for enforceability
void agreement
w/o legal force or binding effect
voidable contract
may be legally enforced or maybe rejected by a party
unenforcable contract
valid contract that for some reason cant be enforced
extent of performance (contract)
- executed
- executory
executed contract
has been fully performed by both parties
executory contract
something remains to be done by either or both parties
requisites of valid contract
1. competent parties 2 mutual agreement 3. genuine assent 4. reciprocal consideration 5. formation 6. form prescribed by law
competent parties
- parties who are legally qualified to make a binding contractual agreement
- agreement might be negated by: (1) infancy or minority, (2) incapacitating mental condition, (3) incapacitating intoxication.
exception for necessaries
an agreement to purchase goods/services that are necessaries is enforceable as a quasi contract.
mutual agreement
- contract is intended by objective theory of contracts
-
necessaries
Contract is intended by ordinarily required by and appropriate to an incompetent person’s station if life, yet not available and/or not provided by parent or guardian.
objective theory of contracts
the word and conduct of an offeror mean whatever a reasonable person in the offeree’s position would think they mean, as opposed to what the offerer may have actually meant
The offer
- must manifest an intention to be legally bound
- the terms of the offer must be reasonably definite and certain so a court can fashion a remedy.
- the offer must be communicated to the offeree
revocation
the taking back of an offer
option contract
an agreement concerning the right to buy/sell something to another at a certain price within a certain time
genuine assent
- when consent of both parties to be bound by a contract is freely given and is not negated by fraud, duress, undue influence, and/or certain mistakes
duress
any threat of, or actual, physical harm that deprives a person of the freedom of will to choose and decide
undue influence
wrongful persuasion, often by a fiduciary or other trusted individual, that deprives the victim of freedom of will in making a contract
fraud
a knowingly false representation of a material fact, made through words or conduct, with intent to deceive a victim, who is induced to contract in reliance on the lie, and who is thereby injured
mutual/bilateral mistake
- where both parties to a contract labor under the same error about an important fact in their agreement
- parties are mistaken about material fact, either party can rescind
unilateral mistake
a situation in which one of the parties to a contract labors under some error about an important fact in the agreement
reciprocal consideration
the price/inducement to enter a contract
legality in formation and execution
an agreement may fail to qualify because it either (1) contrary to public policy or (2) contrary to some statute
violation of statutes
- to gamble or conduct illegal lotteries
- to practice a trade or profession w/o license
- to engage in profit-seeking business on Sundays
- to charge interest rates that may be usurious
gambling
illegal if involve:
(1)some payments by gambler (2) for a chance (3) to win some prize.
insurable interest
a sufficient interest in property to where its loss or destruction would cause an econ loss to the owner
blue laws
statutes that regulate or prohibit commercial activities and amusements on Sundays
blue sky laws
regulate the sale of stocks and bonds and are designed to prevent fraudulent sale of securities worth no more than patches of blue sky
usury
the practice of charging excessively high rates on loans
subornation of prejury
crime of persuading another person to commit perjury
lobbying
efforts by individuals and representatives of special-interest groups to persuade legislators to enact, amend or rescind specified laws.
covenant not to compete
a promise not to engage in a competing business or profession. such covenants are generally illegal unless part of an otherwise enforceable contract for the sale of a business or for employment. In such cases, they are legal only if they are drafted to be reasonable regarding time, scope, geographic area, and are necessary to protect the interests of the contracting parties.
statute of frauds
a state statute requiring certain types of contracts to be evidenced by WRITING and to be SIGNED by the party to be charged, or by her or his authorized agent.
real property
land and things permanently attached to it. Includes air space above, surface water, and subsurface waters, gases, and minerals
personal property
not real property
tangible property
property that has physical existence and can be touched
intangible property
recognized by law even though it has no physical existence
what contracts must comply with statute of frauds
- contract for the sale of land or an interest therein
- contract for the sale of tangible goods for the price of 500 or more,
- contract that is not to be performed and cant be performed within 1 year from the date of agreement
- a secondary or underlying contract under which one person promises to pay or answer for the debt or duty of another, if such person fail to perform , or one in which an executor or administrator of an estate promises to pay a debt of the estate with his own money
- a promise made in consideration of marriage
- for the sale of kinds of personal property not otherwise covered
memorandum
- less writing but still satisfies the statute of fraud
- requirements: (1) must be signed by the party against whom enforcement is sought, (2) must contain at least the essential terms of the contract.
The uniform electronic transactions act (UETA)
- establish legal equivalence of electronic records and signatures w paper writing and manually signed signatures, removing barriers to electronic commerce
- SECTION 7: an elec record of sig can be sufficient to provide for enforceability of the contract
privity of contract
applies to a direct contractual relationship between parties, as exists
incidental beneficiary
person who benefits from a contract but is not named and has no legally enforceable rights or duties
assignment
the transfer of some or all rights under a contract to another person
delegation
transfer of some or all contractual duties to another person
how contracts are discharged?
- performance
- substantial performance
- waive
- accord and satisfaction
- novation
- material alteration
- breach
- rescission
performace
parties have done what they promised to do
substantial performance
when a party honestly performs most essential of a contract, but there’s some minor omission or deviation that can be corrected, or compensated for in a reduction of the price
waive
give up a right
accord and satisfaction
a party agrees to accept some substitutes for the promised performance of a contract, which is then provided
novation
a three-party agreement in which a creditor accepts a new party who agrees to assume the debt and to release the prior debtor
material alteration
any deliberate, unilateral, important change that is made in a written contract, w/o legal excuse
breach
failure w/o legal excuse to perform a promise made in a legally binding agreement
rescission
the unmaking of a contract by the mutual agreement of parties
compensation damage
in case of breach a contract, this amount is equivalent to the actual dollar loss suffered b/c the defendant did not perform as promised.
liquidated damages
amount of damages that contracting parties have previously agreed would be fair payment in case of breach. this amount will be unacceptable by a court if it is so large as to constitute a penalty
adhesion contract
take it or leave it
caveat emptor - let the buyer beware
before purchase, buyers should investigate and rely on their own judgment regarding obvious or readily discoverable shortcomings of the goods
express warranty
a warranty given by a seller to a buyer orally or in writing
implied warranty
a warranty implied by actions or law whether or not it is specifically mentioned in a contract
warranty of conformity to description, sample, or model (ex-war)
all goods must conform to the sample or model shown at the time of the sale, or to the specifications provided
warranty of conformity to seller’s statement or promise (ex-war)
the seller who openly states or writes a factual assertion about the goods is bound by that assertion
warranty of title (im-war)
the seller has the title to the goods as claimed and the right to transfer or sell them
warranty against encumbrances (im)
goods delivered will be free of liens or encumbrances-creditor’ claims-of which the buyer is not aware at the time of contracting
warranty of fitness for a articular purpose
if the buyer indicates the purpose for which the goods are needed then relies on the seller’s selection, the goods will be reasonably fir fot the intended stated purpose
warranty against infringement (mer-im)
goods sold are delivered free of any rightful claim of a 3rd party under patent, copyright, other legal protection
warranty of merchantability (mer-im)
promising that the goods are fit for the ordinary purposes for which such goods are used.
disclaimer
a written or oral statement stating that a warranty does not exist
consequential damages
amount awarded by a court to make good or replace indirect but foreseeable economic loss resulting from a party’s breach of contract
unconscionable
a bargain so unfair to a party that no resonable or informed person should agree to it and a court may decline to enforce it
parol evidence rule
when contracting parties have put their complete agreement into writing, no prior or contemporaneous oral or written terms may be unilaterally added later to change the written contract, absent proof of fraud, mistake, illegality
Magnuson-Moss Warranty Act of 1975
fed law that protects ultimate consumers of personal, family, and household goods by defining effects of full and limited warranties
