Chapter 7 – Fundamentals of Contract Law

Question 1

If Justin offers to sell Tristan his TV for $500, this offer must be in which form to constitute a legally valid offer?

Answer 1

At common law, an offer can be expressed in any form. This includes in writing, orally, or even by the conduct of the offeror.

Question 2

A __________ is a legal term for a “subject to” clause. In contract law, it calls for the happening of some event or the performance of some act before the contract shall be binding upon the parties.

Answer 2

condition precedent

Question 3

In the law of contracts, __________ amounts to the unmaking or undoing of a contract from the beginning, as opposed to termination.

Answer 3

rescission

Question 4

What is frustration of contract?

Answer 4

A frustrated contract is a contract that, after its formation, and through no fault of either party, is incapable of being performed due to an unforeseen event. An example is a lighting storm starting a fire that burns down a home, in the time between the sale contract’s formation and the date of possession.

Question 5

An advertisement in a magazine to sell a vintage car for $100,000 would usually be considered an _________ and not an __________.

Answer 5

An advertisement in a magazine to sell a vintage car for $100,000 would usually be considered an invitation to treat and not an offer.

Question 6

What does a court order when it awards specific performance to a plaintiff?

Answer 6

When a court awards specific performance, it orders that the terms of the contract be carried out by the party in default.

Question 7

___________ is the term for the cancellation of an offer communicated by the offeror to the offeree prior to acceptance.

Answer 7

Revocation

Question 8

A ______________ is a statement by the recipient of the offer which has the legal effect of rejecting the original offer and of proposing a new offer to the original offeror.

Answer 8

counter offer

Question 9

In the law of contract, what is consideration?

Answer 9

In the law contract, consideration means some right, benefit or profit accruing to the promissor, or some detriment suffered by the promissee. In other words, the party seeking to enforce the contract must have “paid” something in return for the promise made to them, and consideration refers to that thing which was paid.

Question 10

A __________ defect is a hidden or concealed defect that would not be discovered during the course of a reasonable inspection.

Answer 10

latent

Question 11

What is an invitation to treat?

Answer 11

An invitation to treat is a type of advertisement used to induce the public or an individual to submit an offer. An invitation to treat is not an offer capable of acceptance to form a contract.

Question 12

A person can assign away _________ under a contract to a third party, who can then sue to enforce those benefits. However, a person cannot assign away _________ under a contract to a third party.

Answer 12

A person can assign away benefits under a contract to a third party. However, a person cannot generally assign away liabilities under a contract. For example, if A has a contract with B under which B must pay A $100, A can assign the right to receive $100, which is a benefit, to C. But, if A has a contract with B under which A must pay B $100, A cannot assign the obligation to pay B $100, which is a liability, to C.

Question 13

What is mental incapacity, and what is the effect of mental incapacity on agreements signed by a mentally incapable party?

Answer 13

Mental incapacity is the state in which cognitive impairments renders a person unable to understand the nature and effects of their actions. If a person who is mentally incapable enters into a contract, that contract is voidable by the person or their legal representative.

Question 14

Name five ways a contract can be terminated.

Answer 14

1) performance;
2) agreement to waive performance or substitute another agreement;
3) nonfulfillment of a condition precedent;
4) frustration; and
5) breach of a condition of the contract which is accepted by the injured party.

Question 15

In contract law, what are the six essential elements for a legally binding contract?

Answer 15

The six essential elements of a contract are: offer, acceptance, consideration, legal intention, capacity, and legal object.

Question 16

What is the difference between a statutory assignment and an equitable assignment?

Answer 16

A statutory assignment complies with The Choses in Action Act. It must be in writing and is subject to any conditions or restrictions on assignment as contained in the original contract. An equitable assignment is an assignment which does not fulfill the statutory requirements (i.e., is not in writing). In order to enforce an equitable assignment, all three parties must be parties to the court action. To enforce a statutory assignment, only the promisor and assignee are named as parties, and not the assignor.

Question 17

In legal terms, what is a breach of contract?

Answer 17

A breach of contract is failure, without legal excuse, to perform any promise which forms the whole or part of a contract.

Question 18

Assume that Lucas contracts with George to commit a crime in exchange for $100. This agreement will likely be held to lack a _________ and therefore may be deemed __________.

Answer 18

This agreement will likely be held by a court to lack a legal object, meaning that the contract is illegal. Where this is the case, the “contract” may be deemed void and unenforceable by the court.

Question 19

When does acceptance of a valid offer have legal effect?

Answer 19

Acceptance of an offer has no legal effect until the acceptance is communicated to the offeror.

Question 20

In what contexts does the common law presume that parties intend to be legally bound by an agreement?

Answer 20

The law presumes legal intention, which is an essential element of contract, in the case of an agreement between strangers and in the case of commercial/business agreements.