chapters 8,9,10

Question 1

Know the two parts that make up an “agreement”:

Answer 1

Mutual ascent, evidenced by “offer” and “acceptance”

Question 2

Know the basic terms that an offer must usually contain.

Answer 2

A promise or commitment to perform or refrain from performing specific acts.

1. Serious objective intent by the offerer
2. Terms must be reasonably certain or definite, clear to parties and courts
3. Must be communicated to the offeree

Question 3

Know the difference between an acceptance and a counter-offer.

Answer 3

Acceptance cannot impose new conditions on an offer; if it does, it may be considered a counter-offer

Question 4

E-contracts generally follow regular contract rules

Answer 4

Must meet basic requirements of a contract: agreement, consideration, contractual capacity, and legality.

Software sales often involve licensing.

Question 5

E-contracts may require compliance with the vendor’s terms,

Answer 5

Disclaimers, Return Policy, Limitation on Remedies, Privacy Policy, Dispute Resolution (Binding Arbitration), Forum Selection Clause, Choice-of-law Clause

Question 6

Click-on Agreement

Answer 6

Terms are legally accepted even if not read by all parties.

Question 7

know when e-signatures are not allowed (for certain documents)

Answer 7

Exempted documents include court papers, divorce decrees, evictions, foreclosures, health insurance terminations, pre-nuptial agreements, wills

Question 8

Know the basic requirements of valid consideration

Answer 8

1. legally sufficient value

2. bargained-for exchange

Question 9

when consideration is not adequate

Answer 9

Past consideration, illusory promises, pre-existing duty, gifts

Question 10

Elements of promissory estoppel

Answer 10

1. Clear and definite promise
2. Promisor should have expected that promissee relied on the promise
3. Promissee reasonably relied on the promise by acting or refraining to act
4. Promisee’s reliance was definite and resulted in detriment
5. Enforcement is necessary to avoid injustice

Question 11

Know the two categories of insufficient capacity

Answer 11

Age and Mental Status

Question 12

When a minor enters a contract

Answer 12

• Voidable by disaffirmance: entire contract must be voided
• Ratification is acceptance of the contract when the minor reaches majority age or Implied Ratification
• Not voidable by the parental cosigner

Question 13

A person who was intoxicated at the time the contract was formed may be allowed by a court to void the contract, if

Answer 13

the court finds that the intoxicated person lacked the necessary mental capacity, and the other party was aware of that

Question 14

In cases involving mental status which may affect the party’s understanding of the contract terms, the party’s options differ depending on

Answer 14

• whether he or she was previously ruled incompetent by a court (contract is void)
• or not (contract is voidable if the party proves lack of adequate understanding to the court, otherwise the contract will be upheld)

Question 15

An otherwise valid contract may be void or unenforceable due to lack of legality. Lack of legality falls into two main parts:

Answer 15

(1) contracts that violate state or federal law, e.g. contracts to perform an illegal task, or charge interest above the legal limit
2) contracts that are deemed to violate “public policy,” such as contracts in restraint of trade, or which are unconscionable (grossly unfair)

Question 16

the legal name for an employment contract clause which prohibits the employee from later competing against that employer

Answer 16

Noncompete agreements, included in employment contracts

Question 17

An “exculpatory clause” in a contract (shielding one party from any liability) may be upheld by a court if

Answer 17

the activity is not essential, such as going to an amusement park or a ski lodge.

Question 18

an agreement to form a contract may be invalid

Answer 18

if the agreement was not a free and voluntary act.

“voluntary consent”

Question 19

Lack of voluntariness may arise from

Answer 19

• mistakes as to the terms of the contract

- when one party uses fraud, undue influence, or duress to pressure the other party into an agreement

Question 20

a mistake made by both parties

Answer 20

(“bilateral mistake”) usually means the contract may be voided

Question 21

A mistake by one party only

Answer 21

(“unilateral”) usually means that the party making the mistake is still bound by the contract

Question 22

A mistake as to the value of the subject of the contract

Answer 22

• is usually not grounds to void a contract.
• Exceptions:
  1. Other party knew mistake was made
  2. Substantial mathematical mistakes

Question 23

statute of frauds

Answer 23

Know that although verbal contracts are generally valid, certain laws known as the “statute of frauds” require that some contracts be evidenced by writing:

• contracts involving the sale of land
• contracts regarding marriage
• contracts to pay the debts of another
• contracts to purchase goods valued at $500 or more

Question 24

assignment of rights under a contract

Answer 24

rights of assignee to receive payments or services from assignor
exception: not allowed when the contract is personal by nature such as a contract for a child’s tutor, or a music instructor or a sculptor

Question 25

delegation

Answer 25

duties to be performed under a contract

Question 26

When a valid assignment occurs, the party which assigned its rights to a third party…

Answer 26

becomes free and clear from the contract.

Question 27

When a delegation of contract duties to a third party is valid, but later a breach of contract occurs because the third party fails to fulfill the required duties…

Answer 27

the non-breaching party may sue not only the third party but also the original party who delegated the duties to the third party

Question 28

Conditions precedent

Answer 28

must be fulfilled before the contract takes effect

Question 29

conditions subsequent

Answer 29

if not fulfilled, will discharge the contract after it began

Question 30

know the difference between an intended beneficiary and an incidental beneficiary

Answer 30

In case of a dispute, only an intended beneficiary (but not an incidental beneficiary) may sue for breach of contract.

Question 31

Know the three levels of contract performance

Answer 31

(1) complete performance of all contract terms
(2) substantial performance of most contract terms
(3) material breach, when performance has major issues and does not reach the level of substantial performance

Question 32

Know the effect of the different levels of performance on the parties’ remedies

Answer 32

(1) both parties are discharged from the contract because the contract is complete
(2) the nonbreaching party cannot void the entire contract but may sue for appropriate damages to compensate for items not completely performed

Question 33

Know that a party suing for breach of contract is usually allowed to collect…

Answer 33

compensatory damages and reasonably foreseeable consequential damages, but usually not punitive damages. “Nominal” damages for a token amount of money are rare

Question 34

Mitigation

Answer 34

A non-breaching party is generally required to make reasonable efforts to reduce or mitigate damages caused by the other party’s breach of contract, rather than doing nothing.

Question 35

Contracts may be discharged by “operation of law,” which includes:

Answer 35

• when the non-breaching party fails to take legal action against the breaching party within the time allowed by the statute of limitations
• or when the breaching party files bankruptcy
• or when the subject matter of the contract is destroyed, such that it is impossible to fulfill the contract

Question 36

Understand the different kinds of equitable relief which a court may grant

Answer 36

• reformation (where the court rewrites part of the contract)
• quasi-contract (where the court allows one party to recover damages despite the lack of a contract)
• specific performance (where the court requires the contract to be performed instead of awarding damages, usually when the subject matter of the contract is unique such as a sculpture or a rare book)