Contract Law Flashcards
What is a contract?
A contract is an agreement between two or more parties that is enforceable in court.
What is a breach of contract?
Failure to perform the terms of a contract constitutes breach of contract, which in turn results in liability.
Different forms of a contract
A contract can be in writing and signed, or it can be oral. It can even be implied, which means it can come into existence without a word ever being written or spoken. Contracts can also be created on the internet.
Elements of a valid enforceable contract?
Contractual capacity, Mutuality, Legality, Consideration, Proper form, Genuine assent.
What is contractual capacity? Are there any exceptions?
For a valid contract, the parties must have legal capacity to contract- that is, the ability both to understand the terms of the contract and to appreciate that failure to perform its terms can lead to legal liability, including a lawsuit. The following groups of people are viewed by the law as having diminished mental abilities and thus lacking contractual capacity:
- The minors: People who are not yet legal adults; those under age 18 in some states, under 19 or 21 in others.
- The mentally incompetent.
- The very intoxicated.
The contracts of all three groups are voidable. A voidable contract is one that may be canceled at the option of one party (in this case, the person with legal disability). This right to cancel applies while the disability exists and for a reasonable time after it ends- that is, after the minor reaches 18 (or 19 or 21 depending on the state), after the very intoxicated person becomes sober, or after the mentally incompetent person becomes competent (if ever).
What is mutuality? how is it established?
Mutuality (sometimes called a meeting of minds) means that all parties to the contract are interested in its terms and intend to enter an agreement to which they will be legally bound. It is established by one party making an offer and the other party accepting that offer.
What is an offer? terms? responses?
- An offer is a proposal to do or give something of value in exchange for something else.
- An offeror is the person who makes an offer; the offeree is the person to whom the offer is made.
- The terms of an offer must be definite. If the terms are vague a contract may not result.
- When an offer is made, the offeree has two options: Accept the offer, or reject it. If the offeree accepts the terms of the offer, mutuality is achieved. If the other essential elements needed for a contract are present, an enforceable contract will exist. If however the offeree rejects the offer, the parties have not mutually agreed upon the terms and so no contract exists.
What is a counteroffer?
Sometimes the offeree is interested in the offer but wants to change a few terms. In such a case the offeree makes a counteroffer, a response to an offer that modifies one or more of its provisions. The counteroffer is treated as a new offer. The original offeror has the option of accepting the counteroffer, rejecting it, or making yet another counteroffer.
What is legality?
To be enforceable, a contract must have a legal objective. If what the parties obligate themselves to do is illegal, the contract is not just voidable, but void.
What is a void contract?
A void contract is one that is unenforceable in court.
The court will dismiss the case without the need for a trial.
What is consideration? Why is it important?
For an agreement to be binding and enforceable in court, there must be consideration.
In connection with contracts, consideration means something of value exchanged for something else of value.
What are illusory contracts?
Sometimes the terms of the contract do not contain a firm commitment. If an apparent commitment is so indefinite that the party has not in fact promised to do anything, the promise is said to be illusory. An illusory promise does not constitute consideration and will not give rise to a contract.
What is proper form?
The general rule is that oral contracts are enforceable. Such contracts may, however, be difficult to prove. A good practice is to put all contracts in writing and thereby avoid the “proof problem”. However, an oral contract is enforceable if it can be proved.
Statute to prevent frauds
The rule that oral contracts are enforceable is a general rule. Several exceptions exist. Certain types of contracts are not enforceable unless they are in writing. The law that requires a writing for these contracts is called the Statute of Frauds. Among the types of contracts within the Statute of Frauds are the following:
- Contracts for the purchase and sale of real property, which includes land and buildings, such as a hotel.
- Contracts that cannot be completed within one year from when they are made, such as a two-year employment contract for a restaurant manager.
- Contracts for the sale of goods (moveable, tangible objects, not services) in excess of $500, such as the sale of a $2300 computer.
What is an exception to the statute of fraud?
An exception to the writing requirement of the Statute of Frauds is the doctrine of part performance. Where the party asserting the absence of writing as a defense has partly performed the contract, the court may construe thereof both the existence of the contract and its terms.
