Contract Law Flashcards
ab initio
‘from the beginning’. a contract terminated ab initio returns the parties to the pre-contractual position
acceptance
the acceptance of an offer by words or conduct. The acceptance must mirror the offer (mirror image rule)
accord and satisfaction
required for an unilateral discharge of the contract.
accord: agreement to discharge a contract
satisfaction: consideration needed
adequate
consideration does not have to be adequate, so both parties do not have to give up something equal
affirm
an affirmed, or accepted, contract can’t be rescinded if the party that accepted knew of a defect
agreement to agree
non-binding intention of the parties. This can be a letter of intent, a memorandum of understanding or a heads of agreement.
anticipatory breach
a party makes clear that he will not perform his contractual obligations before the due date
bars to rescission
a party can’t always rescind a contract, for instance in the case of
- affirmation
- no possibility of restitutio in integrum
- third party rights have intervened
battle of the forms
the situation in which it is unclear whose standard contract applies (the offer or the acception)
bilateral discharge
both parties have not performed their contractual obligations, so they discharge by agreement to not enforce the original contract
binding
a binding contract is legally enforceable
breach of contract
the refusal or failure by a party to perform a contractual obligation. Damages are available for any breach, but in the case of a very serious breach the innocent party can also end the contract
business efficacy rule
a court may imply a term in, if the agreement was clearly intended to create a legal relationship and the contract cannot function without an implied term
capacity
the ability of a natural/legal person to enter into a contract
caveat emptor
let the buyer beware
collateral contract
one party enters into the main contract on the basis of a promise made by the other party
collective agreements
agreement between trade unions and employers, has to be incorporated into the individual employment contract
common mistake
both parties mistakenly believe the samen think and this mistaken assumption is based on a reasonable ground
condition
a fundamental term of the contract. If it is breached, a party can claim damages as well as treat the contract as ended
condition precedent
a condition stating that a right will not be granted until some future event
condition subsequent
a condition stating that the contract can be modified or set aside if some event occurs later
consensus ad idem
the need of a meeting of minds in order for there to be contractual agreement
consequential loss
unusual or special loss that would not necessarily be caused by the breach
consideration
the bargain. Each party gives something up (acts or promises).
construction
the court interprets the meaning of words
contract
a legally enforceable agreement
contracts in restraint of trade
contracts preventing the free exercise of trade or business. These are void unless it can be shown that the provision is reasonable between the parties (anti-competition clause in employment contract) and is not against the public interest
contract of adhesion
standard form contract on a ‘take it or leave it’ basis offered by a party in a superior position. the other party cannot negotiate the terms
contra proferentem rule
an exclusion clause is interpreted strictly, so if there is any confusion, it comes for the risk of the party who relies on the clause
counter offer
not all the terms of an offer are accepted, so there is no acceptance but a counter offer
damages
financial compensation that put the claimant in the position he would have been in were the contract performed properly
deed
a written document signed by parties and witnesses
digital content
data produced and supplied in digital form, such as online films or games
discharge
release from the obligations under a contract. It may be by performance, agreement, breach or frustration
discharge by agreement
both parties agree to end the contract
discharge by breach
- when the party in default has repudiated the contract either before performance is due or before it has been fully performed
- when there is a fundamental breach
discharge by frustration
it becomes impossible/futile to carry out the contract due to circumstances that are not the fault of either party
discharge by performance
the obligations have been carried out
distance selling
selling and buying of goods via the internet, mail order, phone or tv
divisible contract
the contract can be divided into a number of specific parts
doctrine of impossibility
US term for doctrine of frustration
duress
violence or threats in order to make someone enter into a contract. This can also be economic duress: illegitimate pressure going beyond acceptable commercial practice. Thus, there cannot be a voluntary acceptance of an offer
entire contract
contract that is not divisible into sets of obligations
exceptio non adimpleti contractus
Civil law, not common law! This means one of the parties can suspend his own performance if the other party does not fulfill the agreed obligation (opschortingsrecht)
exclude
to rule out liability for contractual failure
exclusion/exemption/limitation clause
a term that excludes or limits liability for a breach of contract, misrepresentation or negligence
executed consideration
one party performs an act in fulfilment of a promise made by the other, as in a unilateral contract
executory consideration
an exchange of promises to perform acts in the future
expectation damages
damages the innocent party can claim in a breach of contract action, where the profit the innocent party could have made if there was no breach, is taken into account
ex post facto warranty
if the innocent party chooses to continue the contract even after the breach of a condition, the condition is treated as a warranty. Only damages may be claimed in this case
express terms
terms explicitly stated by the parties, oral or written
firm offer
the offer is unequivocal, but can be withdrawn anytime before acceptance. This can even be done if there was a promise to keep the offer open. That promise would only be binding if there is a separate contract where value for the promise would have been given (option contract)
force majeure
a list of events considered outside the control of parties, such as natural disasters, for which the parties cannot be in breach
fraudulent misrepresentation
the person knew that the statement was untrue, or was reckless about the truth
frustrating event
an event beyond the control of the parties that makes the contract impossible or commercially pointless to carry out
frustration of the common venture
a contract can be discharged by frustration if there is no physical destruction of the subject matter, but the essential commercial purpose of the contract no longer exists
fundamental term
a term is fundamental if it goes to the root of the contract
guarantee
also called warranty. This is a legally enforceable promise that the goods are of good quality and will work properly
honour clause
this clause makes clear that there is no intention to create legal relations
illegality
when a contract is illegal, it is void
implied terms
terms that can be read into the contract, either by custom, by statute or by the courts
incorporation
an exemption clause must be incorporated into the contract, either by including it in a signed document or by giving notice of it in case there is no written contract
indemnify
to reimburse someone for the damage that he has suffered, a statement of liability to pay compensation
indemnity
an order of rescission may be accompanied by the court ordering an indemnity. This is not the same as damages; it is simply to put the parties back into their pre-contractual situation
induce
to encourage or persuade someone (to enter into a contract)
inequality of bargaining power
one party to a contract may have a dominant position
inequitable
unfair
injunction
usually a court order to stop a negative stipulation in the contract from being broken. It will not be ordered if damages are a sufficient remedy
innocent misrepresentation
the maker of the statement had reasonable grounds for believing it was true
innocent party
the party who has suffered loss because the other party is in default
innominate term
uncertain whether this is a condition or a warranty
intention to create legal relations
one of the requirements for a legally binding agreement
invitation to tender
an invitation to treat
invitation to treat
a stage in negotiations where one party is inviting others to make an offer, which he is free to accept or reject.
just apportionment
statute law has provisions for a fair adjustment of costs incurred under a contract discharged by frustration
lapse
no longer valid, for instance, an offer has lapsed if it has not been accepted within the set time limit
last shot rule
parties have exchanged their own standard contracts and the conditions laid down in the acceptance will be the ones to determine the contract
letter of comfort
a letter written in support of someone who is applying for a loan
letter of guarantee
a declaration to guarantee the payment of a debt incurred by another if that other fails to repay (garantstelling)
letter of intent
not a contract. It will only be binding if it can be proced that this document was indeed intended by the parties to be a binding contract, not just an agreement to agree. This depends on the presence of fundamental terms and the charactaristics of a final agreement
‘lie where they fall’
in common law, there is no just apportionment for costs incurred when a contract is discharged by frustration and it is not possible to recover money
liquidated damages
or specified damages: the parties themselves specify the damages
liquidated damages clause
a proper attempt to pre-estimate the loss that would result if the other party breaches the contract
main purpose rule
an exemption clause is not intented to defeat the main purpose of the contract
mandatory injunction
a court order requiring the defendant to act
material breach
US term for fundamental breach
merchant
professional contracting party
minor
a person under 18
misrepresentation
a false statement. Can be fraudulent, negligent or innocent
mistake
if the mistake is of an operative and fundamental character, which goes to the very substance of the contract, and existed at the time the contract was entered into, the contract will be void
mistake as to identity
a party is mistaken as to the identity of the other party
mistake as to quality
mistake as to the quality of the subject matter of the contract is not usually sufficient to make the contract void
mitigation
minimising loss by the innocent party (schadebeperkingsplicht)
mutual mistake
parties are at cross-purposes
naturally arising
damages may be climed for losses that arise naturally from the nature of the contract
negligent misreprentation
a lack of reasonable care was taken in making the statement
nominal consideration
something of minimal value exchanged in order to make the other party’s promise legally enforceable
non-consumer
a person acting other than a consumer
non est factum
in general, a person is bound by the terms of the contract, even if he has not read them. Non est factum is a defence against this: the contract is something fundamentally different from what the party intended to sign. If this defence succeeds the contract is void ab initio
notice of default
notice is given to the defaulting party that he is in breach of contract and he is given a fixed period of time to fulfil his duties. This is not a requirement in UK law as it is with the Dutch ingebrekestelling
of the essence
a term that is of fundamental importance
offer
willingness to enter into a contract without further negotiations
parol evidence rule / four corners rule
the rights and duties created by the written agreement must be looked for only within the four corners of the writing itself. Earlier drafts are irrelevant
partial performance
the performance is not exact and complete
past consideration
past consideration is not valid, because it refers to something that already has been done before the promise was made
penalty clause
punishing the other party for a breach. in UK law, these clauses are in principle unenforceable
peppercorn rent
nominal consideration has been given in order to make the agreement legally binding
performance
to carry out contractual obligations
postal rule
if acceptance is to be communicated by post, the acceptance is only complete when the letter is posted, even if the letter is never delivered
pre-contractual
a period of negotiation
presumption
the law makes certain presumptions based on the facts. in order to override this presumption, a party must bring forward further evidence
previous course of dealing
an exclusion clause may have been incorporated because parties have contracted before on the same consistent terms
prima facie
at first sight
principle of good faith
redelijkheid & billijkheid does not apply in common law
privity of contract
a contract only confers rights and duties to the parties signing the contract
promissory estoppel
equitable principle. A one-sided promise may be binding if there is an existing legal relationship and the promisor has promised not to enforce a legal right. Having induced reliance on this promise, it would be inequitable not to enforce the promise
proximate
damages are awarded for a loss that clearly results from an event of default
quantum meruit
‘as much as he deserves’
reasonable
an exclusion clause must be reasonable
reasonable person
objective test
rebut
to refute or to oppose
reliance loss damages
a party to a contract has the right to claim damages with respect to expenses that have been incurred because that party had relied upon the other party performing his obligations under the contract
remoteness of damage
the loss suffered by the innocent party must be either a natural cause of the breach or reasonable within the contemplation of the parties as the propable result of a breach, if not, the damage is too remote and no damages can be claimed.
representation
a statement that induces the contract but does not itself form a part of that contract
repudiation
the other party makes it clear that he will not (continue to) perform the contract
rescission
the representee can opt to have a voidable contract set aside, ie to rescind the contract. In the case of a misrepresentation, the contract can be terminated retrospectively and the parties are put back in the position they were in before the contract was made
restitutio in integrum
‘to restore something to its original state’
revoke
an act of annulment, such as withdrawing an offer
rights and obligations
are set out in the terms of the contract
rule in Pinnel’s case
the payment of a lesser amount than is owed, cannot discharge the obligation to pay the full amount, even if the creditor has agreed to accept the lesser amount, unless there is fresh consideration
rule of construction
interpretation of a clause, in order to reflect the parties’ intention when making the clause
rule of law
unlike a rule of construction, this must be applied whether it would mean giving effect to the parties’ intention or not
sale of goods
transferring property for money consideration. Goods are tangible, moveable, personal property. Excluded from this category are real property, money, choses in action and intangibles (like shares).
set aside
to annul or make void. A voidable contract is valid until it is set aside
signatory
one who signs a document
simple contract
a contract that does not have to be in a particular form
sit on the breach
the innocent party should mitigate his damage and not just sit still and do nothing
special notice
if a claimant wants to claim damages for losses that do not arise naturally from the contract, then he must give the other party notice of special circumstances that would make such losses probable.
specific performance
a court order to make a person carry out his obligations under a contract. This is a discretionary remedy and will not be ordered if damages are a sufficient remedy
statement of fact
in order to be classed as misrepresentation, the statement must be a fact, not an opinion
substantial performance
the contractual obligations are as good as fulfilled except for a few minor aspects
sufficient
the consideration has some value so it is sufficient
suspension of performance
not possible in common law like the Dutch opschorting
tender
offer to provide goods or services for a specified price; an invitation to treat
termination
a contract is brought to an end
terms
parts of a contract, either conditions or warranties
trade usage
when a contract is silent on the matter, a term can be incorporated into a contract reflecting local custom or trade usage in a particular sector
uberrimae fidei
‘of the utmost good faith’. Contracts that are uberrimae fidei have a duty of full disclosure
unconscionability / unconscionable inadequacy
mostly in US law. it allows a contract to be set aside where there is an unconscionable bargain, ie a bargain that is so detrimental to one of the patries as to be an affront to what can be considered reasonable
undue influence
improper pressure other than violence to make someone enter into a contract
unfair contract terms
refers in particular to the use of exclusion clauses
UCC
Uniform Commercial Code, a uniform set of rules in the US to govern commercial transactions, but not all of them
unilateral contract
there is no exchange of promises. instead, one party provides consideration in the form of a promise and the other party provides consideration in the form of an act
unilateral discharge
when there has been (partial) performance by only one party, there can only be discharge if the other party draws up a deed or provides fresh consideration
unilateral mistake
a ground for making the contract void, where only one of the parties is mistaken and the other party is aware of the mistaken assumption. These cases often also involve misrepresentation.
A mistake makes the contract void from the outset, but misrepresentation makes a contract voidable.
unliquidated damages
the calculation of the damages is at the discretion of the court
vitiating factor
a defect that was present in the agreement at the time the contract was concluded. This defect is sufficiently serious to have the contract set aside. These factors are misrepresentation, mistake, duress and undue influence
void
the contract was never legally valid and has no legal effect
voidable
a valid contract containing a vitiating factor. It is valid until one of the parties takes steps to rescind the contract
waiver
a party gives up his right to insist upon precise performance under the contract
warranties and indemnities
here, a warranty is a guarantee, ie a promise that the facts are as stated. It is usually connected to a promise to indemnify the promisee fo any loss that he sustains for having relied on the promise if the promise is false. These clauses are also known as indemnity clauses
warranty
- a term of lesser importance in a contract.If it has been breached, the innocent party has the right to claim damages
- guarantee
- US: warranties and indemnities in the sale of goods. These are express (affirmation or promise) or implied (buyer expresses a particular purpose to the seller). If the goods do not conform to the warranty, the innocent party can bring an action for breach of warranty
