Contract Law

Question 1

Four elements of a contract (to be legally enforceable)

Answer 1

Agreement

Capacity to contract

Consideration

Legal purpose

Question 2

Requirements of a valid offer

Answer 2

Intent to contract

Definite terms

Communication to the other party

Question 3

Factors considered for duration and termination

Answer 3

Lapse of time

Operation of law

Offeree’s rejection

Counteroffers

Offeror’s revocation

Question 4

Counteroffer

Answer 4

Proposal that varies in some material way from the original offer

Terminates original offer and constitutes a new offer

Question 5

Requirements for acceptance

Answer 5

Acceptance made by offeree

Acceptance is unconditional and unequivocal

Offeree must communicate acceptance by appropriate word or act

Question 6

Forbearance

Answer 6

Act of giving up or the promise to give up a legal right

Question 7

Substantial performance

Answer 7

Performance of the primary, necessary terms of an agreement

Question 8

Parties who may lack capacity to contract

Answer 8

Minors

Insane persons

Intoxicated persons

Artificial entities

Question 9

Conditions to avoid a contract re: insanity/intoxication

Answer 9

Person did not know contract was forming

Person did not understand legal consequences of acts from contract

Question 10

Ultra vires

Answer 10

An attempted contract not within corporate powers

Contracts “beyond its power”

Question 11

Consideration necessary to make a promise

Answer 11

A return promice

Act performed

Forbearance from acting

Question 12

Consideration

Answer 12

Something of value or bargained for and exchanged by the parties to a contract

Question 13

Five types of consideration

Answer 13

Valuable

Forbearance

Present

Future

Binding promises

Question 14

Good consideration

Answer 14

Based on love, affection, or moral duty

Not sufficient to support a contract

Question 15

Valuable consideration

Answer 15

Consideration necessary and sufficient to support a valid contract

Question 16

Three types of consideration insufficient to form a binding contract

Answer 16

Past consideration

Promises to perform existing obligations

Compromise and release of claims

Question 17

Promissory estoppel

Answer 17

Permits enforcement of a promise made without consideration in order to prevent injustice

Question 18

Promissory estoppel application

Answer 18

Party has made a promise expecting another to act

Other party has justifiably relied on the promise to his or her detriment

Only enforcement would achieve justice

Question 19

Usury

Answer 19

Charging of illegally high interest rate on a loan

Question 20

Exculpatory clause

Answer 20

Contractual provision purporting to excuse a party from liability resulting from negligence or otherwise wrongful act

Question 21

In pari delicto

Answer 21

If both parties are equally at fault, contract is not enforceable

Question 22

Severable contract

Answer 22

Contract that includes two or more promises (court can enforce separately)

Question 23

Genuine assent

Answer 23

Actual assent to form a contract or their indication of intent by actions or words

Question 24

Five factors counter to genuine assent

Answer 24

Fraud

Mistake

Duress

Undue influence

Innocent misinterpretation

Question 25

Six elements of fraud

Answer 25

(1) a false representation of a (2) material fact (3) knowingly made with (4) intent to deceive (5) on which the other party has placed justifiable reliance (6) to his or her detriment

Question 26

Concealment defense for an insurer (two things)

Answer 26

1. Insured knew concealed fact was material 2. Insured concealed with intent to defraud

Question 27

Unilateral mistake

Answer 27

Perception by one party to a contract that does not agree with the facts Does not ordinarily affect a contract

Question 28

Statute of Frauds

Answer 28

Law to prevent fraud and perjury by requiring certain contracts be in writing and contain signature of party responsible for performing contract

Question 29

Situations in which contracts must be written

Answer 29

Sale of land Will take more than one year To pay another's debt Consideration of marriage Sale of goods \> $500 Sale of real property or legal interests in real property (realty)

Question 30

Uniform Commercial code

Answer 30

Model code providing contract for sale of goods \> $500 must be in writing

Question 31

Parol evidence rule

Answer 31

Assumption that all prior negotiations, etc, were merged into final, written contract If there is a written contract, any separate writings (prior to acceptance) are not applicable

Question 32

Order of importance when determining changes in a printed contract

Answer 32

Handwriting over typewriting Typewriting over printing Words over figures

Question 33

If provision can have more than one reasonable meeting

Answer 33

Courts adopt interpretation least favorable to the party who put the provision into the contract

Question 34

Creditor beneficiary

Answer 34

Third-party owed a debt to be satisfied by performance of contract

Question 35

Donee beneficiary

Answer 35

Receives benefit of a contract's performance as a gift from the promisee

Question 36

Incidental beneficiary

Answer 36

No contractual rights but benefits from a contract even though it is not the intent of the parties to the contract

Question 37

Novation

Answer 37

Substitution of a third party for one of the original parties to a contract, releasing the original party from rights and obligations under the contract

Question 38

Three conditions of contracts for discharge of contractual obligation

Answer 38

Nonfulfillment Condition concurrent Condition subsequent

Question 39

Condition concurrent

Answer 39

Event that must occur at the same time as another condition

Question 40

Condition subsequent

Answer 40

Event that, if it occurs, discharges a duty of performance

Question 41

Anticipatory breach

Answer 41

Unequivocal indication before performance is due that he/she will not perform when performance is due Does not apply to unilateral contracts

Question 42

Materiality of breach

Answer 42

Extent to which breaching party has performed Willfulness of the breach Extent to which nonbreaching party has obtained benefits