Contracts Flashcards
What must a contract contain?
Offer Acceptance Consideration (something of value) Proper form (oral or written) Legal subject matter Two or more competent parties
Becker:
1) An agreement made up of an offer and an acceptance (a meeting of the minds)
2) An exchange of consideration (something of legal value)
3) A lack of defenses (i.e. no reason or good reason for not performing)
What forms may acceptance of a contract take?
Can be written or oral (express) or by conduct (implied).
Must be in the form/method required by offeror. Becker: Utilizing another form/method is NOT a valid acceptance, and actually becomes a counter-offer.
Must be mirror image - i.e. no changes in terms
Becker: applies to common law (i.e. RISE) contracts. A change, deletion or addition of terms is NOT a valid acceptance, and becomes a counter-offer.
Who can accept an offer?
Must be accepted by intended party (offeree)
Acceptance can only be made by a party who knows an offer has been made and has all of the facts - AKA a meeting of the minds
They must intend to accept
Becker: Offers are not assignable.
What happens if an offeree accepts a contract but puts added stipulations?
It is not acceptance; but instead becomes a counter-offer and the original offeror is now the offeree
When is an offeror bound by a contract?
When they RECEIVE the acceptance.
If the offeree rejects; then accepts - whatever gets to the offeror first is what is binding.
What will void an offer?
If offeror dies or becomes insane before acceptance; offer is void.
Contract is binding if acceptance occurs before death/insanity.
What actions or circumstances will revoke a contract?
Offeror revokes and offeree receives revocation
Offeree finds out prior to acceptance that offeror has sold the item
In the case of an Option; offeror cannot revoke until the time of the option has elapsed
Initial rejection by offeree doesn’t void the option.
What is an Option?
Some amount of consideration (like money) is put forth by offeror to keep the offer open for a
stated period of time
What can make a contract VOID?
Fraud in the execution - you did not know you signed it.
Formed under extreme duress - extreme (i.e. gun to your head)
Subject matter does not exist (stolen/destroyed)
Contracts made with those certified insane by courts.
Illegal (commits a crime, usury, party does not have required license, etc.)
Note: If failure to have a license required to protect the public (i.e. CPAs, attorneys, doctors, realtors), VOID. If the license is merely required to raise revenue (hot dog stand), the contract is enforceable.
What can make a contract VOIDABLE?
Fraud in the inducement - you knew you signed it, but didn’t know the terms.
Party not competent to contract - mentally incompetent
Formed under SIMPLE duress (i.e. economic or social, not physical harm. Examples: blackmail, “I’ll fire you if you don’t sign” or “I’ll divorce you if you don’t sign”
Undue influence - taking unfair advantage of a relationship
Becker:
Mutual Mistake
Unilateral Mistake - only if a mistake was made in material fact and the other party knew or should have known about it. Classic example: big mistakes on bids.
What is promissory estoppel?
Promises to donate are legally enforceable. A promise by one party and detrimentally relied upon by another can be enforced without consideration.
Donation to charity is classic example.
Basically; you can’t tell a charity; “Hey; if you buy this
$100;000 piece of land; I’ll pay for the building that
will go on it;” and then renege on your promise
Becker: This is a major exception to the general rules of consideration. For promissory estoppel to work, the promise must be reasonably relied upon and detrimental (i.e. the party relying on the promise must have done something substantial).
Contracts under the Statute of Frauds must be in what form to be valid?
They must be in writing.
Becker: Need only be signed by defendant (the party trying to avoid the contract) to be enforceable.
What makes a contract subject to the Statute of Frauds?
o Cannot be completed within one year
o Involves the purchase of real estate
o $500+ Sale of Goods
o Co-signing and guaranteeing the debt of another
Becker: Remember MYLEGS:
- consideration is Marriage
- IMPOSSIBLE to perform within one Year
- involving Land (except leases less than 1 year)
- involving Executors
- Goods sold for $500 or more
- Surety (promising to be personally liable for someone else’s debt)
Note: Services can be oral, regardless of price, so long as you do it within a year.
What makes a contract subject to the Statute of Frauds?
o Cannot be completed within one year
o Involves the purchase of real estate
o $500+ Sale of Goods
o Co-signing and guaranteeing the debt of another
Becker: Remember MYLEGS:
- consideration is Marriage
- cannot be performed within one Year
- involving Land
- involving Executors
- Goods sold for $500 or more
- Surety (promising to be personally liable for someone else’s debt)
Note: Services can be oral, regardless of price, so long as you do it within a year.
What makes a contract subject to the Statute of Frauds?
o Cannot be completed within one year
o Involves the purchase of real estate
o $500+ Sale of Goods
o Co-signing and guaranteeing the debt of another
What are the requirements for the assignment of a contract?
Contracts are assignable to a third party beneficiary; but must be done so in good faith
Obligations may be assignable- Assignor is still liable
Assignor may be released from liability if other party grants a novation
When can contracts be discharged by law?
Party under contract is bankrupt
Party under contract dies or is incapacitated
Party cannot physically complete the contract (i.e. They are in prison so can’t finish building your house)
What is the difference between a unilateral and bilateral contract?
In a unilateral contract, there is one promise given in exchange for performance. A contract is not formed until performance is completed.
In a bilateral contract, there are two promises: a promise exchanged for a promise. A contract is formed as soon as the promises are exchanged.
What are the methods of contract formation?
Express Contract - formed by language, oral or written.
Implied-in-Fact Contract - formed by conduct
Implied-in-Law Contract - A remedy, not a contract, used to recover or prevent unjust enrichment.
What stages of performance exist for contracts?
Executory Contract - Duties remain to be performed.
Executed Contract - All of the duties under the contract have been performed.
What sources of contract law exist?
1) Common Law - judge made law.
Key: Use R.I.S.E. (Real Estate, Insurance, Services & Employment)
2) UCC Sales Article - statutory law covering the sale of goods (things you can touch or move).
What is entailed in an offer?
1) Intent to make a contract - the offer must be sufficient for a reasonable person to assume that the offer was serious (i.e. not an obvious joke, its gotta be serious).
2) Terms must be Definite and Certain - R.I.S.E. (aka a common law matter) must include:
- identity of the offeree and the subject matter
- price to be paid
- time of performance
- quantity involved
- nature of the work to be performed.
UCC is more liberal, and only need terms of quantity.
3) Communication to Offeree - No Knowledge, No Acceptance
How can an offeror terminate an offer?
Revocation - Generally, at any time before acceptance by communicating to the offeree. Even if you promised to keep the offer open, you can revoke before acceptance.
Exception: If the offeree purchases an option, if the oferee begins to perform under a unilateral contract, or a merchant “firm offer” under UCC.
Note: The revocation is effective when RECEIVED by offeree. Revocation may be direct (oral or written) or indirect (by conduct). If offer made through publications, must be made through comparable means (i.e. can’t be offered through internet then revoked through newspaper).
How can an offeree terminate an offer?
1) Express rejection or counteroffer (since a counteroffer is both a rejection and a new offer).
Note: A mere inquiry to “feel the other party out” is not a counteroffer. Effective when received by the Offeror.
2) Lapse of time: Silence = Rejection
