Contracts Flashcards
Contract
legally enforceable agreement between 2 or more entities (people, businesses, governments, etc)
Examples of common contracts
Terms and Conditions
Leases
Student Loans
Codes of Conduct
What are the things needed to establish a contract?
An offer
Acceptance of the offer
Mutual assent of the parties
Support by Consideration
Cannot violate public policy
Void contracts
- not contracts at all
- Usually because they lack one of the key elements of a contract
Voidable Contracts
- contracts that may be avoided by 1 of the parties (but the other cannot)
- Perhaps due to fraud, or duress
Unenforceable Contracts
- those that cannot be enforced by courts
- Perhaps the contract was valid, but the statute of limitations on enforcement has passed. Or the writing cannot be produced.
Bilateral Contract
both parties agree to do take some action in the future
Unilateral contract
one party makes a promise in exchange for another person performing (or not performing) an act
Offer
- a proposal to make a contract
- Made by an offeror to the offeree
What makes an offer legally effective?
- A definite proposal
- Made with intent to contract
- Communicated to the offeree
Offers p2
Offers are distinct from solicitations of an offer – invitations for someone else to make an offer
List of things that can terminate a contract
- Revocation by the offeror (before acceptance only)
- Lapse of time (explicit limit, or “reasonable” time)
- Subsequent illegality (the subject matter gets banned)
- Destruction of the subject matter
- Death or lack of capacity (Before acceptance)
- Rejection
- The offeree makes a counteroffer
Counteroffer
- A rejection of the previous offer
- A new offer to perform under different terms
Is the previous offer still valid if a counteroffer is produced?
No, the previous offer is now terminated and no longer available or binding on either party
Is an inquiry a counteroffer?
No
Option
an agreement to hold an offer open for a set period of time
Acceptance
the agreement of the offeree to be bound by the terms of the offer
What are the conditions under which an acceptance is legal?
- An unconditional consent
- Remember that conditional consent might be a counteroffer
- To an open offer
- By the offeree only
- Communicated to the offeror (Mailbox Rule)
Forms of Acceptance
- A promise
- An act, or a forbearance of an act
- Anything else specified by the offer (if the offer specifies a form, it MUST take that form)
Does silence count as acceptance?
No
Capacity
the laws recognition that an individual has the mental authority to make significant binding decisions
When are people provided the defense of incapacity?
- Minors
- Suffering from mental disabilities or defects
- Intoxicated
Consideration
the thing of value that each party exchanges in the contract
Forbearance
a party agreeing to refrain from some action or forgo some legal right.
Illegal Contracts
If parties enter into contracts that involve illegal activity neither party can seek enforcement or recission
Three exceptions of Illegal Contracts
- The contract is illegal because the law exists to protect one of the parties
- One party is coerced, defrauded, or unduly influenced to participate
- A party repents and rescinds before the illegal act is executed
Statute of Frauds
certain types of contracts must be in writing
What types of contracts are unenforceable unless in writing?
- Contracts conveying real estate
- Contracts worth over a certain dollar amount (usually $500)
- Contracts that cannot be performed in less than 1 year
- Contracts where marriage is part of the consideration
- Agreements to be responsible for other people’s debts
- Agreements to be the administrator of an estate
Because the contract is intended to be the last word, outside evidence is inadmissible if offered to try to change the terms of the contract. When might outside evidence be admissible?
- When agreements are incomplete (partially integrated) but only with respect to unaddressed terms
- To prove fraud
- To prove lack of consideration
- To explain the meaning of ambiguous words
Performance
Fulfilling the promise made in a contract
Anticipatory repudiation
one party states an intention not to perform before performance is due
Accord and Satisfaction
- Parties might end up “settling” for less than they originally agreed to.
- For example, a debtor who cannot pay the full amount might offer to pay off a portion (accord). If the creditor agrees and accepts payment in exchange for canceling the debt, you have satisfaction and the resulting compromise is enforceable – the contract has ended
Warranty
a contractual obligation that sets the standard of performance – it is a guarantee of a certain level of performance
Assignment
- the transfer of rights
- Roles – assignor and assignee
Delegation
the assignment of duties
When are rights non-assignable?
if doing so would significantly affect the corresponding duty
When can you not delegate?
if there is a personal component in performance
Breach
occurs when a party totally or substantially fails to perform their part of the contract
Condition precedent
something that must occur before a duty to perform must take place
Condition subsequent
something that can terminate a party’s obligation to perform
