Contracts

Question 1

What must a contract contain?

Answer 1

Offer, Acceptance, Consideration, Proper form (oral or written), Legal subject matter, 2 Competent parties

Question 2

What forms may acceptance of a contract take?

Answer 2

Can be written or oral

Must be in the form/method required by offeror

Must be mirror image - i.e. no changes in terms

Question 3

Who can accept an offer?

Answer 3

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

Question 4

What happens if an offeree accepts a contract but puts added stipulations?

Answer 4

It is not acceptance; but instead becomes a counter-offer and the original offeror is now the offeree

Question 5

When is an offeror bound by a contract?

Answer 5

When they RECEIVE the acceptance.

If the offeree rejects; then accepts - whatever gets to the offeror first is what is binding.

Question 6

What will void an offer?

Answer 6

If offeror dies or becomes insane before acceptance; offer is void.

Contract is binding if acceptance occurs before death/insanity.

Question 7

What actions or circumstances will revoke a contract?

Answer 7

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.

Question 8

What is an Option?

Answer 8

Some amount of consideration (like money) is put forth by offeror to keep the offer open for a
stated period of time

Question 9

What is a Requirements Contract? How are they limited?

Answer 9

These are contracts where someone becomes the exclusive provider of something in exchange for
consideration

Companies can’t get locked in to one and then have market conditions force them to sell something at
what has become an unreasonable price

Question 10

What is promissory estoppel?

Answer 10

Promises to donate are legally enforceable

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

Question 11

What can make a contract VOID?

Answer 11

Fraud in the execution

Formed under extreme duress - extreme

Illegal

Question 12

What can make a contract VOIDABLE?

Answer 12

Fraud in the inducement

Party not competent to contract

Formed under SIMPLE duress

Undue influence

Question 13

What is the result of a clerical error in a contract?

Answer 13

The contract is unenforceable.

Example: Person signs a contract to pay $500.00 to have
their lawn re-seeded but due to clerical error; it actually reads $5000.00

Question 14

Contracts under the Statute of Frauds must be in what form to be valid?

Answer 14

They must be in writing.

Question 15

What makes a contract subject to the Statute of Frauds?

Answer 15

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

Question 16

What is the parol evidence rule?

Answer 16

Prevents one party to a written contract from coming in after the fact and claiming that a certain
conversation took place that conflicts with what is agreed upon in the written contract

It also prevents using an oral argument to read into the meaning of what is written on paper

If it’s on paper; it trumps what was agreed-upon orally prior to the written contract

Note: does not negate oral agreements made AFTER the contract or disallow oral words from clarifying ambiguous contract language.

Question 17

What are the requirements for the assignment of a contract?

Answer 17

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

Question 18

When can contracts be discharged by law?

Answer 18

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)

Illegal activity

Question 19

What kind of damages can plaintiffs sue for?

Answer 19

Compensatory damages: damages that compensate for breach

Specific performance: forced performance

Question 20

What is a recission of a contract?

Answer 20

“Undoes” a contract and restores parties to original position

Question 21

What is a novation?

Answer 21

Agreement is unchanged but one of the original parties is released and a new party enters.

Question 22

What is a substituted contract?

Answer 22

The original parties are released from the original contract but are bound by a new contract.