Contracts

Question 1

The formation of a valid common law contract must contain what?

Answer 1

Offer - the offeror expresses willingness to enter into contract (intent to make offer and communicated to offerree)
Acceptance - creates a contract
Consideration - both parties must provide

Question 2

What are the rules regarding acceptance of an offer?

Answer 2

Mirror-Image Rule - must accept all terms and cond. w/o alteration, or it will be a counter-offer
Early Acceptance Rule (mail-box rule) - effective when transmitted or dispatched

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 can make a contract VOID?

Answer 10

Fraud in the execution
Formed under extreme duress - extreme
Illegal

Question 11

What can make a contract VOIDABLE?

Answer 11

Fraud in the inducement
Party not competent to contract/intoxication
Formed under SIMPLE duress (improper threat)
Undue influence (trusted the other party)
Misrepresentation of a material fact
Capacity - ex: a minor can withdraw if they choose

Question 12

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

Answer 12

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 13

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

Answer 13

They must be in writing.

(Unless the contract has already been performed by both parties; or the contract meets certain exceptions regarding the sale of goods- SPAM)

Question 14

What makes a contract subject to the Statute of Frauds?

Answer 14

“GROSS”

• Sale of “G”oods worth $500+
• Real estate sales
• Over one yr required to perform contract
• Suretyship (guarantee debt of another)
• Statements in consideration of marriage

Question 15

What is the parol evidence rule?

Answer 15

Prohibits the use of oral or written evidence to contradict the terms of the written contract
If there is a written contract, the parol rule applies
It bars from court, any prior agreements made before the written contract, but does not bar any agreements or modifications made after the written agreement.

Question 16

What are the requirements for the assignment of a contract?

Answer 16

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 17

When can contracts be discharged by law?

Answer 17

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)

Question 18

What would terminate an offer?

Answer 18

Expiration
Revocation (must be received to be effective)
Rejection (refusal by offeree)
Counteroffer
Operation of Law (death, insanity, illegal matter)

Question 19

Bilateral contract

Answer 19

A contract that can be accepted by a promise

Question 20

Unilateral contract

Answer 20

A contract that can only be accepted by actual performance

Common law prohibits the offeror from revoking an offer if the offerree is in the process of performing such actions

Question 21

What would a victim of a contract breach entitiled?

Answer 21

Actual damages (damages directly caused by the breach)
The courts do not award punitive damages that are designed to specifically punish the defendant

Question 22

Anticipatory breach

Answer 22

When a party indicates in advance that they will not perform a term required in the future

Question 23

What are the two main sources of contract law?

Answer 23

Common Law derived from courts

Uniform Commercial Code (UCC)- derived from Statutory Law (Sales of Goods)

Question 24

What is an express contract?

Answer 24

The terms of an offer must be definite to permit the formation of a contract, including clear agreement to subject matter, price, and time of performance.

Terms can be implied-in-fact and not explicitly stated

Question 25

What is a quasi-contract?

Answer 25

A contract that can be implied-in-law.

Occurs when the courts decide that parties should be treated as if they had an agreement, even though they did not.

Question 26

What is the difference between the effective dates of acceptance of offers versus revocations/rejections when using the mailbox rule?

Answer 26

Acceptances are effective when tramsmitted (mailed)

Revocations/Rejections aren’t effective until they are received

Question 27

What is required in order for a consideration of an offer to be valid?

Answer 27

Contract must be the result of the contract.

It cannot be past considerations or pre-existing duty

Question 28

What are the exceptions to the Statute of Frauds rule requiring a written contract?

Answer 28

When the contract has already been performed by both parties
For contracts involving sale of goods, exceptions are SPAM:
-Specifically manufactured goods by seller
-Partial performance will be enforced to extent of perf
-Admit in court to having made the contract by defend.
-Merchant does not object within 10 days of confirm.