Contracts

Question 1

What must a contract contain?

Answer 1

Offer, Acceptance, Consideration ( something of legal value), Proper form (oral or written), Legal subject matter, 2 Competent parties, lack of defenses

Question 2

What forms may acceptance of a contract take?

Answer 2

Can be written or oral - doesn’t even require words.

Must be in the form/method required by offeror - if another method is used then it is now a counteroffer.

Must be mirror image - i.e. no changes in terms; any change in term is now a counteroffer.

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

Offer has to be accepted before it’s terminated in order to create a contract.

Offers are not assignable, option contracts are assignable.

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

What will void an offer?

Answer 5

If offeror dies or becomes insane before acceptance; offer is void. But an option contract is not terminated by death of a party.

Contract is binding if acceptance occurs before death/insanity.

Terminated contract : revocation by offer or or rejection by offeree

Revocation can be direct or indirect.

Rejection is effective when it is received. Offeree’s silence is a rejection of the offer.

Question 6

What actions or circumstances will revoke a contract?

Answer 6

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 7

What is an Option?

Answer 7

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

Question 8

What is a Requirements Contract? How are they limited?

Answer 8

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 9

What is promissory estoppel?

Answer 9

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 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

Formed under SIMPLE duress

Undue influence

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.

Question 14

What makes a contract subject to the Statute of Frauds?

Answer 14

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 15

What is the parol evidence rule?

Answer 15

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 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

Express Contract

Answer 18

A contract formed by language, oral or written.

Question 19

Implied In Fact - Contract

Answer 19

A contract formed by conduct.

Question 20

Implied In Law - Contract or Quasi Contract

Answer 20

Not a contract; A remedy that allows a plantiff to recover a benefit unjustly granted to the defendent; to prevent unjust enrichment.

Question 21

Unilateral contract

Answer 21

There is one promise, given in exchange for performance. Contract is not formed until performance is done.

Question 22

Bilateral contract

Answer 22

Two promises; promise is exchange for a promise. Contract is formed as soon as the promises are exchanged.

Question 23

Sources of contract law

Answer 23

Common Law and Uniform Commercial Code (UCC) Sales

Question 24

Characteristics of an offer

Answer 24

Must be definite and certain in its terms; offer for sale of goods only need quantity stated ( UCC); offer under common law must include - identity of offeree and subject matter; the price to be paid; time of performance; quantity involved; the nature of the work to be performed. You have to have knowledge of the offer in order to accept -ex: reward for something lost

Question 25

Exceptions to an effective revocation

Answer 25

Consideration has been paid to keep offer open ( option contract), start on a unilateral contract, merchant firm offers under the UCC

Question 26

Counteroffer

Answer 26

Is both a rejection and an offer - terminates the original offer and now the original offeror is now the offeree who may acceptor reject.

Question 27

Mailbox Rule

Answer 27

Acceptances are effective when dispatched - mail, email , fax - if it is properly addresed, and it does not matter if it gets lost or delayed, as long as it is properly addresed. Exception is if the offeror opts out and state when they will like to receive it.

Question 28

Offers, rejections, revocation, and counter offers

Answer 28

Are all effective on the date it is received.

Question 29

Consideration

Answer 29

Has to have a legal value and has to have been given in exchange for other consideration.

Question 30

Defenses

Answer 30

Can make a contract void ( unenforceable by either party) or voidable ( it may be avoided at the option of the party adversely affected)

Unilateral mistake is not a defense to a contract, unless the other party knew or should have knownthe mistake.

Question 31

Defense - Fraud

Answer 31

Misrepresentation - must be material in fact, no opinions, must be made with scienter, must knowingly or intentional, purpose was to induce reliance, liable to anyone that suffered a loss, defrauded party may rescind the contract or sue for money damages, but not both.

Question 32

Fraud in the execution

Answer 32

Deceived,not knowing what you are signing a contract, makes contract void.

Question 33

Fraud in the inducement

Answer 33

Defrauded party is aware making a contract but the terms are misrepresented.

Question 34

Duress

Answer 34

It’s an unlawful use of a threat of harm. If it is physical harm, then it is void, if financially or socially, then it is voidable.

Question 35

Minor

Answer 35

May disaffirm a contract a contract anytime while a minor, must return whatever she possesses when they disaffirms.

Question 36

Contracts required in writing

Answer 36

Marriage; terms can’t be performed in a year; interest in land, real estate; executor contracts; sale of goods over $500; surety contracts - MY LEGS

Question 37

Exception to written contract - don’t have to be written

Answer 37

If itso possible to perform in a year, not contracted but possible; if one party has already performed their part; lease of land for less than a year.

Question 38

Surety

Answer 38

Promise to pay debt of another person; must be evidenced in writing- only if it is collateral. A primary promise is not a surety promise.

Question 39

Contract

Answer 39

Does not have to be formal - need evidence of material terms that was signed by the person being sued.

Question 40

Accord and satisfaction

Answer 40

Agreement to substitute one contract for another; satisfaction is the execution of the accord. It discharge the original duty.

Question 41

Novation

Answer 41

A new contract substitutes a new party for an old party in an existing contract. All parties mustagree to the release.

Question 42

Condition Precedent ; Condition Subsequent; Condition Concurrent

Answer 42

Condition that must occur before the other party must perform; Subsequent: condition that will occur after a party’s duty to perform has arisenand will cutt off that duty; Concurrent: Conditions that must occur simultaneously;

Question 43

Remedies

Answer 43

What 5o do when a party fails to perform something they are contractually obligated to do.

Question 44

Anticipatory Breach

Answer 44

Curs when someone let’s you know in advance that they will not be able to perform their contracted duties. The other party can either sue now for damageseven before the time scheduled, wait till the same scheduled time and then sue, or cancel the contract.

Question 45

Damages

Answer 45

Once there’s a breach, the other party is entitled to damages.

Question 46

Compensatory Damage

Answer 46

Enough money to obtain substitute performance - the difference between the cost of substitute performance and the contract price.

Question 47

Consequential Damage

Answer 47

All damages that are reasonably forseeable as a result of the breach- extra costs you had to endure

Question 48

Specific Performance

Answer 48

Breach of contract involving land or unique items - therefore person can only receive specific performance or compensatory damage, not both.

Question 49

Liquidated Damage

Answer 49

Damages agreed to in the contract. Contract already stated what the damages will be if there was a breach.

Question 50

Punitive Damage

Answer 50

Not available for breach of contract, more for fraud

Question 51

Recission

Answer 51

Cancels the contract and return the parties to their former position.

Question 52

Third Party Beneficiary

Answer 52

To be one, it must be the purpose of the parties in the contract to give benefit directly to the third person, the intended beneficiary. The person must be named or specifically described.

Question 53

Assignment

Answer 53

Give contract rights to a third party.

Question 54

Delegation

Answer 54

Party wants third party to perform contract duties.