Contracts Flashcards
What must a contract contain?
Offer, Acceptance, Consideration ( something of legal value), Proper form (oral or written), Legal subject matter, 2 Competent parties, lack of defenses
What forms may acceptance of a contract take?
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.
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
Offer has to be accepted before it’s terminated in order to create a contract.
Offers are not assignable, option contracts are 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
What will void an offer?
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.
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 is a Requirements Contract? How are they limited?
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
What is promissory estoppel?
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
What can make a contract VOID?
Fraud in the execution
Formed under extreme duress - extreme
Illegal
What can make a contract VOIDABLE?
Fraud in the inducement
Party not competent to contract
Formed under SIMPLE duress
Undue influence
What is the result of a clerical error in a contract?
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
Contracts under the Statute of Frauds must be in what form to be valid?
They must be in writing.
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 is the parol evidence rule?
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.
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)
Express Contract
A contract formed by language, oral or written.
Implied In Fact - Contract
A contract formed by conduct.
Implied In Law - Contract or Quasi Contract
Not a contract; A remedy that allows a plantiff to recover a benefit unjustly granted to the defendent; to prevent unjust enrichment.
Unilateral contract
There is one promise, given in exchange for performance. Contract is not formed until performance is done.
Bilateral contract
Two promises; promise is exchange for a promise. Contract is formed as soon as the promises are exchanged.
Sources of contract law
Common Law and Uniform Commercial Code (UCC) Sales
Characteristics of an offer
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
Exceptions to an effective revocation
Consideration has been paid to keep offer open ( option contract), start on a unilateral contract, merchant firm offers under the UCC
Counteroffer
Is both a rejection and an offer - terminates the original offer and now the original offeror is now the offeree who may acceptor reject.
Mailbox Rule
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.
Offers, rejections, revocation, and counter offers
Are all effective on the date it is received.
Consideration
Has to have a legal value and has to have been given in exchange for other consideration.
Defenses
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.
Defense - Fraud
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.
Fraud in the execution
Deceived,not knowing what you are signing a contract, makes contract void.
Fraud in the inducement
Defrauded party is aware making a contract but the terms are misrepresented.
Duress
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.
Minor
May disaffirm a contract a contract anytime while a minor, must return whatever she possesses when they disaffirms.
Contracts required in writing
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
Exception to written contract - don’t have to be written
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.
Surety
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.
Contract
Does not have to be formal - need evidence of material terms that was signed by the person being sued.
Accord and satisfaction
Agreement to substitute one contract for another; satisfaction is the execution of the accord. It discharge the original duty.
Novation
A new contract substitutes a new party for an old party in an existing contract. All parties mustagree to the release.
Condition Precedent ; Condition Subsequent; Condition Concurrent
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;
Remedies
What 5o do when a party fails to perform something they are contractually obligated to do.
Anticipatory Breach
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.
Damages
Once there’s a breach, the other party is entitled to damages.
Compensatory Damage
Enough money to obtain substitute performance - the difference between the cost of substitute performance and the contract price.
Consequential Damage
All damages that are reasonably forseeable as a result of the breach- extra costs you had to endure
Specific Performance
Breach of contract involving land or unique items - therefore person can only receive specific performance or compensatory damage, not both.
Liquidated Damage
Damages agreed to in the contract. Contract already stated what the damages will be if there was a breach.
Punitive Damage
Not available for breach of contract, more for fraud
Recission
Cancels the contract and return the parties to their former position.
Third Party Beneficiary
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.
Assignment
Give contract rights to a third party.
Delegation
Party wants third party to perform contract duties.
