Contracts

Question 1

Differentiate between express or Implied contracts:

Answer 1

Expressed contracts are contracts where the parties, either orally or in writing, state the terms of the contract and implied contracts are implied in fact or in law (quasi contract)

Question 2

Differentiate between bilateral or unilateral contracts:

Answer 2

Bilateral is a promise for a promise and it creates legal obligations for both parties.
Unilateral contract is a promise for an action, no legal obligation for either party unless the promisee undertakes the action.

Question 3

Differentiate between Valid, Void or Voidable:

Answer 3

Valid contracts are enforceable by either party
Void contracts are not enforceable by either party
Voidable contracts are valid contracts unless one of the parties chooses to void the contract.

Question 4

Differentiate between executed or executory contracts:

Answer 4

Executed contracts have been completely performed by both parties and Executory contracts are contracts where some aspect of the contract has not yet been performed.

Question 5

Essential elements of a contract are:

*hint: 4

Answer 5

Mutual Assent (Offer & Acceptance)
Consideration
Capacity
Legality

Question 6

Elements of an effective offer:

Answer 6

Definite or specific terms
Intent to be bound or seriousness (reasonable person standard)
Offeror must communicate offer to the offeree.
(Advertisements are usually not offers)

Question 7

When is revocation of the offer valid?

What if consideration is given to keep the offer open?

Answer 7

An offeror may usually revoke an offer any time prior to acceptance, if the offeree has given consideration to keep the offer open however, the offer is irrevocalbe for the stated term=Option contract.

Question 8

Offeree’s actions to the offer can be:

Answer 8

Rejection or counteroffer. If counteroffer: mirror image rule exactly, any deviation constitutes a counteroffer.

Question 9

Operation of Law:

Answer 9

Automatic, immediate termination of the offer, not necessarily a contract.
Death of either party
Incompetence of either party
Subsequent destruction of the subject matter
Subsequent illegality.

Question 10

Mailbox rule:

Answer 10

Acceptances are valid when sent. All other communications are only valid upon receipt.

Question 11

What are the exceptions to the mailbox rule:

Answer 11

Offer states that acceptance is only valid upon receipt
Offeree must use specified method of acceptance.
Offeree sent prior rejection of the offer.

Question 12

Types of Duress:

Are they void or voidable?

Answer 12

Immediate physical coercion (direct physical threat): contract is void
Threats, including non-immediate threats of physical violence: Voidable by coerced party. Threat must have induced the coerced party to agree.

Question 13

Undue influence:

is the contract void or voidable?

Answer 13

Where one party attempts to misuse his/her position of trust and unfairly persuades the other party to enter into the agreement. Contracts are voidable

Question 14

Fraud requires the additional element of scienter or intent. What are the 2 types of fraud?
Is the contract void or voidable?

Answer 14

Fraud in the execution: misled party is completely unaware of the nature of the agreement he has entered into. Contract is Void.

Fraud in the inducement: party understands nature of contract, but was misled by other party. Contract is voidable.

Question 15

Types of misrepresentation? (contract is voidable)

Answer 15

Negligent misrepresentation: False statement made without due care, but without knowledge that it was false.
Innocent misrepresentation: false statement made with due care and without knowledge of its falsity.

Question 16

Two types of contract mistakes:

Are they void or voidable?

Answer 16

Mutual mistake: both parties to the transaction are incorrect concerning a material fact of the transaction. Contract is voidable by either party.
Unilateral mistake: Only one of the parties is mistaken about a material fact. Usually the contract is not voidalbe, unless the nonmistaken party knowingly takes advantage of the mistaken party.

Question 17

Consideration is what makes a promise legally ________:

A contract without consideration is a promise of a_______:

Answer 17

consideration is what makes a promise legally enforceable and thus a contract, without consideration, a promise is just a promise of a gift. Consideration requires an exchange of promises. The promises must be legally sufficient.

Question 18

Is past consideration valid?

Answer 18

No, past consideration is not consideration.

Question 19

What is promissary estoppel:

Answer 19

Promisee relied on the promise to his/her detriment. Promisor knew or should have known that promisee would rely on the promise. An injustice would occur if the promise is not enforced.

Question 20

Capacity of the parties: (Minors, mental incapacity, intoxication)

Answer 20

Minors younger than 18 years old, may reject or void the contract, but must disaffirm while still a minor or within a reasonable time after reaching majority.
Mental incapacity: if adjudicated incompetent-contract is void.
If person suffers from some mental disorder that creates a diminished capacity-contract is voidable.
Intoxication: contracts, made under the influence of drugs or alcohol are voidable by the party under the influence.

Question 21

What contracts must be evidenced by a writing to be enforceable under Statute of Frauds?

Answer 21

Contracts promising to pay the debts of another person.
Contracts for the sale or transfer of interest in real estate
Contracts that by their terms, cannot possibly be performed within 1 year.
Under UCC contracts for the sale of goods for $500 or more.
Anything in consideration to marriage

Question 22

A sufficient writing under Statute of Frauds must include:

*hint 3 things

Answer 22

Identify the parties
Identify the subject matter
Be signed by the party to be charged.

Question 23

Explain Parol Evidence Rule:

Answer 23

Applies only if there is a written contract.
Prohibits any evidence that contradicts or changes the meaning of the written contract.
Excludes both written and oral evidence of prior or contemporaneous statements that are not included in the final written contract.

Question 24

Explain assignment:
What are the 3 parties?
Are all rights assignable?

Answer 24

Assignor, assignee, obligor. Revocation: generally revocable unless: the assignee provides consideration or the assignment has been delivered. Assume that all rights are assignable except those that would materially change the risk or the duty of the obligor, highly personal contracts, and those prohibited by law.

Question 25

Explain delegations:
What is being transferred?
Who was the legal liability.

Answer 25

where a delegator transfers his/her duties to the delegatee. Unlike the assignment, the delegator and the delagatee have legal liability to the obligee.

Question 26

Intended beneficiaries are those whom the contract was meant to benefit, they consist of:

Answer 26

Creditor beneficiaries: whose who are owed a debt or have given some other type of consideration.
Donee beneficiaries: those who receive the benefits of the contract as a gift.

Question 27

What are incidental beneficiaries:

Can they sue?

Answer 27

Those who benefit from the contract, even though the original parties did not intend for these people to benefit. May not sue anyone.

Question 28

What is a novation:

Answer 28

Where the original parties to the contract agree with a third party will replace one of the original parties to the contract.

Question 29

What is substituted contract:

Answer 29

where parties create new obligations, a new contract, to replace the old contract.

Question 30

What is accord and satisfaction:

Answer 30

an accord is an agreement to substitute a performance for the originally required performance under the contract and satisfaction is the performance of the accord.

Question 31

What is mutual rescission?

rescission means revocation, cancellation

Answer 31

Where both parties agree to terminate their duties under the contract, thus terminating the contract.

Question 32

Operation of law for ending a contract:

Answer 32

Impossibility
Bankruptcy
Statute of limitations: clock start running from breach of contract.

Question 33

When is specific performance used:

What kind of contracts is specific performance usually used for?

Answer 33

Parties are ordered to perform as promised in their contract. Used only for unique items, real estate. Not used for personal service contracts.

Question 34

Obligor must have notice of the assignment, or otherwise he is:

Answer 34

Given that the obligor was without notice of the assignment, he was discharged to the extent of performance rendered to the assignor.

Question 35

To satisfy the consideration requirement for a valid contract, the consideration exchanged by the parties must be

Answer 35

Consideration to render a contract enforceable must be legally sufficient and must be provided in a bargained-for exchange.

Question 36

What is the difference between accord and satisfaction and mutual recession?

Answer 36

In an accord and satisfaction, parties to a contract may make a new contract in which both the prior and the new contracts are to be discharged by performance of the new contract. The new agreement made after maturity or breach of the original contract is called an accord. The performance is called a satisfaction. In a mutual rescission, the parties to a contract agree to cancel it. They are restored to their original positions.

Question 37

By a liquidated damages clause, the parties to a contract agree in advance to the damages to be paid in the event of a breach. A liquidated damages clause is enforceable if all of the following apply:

Answer 37

By a liquidated damages clause, the parties to a contract agree in advance to the damages to be paid in the event of a breach. A liquidated damages clause is enforceable if all of the following apply: (1) It is not intended as a penalty, (2) it reasonably forecasts the probable loss due to the breach, and (3) the loss is difficult to calculate.

Question 38

What are compensatory damages?

Answer 38

Compensatory damages (also called actual damages or general damages) are damages incurred from the wrongful conduct of the breaching party. The usual measure of compensatory damages is the amount of money necessary to compensate the nonbreaching party for the breach.

Question 39

Are compensatory damages available when misrepresentation is innocent?

Answer 39

Compensatory damages are not available when misrepresentation is innocent