Contracts Flashcards
What is the objective theory of contracts according to Hand?
A contract has nothing to do with the personal or individual intent of the parties. A contract is a obligation attached by the force of law to certain acts of the parties which represent a known intent.
What is the subjective theory of contracts?
A desire for legal symmetry, legal uniformity. What was intended? Meant?
When is the mental assent of both parties not requisite for contract formation?
If the words or acts of one party has just one reasonable meaning, his undisclosed intention is immaterial. If his words or acts manifest an intention to agree
Is a joking contract binding?
Yes. If a reasonable person would consider the contract real, it is enforceable and binding.
When is a promise not bound?
A promise is not bound to the contract if the promise, whether from its content or circumstance of making, is insufficiently serious to indicate the promisor intent to be bound.
If a party refuses to sign a document after coming to terms, can the other signing party enforce the non signing party to sign?
Depends. Two rules regarding that are: (a) absent an express intent that no contract shall exist, Mutual assent between the parties, even oral or informal to exchange acts is sufficient to create a binding contract.
(b) to avoid the obligation to be bound at least one party must express an intention not to be bound until a writing is executed
What are the factors to determine parties intent to be bound in absence of a document executed by both sides?
Whether
(a) there has been an express reservation of the right to be bound in absence if writing
(b) partial performance of the contract
(c) where all the terms if the alleged contract agreed upon
(d) was the agreement at issue the type if contract usually committed to writing?
What is assent?
Agreement, approval or permission; verbal or nonverbal conduct reasonably interpreted as willingness.
What is an offer?
An offer is an act whereby one person confers upon another the power to create contractual relations between them.
It must be an act that leads the offeree reasonably to believe the power to create a contract is conferred upon him.
Is an advertisement an offer ?
Generally no. An advertisement is an invitation by seller to buyer to make an offer to purchase
What is the test for an offer?
Where the offer is clear, definite, and explicit. It leaves nothing open for negotiation.
When can an advertiser modify his offer?
Anytime before acceptance.
Is an offer done in error enforceable?
All courts agree if the offeree knows or should have known of offeror material mistake at the time of acceptance the offeror is not bound
What is an acceptance?
An acceptance is a voluntary act of the offeree whereby he exercises the power conferred upon him by the offer.
What acts are sufficient to show acceptance?
Depends on the terms in which the offer was expressed. (either by words or other conduct)
The offeror has full power to determine the acts that constitute acceptance.
What happens after the offeror contact is accepted
The offeror is no longer free to change its mind and withdraw from the relationship without incurring liability.
What is power in a contractural sense?
Power is the capacity to change a legal relationship.
What is a countermand?
To cancel or revoke a contract
What is a bilateral contract?
A contract affecting or obligating both parties. Both sides must act in accordance to an exchange of promises.
What is a unilateral contract?
Contract in which one party makes an express promise or undertakes a performance without first securing a reciprocal agreement from other party. Only the promisor is bound.
Is the shipment if goods considered acceptance?
If seller has already shipped prior to buyers revocation then yes. This can be done by a prompt promise to ship or by the prompt shipment
Power of contract can be terminated by
- Lapse of the offer
- Revocation of the offer
- Offeror death or incapacity
- By offeree rejection.
Four essential terms for certainty
(1) parties (2) Subject matter (3) time for performance (4) price
What is CCIC
Essential elements of an offer: (1) Communication; Communicated to an; Identified offeree; Containing definite terms
Who is the mater of the offer?
The offeror is the master of his offer
Who may accept the offer
Only the person to whom the offer is addressed,
At common law is additional or dirrent terms allowed?
No. additional terms of a rejection to the offer and is a counter-offer. All offers must be a mirror image of the acceptance.
Are additional terms allowed if both partiesd are merchants
If both parties are merchants such additional terms become part of the contract unless (1) the offer expressly limits acceptance (2) the additional terms MATERIALLY ALTER the contract (3) the offeror notifies the offeree that she objects to the terms.
Are additional terms allowed when only one party is a merchant?
No. For additional terms to be added to the contract a definate and seasonal expression of acceptance is needed by the offeree. The different and additional terms are considered proposals to be added to the contract
Offer v. mere invitation to deal
Offer has power of acceptance is TIME for acceptance has not expired or offer has not been revoked. If counter offer–>power of acceptance terminated; new offer. If acceptance–>contract formed. Rejection–>no contract formed. Inquiry–>Power of acceptance not terminated but no contract is formed. Wait for future communication
What is COALL
Consideration; Offer; Acceptance; Legal capacity of parties; Legal subject matter
If an offeror expressly promised not to revoke the offer for a given period of time can he?
Yes. An offeror as the master of the offer can revoke the offer at any time until it is accepted.
If an offeror simply does nothing is that considered a revocation?
Yes. where no communication is made but the offeree has knowledge of facts that would make revocation clear to a reasonable person then revocation is effective.
What is an exception to the Rule of Revocation?
(1) Option contracts (2) Firm Offers (3) Detrimental reliance (4) Beginning performance in Unilateral contracts (5) rejection by offeree (6) operation of law
What is an Option Contract?
A contract where the offeree is given the exclusive power of acceptance for a period of time. Usually CONSIDERATION is required. ex.) down payment to hold house off the market in a real estate deal
What is a Firm Offer
UCC 2-205 makes a signed written offer made by a merchant stating it will be held open for a specified term is irrevocable. (But not to exceed 90 days without consideration)
What is detrimental reliance?
Where the offeror reasonably expects that the the offeree would rely to his detriment on the offer.
What is termination by operation of law?
Time lapse: Where the offer contains a provision that it will lapse after a given point in time, the offer is terminated by operation of law when that time passes. If no time stated, then it is open for a reasonable period of time. Death or insanity: If the offer is accepted PRIOR to death or insanity this DOES NOT terminate the obligations of the contract.
What is DIRT CAR
How to terminate an offer: Death or disability; Illegality; Revocation; Time (lapse); Counter-offer; Acceptance, Rejection.
What is a valuable consideration?
Bargained-for exchange of promises between the parties resulting in a chnage of legal position for both. A bargain-for legal detriment.
Define bargain-for requirement
A bargain requires that each party to the contract incur a legal detriment and obtain a legal benefit.
Exceptions to consideration requirement
promises for a benefit recieved-a promise made in recognition of a benefit previously recieved by the promisor is binding to the extent necessary to prevent injustice. Moral consideration-a promise based on moral obligation is sufficent if it confers an economic benefit on the promisor
At what time does one measure legally sufficient?
Sufficiency pf consideration is determined at the time of the making of the contract.
Define legal detriment
Detriment involves doing something you where not legally obligated to do or refrianing from something you where legally permitted to do.
What happens if there is no legal detriment
Even where no legal detriment is incurred; promises or acts that confer a LEGAL BENEFIT on the promisee, provided the benefit is something to which the promisee would have no claim without the agreement, are legally sufficient.
How important is the adequacy of consideration?
Courts will not normally inquire into the adequacy of consideration or the relative values exchanged.
What is the pre-existing legal duty rule
The promise to perform or actually performing of a legal duty is not consideration.
Promises to accept smaller sums of payment rule
Where the cliam is undisputed; a debtors promise to pay less than the amount owed is generally not valuable consideration for the creditors promise to discharge the debt.
What is the exception to the Smaller Payment in full rule?
If the promise to pay involved additional performace (paying early, promise to pay in cash instead of check) then the modification is supported by consideration. Or if there is a written release.
Does the UCC require consideration for modification of a contract?
No! The UCC does NOT require any consideration to support modification of a contract for the sale of goods if both parties are acting in goodfaith.
What is an illusory promise?
A promise that allows the promisor to aboid any legal detriment
Right to choose Amongst Alternatives
A promise to choose one of several alternative means of performance is illusory unless EVERY alternative involves some legal detriment to the promisor. Exception: if the power to choose is with a third party then that is a legal detriment ad supplies valuable consideration.
What is promissory estoppel–Detrimental Reliance
In certain situations a promisor is esopped from denying liability on a gratuitous promise even though a bargained-for exchange is missing.
What are the elements of Promissory Estoppel
(1) foreseeability-the promisee must show that it was foreseeable that she would rely on that pomise; (2) actual reliance–the promisee must show that she actually relied on the promise; (3) reasonable reliance–reliance must be reasonable under the circumstances; (4) detriment–The Promisee must be at risk of suffering an economic loss if the promisor is allowed to retract his promise.
Is a promise to pay for reviously performed acts enforceable?
Yes, if the acts were performed with expectation of payment, a subsequent promise to pay for them is enforceable without added consideration.
What will prevent a contract from forming
(1) Mistake; (2) fraud; (3) Communication problems; Capacity to contract; (5) effects of illegality; (6) duress.
What are the types of mistakes
(1) Mutual, both parties mistake a basic assumption of fact (2) Mistranscription mistake in the writing of an oral agreement; (3) Unilateral mistake; a mistake by one party; (4) Misunderstanding a mistake which both parties have different but equally reasonable interpretations; (5)mistake in transmission by intermediary
Define a mutual mistake
(1) Both parties are mistaken; (2) to a basic assumption of fact that, (3) materially affects the agreed exchange.
Define Ambiguity
Parties use terms that have at least two reasonable interpretations (2) each party has different meaning to those terms (3) neither party knows or has reasons to knoe the meaning attached by the other party.
Is a contract with fraud VOID?
No a contract with material misrepresentation is voidable by the innocent party.
Does a party need to tell everything they know
No. Generally you are not bound to tell a party everything you know, but you MAY have to disclose if you have knowlege not reasonably ascertainable by the other party
What is DUI MULE?
Defenses to contract formation: Duress; Undue influence Illegality; Misrepresentation; Unconscionability; Lack of capacity; Existence of Mistake or Misunderstanding.
What is the purpose of the Statue of Frauds
Most contracts are valid whether written or non, but certain contracts are unenforceable unless they are reduced to writing.
What is MY LEGS
Marriage–contract made on consideration of marriage; Year–one-year provision; Land-contracts for the interest of land; Executor- administrator provision; Goods–contracts for the sale of goods, Surety agreements.
