Contracts

Question 2

What must a contract contain?

Answer 2

Offer
Acceptance
Consideration (something of value)
Proper form (oral or written)
Legal subject matter
Two or more competent parties
No defenses

Question 3

What forms may acceptance of a contract take?

Answer 3

Can be written or oral

Must be in the form/method required by offeror

Must be mirror image - i.e. no changes in terms

Question 4

Who can accept an offer?

Answer 4

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 5

What happens if an offeree accepts a contract but puts added stipulations?

Answer 5

It is not acceptance; but instead becomes a counter-offer and the original offeror is now the offeree

Question 6

When is an offeror bound by a contract?

Answer 6

When they RECEIVE the acceptance.

If the offeree rejects; then accepts - whatever gets to the offeror first is what is binding.

Question 7

What will void an offer?

Answer 7

If offeror dies or becomes insane before acceptance; offer is void.

Contract is binding if acceptance occurs before death/insanity.

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 actions or circumstances will revoke a contract?

Answer 9

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 10

What is promissory estoppel?

Answer 10

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 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

What is a Requirements Contract? How are they limited?

Answer 13

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 14

What makes a contract subject to the Statute of Frauds? Need signing by the defendant

Answer 14

MYLEGS
Marriage
Year - Cannot be completed within 1 year
Land - Purchase of real estate
Executor
Goods for sale - $500+ Sale of Goods
Surety

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

Which contracts are governed by common law?

Answer 18

RISE
> Real Estate
> Insurance
> Services
> Employment

Question 19

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

Answer 19

They must be in writing.

Question 20

Which contracts are governed by UCC uniform commercial code sales article?

Answer 20

Sales of goods - moveable things

Question 21

What’s a creditor beneficiary?

Answer 21

Creditor beneficiary receive interest because a party owes them something.

Question 22

What is a donee beneficiary?

Answer 22

Donee beneficiaries receive their interests as a gift

Question 23

What’s the statute of limitations?

Answer 23

The statute of limitations provides that legal action must be commenced within a certain period of time. If the statute of limitations has expired on the contract it is unenforceable. It does not make a contract void but merely bars access to judicial remedies.

Question 24

What is the statute of limitations for RISE - common law?

Answer 24

4 to 6 years

Question 25

What is the statute of limitations period under you UCC?

Answer 25

Four years

Question 26

What is a unilateral contract?

Answer 26

A unilateral contract is formed when a promise is exchanged for an act.

Example: Kay promised to pay for John’s education in exchange for John obtaining rare artifacts and John performed. Thus, a unilateral contract was formed.

Question 27

What is innocent misrepresentation?

Answer 27

An innocent misrepresentation has all the elements of fraud except scienter. The misrepresentation is made innocently not intentionally. (not punitive)

Question 28

What are the options if a party commits an act that constitutes anticipatory repudiation?

Answer 28

Treat the repudiation as an immediate breach and Sue for damages immediately.

Ignore the repudiation, await the time specified for performance, and sue if the repudiation party does not perform.

Cancel the contract

Question 29

What is a gratuitous surety?

Answer 29

Is one that it’s not compensated for his promise to the creditor.
If the creditor does anything that that the gratuities surety’s risk the surety’s obligation is discharged.

Question 30

What is a surety right of exoneration?

Answer 30

If the debtor fails to pay, the surety may bring a suit for exoneration to compel the debtor to pay. The surety may do this prior to paying the creditor

Question 31

What is the surety right of subrogation?

Answer 31

Once the surety pays the creditor, the surety may enforce any right that the creditor had against the debtor. For example, if the creditor was a secured creditor, the surety would gain the rights of a secured creditor upon payment.

Question 32

What is a surety reimbursement?

Answer 32

The surety is entitled to reimbursement from the debtor from any amounts that the surety paid. This is also called indemnification.

Question 33

What is a quasi-contract?

Answer 33

It is not a contract but a remedy to prevent unjust enrichment.

Question 34

Name a circumstance in which a promise will be enforced without consideration.

Answer 34

Detrimental reliance and Promissory estoppel

Question 35

What is promissory estoppel?

Answer 35

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 36

What is detrimental reliance?

Answer 36

Promises made by one party and detrimentally relied upon by another can be enforced without consideration. For the doctrine to apply the promise must be reasonably relied upon and detrimental.