Contracts - Chapter 10 Flashcards
What contracts must be in writing?
Real Estate Contracts, Contracts That Cannot Be Performed in One Year, Promises to Pay Someone Else’s Debt, Marriage Agreements (e.g., prenuptial agreements).
What is the Parol Evidence Rule?
It prevents prior oral or written statements from contradicting a final written contract.
What are exceptions to the Parol Evidence Rule?
To prove fraud, duress, or mistake; to clarify ambiguous terms; to show a condition precedent (e.g., ‘valid only if I get financing’).
What is a contract?
A promise or set of promises for the breach of which the law gives a remedy or the performance of which the law recognizes as a duty. (Restatement 2d of Contracts)
What is a promise?
A manifestation of intent to act (or refrain from acting) in a certain way.
Are all contracts promises?
All contracts are promises, but not all promises are contracts.
What is an express contract?
An agreement manifested by oral or written language.
What is an implied-in-fact contract?
A contract that arises from the conduct of the parties rather than their words.
Example: Ordering a meal implies a promise to pay the menu price.
What is a bilateral contract?
A promise in exchange for a promise.
Example: Owner promises to pay Painter $3,000, and Painter promises to paint the house.
What is a unilateral contract?
A promise in exchange for performance.
Example: Owner promises to pay $3,000 only if and when Painter completes the job.
What is a valid contract?
A contract that satisfies all required elements and is legally enforceable.
What is a void contract?
A contract that lacks one or more required elements and has no legal effect.
What is a voidable contract?
A contract that one party may avoid due to defects in formation (e.g., fraud, duress, lack of capacity).
What is an unenforceable contract?
A contract that is valid but cannot be enforced due to legal issues (e.g., violating the Statute of Frauds or statute of limitations).
What is an executed contract?
A completed contract where all duties have been performed.
Do not confuse this with a contract that is simply ‘signed.’
What is an executory contract?
A contract where one or more promises remain unfulfilled.
What is promissory estoppel?
A promise which the promisor reasonably expects to induce the promisee to act or forbear, and the promise does cause such action or forbearance. The promise is enforceable if injustice can be avoided only by enforcement.
What is a quasi-contract?
Also known as unjust enrichment, this doctrine applies when: A benefit is conferred on the defendant; The defendant has knowledge of the benefit; Retention of the benefit would be unfair without compensation.
What is an agreement?
A ‘meeting of the minds’ between parties, shown by offer and acceptance.
What is genuine consent?
The agreement must be voluntary, without fraud, duress, undue influence, or mistake.
What is consideration?
A legal benefit-detriment exchange where both parties give something of value.
What is legality in contracts?
The contract’s subject matter must be lawful.
What is capacity in contracts?
Both parties must be legally competent (not minors, intoxicated, or mentally incapacitated).
What is an offer?
A promise to do or refrain from doing something, which must: Show clear intent to form a contract; Be definite in terms; Be communicated to the offeree.
What is acceptance?
An expression of assent to the exact terms of the offer.
What are the requirements for a valid acceptance?
Must be unconditional (Mirror Image Rule). Offeree must accept all terms of the contract without adding or subtracting things to it. (Mailbox Rule: Acceptance is valid when sent, not when received).
What is revocation?
The offeror withdraws the offer before acceptance.
What is rejection?
The offeree refuses the offer.
What is a counteroffer?
The offeree changes the terms, terminating the original offer and creating a new one.
Note Negotiating is not a counteroffer! Think of offer letter from work
What is operation of law?
An offer automatically terminates if: The offeror or offeree dies or becomes incapacitated; The subject matter is destroyed; The contract becomes illegal before acceptance.
What is duress in contracts?
A contract is void if entered under physical compulsion (e.g., at gunpoint). A contract is voidable if entered under improper threats (e.g., economic or social coercion).
What is undue influence?
A contract is voidable if one party abuses a fiduciary relationship to pressure the other into agreement.
What is fraud in the execution?
The victim does not know they are entering a contract → Void.
What is fraud in the inducement?
The victim was misled about key facts → Voidable.
What is mutual mistake?
Both parties misunderstand a material fact → Voidable.
What is unilateral mistake?
One party is mistaken → Not voidable unless the other party knew or caused the mistake.
What is consideration in contracts?
Something of legal value exchanged between parties (a benefit or detriment).
What is an illusory promise?
A promise that is not enforceable because it lacks commitment (e.g., ‘I will sell if I feel like it’).
What is the pre-existing duty rule?
A promise to do something you are already legally required to do is not valid consideration.
What are illegal contracts?
A contract is void if it involves: Criminal activity; Unlicensed professionals in regulated fields; Usury (charging excessive interest rates).
What is capacity to contract?
A contract may be voidable if one party lacks capacity: Minors (unless for necessities like food, shelter, and medical care); Mentally incompetent individuals (if they didn’t understand the contract); Intoxicated individuals (if the other party knew they were too impaired to consent).
What is the full performance exception to the Statute of Frauds?
An oral contract that cannot be fully performed within one year may still be enforced if one party has fully performed.
What are the elements of a valid contract?
(All elements must be present for a contract to be enforceable)
Agreement – A “meeting of the minds” shown by offer and acceptance.
Genuine Consent – No fraud, duress, undue influence, or mistake.
Consideration – A legal benefit-detriment exchange where both parties give something of value.
Legality – The contract’s subject matter must be lawful.
Capacity – Both parties must be legally competent (not minors, intoxicated, or mentally incapacitated).
Writing (when required) – Some contracts must be in writing under the Statute of Frauds to be enforceable.
What is a Material Breach?
A failure to perform a contract obligation that is so substantial it defeats the purpose of the contract and excuses the non-breaching party from further performance.
What is Substantial Performance?
When a party performs most of the contract terms in good faith, and the remaining obligations are minor. The contract remains enforceable, but the breaching party may owe damages.
What is Delegation of a Contract?
The transfer of duties under a contract to a third party. The delegating party is still liable unless a novation occurs.
What is Assignment of a Contract?
The transfer of rights under a contract to a third party. The assignee receives the benefits originally intended for the assignor.
What is Novation?
An agreement that substitutes one party in a contract with a new party, with the consent of all original parties. The old party is released from liability.
What is an Accord?
An agreement to accept a different performance than originally agreed to under the contract.
What is Satisfaction?
The actual performance of the new obligation agreed to in the accord.
What is Accord and Satisfaction?
A legal settlement where one party agrees to accept a different performance, and the other party performs it, discharging the original obligation.
What is an Injunction?
A court order that requires a party to do or refrain from doing something. Not a form of damages.
What is Specific Performance?
A remedy where the court orders a party to perform their part of the contract, typically used when monetary damages are inadequate (e.g., sale of unique goods or land).
What are Compensatory Damages?
Monetary compensation for actual losses incurred due to breach of contract.
What are Consequential Damages?
Damages for indirect losses that were foreseeable at the time the contract was made (e.g., lost profits).
What are Punitive Damages?
Damages meant to punish the breaching party for intentional or egregious misconduct. Rare in contract law.
What are Nominal Damages?
A small, symbolic monetary award granted when a breach occurred but no real loss resulted.
What are Liquidated Damages?
A set amount of damages agreed upon in advance within the contract, enforceable if reasonable and not a penalty.
What is Restitution?
A remedy that returns the injured party to the position they were in before the contract, often to prevent unjust enrichment.
What is a Quasi Contract (Quantum Meruit)?
A court-imposed contract to prevent unjust enrichment when no actual contract exists but one party benefited at another’s expense.
What is the Statute of Frauds?
A legal rule requiring certain contracts (e.g., land, over 1 year, debt of another) to be in writing to be enforceable.
What is the Parol Evidence Rule?
Prevents parties from using prior oral or written statements to contradict a complete and final written contract.
What is Impossibility of Performance?
A doctrine that discharges contractual obligations when an unforeseen event makes performance literally impossible.
What is Frustration of Purpose / Impracticability?
A doctrine where performance is possible, but the core reason for the contract has been destroyed or made impractical by unforeseen events.
What are Expectation Damages?
Damages intended to put the non-breaching party in the position they would have been in had the contract been performed.
What is the Duty to Mitigate Damages?
The non-breaching party has a legal obligation to take reasonable steps to reduce or limit their losses.
