Contracts (Roger 13 / Gleim 17) Flashcards
What is the difference between a unilateral and bilateral contract?
In a Unilateral Contract, only one party to the contract makes a promise and the other party is an actor, not a promisor. In a Bilateral Contract, both parties to the contract make a promise. Think Unilateral (unicycle - one wheel) vs Bilateral (bicycle - two wheels).
What is the difference between an Executory and an Executed Contract?
An Executory contract is not yet fully performed. An Executed contract has been fully performed by all parties.
When is a contract formed?
When a party accepts an offer.
An offer must be…
1) communited to an offeree
2) in a communication authorized by the offeror
3) indicate an objective intent to enter into a contract, and
4) sufficiently definite and certain.
Is an advertisement an offer?
Advertisements are usually not offers but invitations to submit offers. However, an advertisement may be an offer if it uses clear, definite, and explicit language that leaves nothing open for negotiation. An advertisement can also be an offer is it says “offer valid to only the first 10 people in line
What is an option contract and is it an irrevocable offer?
In an option, the offeree exchanges something of value for the offeror’s promise to hold the offer open for a specified period; therefore, an option contract is an irrevocable offer.
What will terminate an offer?
1) Expiration - expires after reasonable time if no stated date
2) Revocation - may revoke even if promised not to do so (unless option contract). Revocation must be received to be effective
3) Rejection - refusal by offeree, must be received by offeror
4) Counteroffer - a form of rejection by offeree (an inquiry is not a counteroffer)
5) Operation of law (Don’t have to give notice - this is automatic): Death or insanity of either party; destruction of subject matter; and/or illegality of subject matter (an offer to commit a crime for compensation).
Describe the mirror image rule
Must accept all terms and conditions of the offer without any alteration; otherwise it’s a counteroffer which would terminate the offer. An acceptance must be unequivocal and unqualified with respect to the precise terms specified by the offer.
What are the required elements of a contract?
The 4 essential elements of a contract are an agreement (offer and acceptance), consideration, legal capacity of the parties to contract, and a legal objective or purpose. A writing is not required to enter into a contract. However, some contracts are not enforceable unless a writing evidences the contract.
When a client accepts the services of an accountant without an agreement concerning payment, the result is 1) no contract; 2) an implied-in-law contract; 3) an express contract; or 4) an implied in fact contract?
Answer: 4) An implied in fact contract. Enforceable contracts may be formed without an express agreement of terms if the facts of the situation indicate (imply) an objective intent of both parties to contract. Objective intent means the apparent intent of an ordinary, reasonable person and not the actual (subjective) intent. When a client accepts the services of an accountant, there is an implied agreement to pay for them. Because the facts indicate a contract was formed, it is an implied-in-fact contract.
Certain contracts have absolutely no effect and are not recognized under law. If two or more parties enter into such an agreement, it is 1) valid; 2) voidable; 3) void; or 4) unenforceable?
Answer: 3) Void. Contracts that are of no effect and not recognized under law are void. Neither party has a legal obligation to the other based on the contract. The parties may go through with their performance, but the law provides no remedy for a breach.
Carson Corp, a retail chain, asked Alto Construction to fix a broken window at one of Carson’s stores. Alto offered to make the repairs within 3 days at a price to be agreed on after the work was completed. A contract based on Alto’s offer would fail because of indefiniteness as to the A) Nature of the subject matter; B) Price involved; C) Parties to the contract; or D) Time for performance?
Answer: B) Price involved. An agreement regarding the sale of real estate or services is not enforceable as a contract unless essential terms are agreed upon with reasonable certainty. A contract must be definite and complete. Essential terms generally include the names of the parties, subject matter and quantity, price, and time and place for performance. No basis for objectively computing the price was agreed to by the parties. An agreement to agree does not create an enforceable obligation at common law.
An offer is not terminated by operation of law solely because the A) Subject matter is destroyed; B) Subject matter is sold to a third party; C) Offeror dies; or D) Offeree is adjudicated insane?
Answer: B) Subject matter is sold to a third party. An offer is automatically terminated by certain events: incapacity (death or adjudicated insanity) or either party, destruction of the subject matter, and supervening illegality. Sale of the subject matter does not automatically terminate the offer. But if the offeree receives actual notice of the sale, the sale is effective as a revocation.
What are the 2 elements that must be present to satisfy the consideration requirement?
1) Legal sufficiency and
2) A bargained for exchange (mutuality of consideration).
Explain Accord and Satisfaction
Parties to a contract may make a new contract in which the prior and the new contracts are to be discharged by performance of the new contract. The new agreement is called an accord. The performance of this agreement is called a satisfaction.
