Contractual intent & Contract Provisons

Question 1

Contractual Intent Defined

Answer 1

The parties to the contract must actually intend to enter into a contract for the same bargain at the same time; no contract can exist if there is no mutual assent

Question 2

When determining the contractual intent of an agreement, there are 3 areas of possible concern:

Answer 2

1. Fraud
2. Duress
3. Mistake

Question 3

Fraud

Answer 3

one party to an agreement tricks a second party into entering the agreement

Question 4

the 5 elements of contractual fraud are:

Answer 4

i. The misrepresentation
ii. Of a material fact
iii. Made with the intent to deceive and
iv. Relied on by the other party
v. To his or her detriment

Question 5

misrepresentation

Answer 5

Occurs when the person making the statements does not intend to deceive the other party

Question 6

Duress

Answer 6

implies some form of force or coercion exercised over one party to the contract in order to induce that party’s promise to contract

Question 7

physical duress

Answer 7

The most obvious example of duress; it occurs when one party forces the other to enter into the contract by threatening physical harm

Question 8

Economic duress

Answer 8

When a person is induced to contract for fear of losing some monetary benefit

Question 9

Mental duress

Answer 9

When a person is coerced to enter into a contract by psychological threats

Question 10

undue influence

Answer 10

When the mental duress is exercised by someone who is in a CLOSE RELATIONSHIP with the innocent party, it is known as undue influence

Question 11

Contract of adhesion

Answer 11

• Falls under the category of duress
• It is a contract in which one side has an unfair bargaining position, a position that is so unequal that the other party’s assent is suspect

Question 12

Mistakes

Answer 12

• occurs when one (or both) of the parties is under a misconception as to the subject matter of the contract
• With mistakes, there is no intent to deceive or misrepresent, the mistake is due to the honest and innocent belief of the parties

Question 13

Contractual mistakes are divided into 2 broad categories:

Answer 13

1. Mutual Mistake

2. Unilateral Mistake

Question 14

mutual mistake

Answer 14

• concerns the underlying consideration of the contract itself
• the mistake has a material adverse effect on the parties, and the mistake was of the type that could not be foreseen

Question 15

Unilateral Mistake

Answer 15

• concerns a situation in which only one party to the contract is mistaken b/c of some typewritten or computation error

Question 16

differentiate between a mutual mistake and a unilateral mistake

Answer 16

1. With a mutual mistake, both parties are intending different subject matter, and so no contract exists b/c there is no meeting of the minds
2. With a unilateral mistake, only one party to the contract is mistaken, and the contract can be enforced by the innocent party (the one who did not cause the error)

Question 17

The Statue of Frauds (6)

Answer 17

1. Contracts for an interest in real estate
2. Contracts in consideration of marriage
3. Contracts that are not to be performed within one year
4. Guarantees
5. Contracts for the sale of goods valued over a specified amount
6. Executor’s promises to pay a decedent’s debts

Question 18

guarantee

Answer 18

a promise to answer for the debts of another; b/c there is , in fact, no consideration for this promise, it must be in writing to be enforceable

Question 19

The Statute of Frauds is concerned with the _____ of a contractual agreement, not with the ______ of its terms.

Answer 19

• enforceability

- validity

Question 20

Regardless of the statute, if the parties have _______ or made a ________ on the performance, the contract is taken out of the statute

Answer 20

Regardless of the statute, if the parties have performed or made a substantial beginning on the performance, the contract is taken out of the statute

Question 21

Covenant

Answer 21

• an unconditional, absolute promise to perform
• if the party fails to fulfill his contractual covenant, it is deemed to be a breach, or violation, of the entire contract per se

Question 22

Condition

Answer 22

• an agreement with respect to when the promises are to be performed
• this is a timing element for performance of the covenant

Question 23

Conditions are categorized by WHEN they create, or extinguish, the duty to perform the covenant; there are 3 categories:

Answer 23

1. Conditions precedent
2. Conditions subsequent
3. Conditions concurrent

Question 24

Conditions are categorized not only by their timing element, but also by HOW the parties have arrived at them; there are 3 categories:

Answer 24

1. Express conditions
2. Implied-in-fact conditions
3. Implied-in-law conditions

Question 25

Conditions precedent:

Answer 25

a condition that must occur before the contractual promise becomes operative and enforceable

Question 26

Conditions Subsequent:

Answer 26

a condition that extinguishes a previous absolute duty to perform; this type of condition relieves the parties of their contractual obligations without being in breach of contract (ex. returning a purchased shirt)

Question 27

Conditions Concurrent:

Answer 27

the most typical type of condition; it occurs when the mutual performances of the parties are capable of simultaneous execution, and the parties expect the promise and the performance to occur at the same time

Question 28

Express conditions:

Answer 28

a condition that has been specifically manifested in so many words by the parties themselves (written or oral)

Question 29

Implied-in-Fact conditions:

Answer 29

comes about out of necessity; it is what the parties would, in good faith, expect from each other

Question 30

Implied-in-Law Conditions:

Answer 30

aka a constructive condition, it is a condition that the law imposes in the interest of fairness
- this arises in situations where the parties have not specifically agreed to any definite time element, its purpose is to give each party to the agreement the same amount of time in which to perform

Question 31

There are 3 general rules with respect to constructive conditions:

Answer 31

1. When one party’s performance requires time to complete, the other side may take the same amount of time
2. When a date is set for one party’s performance, the other party is expected to perform on that date as well
3. When the performances can be simultaneous, they will be simultaneous

Question 32

Rules of construction

Answer 32

guidelines that the courts use to interpret all contractual provisions; it attempts to uphold contracts as valid and to give interpretation to the presumptive intent of the contracting parties

Question 33

There are 4 primary rules of construction with respect to analyzing the validity of contractual provisions

Answer 33

1. Lengthy communications are viewed as a whole, and any inconsistent words are discarded
2. Contracts are to interpreted according to business custom and usage
3. Words are to be construed according to their ordinary meaning
4. If there is an inconsistency with words that are printed, typed, or handwritten, handwriting prevails over typing, and typing prevails over mechanical printing

Question 34

Parol evidence rule

Answer 34

created to prevent parties from attempting to change the provisions of a written agreement by offering oral evidence to dispute the terms of a contract

Question 35

There are 4 exceptions to the parol evidence rule that permit a court to accept oral testimony in interpreting (although they are called “exceptions” to the rule, they are actually in fact NOT; oral evidence here is NOT being used to vary the terms of the writing, but to show something outside the writing that changes the meaning of the contract):

Answer 35

1. First exception – involves showing a failure of consideration; here the contract provision is not being question, but the fact that the consideration was not what was promised in the writing
2. Second exception – permits a party to show that the contract was induced by fraud, duress, or mistake
3. Third exception – permits oral testimony to prove the existence of a collateral oral agreement; oral contract is being proved; the purpose of the exception is to permit both contracts to be considered
4. Fourth exception – permits oral testimony to explain ambiguities in a written contract