CPCU 530 Ch. 2 Flashcards
A legally enforceable agreement between two or more parties in which each party makes some promise to the other
Contract
The party to a contract making a prmise
Promisor
The party to a contract to whom a promise is made
Promisee
The relationship that exists between the parties to a contract
Privity of contract
A person who is not a party to a contract but who benefits from it and has a legal right to enforce the contract if it is breached by either of the contracting parties
Third-party beneficiary
The failure, without legal excuse, to fulfill a contractual promise
Breach of contract
A contract in which each party promises a performance
Bilateral contract
A contract in which only one party makes a promise or undertakes the requested performance
Unilateral contract
A contract that has been completely performed by both parties
Executed contract
A contract that has not been completely performed by one or both of the parties
Executory contract
A contract whose terms and intentions are explicitly stated
Express contract
A contract whose terms and intentions are indicated by the actions of the parties to the contract and the surronding circumstances
Implied contract
A contract that is not express but that the parties presumably intended, either by tactic understanding or by the assumption that it existed
Implied-in-fact contract
An obligation that is not an actual contract but that is imposed by law because of the parties’ conduct or some special relationship between them or because one of them would otherwise be unjustly enriched
Implied in law contract
A contract that one of the parties can reject (avoid) based on some circumstances surrounded its execution
Voidable contract
An agreement that, despite the parties’ intentions, never reaches contract status and is therefore not legally enforceable or binding
Void contract
A promise that requires some action by the intended recipient to make an agreement
Offer
The party to a contract who promises to give something in return a promise or an act by another party
Offeror
The party to a contract who makes a promise or acts in return for something offered by another party
Offeree
A proposal an offeree makes to an offeror that varies in some material way from the original offer, resulting in rejection of the original offer and constituting a new offer
Counteroffer
The assent to an offer that occurs when the party to whom an offer has been made either agrees to the proposal or does what has been proposed
Acceptance
The act of giving up or the promise, necessary terms of an agreement
Forbearance
The performance of the primary, necessary terms of an agreement
Substantive performance
A party to a contract who has the basic or minimal ability to do something about the mental ability to understand problems and make decision
Competent party
The return of specific property by court order
Restitution
Something of value or bargained for and exchanged by the parties to a contract
Consideration
Consideration based on natural love or affection, or on moral duty, that is not sufficient to support contract
Good consideration
The consideration necessary and sufficient to support a valid contract
Valuable consideration
A promise no supported by valuable consideration and, therefore, not binding
Gratuitous promise
An agreement (accord) to substitute performance other than that required in a contract and the carrying out of that agreement (satisfaction)
Accord and satisfaction
A legal principle that permits enforcement of a promise made without consideration in order to prevent injustice
Promissory estoppel
An interest in the subject of an insurance policy that is not unduly remote and that would cause the interested party to suffer financial loss if an insured event occurred
Insurable interest
The charging of an illegally high rate of interest on a loan
Usury
The failure to exercise the degree of care that a reasonable person in a similar situation would exercise to avoid harming othera
Negligence
A contractual provision purporting excuse of a party from liability resulting from negligence or an otherwise wrongful act
Exculpatory clause (exculpatory agreement)
An agreement between an employer (the principle) and an employee (the agent) to protect the employer’s customer, trade secrets, confidential information, and other items for a specific period after an employee relationship has been terminated
Noncomplete agreement
An illegal transaction in which both parties are equally at fault
In pari delicto agreement
A contract that includes two or more promises, each of which a court can enforce separately
Severable contract
Contracting parties actual assent to form a contract or their indication of intent to contract by their actions and words
Genuine assent
An intentional misrepresentation resulting in harm to a person or an organization
Fault
A statement of fact or opinion made by the insured when applying for insurance, usually in response to a question from the insurer
Representation
In insurance, a fact that would affect the insurer’s decision to provide or maintain insurance or to settle a claim
Material fact
A legal action that voids a principle’s bid
Rescission
A perception that does not agree with the facts
Mistake
A perception by one party to a contract that does not agree with the facts
Unilateral mistake
A perception by both parties to a contract that does not agree with the facts
Bilateral mistake
The use of restraint, violence, or threats of violence to compel a party to act contrary to his or her wishes or interests
Duress
The improper use of power or trust to deprive a person of free will and substitute another’s objective, resulting in lack of genuine assent to a contract
Undue influence
A law to prevent fraud and perjury by requiring that certain contracts be in writing and contain the signature of the party responsible for performing that contract
Statue of frauds
Tangible property consisting of land, all structures permanently attached to land, and whatever is growing on the land
Real property (realty)
A model code that has been adopted in whole or in part by each state and whose purpose is to provide a consistent legal basis for business transactions throughout the US and its territories
Uniform Commercial Code (UCC)
An event that must occur before a duty of performance arises in a contract
Condition precedent
A rule of evidence that limits the terms of a contract evidenced by a writing to those expressed in writing
Parol evidence rule
The transfer of rights or a property
Assignment
The party to a contract who makes an assignment
Assignor
The individual or entity to whom property, rights, or interests have been transferred
Assignee
A contract between two parties that benefits a third party
Third party beneficiary contract
A third party beneficiary owed a debt that is to be satisfied by performance of a contract
Creditor beneficiary
A third party beneficiary who receives the benefits of a contract’s performance as a gift from the promisee, with the intent of the contracting parties
Donee beneficiary
A third party beneficiary who has no contractual rights but benefits from a contract even though that is not the intent of the parties to the contract
Incidental beneficiary
An offer to perform one’s duties under a contract
Tender
The substitution of a third party for one of the original parties to a contract, releasing the original party from rights and obligations under the contract
Novation
An event that must occur at the same time as another condition in a contract
Condition concurrent
An event that, if it occurs, discharges a duty of performance in a contract
Condition subsequent
A party’s refusal to meet obligation under a contract
Repudiation
A party’s unequivocal indication before contract performance is due that he or she will not perform when performance is due
Anticipatory breach
Violation of the agreement that would justify an owner’s termination of contract
Material breach of contract
A payment awarded by a court to reimburse a victim for actual harm
Compensatory damages
A payment awarded by a court to indemnify an injured party for losses that result indirectly from a wrong such as a breach of contract or a tort
Consequential damages
A payment awarded by a court to punish a defendant for a reckless, malicious, or deceitful act to deter similar conduct; the award need not bear any relation to a party’s actual damages
Punitive damages (exemplary damages)
An intentional or reckless act, extreme or outrageous in nature, causing severe emotional distress that results in physical injury; generally applied in suits for breach of insurance contracts
Bad faith (outrage)
A payment awarded by a court that exceeds the usual contract damages for a breach of contract
Extra contractual damages
A duty owned by an injured party to a claim to take reasonable measures to minimize or avoid additional injury or loss
Mitigation of damages
A reasonable estimation of actual damages, agreed to by contracting parties and included in the contract, to be paid in the event of a breach or for negligence
Liquidated damages
A court ordered equitable remedy requiring a party to perform a certain act, often but not always, as a result of a breach of contract
Specific performance
A court-ordered equitable remedy requiring a party to act or refrain from acting
Injunction
