Exam 2

Question 1

What is a contract designed to provide? (3)

Answer 1

1. Stability
2. Predictability
3. Certainty

Question 2

Why is contract law is necessary? (2)

Answer 2

1. Ensure compliance of promises
2. Gives non-breaching people right to be made whole or receive remedy.

Question 3

What is a Contract?

Answer 3

a legally binding agreement between two or more competent parties

Question 4

What is a Contract Agreement based on?

Answer 4

It is based on a promise that is enforceable by a court

Question 5

Courts focus on ___________

Answer 5

the intent of the parties

Question 6

What is a party’s intent judged by?

Answer 6

objective facts as interpreted by a reasonable person

Question 7

Chart of an Agreement Contract

Answer 7

Question 8

What are the 4 elements of a Contract

Answer 8

1. Agreement (offer and acceptance)
2. Consideration
3. Contractual Capacity
4. Lawful Objective

Question 9

Bilateral Contract

Answer 9

To accept the offer, the offeree
must only promise to perform (“promise for a
promise”).

Question 10

Unilateral Contract

Answer 10

Offeree can accept the offer only
by completing the contract performance
(“promise for an act”).

Question 11

Objective Theory of Contracts

Answer 11

Courts focus on the intent of the parties in determining whether a contract has been formed.

• A party’s intent is judged by outward (not
  hidden), objective facts as interpreted by a reasonable person.
• The party’s secret and subjective intentions
  are not important.

Objective facts-what a reasonable person reading the contract would interpret

Question 12

Express Contract

Answer 12

An agreement that is stated in words (oral
or written).

Question 13

Implied-In-Fact Contract

Answer 13

A contract formed by the parties’
conduct

Question 14

What are the Requirements of an Implied-In-Fact Contract? (3)

Answer 14

1. Plaintiff furnished goods or services.
2. Plaintiff expected to be paid.
3. Defendant had chance to reject and did not

Question 15

What makes up a valid contract

Answer 15

1.Enforceable: A valid contract is enforced because
there are no defenses against it.
2.Unenforceable: A contract exists, is not enforced
because of a legal defense.
3.Voidable: A party may avoid enforcement of the
contractual promises that were made.

Question 16

What makes up a void contract

Answer 16

1. A writing that has no legal effect; a nullity
2. No contract exists, or it is a contract without legal
   obligations

Question 17

Quasi Contracts

Answer 17

– Fictional contracts created by courts.
– Imposed on parties for the interest of fairness
and justice to prevent unjust enrichment

Question 18

Interpretation of Contract Terms (8)

Answer 18

1. Reasonable, lawful, effective meaning given to contract.
2. Contracts are interpreted as a whole.
3. Terms negotiated separately given greater weight.
4. Ordinary, common meaning of words given.
5. Specific wording given greater weight than general language.
6. Written or typewritten terms given greater weight than preprinted terms.
7. Ambiguous terms interpreted against the drafter.
8. Trade usage, prior dealing, course of performance allowed to clarify meaning.

Question 19

Who is the offeror?

Answer 19

The one who offers the contract

Question 20

Who is the offeree?

Answer 20

The one who receives the contract

Question 21

What are the Elements of An Agreement?

Answer 21

• Agreement requires both offer and
  acceptance.
  – Parties must show mutual assent to terms of
  contract.
• Once an agreement is reached, a valid
  contract is formed, IF the other elements of a
  contract are present.
  – Other elements are (Consideration; Contractual
  Capacity; and Lawful Objective)

Question 22

What is the Process of Reaching an Agreement? (4)

Answer 22

1. Parties engage in preliminary negotiations about
   price, time of performance, etc.
2. Someone makes an offer during negotiations
   (Offeror).
3. Offer sets forth the terms under which the offeror
   is willing to enter into the contract.
4. Offeree has power to create an agreement by
   accepting the offer.

Question 23

What are the Requirements of An Offer? (3)

Answer 23

1. Offeror must objectively intend to be bound by
   the offer (serious intentions).
2. The terms of the offer must be definite or
   reasonably certain.
3. The offer must be communicated to the offeree.

Question 24

What is the Objective Theory of Contracts?

Answer 24

• Intent to contract (offeror’s serious intentions) is judged by the reasonable person standard.
• Intent to be bound by a contract is NOT judged by the subjective intent of the parties.

Question 25

Examples of Statements that Are Not Considered Offers (6)

Answer 25

No valid contracts result from:
1. Expressions of Opinion.
2. Statements of Future Intent.
3. Preliminary Negotiations
4. Invitations to Bid.
5. Advertisements and Price Lists.
6. Auctions.

Question 26

What are Modern View Agreements?

Answer 26

These are enforceable if it is
clear that the parties intended to be bound to
the agreement.
– Focus is on the parties’ intent, rather than on the
form or designation.

Question 27

What are Preliminary Agreements?

Answer 27

Preliminary agreement is a binding contract if the parties have agreed on all essential terms and no disputed issues remain to be resolved.

Question 28

When are the Terms of a Contract Considered Reasonably Certain or Definite?

Answer 28

1. Identification of the parties.
2. Object or subject matter of the contract.
3. Consideration to be paid.
4. Time of payment, Delivery, or Performance.

Also when an offer is expressed or implied