exam 2 - ch. 6 Flashcards
- Enforceable agreements between the parties.
- A promise or a set of promises enforceable by law.
contracts
- While the word contract is often used to describe a
written document, many contracts are not in writing and
yet are enforceable. - Some contracts, however, are required to be in writing in
order to be enforceable.
© McGraw Hill
Written versus Oral Contracts
involves two promises and two
performances
bilateral contract
involves one promise, followed by
one performance, which then triggers a second
performance
unilateral contract
is created when the parties have knowingly and
intentionally agreed on the promises and performances
express contract
is one in which the agreement is reached by the parties’
actions
implied contract
The law permits ___________________ to be enforceable where one party suffers
losses as a result of another party’s unjust enrichment.
quasi-contracts
When a contract has the necessary elements, it is said to be a…
valid contract
When an agreement lacks one of the required elements or has not been
formed in conformance of the law from the outset, the contract is considered to be…
void
when the law gives one or more parties the right to
cancel an otherwise valid contract under the circumstances
A contract is voidable
Although a contract may have met the required elements and be considered
valid, it still may be ________ because one party asserts a legal defense
to performing the contract.
unenforceable
Contracts for services or real estate are governed by
d by state common
law
Contracts for goods or products are governed by ________ based on the Uniform Commercial Code.
state statutory law
Contracts that involve terms for both goods and services. The source of law is established by determining the predominant thrust of the contract subject matter.
Hybrid contracts
In determining the source of law governing a hybrid contract, courts will examine:
- Allocation of price in the contract (value of goods versus value of
services) and - Uniqueness of the services.
Overview of a Contract
Transaction… 3 parts:
- Formation.
- Enforceability.
- Performance.
A valid contract is formed when four elements are met:
- Mutual assent (offer and acceptance).
- Consideration.
- Capacity.
- Legality.
Broad underlying requirement that must be met to form an enforceable contract
Mutual Assent
Parties have agreed to certain promises and obligations
Meeting of the Minds
- A promise or commitment to do (or refrain from doing) a specified
activity such as selling a good at a certain price or offering to provide
services at a given rate. - The expression of a willingness to enter into a contract by the offeror’s
promising an offer that she will perform certain obligations in exchange for the offer’s counter promise to perform.
offer
- The offer’s expression of agreement to the terms of the offer.
- An offer typically communicates the acceptance in writing or orally
but, in some cases, may accept via some action or conduct
Acceptance
An offer may be terminated by action of the parties by:
- Revocation
- Rejection
- Counteroffer
- Operation of law
where the offeror revokes (withdraws) the offer prior to
acceptance
revocation
where the offer rejects the offer
rejection
where the offeree rejects the original offer and proposes a
new offer with different terms
counteroffer
An offer may also be terminated by certain happenings or events covered by
operation of law.
- Lapse of time,
- Death or incapacity of the offeror or offeree,
- Destruction of the subject matter of the contract before acceptance,
- Supervening illegality
the offer has to be communicated before the performance correct?
YES (lost dog example in class)
- Provides that the acceptance of an offer is generally effective upon dispatch
of the acceptance when sent in a commercially reasonable manner and not
when the acceptance is received by the offeror. - Governs common law contracts.
The mailbox rule
For an offer to be valid, the parties must reach mutual assent on all of the essential terms
of the agreement… what are these terms?
(1) parties to the contract, (2) subject matter of the contract, (3)
time for performance or delivery, and (4) price or other consideration to be exchanged.
Mutual mistake
- Both parties hold an erroneous belief.
- May be the basis for canceling a contract.
- Also called avoiding the contract
Unilateral mistake
- Only one party has an erroneous belief about a basic assumption in the terms of
the agreement
an acceptance is effective as soon as it s put into the mail… true or false
true
silence is not expectance… true or false
true
Sarah and James entered into an agreement where Sarah offered to sell her Camero to James for $15,000 and James agreed to buy it for that price. This agreement is known as a/an:
meeting of the minds
Which of the following stands for the proposition that a contract must involve both sides receiving and giving up something of legal value?
consideration
- The mutual exchange of benefits and detriments.
- Each party receives something of value from the other and each party
gives up something of value, called legal detriment, to the other. - Results in a bargained-for exchange.
consideration
The benefits and detriments may take the form of (1) money, (2) goods, (3) services, or (4) the giving up. true or false?
true
- The giving up of a right that you legally possess.
- Can be used as consideration in a contract.
Forbearance
Applies in circumstances where one party claims he wishes to modify an existing contract because of unforeseen difficulties in performing his obligations.
Preexisting duty rule
aspect of consideration primarily distinguishes contracts from illusory promises
bargained-for exchange
All promises do not support a bargained-for exchange and will not support contractual consideration.
true or false
false (only some)
Examples of illusory promises are:
- Deathbed promises, in which you make a promise to a friend or loved one just prior
to her death to comfort her; - Promises of a gift, in which a promise is made but no reciprocal promise is
exchanged; - Promises of love and friendship; and
- Promises that by their terms are not binding
Past Consideration.
- A promise made in return for a detriment
previously made by the promisee. - Not considered to meet the bargained-for
exchange requirement.
(already preformed before promise was made)
Under the theory of __________ a relying party may recover damages if (1) the promisor makes a promise that is reasonable; (2) the promisee actually relied on the promise and suffered an injury; (3) the promisee’s reliance was reasonably foreseeable to the promisor; and (4) principles of equity and justice are served by providing compensation to the reliant party.
promissory estoppel
Certain classes of persons have only limited power to contract:
minors and those with mental incapacity
Contracts will be enforced by the courts only if each party has the legal ___________ courts only if each party has the legal capacity
capacity
For a contract to be enforceable, it must meet the requirement of:
legality
genuine assent
For a contract to be enforceable, the contract must also be…
almost all contracts are and will follow under state common law … true or false
true
Enforceability
Even if the elements of a contract are met, the contract must still:
1. Be the product of genuine assent, and
2. Be in writing under certain circumstances.
for a contract to be valid and enforceable, the
law requires the parties to have given _________ ________ on the
terms of the contract
genuine assent
- For one party to avoid the contract on the basis of misrepresentation,
she must prove:
1. The misrepresented fact was material in the agreement, or the false representation
somehow changed the value of the contract.
2. She justifiably relied on the misstatement when forming an agreement.
3. The misrepresentation was one of fact and not just someone’s opinion or mere puffing.
Misrepresentation
a party can be liable even if a the company is innocent… true or false
true
Fraudulent Misrepresentation:
When one party has engaged in conduct that meets the standards for
misrepresentation but that party has
actual knowledge that the representation is not true.
Duress:
If one party to a contract uses any form of unfair coercion to induce another party to enter into or modify a contract.
Categorie
of Duress
Violence or threats of a violent act.
Categorie
of Duress
Economic threats such as wrongful
termination or threats to breach a
contract.
Categorie
of Duress
Threats of extortion or other threats
whereby the other party has no
meaningful choice
