exam 2 - ch. 6, 7, 9 Flashcards
1
Q
- Enforceable agreements between the parties.
- A promise or a set of promises enforceable by law.
A
contracts
2
Q
- 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
A
Written versus Oral Contracts
3
Q
involves two promises and two
performances
A
bilateral contract
4
Q
involves one promise, followed by
one performance, which then triggers a second
performance
A
unilateral contract
5
Q
is created when the parties have knowingly and
intentionally agreed on the promises and performances
A
express contract
6
Q
is one in which the agreement is reached by the parties’
actions
A
implied contract
7
Q
The law permits ___________________ to be enforceable where one party suffers
losses as a result of another party’s unjust enrichment.
A
quasi-contracts
8
Q
When a contract has the necessary elements, it is said to be a…
A
valid contract
9
Q
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…
A
void
10
Q
when the law gives one or more parties the right to
cancel an otherwise valid contract under the circumstances
A
A contract is voidable
11
Q
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.
A
unenforceable
12
Q
Contracts for services or real estate are governed by
A
state common
law
13
Q
Contracts for goods or products are governed by ________ based on the Uniform Commercial Code.
A
state statutory law
14
Q
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.
A
Hybrid contracts
15
Q
In determining the source of law governing a hybrid contract, courts will examine:
A
- Allocation of price in the contract (value of goods versus value of
services) and - Uniqueness of the services.
16
Q
Contract
Transaction… 3 parts:
A
- Formation.
- Enforceability.
- Performance.
17
Q
A valid contract is formed when four elements are met:
A
- Mutual assent (offer and acceptance).
- Consideration.
- Capacity.
- Legality.
18
Q
Broad underlying requirement that must be met to form an enforceable contract
A
Mutual Assent
19
Q
Parties have agreed to certain promises and obligations
A
Meeting of the Minds
20
Q
- 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.
A
offer
21
Q
- 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
A
Acceptance
22
Q
An offer may be terminated by action of the parties by:
A
- Revocation
- Rejection
- Counteroffer
- Operation of law
23
Q
where the offeror revokes (withdraws) the offer prior to
acceptance
A
revocation
24
Q
where the offer rejects the offer
A
rejection
25
where the offeree rejects the original offer and proposes a
new offer with different terms
counteroffer
26
An offer may also be terminated by certain happenings or events covered by
operation of law.
1. Lapse of time,
2. Death or incapacity of the offeror or offeree,
3. Destruction of the subject matter of the contract before acceptance,
4. Supervening illegality
27
the offer has to be communicated before the performance correct?
YES (lost dog example in class)
27
* 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
28
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.
29
Mutual mistake
* Both parties hold an erroneous belief.
* May be the basis for canceling a contract.
* Also called avoiding the contract
30
Unilateral mistake
* Only one party has an erroneous belief about a basic assumption in the terms of
the agreement
31
an acceptance is effective as soon as it s put into the mail... true or false
true
32
silence is not expectance... true or false
true
33
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
33
Which of the following stands for the proposition that a contract must involve both sides receiving and giving up something of legal value?
consideration
34
- 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
35
The benefits and detriments may take the form of (1) money, (2) goods, (3) services, or (4) the giving up. true or false?
true
36
* The giving up of a right that you legally possess.
* Can be used as consideration in a contract.
Forbearance
37
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
38
aspect of consideration primarily distinguishes contracts from illusory promises
bargained-for exchange
39
All promises do not support a bargained-for exchange and will not support contractual consideration.
true or false
false (only some)
40
Examples of illusory promises are:
1. Deathbed promises, in which you make a promise to a friend or loved one just prior
to her death to comfort her;
2. Promises of a gift, in which a promise is made but no reciprocal promise is
exchanged;
3. Promises of love and friendship; and
4. Promises that by their terms are not binding
41
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)
41
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
42
Certain classes of persons have only limited power to contract:
minors and those with mental incapacity
42
Contracts will be enforced by the courts only if each party has the legal ___________ courts only if each party has the legal capacity
capacity
43
For a contract to be enforceable, it must meet the requirement of:
legality
44
45
genuine assent
For a contract to be enforceable, the contract must also be...
45
almost all contracts are and will follow under state common law ... true or false
true
45
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.
46
for a contract to be valid and enforceable, the
law requires the parties to have given _________ ________ on the terms of the contract
genuine assent
47
- 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
48
a party can be liable even if a the company is innocent... true or false
true
49
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.
50
Duress:
If one party to a contract uses any form of unfair coercion to induce another party to enter into or modify a contract.
51
Categorie
of Duress
- Violence or threats of a violent act.
- Economic threats such as wrongful
termination or threats to breach a
contract.
- Threats of extortion or other threats
whereby the other party has no
meaningful choice
52
Undue Influence:
Allows the influenced party to avoid a contract when the
court determines that the terms of the contract are unfair
and the parties had some type of relationship that
involved a fiduciary duty or some duty to care for the
influenced party.
* Improper pressure of a trusted relationship.
53
A contract may potentially be avoided on the grounds that one party suffered a grossly
unfair burden that shocks the objective conscience.
Unconscionability
54
the law governing which contracts must be in
writing in order to be enforceable.
The statute’s purpose is to prevent fraud by requiring that certain contracts
have written evidence of their existence and terms in order to be
enforceable.
statute of frauds
55
statute of frauds primarily applies to five types of contracts:
* Contracts that involve the sale of interest in land.
* Contracts that cannot be performed in under one year.
* Contracts to pay the debt of another.
* Contracts made in consideration of marriage.
* Contracts for the sale of goods for $500 or more and lease transactions for goods amounting to $1,000 or more (U C C contracts).
56
Parol evidence rule:
- Provides that any writing intended by the parties to be the final expression of their agreement may not be contradicted by any oral or written agreements made prior to the writing.
- Does not bar admission of the
preliminary documents when they are being used to determine the meaning that the parties intended concerning a particular term in the contract.
57
Ambiguous terms
are construed by
the court against the interest of the
side that drafted the agreement.
58
Courts may also supply a reasonable
term in a situation where the
contract is silent and has
omitted terms.
59
Condition precedent:
An event that must occur before performance under a contract is due.
60
Condition subsequent:
An event that occurs after the performance under the contract and discharges the parties’ obligations.
61
Parties agree on terms and the parties perform the contractual obligations in ______ in order to complete the contract.
good faith
62
This completion is known as _______ , because both parties have now “discharged” their obligation to the other
by performing the agreed-upon duties.
discharge
63
Substantial performance:
The party trying to enforce the contract must show that she acted in good faith
and that any deviation from the required performance was not material.
64
Mutual Consent 1: Rescission
* Neither party has fully performed, the parties may agree to cancel the contract.
* Each party gives up rights under the contract in exchange for the release by the other party from performing their obligations.
64
Material:
Refers to some deviation from the contract that results in a substantial change in
the value of the contract or that changes a fundamental basis of the agreement.
65
Mutual Consent: Accord and satisfaction
One party agrees to render a substitute performance in the future (known as
accord), and the other party promises to accept that substitute performance in
discharge of the existing performance obligation.
Once the substitute performance has been rendered, this acts as a satisfaction of the obligation.
66
Generally used to compromise when two
parties have a dispute as to performance
of the contract and wish to amend its
terms.
* Immediately discharges any obligations
under the original contract.
Substitute agreement
67
A kind of substitute agreement that involves a substitute third party rather
than a substitute promise.
* Revokes and discharges all of the replaced party’s obligations under the old
contract.
Novation
68
* Impossibility.
* Impracticability.
* Frustration of purpose.
Operation of Law
69
* After the parties have entered an agreement, the contemplated performance of the obligations may
become impossible and, therefore, may be subject to discharge.
* Must be objective.
Impossibility
70
Must fit into one of four
intervening events
* Destruction of the subject matter:
* Death or incapacitation of one of
the parties to the contract.
* The means of performance
contemplated in the contract
cannot be performed.
* Performance of the obligation has
become illegal subsequent to the
contract but prior to performance.
Impossibility 2
71
For a contract to be discharged under
____________, the burden must be
unforeseeable and extreme in terms of cost.
impracticability
72
may be used to
discharge an obligation if, after the parties
enter into an agreement
1. A party’s principal purpose is
substantially frustrated without her
fault.
2. Some event occurs, when the
nonoccurrence of the event was a
central assumption of both parties
when entering into the contract.
3. The parties have not otherwise agreed
on who bears the risk
of such an occurrence.
Frustration of purpose
73
The parties may also be discharged through operation of law when:
* A contract is ______ altered by a party.
* A contract is subject to relief of the ___________.
* The statute of limitations, where state law imposes a time limit on enforcement of contract ___________, has expired.
- unilaterally
- Bankruptcy Code
- obligations
74
When a party to an agreement owes a duty to perform and fails to fulfill her obligation, she is said to have ________ the contract.
breached
75
The party that suffered the breach is also entitled to sue the breaching party in an attempt to recover ______________.
money damages (remedies)
76
Attempt to put the nonbreaching party in the same position she would have been in if
the other party had performed as agreed.
* Out-of-pocket damages, Profits.
Compensatory Damages
77
compensate the nonbreaching party for foreseeable
indirect losses not covered by compensatory damages.
An aggrieved party is entitled to recover consequential damages if the
damages are caused by unique and foreseeable circumstances beyond
the contract itself.
Consequential Damages:
78
is a remedy designed to
prevent unjust enrichment of one
party in an agreement
Restitution
79
- Damages that the parties agree to ahead of time.
- Damages cannot be excessive so as to penalize the breaching party.
Liquidated Damages:
80
Specific Performance:
* Remedy whereby a court orders the breaching party to render the promised
performance by ordering the party to take a specific action.
* Available only when the subject matter of the contract is sufficiently unique so
that money damages are inadequate.
Equitable Remedies
81
When the parties have imperfectly expressed their agreement and this
imperfection results in a dispute, a court may change the contract by rewriting it
to conform to the parties’ actual intentions.
Reformation
82
A court order to refrain from performing a particular act.
Injunctive Relief
83
* The law imposes an obligation on the parties in a contract to take
appropriate steps to avoid incurring damages and losses.
* The rule preventing recovery for reasonably avoidable damages is
often called the duty to mitigate.
Mitigation of Damages
84
as applied to contract enforcement, requires that the party show that it had no fault in the breaching of the contract and that it was ready, willing, and able to perform its required obligations under the contract
Clean hands
85
This readiness to perform is called
tender of performance
86
Assignment:
A transfer of current rights (not future rights) under a contract by one party in a contract to a third party.
87
* Parties to a contract may also substitute another party to perform any duties owed under the agreement.
* A delegation is a transfer of current duties owed by one party under a contract to a third party.
delegation
88
becomes a party to the contract and certain rights arise to protect the third party.
third-party beneficiary
89
One who commits a tort.
Tortfeasor.
89
A civil wrong where one party has acted, or failed to act, and that action/inaction
causes a loss to be suffered by another party.
The law provides a remedy for one who has suffered an injury/loss.
Tort
90
Tortfeasor’s wrongful conduct.
Tortious conduct.
91
One in which the tortfeasor is willful in bringing about a particular event that causes harm to another party.
Intentional tort.
92
An accidental (without willful intent) event that causes harm to another party.
Negligence.
93
* A tortfeasor may be held liable for an act
regardless of intent or willfulness.
* Applies primarily in cases of defective products and abnormally dangerous activities.
Strict liability torts:
94
If the victim is a public figure, such as a candidate for political office or a
celebrity, the defamation must have been committed with malice or reckless
disregard for the truth.
Defamation 2
Public Figure Standard.
95
- Truth.
- Privilege Defenses.
Defenses to Defamation.
96
* Government officials.
* Judicial officers/proceedings.
* State legislators
Privilege Defenses: Absolute Privilege
97
* Media.
* Fair report privilege.
* Employers
Privilege Defenses: Qualified Privilege
98
Trade libel requires the
statement:
* Clear and specific reference to
the disparaged party or product,
* Knowledge the statement was
false, or reckless disregard for
the truth,
* Communicated to a third party
99
Some states have passed ______ _____ ___________ intended to protect the
interest of a state’s major industries, such as
agriculture, dairy, or beef.
product
disparagement statutes
100
Fraudulent Misrepresentation: The law allows the innocent party to recover if
1. The misrepresentation was a material fact known to be false by the
tortfeasor (or reckless disregard for the truth);
2. The tortfeasor intended to persuade the innocent party to rely on the
statement and the innocent party did, in fact, rely on it; and
3. Damages were suffered by the innocent party
100
While the merchant has the right to briefly
detain a suspected shoplifter, he must be
cautious about giving rise to a ________ ________ claim when detaining an
individual.
false
imprisonment
101
Merchant must follow certain guidelines:
* Limited detention.
* Limited to premises.
* Seizure of property.
* Coercion
102
Other
Intentional Torts
Battery.
Intentional Infliction of Emotional
Distress.
Trespass (land).
Trespass (chattel).
Conversion.
Civil Assault.
103
Tortious Interference with
Existing Contractual
Relationship 1
When one party induces another party to break an existing contract with a third party, the
inducing party may be liable for any damages suffered by the innocent party as a result of
breaking the contract.
104
Tortious Interference with
Existing Contractual
Relationship 2
For the injured party to recover damages, the tortfeasor must have:
1. Had specific knowledge of the contract,
2. Actively interfered with the contract, and
3. Caused some identifiable damages (losses) to the injured party.
105
Tortious Interference with
Prospective Advantage
The law also protects interference with potential contract (prospects) or other business
relationships.
* Because no contract actually exists, courts allow recovery for this tort only under limited
circumstances in which the tortfeasor’s conduct was highly anticompetitive.
106
Negligence 1
* When a tortfeasor causes harm to an
injured party by creating an
unreasonable risk of harm, the law
provides the injured party a remedy
regardless of the tortfeasor’s intent.
107
Elements
of
Negligence
- duty
- breach of duty
- cause in fact
- Proximate (legal) cause
- actual damages
108
Duty:
Did the tortfeasor owe a duty of care to
the injured party?
109
Breach of duty:
Did the tortfeasor fail to exercise reasonable care?
110
Cause in fact:
Except for the breach of duty by
the tortfeasor, would the injured party have
suffered damages?
111
Proximate (legal) cause:
Was there a link between the breach of duty and the damages suffered by the injured party?
112
Actual damages:
Did the injured party suffer harm?
113
Palsgraf versus Long Island
Railroad Co.,
162 N.E. 99 (Ct. App. N.Y. 19 28)
“The risk reasonably to be perceived
defines the duty to be obeyed, and risk
imports relation; it is risk to another or
to others within the range of
apprehension.”
114
Comparative
Negligence
This defense requires a jury to divide up the
proportion of negligence committed by the parties in terms of percentage. Successfully asserting comparative negligence reduces (but does not eliminate) the final award to the plaintiff.
115
Assumption of the Risk
The injured party/plaintiff knew or should have known (by virtue of the circumstances or
warning signs, etc.) that a risk of harm was inherent in the activity, and The injured party/plaintiff voluntarily participated in the
activity.
115
Strict liability
is a concept rooted in the
notion that the general public benefits
when liability is imposed on those who
engaged in certain activities that result in
harm to another party, even if the
activities were undertaken in the most
careful manner possible (without
negligence).
116
In a products liability case, the injured party
may pursue a legal remedy against the
seller under one of three theories:
- Negligence.
- Warranty.
- Strict liability.
117
Warranty
laws are important protection
for purchasers because they impose
liability even in the absence of
negligence.
118
Defining “Defect”
Design or Manufacturing
Defect.
Inadequate Warning.
Improper Packaging.
Unavoidably Unsafe.
119
Seller’s Defenses
Substantial Change.
Assumption of the Risk.
Misuse of Product.
