Exam 3 Contents Flashcards
What are contracts governed by?
Common law, unless there is a statutory law governing the contract
Contract (k)
a promise or set of promises for the breach of which the law gives a remedy, or the performance of which the law in some way recognizes as a duty
Objective theory of contracts
A theory under which the intent to form a contract will be judged by:
-outward, objective facts (what the party said when entering into the contract –how the party acted or appeared
-and the circumstances surrounding the transaction) as interpreted by a reasonable person, rather than by the party’s own secret, subjective intentions.
What are the 4 requirements for a contract?
Agreement, consideration, capacity, and legality
Defenses to a K
– Voluntary consent- consent of both parties must be voluntary
* Examples include fraud, undue influence, mistake, or duress
– Form- the contract must be in the appropriate form required by
law
* Some K must be in writing
Bilateral Contract
A type of contract that arises when a promise is given in exchange for a return promise.
Formal contract
A contract that by law requires a specific form, such as being executed under seal, to be valid.
Unilateral contract
A contract that results when an offer can be accepted only by the offeree’s performance.
Informal contract
A contract that does not require a specified form or formality in order to be valid.
Express contract
A contract in which the terms of the agreement are fully and explicitly stated in words, oral or written.
Implied Contract
A contract formed in whole or in part from the conduct of the parties.
the conduct of the parties dictates rather expressed statements define the K
What are the requirements for an implied K?
-Plaintiff furnished some services or property
-Plaintiff expected to be paid for the services or property; Defendant knew or should have known payment was expected
-The defendant had a chance to reject the services or property and did not.
Executed contracts
Contracts in which performance has been completed.
Executory contracts
those contracts in which the terms have not been completely executed or fulfilled
Enforceable contract
a valid contract that can be enforced because there are no legal defenses against it
Unenforceable contract
A valid contract rendered unenforceable by some statute or law.
Voidable contract
A contract that may be legally avoided at the option of one or both of the parties.
Offer
A promise or commitment to perform or refrain from performing some specified act in the future.
Requirements for an offer
-The offeror must have a serious intention to become bound by the offer
-The terms of the offer must be reasonably certain
-The offer must be communicated to the offeree.
Agreement
The parties must agree on the terms and communicate to each other their mutual agreement to the same bargain; traditionally an offer and acceptance
Intention
What would a reasonable person in the offeree’s position conclude the offeror’s words and actions mean?
Situations in which intent may be lacking
- Expressions of opinion- not an offer
- Statements of future intent- “I plan on selling X”
- Preliminary negotiations- a request or invitation to negotiate is not an offer
- Invitations to bid- invitations to submit bids is not an offer; bids submitted are offers
- Advertisements and price lists- are considered invitations to negotiate
- Live and online auctions- again invitations to submit offers
Terms of a K must express or imply what 2 things?
The identity of the parties and the identity of the object or subject matter of the K
Revocation
The revoking or withdrawing of an offer
Option contract
a contract that is created when the offeror promises to hold an offer open for a set time period in return for consideration
Termination by action of the offeree
If the offeree rejects the offer, by words or by conduct, the offer is terminated
Counteroffer
a rejection of the original offer and the simultaneous making of a new offer
What are some terminations of contract by operation of law?
-Lapse of time: an offer terminates automatically when a specified in the offer has been exceeded (if unstated, a reasonable time period)
-Destruction of the specific subject matter of the offer: death or incompetence of the offeror or the offeree
-Supervening Illegality: a statute or court decision that makes an offer illegal automatically terminates the offer
Acceptance
Acceptance
Unequivocal acceptance (Mirror Image Rule)
The acceptance cannot impose new conditions on—or change the terms of—the original offer.
Silence as Acceptance (general rule)
silence cannot constitute acceptance, even when the offer states it can be, unless the offeree has had prior dealing with the offeror. (i.e. landscaper notifies you they are raising rate effective next month and you do not object)
Communication of Acceptance
some K do not require formal acceptance (unilateral). However, bilateral K requires communication of acceptance (bilateral is formed when a promise is made rather than when the act is performed)
Mailbox rule (deposited acceptance rule)
acceptance becomes binding when it is deposited with the postal service
Substitute Method of Acceptance
when the offeror authorizes a particular method of acceptance, but the offeree accepts by a different means.
for example, if an offer states acceptance must be via registered mail but the offeree sends a signed acceptance via overnight courier service, which is considered equally reliable and timely, this could be considered a valid substitute method of acceptance
How e-contracts differ from regular contracts?
Not much; meet the same 4 basic requirements (agreement, consideration, capacity, and legality). Differ in certain documents that can’t be signed electronically, like wills, divorce papers, etc.
What should an online offer include?
-Acceptance of terms: a clause that clearly indicates what constitutes acceptance
-Payment: a provision specifying how payment for the goods/services must be made.
-Return policy
-Disclaimer: a disclaimer of liability for certain use of the goods
-Limitation on remedies: a provision specifying the remedies available for the buyer if the goods are found to be defective or if the K is breached.
-Privacy policy: a statement indicating how the seller will use the information gathered by the buyer.
-Dispute resolution
Click-on agreements
An agreement that arises when an online buyer clicks on “I agree”
Shrink-wrap agreements
Contract terms are inside the box.
Party opening box agrees to terms by keeping merchandise.
E-signature
As defined by the Uniform Electronic Transactions Act, “an electronic sound, symbol, or process attached to or logically associated with a record and executed or adopted by a person with the intent to sign the record.”
What documents can not be bound by an e-signature?
court papers, divorce decrees, evictions, foreclosures, health insurance terminations, prenups, and wills.
Uniform Electronic Transaction Act
Sets forth rules for entering into an enforceable contract using electronic means.
Consideration
the value given in return for a performance or promise
A legally sufficient value can take what forms?
-A promise to do something that one has no prior legal duty to do;
-The performance of an action that one is otherwise not obligated to undertake
-Refraining from an action that one has a legal right to undertake(forbearance)
Bargained for exchange
The item of value must be given or promised by the offeror in return for the offeree’s promise, performance, or promise of performance.
Preexisting duty
a promise to do what one has a legal duty to do does not constitute legally sufficient consideration
For example, if a builder agrees to build a house for a certain price but then demands more money halfway through the project, the owner cannot be forced to pay the extra amount.
Past considerations
Promises made in return for actions/events that have already happened are unenforceable
If someone helps their neighbor move furniture without an agreement, and the neighbor later promises to pay them, the promise cannot be enforced.
Accord and Satisfaction
an agreement made and executed in satisfaction of the rights one has from a previous contract
legal agreement between two parties where they agree to accept a different performance in place of a pre-existing duty
Release
a K where one party forfeits the right to pursue a legal claim against the other party; For a release to be binding it must stratify the following: made in good faith; in writing & signed; some form of consideration
Detrimental reliance
Situation in which the offeree acts, based on a reasonable promise made by the offeror, and would be injured if the offeror’s promise is not enforced.
legal concept that allows a party to seek legal remedies when they have suffered harm due to relying on another party’s promises
What elements are required for promissory estoppel?
-There must be a clear and definite promise;
-The promisor should have expected the “promisee” would rely on the promise
-The “promisee” reasonably relied on the promise- The “promisee’s” reliance was definite and resulted in substantial detriment
-Enforcement of the promise is necessary to avoid injustice
t allows a promise to be enforced even if it is not a formal contract. It prevents a party from withdrawing a promise that a second party has reasonably relied on.
Contractual Capacity
the legal ability to enter into a contractual relationship
Who does not have contractual capacity?
Minors, intoxicated persons, mentally incompetent
What are some examples of illegal contracts?
Contracts to commit a crime, usury (a lender who makes a loan at an interest rate above the lawful maximum rate), gambling
Substantive contract
when the K/clause are oppressive or overly harsh; cts will look does it deprive one party of the benefits of K agreement or leave the party w/out a remedy for nonperformance by the other
Statute of Frauds
A state statute under which certain types of contracts must be in writing to be enforceable.
K that violate the statute of frauds are voidable by a party who chooses not follow through on the agreement
Privity of contract
The relationship that exists between the promisor and the promisee of a contract.
states that only the parties to the agreement alone have the rights and liabilities under the agreement
Assignment
the transfer of a contractual right; the assignee only receives those right transfer or all the rights of the assignor
Delegation
the transfer of contractual duty; duties are not assigned they are delegated; delegation does not generally relieve the delegator from liability under the K.
EX:A general contractor may delegate the duty to perform electrical work to an electrician. The general contractor is still responsible for the project and will be paid when it’s finished.
Voluntary consent
Knowledge of, and genuine assent to, the terms of a contract.
Unilateral Mistake of Fact
A mistake made by one of the contracting parties. Generally, a unilateral mistake will not excuse the performance of the contract unless: (1) the other party to the contract knew or should have known of the mistake; or (2) the mistake is one of mathematics only.
For example, if Party A has a mistaken belief they will receive a shipment of fresh and edible apples but Party B intends to send plastic and decorative ones
Fraudulent Misrepresentation
Any misrepresentation, either by misstatement or by omission of a material fact, knowingly made with the intention of deceiving another and on which a reasonable person would and does rely to his or her detriment.
Bilateral Mistake
a mutual misunderstanding concerning the basic assumption on which the K was made. When both parties are mistaken about the same material fact, either party can rescind the K.
What are some traits of fraudulent misrepresentation?
-Misrepresentation of a material fact;
-There must be an intent to deceive;
-The innocent party must justifiably rely on the misrepresentation; and
-To collect damages, the innocent party must have been harmed as a result of the misrepresentation
Undue influence
arises when one party’s influence over the other begins to effect decision-making and party’s free will.
Condition
a qualification in a K based on a possible future event. The occurrence of the event will trigger the performance of a legal obligation or terminate an existing one.
What is the most common way to discharge/terminate contractual obligations?
Performance of the duties
Tender
an unconditional offer to perform by a party who is ready willingand able to do so.
Duress
the use of force or threats against a party to have them enter a K.
Complete performance
when the party performs exactly as required/agreed upon, the party performance is complete.
What are the required elements to qualify for substantial performance?
The party must have performed in good faith- can’t intentionally fail to perform something
-The performance must not vary greatly from the performance promised in the K; issues are considered minor if they can be addressed by $
-The performance must create the same benefits as those promised in the K
Substantial perfomance
is when a party has performed in good faith substantially all the terms of K and can enforce the K against the other party.
Anticipatory repudiation
arise prior to either party having complied with their respective contractual duties, when one party refuses to carryout their contractual duties.
Breach of contract
the nonperformance of a contractual duty
Time of performance (general rule)
if none is stated; reasonable time will be implied; If stated the parties must perform by that time.
Recission
the unmaking of a contract so as to return the parties to the positions they occupied before the contract was made
Mutual recission
requires the parties to make another agreement that also satisfies the legal requirements for a K. There must be an offer, acceptance, and consideration.
Discharge by novation
Novation is when both parties agree to substitute a 3rd party for one of the original parties.
What are the requirements for discharge by novation?
-A previous valid agreement
-A new agreement by all the parties to a new K
-The termination of the old agreement
-A new K that is valid
Discharge by settlement agreement
a settlement agreement arising out a dispute between the parties will be recognized under law. Which will expressly or impliedly revoke the original K
a legally binding contract between two parties that resolves a dispute and ends their claims. The agreement is intended to avoid the expense and time of litigation
Discharge by Accord and Satisfaction
the parties agree to accept a performance that is different from what was originally promised. Accord & Satisfaction discharge the original K
In an accord and satisfaction, both parties give up something to limit their liability. The accord is the agreement, and the satisfaction is the consideration that makes the agreement legally binding.
What are some circumstances where contracts could be discharged by operation of law?
Material alteration of K; SOL; bankruptcy; impossibility
Material Alteration of the Contract
to discourage parties from altering the terms of their K, the law allows the innocent party to be discharged when the other party has materially altered a written agreement w/out consent.
What are 3 scenarios where performance is impossible?
-When one party to a personal K dies/becomes incapacitated prior to the performance
-When the specific subject matter of the K is destroyed
-When a change in law renders performance illegal
Temporary Impossibility
An occurrence or event that makes performance temporarily impossible operates to suspend performance until the impossibility ceases.
Commercial Impracticability
A doctrine that may excuse the duty to perform a contract when performance becomes much more difficult or costly due to forces that neither party could control or contemplate at the time the contract was formed.
Frustration of Purpose
when unforeseen supervening circumstances make it impossible to attain the purpose both parties had intended.
Waiver
An intentional, knowing relinquishment of a legal right.
Waiver of Breach
a non-breaching party may be willing to accept a defective performance of the K.
ex:one party made a late payment to the other, and the late payment was accepted
Consequential damages
foreseeable damages that result from a party’s breach of K (aka special damages)
What are the 4 types of damages?
- compensatory
- consequential
- punitive
- nominal
Punitive Damages
Fines above and beyond the actual economic loss to punish the defendant in a civil trial.
Compensatory damages
loss of the bargain; simply “making the person whole”
compensatory damages, also known as actual damages, are damages awarded by a court equivalent to the loss a party suffered
Specific Performance
A legal action to compel a party to carry out the terms of a contract.
Recission and Restitution
returns both parties to pre-contract position
exculpatory clause
A clause that releases a contractual party from liability in the event of monetary or physical injury, no matter who is at fault.
Nominal Damages
A small monetary award (often one dollar) granted to a plaintiff when no actual damage was suffered.
Reformation
an equitable remedy used when the parties have imperfectly expressed their agreement in writing. It allows the court to rewrite the K to reflect the true intentions
nuisance
under common law a person could be held liable if they use their property in a manner that unreasonably interferes with other’s right to use or enjoy their property
Toxic Tort
A personal injury is caused by exposure to a toxic substance, such as asbestos or hazardous waste. Victims can sue for medical expenses, lost wages, and pain and suffering.
What type of companies are held to strict liability when it comes to pollution/environmental law?
Business that engage in ultrahazardous activities- such as the transportation of radioactive materials are strictly liable for any injuries the activities cause
What are some examples of state laws that have been enacted to protect the environment
-A business’s discharge of chemicals into air or water
-Regulate its disposal of toxic waste
-Restrict emissions on motor vehicles
-Regulate the disposal or recycling of other waste (household)
Environmental Protection Agency (EPA)
The US federal agency with a mission to protect human health and the environment; primarily responsible for enforcing federal environmental laws
Environmental Impact Statement (EIS)
Statement required by Federal law from all agencies for any project using Federal funds to assess the potential affect of the new construction or development on the environment.
What must an EIS analyze?
-The impact that the action will have on the environment
-Any adverse effects on the environment and alternative actions that might be taken
-Any Irreversible effects the action might generate.
Clean Air Act
Set emission standards for cars, and limits for release of air pollutants
Federal Water Pollution Control Act
Authorized the surgeon general of the Public Health Service, with others, to prepare comprehensive programs for eliminating or reducing the pollution of interstate waters and tributaries and improving the sanitary condition of surface and underground waters.
Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA)
regulates pesticides and herbicides. The FIRRA requires that these substances be:
-Registered prior to sale
-Certified and used only for approved applications
-Used in limited quantities when applied to food crops
Resource Conservation and Recovery Act (RCRA)
Management of non-hazardous and hazardous solid waste including landfills and storage tanks. Set minimal standards for all waste disposal facilities and for hazardous wastes.
Superfund (CERCLA)
A fund created by Congress in 1980 to clean up hazardous waste sites. Money for the fund comes from taxing chemical products.
Who is responsible for a release or spill?
-The Person who generated the waste at the site
-The Person who transported the waste to the site
-The person who owned or operated the site at the time of disposal
-The Current owner or operator of the site
What are the 4 primary elements of the Superfund?
-It establishes an information-gathering & analysis that enables the government to identify a site and determine the proper course of action
-It authorizes the EPA to respond to emergencies (spills) and to arrange for the clean-up of site
-It creates a hazardous substance response trust fund (Superfund) to pay for the clean-up
-It allows the government to go after the parties responsible for release/spill
Potentially Responsible Party (PRP)
A party liable for the costs of cleaning up a hazardous waste-disposal site under the Comprehensive Environmental Response, Compensation, and Liability Act.