Final Exam - Contracts

Question 1

Define contract

Answer 1

A legally binding and enforceable agreement

Question 2

List the 2 types of contracts:

Answer 2

• Express (written or verbal)

- Implied (through conduct)

Question 3

Two practice methods of establishing contracts

Answer 3

• Take it or leave it (standard form)

- Negotiated

Question 4

List 1-3 of the six essential elements required to form a contract:

Answer 4

1. Intention to create legal relations
2. Agreement (offer and acceptance)
3. Consideration (something or someone)

Question 5

List 4-6 of the six essential elements required to form a contract:

Answer 5

3. Capacity to enter the agreement
4. Genuine consent (free will)
5. Legality of object – legal purpose

Question 6

Lack of 1-3 makes contracts:

Answer 6

“void ab initio” – never came into existence

Question 7

Lack of 4-6 makes contracts

Answer 7

“voidable” – will not be enforced if challenged in court

Question 8

Step 2 (Agreement) of forming contracts, when do parties reach ‘agreement’? (2 step process)

Answer 8

1. Offer; AND
2. Acceptance
   ‘meeting of the minds’

Question 9

Step 3 (consideration) of forming contracts, what constitutes consideration? (3 things)

Answer 9

• Exchange of value for value
• Take care with volunteers
• Cannot have occurred in the past (prior to promise)

Question 10

Step 4 (Capacity) of forming contratcs, when can capacity become an issue? (5 points)

Answer 10

• Minors – under 18 (unless supply of necessaries, beneficial contracts of service, cash transactions)
• Insane/Mental disability
• Intoxicated persons
• Bankrupts (must disclose bankruptcy)
• Corporations

Question 11

Step 5 (consent) of forming contracts, what creates invalid consent? (5 points)

Answer 11

• Duress – actual or threatened violence
• Undue influence – misuse of position of power
• Unconscionability – praying on weakness
• Mistake – unless mutual and fundamental is hard to prove
• Misinterpretation

Question 12

Step 6 (legality of object) in forming contracts, in what circumstances will courts refuse to enforce contracts (or part of a contract)? (2 points)

Answer 12

• Contract to commit a crime or unlawful act (tax evasion)

- Unreasonable restraint of trade

Question 13

List 5 reasons a contract can be terminated

Answer 13

o	By performance
o	By agreement
o	Doctrine of frustration
o	By force majeure clause
o	By breach of condition

Question 14

Contracts: define a condition.

Answer 14

a term vital to the contract – non-performance may permit contract to be set aside (rescission) plus damages

Question 15

Contracts: define a warranty

Answer 15

a term that is not vital – injured party must still perform their part of the contract but may sue for damages

Question 16

List the 4 remedies for a breach of contract

Answer 16

Rescission
Damages
Specific performance
Injunction

Question 17

Regarding contracts, list 5 types of damages (compensation) that could be incurred.

Answer 17

Loss of enjoyment damages
Reimbursement
Restitution
Reliance loss
Expectation loss