Key Terms -Chapter 9

Question 1

accord and satisfaction

Answer 1

A new agreement by contracting parties that is satisfied by full performance, thereby terminating a prior contract.

Question 2

assignment

Answer 2

A complete transfer of all legal rights and obligations by one party to another.

Question 3

bilateral contract

Answer 3

An agreement based on mutual promises of specified consideration.

Question 4

breach of contract

Answer 4

Failure without legal excuse to perform a promise that forms the whole or part of a contract.

Question 5

compensatory damages

Answer 5

The compensation an injured party is entitled to receive for any financial loss caused by the breach as may be awarded by the court.

Question 6

consideration

Answer 6

Anything of value as recognized by law offered as an inducement to contract such as money, action, or forbearance, or a promise to act or a promise to forbear.

Question 7

contractual capacity

Answer 7

Having the ability to understand the terms of a contract and the consequences of nonperformance.

Question 8

counteroffer

Answer 8

A promise or a request by an offeree that terminates the original offer from an offeror by rejecting it and substituting a new offer in its place.

Question 9

duress

Answer 9

The inability of a party to exercise his or her free will because of fear of another party.

Question 10

earnest money

Answer 10

A deposit of money made by a buyer at the time of making an offer to demonstrate the earnest intent to purchase. Also called binder, good faith deposit, or escrow deposit

Question 11

executed contract

Answer 11

An agreement that has been fully performed.

Question 12

executory contract

Answer 12

An agreement that has not been fully performed.

Question 13

express contract

Answer 13

One created verbally or in writing by the parties.

Question 14

full performance

Answer 14

The usual manner of terminating contracts.

Question 15

illusory offer

Answer 15

One that does not obligate the offeror.

Question 16

implied contract

Answer 16

One created by deduction from the conduct of the parties rather than from the direct words of the parties. Opposite of an express contract.

Question 17

land contract

Answer 17

A contract of sale and a financing instrument wherein the seller agrees to convey title when the buyer completes the purchase price installment payments. Also called installment land contract, land contract, and conditional sales contract.

Question 18

liquidated damages

Answer 18

A predetermined amount of money to be paid and received as compensation for a breach of contract.

Question 19

mutual assent

Answer 19

The voluntary agreement of all parties to a contract as evidenced by an offer and acceptance.

Question 20

negligent misrepresentation

Answer 20

An unintended misrepresentation of a material fact that the party did not make knowingly but should have known the truth by exercising due skill, care, and diligence

Question 21

novation

Answer 21

The substitution of a new contract for a prior contract.

Question 22

offeree

Answer 22

One to whom an offer is made.

Question 23

offeror

Answer 23

One making an offer

Question 24

Parol Evidence Rule

Answer 24

Rule of evidence and law that states the written words contain all of the agreement and that oral statements not agreeing with the written word are to be disregarded.

Question 25

ready, willing, and able

Answer 25

Describes a buyer who is ready to buy, willing to buy, and financially able to pay the asking price.

Question 26

unilateral contract

Answer 26

An agreement wherein one party makes a promise of compensation to the other party and the second party returns an action in response to the promise, although he is not legally obligated to do so

Question 27

valid contract

Answer 27

An agreement that is legally binding and enforceable.

Question 28

void contract

Answer 28

An agreement that is absolutely unenforceable and has no legal force or effect

Question 29

voidable contract

Answer 29

One which appears valid, but may be avoided by one of the parties without legal consequences because it contains a defect. If the party who may avoid the contract based on the defect, does not identify the defect and takes action to avoid the contract, the contract is valid and enforceable.