Law of Contracts

Question 1

What is a Promise

Answer 1

In legal terms, a promise is a commitment or undertaking that something will or will not happen in the future. The person making the promise is the promisor, and the person to whom the promise is made is the promisee. The definition of a promise includes both types of commitments.

Question 2

What is a Contract

Answer 2

A contract is “a promise or a 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.” All contracts are promises, but not all promises are contracts.

Question 3

What is Specific Performance?

Answer 3

If, in the opinion of the court, money is an inadequate remedy, the court may force the promisor to perform the breached promise. That is a remedy known as specific performance.

Question 4

What makes a Contract Legally Enforceable

Answer 4

A contract is legally enforceable if the promisee is entitled to a contract remedy and the promisor fails to perform.

Question 5

What three ingredients must be present for Contract Formation

Answer 5

Taken collectively, offer, acceptance, and consideration form a conceptual unit known as contract formation.

Question 6

What are the two fundamental requirements of an enforceable contract?

Answer 6

Agreement

Consideration

Question 7

Agreement

Answer 7

An agreement is created when one party accepts an offer made by the other. An enforceable contract requires an agreement, or bargain, between parties.

Question 8

Consideration

Answer 8

Consideration refers to a benefit or performance that is bargained for and given in exchange for the promise. A promise must be supported by consideration to be enforceable as a contract.

Question 9

What are four formation defects?

Answer 9

1. Lack of contractual capacity of one or both parties.
2. Lack of genuine assent to the bargain due to factors such as fraud, misrepresentation, mistake, duress, or undue influence.
3. A contractual purpose that is illegal or otherwise contrary to public policy.
4. Lack of proper formality when legal formalities are required.

Question 10

Voidable Contract

Answer 10

A voidable contract is when one or more parties have the power, by electing to do so, to avoid the legal relations created by the contract

Question 11

Disaffirmance

Answer 11

Avoidance of a voidable contract is commonly designated “disaffirmance.”

Question 12

List the four contract types

Answer 12

Formal and informal

Unilateral and bilateral

Express and implied

Executed and executory

Question 13

Three Types of Formal Contracts

Answer 13

1. Contract Under Seal

Actual seal put on written contract

2. Recognizance

Promise in court to make certain payments unless a specified event occurs

3. Negotiable Contract

Governed by the Uniform Commercial Code (UCC)

Negotiable instruments (e.g., checks)
Documents of title (e.g., warehouse receipts)
Investment securities (e.g., stocks)

Question 14

Unilateral Contract

Answer 14

A contract containing only one promise is said to be unilateral (“one-sided”). A unilateral contract involves a promise in exchange for performance of an act. Unilateral contracts result when only one of the parties makes a promise.

Question 15

Bilateral Contract

Answer 15

Most contracts, however, are bilateral (“two-sided”), involving at least two promises, in which each party is simultaneously a promisor and a promisee. Bilateral contracts, therefore, involve a promise in exchange for a return promise.

Question 16

12. What is meant by an ‘express’ contract?

Answer 16

A contract is express if it arises from the oral or written language of the parties. Assume Rania states to Omar, “I offer to sell you my motorcycle for $1,500,” and Omar responds, “I accept.” In this case, the promises are express.

Question 17

Implied in Fact

Answer 17

A promise may also be inferred from conduct other than language. In this case, the contract is said to be implied in fact.

Question 18

Implied in Law

Answer 18

Such a quasi-contract is not really a contract at all, but a form of the remedy of restitution. A quasi-contract is designed to provide a remedy when one party confers a benefit upon another and when the second party retains that benefit. If the law considers it necessary to prevent unjust enrichment of the benefited party, it implies or imposes a promise (the quasi-contract) to pay the reasonable value of the benefit conferred. Assume Dalia owes Carr $100. Dalia pays Carr by check but inadvertently makes it payable for $1,000. To prevent a windfall to Carr, the court may imply a promise by Carr (the quasi-contract) to pay Dalia $900.

Question 19

Executed Contract

Answer 19

A promise or contract is executed if it has been completed or performed

Question 20

Executory Contract

Answer 20

Executory if it is yet to be performed.