M-1 - Contracts: Part 1

Question 1

What are the three elements for a legally enforceable contract?

Answer 1

• Offer and acceptance
• Exchange of consideration - Both parties have to provide something of legal value, no gifts, and does not have to have monetary value.
• No defenses to enforcement

Question 2

What is an express contract?

Answer 2

It is a contract form by language, oral, or written. For example, let’s say Irma promises to wash my car for $10 dollars, that would be an express contract.

Question 3

What is an Implied-in-fact contract?

Answer 3

This is where your actions or conduct is entering into a contract. For example, let’s say you go to the store. You going to the store is conduct that you want to go and buy something. If you go to the register, they wring up the item, and you leave with that item, that is an example of implied-in-fact contract. Doesn’t need to be in writing, doesn’t even need to be verbal, it is all implied. Going to the doctor to get treated is another example.

Question 4

What is an Implied-in-law contract?

Answer 4

This is not a contract at all (or quasi contract), and it prevents the defendant from being unjustly taken advantage of. For example, if you get into an oral agreement to purchase some land, that contract is not enforceable since land has to be in writing. Let’s say you gave 15,000 as a down-payment on this verbal agreement, and the seller says nevermind and walks away. While the court cannot enforce the sale of the land, they can enforce a quasi contract where the buyer gets their down-payment back.

Question 5

What is a unilateral contract?

Answer 5

This is a contract where the contract is formed once you complete a specific performance. For example, if you lost your dog, and say 500 dollar reward to anyone who finds my dog, that is an open offer. The contract is not formed until someone finds the dog and brings it back to you. This is an example of a unilateral contract.

Question 6

What is a bilateral contract?

Answer 6

This is a promise for a promise contract. For example, I promise someone 100 dollars if promise to catch me my favorite Pokémon. That is an example of a bilateral contract.

Question 7

What is common law and the RISE acronym?

Answer 7

This is contract law that is enforced based on the old court decisions. They look at old court cases and hearings to help them make a decision in the common law. The type of contracts that are covered in the common law are:

• Real Estate
• Insurance
• Services
• Employment

Question 8

What is the Uniform Commercial Code (UCC)?

Answer 8

This is contract law that applies to the sale of any goods. Basically if you can touch it and move it, this is a good. While common law uses old court cases, UCC uses statutory law that has been adopted in the United States. This is laws and rules that have already been written that are used for UCC.

Question 9

What is the acronym where writing is required in a contract?

Answer 9

MY LEGS

Question 10

How do you explain offer and acceptance in contract?

Answer 10

It’s a meeting of the minds, it’s where one party makes one offer, and the other party agrees to it.

Question 11

What is the objective theory?

Answer 11

It basically states would a reasonable person believe that the offer from the offeror was serious? If not, then the contract would not be valid. If it was made in jest or frustration, then we can assume it was not a reasonable offer.

Question 12

To make a contract you need offer and acceptance, is an advertisement and offer? Are there any exceptions if not?

Answer 12

No an advertisement is not an offer since it is not addressed to anyone in particular. It is mainly getting the attention of people who would want to make an offer.

Now, if the advertisement limits the scope of people who can accept, then this will be considered an offer. Example, if someone loses a dog, and you offer a reward, that is an offer and must be paid out upon completion. This is an advertisement that could turn into a contract. Or another example, first people to show up get a free drink, is also an example of this.

Question 13

One of the elements for a valid offer is that the terms of the offer must be definite and certain. Explain what that means and how that differs from UCC and the common law?

Answer 13

The terms of the offer must be clear and both parties can understand. Depending on if it is common law or UCC there are some different elements.

If you are selling a good, that is the UCC. You only need to define in the quantity in these terms. That is the only element you need to include to make it a valid offer.

For common law, you need to know it all. You need to know the price, time, quantity, parties, and type to be a valid offer.

Question 14

What are the three ways an offer can terminated?

Answer 14

Here are the three ways, but it is important to note, to create a contract an offer must be accepted before it is terminated.

• Revocation of offeror - Person offering pulls the offer back
• Rejection by offeree - Person who got the offer rejects it
• By operation of law - Courts decide that was not a legal offer.

Question 15

If an offeror promises you that you have certain amount (lets say 3 days) of time to consider their offer, and they turn around and sell it to someone else a few hours later for a better deal. Can the offeror get in trouble for lying about the promise?

Answer 15

NO, as long as the offeror revokes the offer anytime before acceptance, that is a valid revocation by the offeror. Even if they promised you that they will hold it for you for three days, they can sell it to someone else a minute later as long as you didn’t accept.

Question 16

If an offeror promises you a certain amount of time for an offer, what can the offeree do to make that offer irrevocable?

Answer 16

They can give the offeror something of value to keep the option open. Let’s say the give the offeror a dollar to hold the item so they can make a decision. Since you gave them something of value, they have to keep the offer open for you, it is irrevocable.

Question 17

How can the offeror revoke the offer?

Answer 17

They can do it one of two ways:

Express - Oral or written to the offeree

Implied - Conduct, or just sell it to someone else. Don’t really even need to communicate it.

Question 18

If the offeree rejects the offer, but later decides he wants the offer, how does this work? Does this work for counteroffers?

Answer 18

If the offeree first rejects and then changes their mind, this means that they terminated the offer, and when they say neverminded, that is a new offer by the offeree. So now that offeree becomes the offeror. Here is an example:

Joe offers Peter a car for 500 dollars and Peter says no. This is a rejection, and the offer has been terminated. Let’s say Peter is going home, and he really thinks he made a bad decision, calls Joe and says, I will buy it for 500. Now Peter is the offeror and Joe is the offeree. It is up to joe to decide, and he can say no, and it would be valid since the original offer was terminated.

Same process for counteroffers, but has to be a counteroffer, not an inquiry. If you say “no but I would do 300”, that terminates the original offer. If you say “would you do 300”, that does not terminate the original offer.

Question 19

Is the rejection effective when it was sent or received?

Answer 19

When received. If you mail someone a letter on July 3rd rejecting their offer, but they did not get that letter until July 6th, that offer was not rejected until July 6th since that is when the offeror received the notice.

Question 20

What is the acronym for an offer to be terminated by operation of law?

Answer 20

DIDI
D - Death - If either party dies before acceptance, the offer is terminated.

I - Incompetency - If either party becomes incompetent before the offer is accepted, the offer is terminated.

D - Destroyed - Subject of the offer is destroyed

I - Illegal - Subject matter of the proposed contract is illegal.

Question 21

What is the exception where an offer cannot be terminated by death?

Answer 21

If an option contract was put into place, you paid the someone to keep the offer open before death. That is still a valid offer.

Question 22

For acceptance, what is the general rule as to who can accept the offer? What is the exception?

Answer 22

The general rule is, that only the person who the offer was offered to can accept the offer, that’s it.

Now if the offeree purchased an option (paid for time to decide), they can assign the contract to someone else to accept. They purchased their right for that time, and this is the exception.

Question 23

What is the general rule to the method of acceptance? How to accept the offer? What is the exception?

Answer 23

You can accept an offer in any manner that is reasonable. The only exception is if the offeror says that you can only accept via email, mail, or however, than you have to accept it that way, or the acceptance is invalid.

Question 24

What is the mirror change rule, and does that apply to common law, UCC, or both?

Answer 24

The mirror change rule states that, in order to accept an offer, you have to accept it exactly how it was spelled out to you. If you try to change things in the agreement, then that is a counteroffer which serves as a rejection.

This applies to common law, as UCC you can make minor changes and the mirror image rule does not apply.

Question 25

Does UCC or Common Law allow you to make minor changes to acceptance of an offer?

Answer 25

UCC, not common law.

Question 26

What is the mailbox rule? Does that apply to rejecting an offer or when accepting an offer?

Answer 26

Unlike an when rejecting an offer, acceptance of an offer is when it it is sent. So you if accepted an offer by mailing someone a letter, and they did not get the letter till a week later, the offer was accepted when the letter was sent.

This applies to when accepting an offer, rejecting an offer is valid once received by an offeror.

Question 27

How can an offeror opt out of the mailbox rule?

Answer 27

All they have to do, is state in the agreement, that the acceptance will not be valid until the offeror gets the acceptance. Must be specified in the offer for this to be valid.

Question 28

An agreement is of legal value if it constitutes either:

Also give an example of something with nonmonetary value

Answer 28

Determent to promise or benefit to the promisor.

Promisee agrees to do something they are not already obligated to do (determent).

The promisor will obtain some benefit.

For example, if someone offers you 1000 dollars to stop smoking, that would be something of legal value. You have a legal right to smoke, so you are giving that up for some value of money. That is consideration from both parties.

Question 29

Can exchange of consideration flow to another third party?

Answer 29

Yes, it can. If Josh tells Alex he will give him 10 bucks to wash Irma’s car, that is an example of third party consideration and it is valid.

Question 30

For exchange of consideration, does the exchange have to be of equal value? Is there an exception?

Answer 30

No, someone can sell their car for 5 dollars and it would be valid. As long as they were not blackmailed, duress, or incompetent, this would be valid.

If it is grossly unfair, then it could be voidable. Someone who is elderly, someone who did not understand the terms, things like that can be looked at. Also if it is at arms length, you owe the other person a fiduciary obligation. Like spouse to spouse, CPA to client, or something like that.

Question 31

If a singer is under contract to sing at a concert for 5,000 but tells the concert director she will not sing unless she gets paid 5,000 more dollars before she comes out, is this valid?

Answer 31

No, she was already under a preexisting contract to perform those services so she cannot use that preexisting duty for more consideration.

Question 32

If a singer is under contract to sing at a concert for 5,000 but tells the concert director she will not sing unless she gets paid 5,000 more dollars before she comes out. The director says fine, and she ends up seeing five more minutes than she was obligated to, is this valid?

Answer 32

Yes, she was obligated to sing, but ended up signing for more than she needed to, so now that 5,000 extra he promised her, has to be paid out since she did more than her preexisting contract.

Question 33

What is the exception where a gift would be an exchange for consideration?

Answer 33

If you promise to donate to a charity, and that charity detrimentally and justifiably relies on your gift, than that promise is enforceable.

Question 34

What is moral consideration?

Answer 34

This is where you do something out of the goodness of your heart, and they person you did it for, promises to pay you after all the work is done. This is not enforceable, since the money did not entice you to do the work.

For example, you save someone’s life and they are so grateful that they offer to pay you. If they end up not paying you, that is fine since the reason you did it was for no compensatory value. Now if they were in trouble and they yelled “someone save me ill pay you 1000 bucks”, then that is binding, and they have to pay you if saved.