MGMT 311 Exam 3 - FLASHCARDS - Chapter 12 part 1
What is a contract?
an agreement that can be enforced by law between two or more parties who promise to perform or refrain from performing some act now or in the future
What do contracts create?
Contracts create expectations as to how parties to agreements will conduct themselves in the future
True or false: If a party to a valid contract does not carry out a promise, a court will enforce the contract and provide some form of relief or remedy to the non-breaching party?
TRUE
True or false: Contract law provides stability and predictability and is the foundation upon which more specialized areas of the law are built?
TRUE
What is objective theory of contracts?
The apparent intention of a party to enter into a contract is determined by the objective, outward manifestation of his or her assent as it would be interpreted by a reasonable person
What is the opposite of objective?
Subjective
What do objective factors include?
- Words the parties have
2. Parties’s actions
3. Parties’s circumstances
What are the four requirements of a valid contract?
- Agreement – the mutual assent and agreement of the parties must be evidenced by an offer and an acceptance.
2. Consideration – legally sufficient and bargained-for consideration must be exchanged for contractual promises.
3. Contractual capacity – each party to a contract must be recognized as being legally competent to enter into contracts. - Legality – the purpose and subject matter of the contract must not be contrary to law or public policy. Legal purpose.
True or false: for a contract to be valid, the agreement of the parties must be evidenced by an offer and an acceptance?
TRUE
True or false: for a contract to be valid, both parties must exchange legally sufficient and bargained-for consideration?
TRUE
True or false: for a contract to be valid, each party to a contract must be recognized as being legally competent to enter into contracts?
TRUE
True or false: for a contract to be valid, the purpose and subject matter of the contract must not be contrary to law or public policy? The contract must have a legal purpose
TRUE
What is an example of legality?
It is still illegal to buy and sell marijuana
What are defenses to the enforceability of a contract, or reasons why although all elements are present, the courts would say it is unenforceable?
- Voluntary Consent – consent must be voluntary and not be based on mistake, fraud, undue influence, or duress.
- Form - some contracts must be in writing and signed by the party being sued
Is voluntary consent a reason why a contract might be unenforceable even if all elements are present?
Yes. Consent must be voluntary and not be based on mistake, fraud, undue influence, or duress.
Why is the form of the contract a reason why a contract might be unenforceable?
a contract’s form can make it unenforceable if it doesn’t meet statutory requirements. For example, a contract may need to be in writing and be signed by the party being sued
Who is a person who makes an offer to enter into a contract or presents something to another party for acceptance or rejection?
Offerer
Who is the party that receives an offer and has the power to accept it, forming a binding contract?
Offeree
What type of contract is it when reciprocal promises are exchanged by the parties so that the promise of one party is exchanged for the promise of the other? Two sided agreement where both parties exchange promises to perform
Bilateral contract
What type of contract is it when one party makes a promise in exchange for the other party actually performing some act or refraining from performing some act?
Unilateral contract
What contract is this example: after you build my fence, I will pay you 2,000 dollars?
Unilateral contract
What contract is this example: Gina offers to sell her car to John for $20,000, and John accepts the offer by promising to pay Gina $20,000?
Bilateral contract
What is an expressed contract?
The terms of the agreement are fully and explicitly stated in oral or written words
What is an implied contract?
Non-verbal and non-written contract that exists based on the behavior of the parties involved or on a set of circumstances
What are the three steps to establish an implied contract?
a. Plaintiff furnished some good or service
B. plaintiff expected to be paid and defendant should have known that
c. defendant had the chance to reject the goods or services but did not
What is an executed contract?
finalized agreement that has passed the sign stage and been accepted by all the relevant parties
What is an executory contract?
when we have formed a contract but haven’t executed.
Not all the elements have been fulfilled–this contract is still in process (as opposed to final, which would be executed)
Does saying I accept your offer form a contract?
No
What is an example of an executed contract?
you say the loaf of bread is a dollar, I agree to pay a dollar. I pay the dollar, you give me the bread, we have executed our contract
What is an example of an executory contract?
we agree the price of bread is a dollar and I intend to buy it. I haven’t given the dollar yet or received the bread. This is executory (we have agreed but haven’t followed through with our obligations)
What is it when all elements that are necessary to form a contract are present?
Valid contract
True or false: Valid contracts can be enforceable or unenforceable?
TRUE
Why might a valid contract be unenforceable?
Lack of capacity, coercion, undue influence, misrepresentation/nondisclosure
What is lack of capacity?
One party is a minor, mentally impaired, or in some way unable to enter into/consent to a contract. If someone is intoxicated, they cannot enter into a contract because at that time, they didn’t have full capacity.
What is an example of why a contract might not be enforceable because of misrepresentation or nondisclosure?
you didn’t reveal that the home inspection showed black mold, that was something you were supposed to disclose
What is an example of how lack of capacity would cause a contract to be unenforceable?
You are having sex with a drunk person and because they are mentally impaired, they are not able to consent.
What is a voidable contract?
A valid contract exists but one or more of the parties has the option of avoiding his or her contractual obligation
What can the party with an option to avoid their contractual obligation do?
The party can elect to void the contract or “ratify” it.
What is a void contract?
a. Agreement has no legal effect and is not really a contract.
b. No legal obligation exists on the part of either party
What are the requirements of an offer?
- Serious intent
- Reasonably certain and definite terms
- communication
What is intent?
The offeror must manifest his or her objective, serious intention to be bound by the terms of the offer
What are situations where intent may be lacking?
a. Expressions of an opinion: saying a piece of land is beautiful
b. Statements of intention to make an offer in the future: want to buy something someday
c. Preliminary negotiations, requests to negotiate
d. Invitations to bid: example
e. Advertisements, catalogues, circulars, and price lists
f. Live and online auctions
True or false: An offer must have reasonably definite terms so that a court can determine if a breach has occurred?
TRUE
In definiteness of terms, can terms be vague?
No
What definite terms are required for an offer?
a. Offer to identify the parties
b. identify the subject matter
c. consideration of the price from each side
d. time of payment, delivery, or performance
Through communication, must the offeror have the intention of making the terms known to the offeree and those terms must be received by the offeree?
Yes
After communication, should the offeree have knowledge of the terms of the offer?
Yes
True or false: An offer may be made to a specific offeree to whom it is communicated?
TRUE
True or false: Offers can certainly be public?
TRUE
What are ways an offer can be terminated by action of the parties?
Revocation, rejection, or counteroffer
What is revocation of an offer?
Offeror is trying to take back offer. The offer is off the table
True or false: an offer may be revoked by the offeror at any time after acceptance?
False. In general, an offer may be revoked by the offeror at any time before acceptance
What type of revocation is explicitly saying I don’t want to follow through with the offer? The offer is off the table
Expressed
What type of revocation is acting as the offer doesn’t exist? I wasn’t serious about the offer
Implied
With implied revocation, are actions to terminate made known to the offeree?
Yes
True or false: A revocation is effective when received?
TRUE
What are offers that cannot be revoked?
Irrevocable offers
What is an option contract?
Separate contract that exists when an offeror has promised to hold the offer open, and the offeree has given money as consideration for this promise of the offeror.
How long is an offer irrevocable in an option contract?
The offer is irrevocable for the period of time that is stated, or if no period is stated, for a reasonable period of time
What is an example of an option contract?
You aren’t sure if you want to buy a dog yet, so you ask the seller if you can pay them $100 to hold the dog for you while you think about it
What happens if the offeree demonstrates his or her intention not to accept offer?
Rejection of the offer
True or false: a rejection of an offer is made effective when recieved?
TRUE
Is an inquiry (questioning) different from a rejection?
Yes. Inquiry does not terminate an offer
What is a is a rejection of an offer and the simultaneous making of a new offer?
Counteroffer
Can a counteroffer be accepted by the original offeror?
Yes
True or false: a counteroffer terminates the original offer?
TRUE
What is the mirror image rule?
A communication from the offeree which contains a material change in addition to the terms of the original offer is a counteroffer, which terminates the original offer.
With the mirror image rule, the offeree’s acceptance must exactly match the offeror’s offer?
Yes
What is termination by operation of law?
Things the law says can occur between the offer and acceptance that will cause the offer to terminate
What are examples of termination by operation of law?
a. Lapse of time.
b. Destruction of the subject matter of the offer.
c. Death or incompetency of the offeror or offeree.
d. Change in the law that makes the contract illegal
What happens when too much time goes by between when the offer was made and acceptance never comes?
Lapse of time. The offer will terminate or die off
Does an offer terminate if the subject matter of the offer is destroyed?
Yes. For example, a car you offered to sell gets totaled
Does an offer terminate if one of the parties dies?
Yes. If someone dies, the offer dies with them
Does an offer terminate if a change in law makes the contract illegal?
Yes
