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REG > REG: Chapter 4 > Flashcards

REG: Chapter 4 Flashcards

1
Q

Nature and Classification of Contracts

What is the difference between Implied-in-Law, Implied-in-Fact and an Express contract?

A

Implied in fact contract
* May be formed without an express terms of the agreement
* The facts of the situation imply an intent of both parties in the contract

Implied-in-law
* Also known as quasi contract
* Prevents unjust enrichment of one party when the facts show that there was no intent by both parties to form a contract
* Imposed mutually dependant and concurrent conditions to reach a result even though nothing is stated in the contract

Express Contract
* A contract where terms (i.e. money) are specifically agreed on

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2
Q

Nature and Classification of Contracts

What’s the difference between void and voidable?

A

Void
* The contracts are not in effect and are not recognized under law

Voidable
* The contract is not valid due to an issue (i.e. fraud)
* The contract may be enforced if the innocent party enters into a contract
* A contract cannot be voided by either party if its valid

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3
Q

Nature and Classification of Contracts

What is an adhesion contract?

A
  • It permits the seller to avoid costs associated with negotiating terms at an individual level
  • The transaction costs of inexpensive goods and services are reduced
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4
Q

Mutual Assent (Offer and Acceptance)

Can a person accept a contract if it has already been rejected?

A
  • Rejection by the offeree automatically terminates the offer
  • An offer cannot be accepted once it has been rejected
  • If the offeree attempts to accept the offer after rejection, then it is a new offer
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5
Q

Mutual Assent (Offer and Acceptance)

When may an offer be revoked?

A
  • An offer may be revoked by words or action
  • Due to operation of law under certain circumstances
  • Death or incompetence of either party
  • A contract is revoked if the person dies prior to the acceptance
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6
Q

Mutual Assent (Offer and Acceptance)

What are the elements of an offer?

A
  • Communication to the offeree is made or authorized by the offeror
  • Intent to enter into the contract
  • Be sufficiently definite and certain

An offer does not need to be communicated in words in order to be an offer. An offer may be oral

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7
Q

Mutual Assent (Offer and Acceptance)

Are price tags considered a contract?

A
  • Price tags are considered as advertising
  • There are no words of promise
  • They are address to the general public and not one person
  • The amount is usually indefinite
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8
Q

Mutual Assent (Offer and Acceptance)

When is a contract unenforceable because of indefiniteness?

A
  • The requirements term that is identified in the conract must be reasonable to the seller’s needs or buyer’s business
  • The contract cannot exist if the terms of the contract is based on the buyer’s or seller’s will
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9
Q

Mutual Assent (Offer and Acceptance)

When is an offer terminated by operation of law?

A
  • Incapacity due to death or insanity
  • Destruction of the subject matter
  • The contract is illegal

An offer is not terminated if the subject matter is sold to a third party

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10
Q

Consideration

What is consideration of a contract?

A
  • Consideration can either be a promise, act or forebearnace
  • Consideration does not occur if the act happened in the past or has a pre-existing legal duty
  • Consideration has occurred if the person receiving the promise experiences a legal detriment or receives a legal benefit
  • Consideration must be legally sufficient
  • Must provide a bargained-for exchange
  • There must be mutual consideration provided by the other party
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11
Q

Capacity

What causes a contract to be void?

A
  • The party is incompetent
  • If another party cosigns the note or acts as surety, then the contract will not be void and they will be responsible
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12
Q

Legality

A
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13
Q

Lack of Genuine Assent

What makes a contract void?

A
  • Physical coercion
  • Fraud in the execution
  • Making a contract in a person who is incompetent
  • Death of one of the parties
  • Duress through physical compulsion
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14
Q

Lack of Genuine Assent

What makes a contract voidable?

A
  • Undue influence
  • Duress through improper threats
  • Mutual mistakes of facts
  • Fraud in the inducement
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15
Q

Lack of Genuine Assent

What is duress?

A
  • A threat, in either words or actions, in order for a person to enter a contract that they did not intend to enter
  • Taking advantage of the other party’s financial difficult does not constitute duress
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16
Q

Lack of Genuine Assent

What is undue influence?

A
  • A person is induced to enter into a contract by another person
  • One party can take advantage of the other party because there is close relationship with the parties
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17
Q

Lack of Genuine Assent

What is fraud in the inducement?

A
  • The consideration is misrepresented
  • Make a contract voidable
  • A material fact that is intentionally misstated by the seller to a buyer
18
Q

Lack of Genuine Assent

What is innocent misrepresentation?

A
  • False representation of a material fact
  • Intended to induce reliance
  • Is justifiably and detrimentally relied upon
  • The only remedy is rescission
19
Q

Lack of Genuine Assent

What is rescission?

A
  • Cancellation of the agreement
  • Both parties are restored to the positions that they had before entering into the contract
  • Payment of reliance damages may occur
20
Q

Lack of Genuine Assent

What is a defense that a CPA can take if he is being sued for negligence?

A
  • Due Care
  • The CPA must perform the work with a degree of knowledge and expected skill
  • The CPA has followed the standards (i.e. GAAP, PCAOB, GAAS, etc.)
21
Q

Statute of Frauds

What are the requirements of Statue of Fraud?

A
  • Only the defendant’s signature is required
  • If there is a secondary promise to pay (i.e. co-lender), then the promise must be in writing
  • A service contract is subject to the statute if performance takes more than a year
  • Recovery is not limited to the original price
  • Contracts involving more than $500 for the sale of goods must be in writing
  • Agreements in consideration of marriage
22
Q

Parol Evidence Rule

What services can use the Parol Evidence Ruling?

A
  • Real estate
  • Services
  • Sale of goods
  • Sale of a business
23
Q

Performance, Discharge, and Breach

What can discharge a party’s obligation from a contract?

A
  • Accord and Satisfaction
  • Mutual rescission
24
Q

Performance, Discharge, and Breach

What is the frustration of purpose doctrine?

A
  • When one of the items for consideration in the contract cannot occur
  • Example: Contract to purchase a room overlooking a parade route, but then the parade is cancelled
25
Q

Performance, Discharge, and Breach

What are the doctrines of impossibility and impracticability?

A
  • Performance is excused if unforseeable circumstances occur that would result in the contract not being fulfilled
  • Ordinary business risks (i.e. change in weather condition) cannot be considered when using these doctrines as a defense
26
Q

Performance, Discharge, and Breach

What type of recovery can be made when a breach of contract is not material?

A
  • The recovery is limited to monetary damages
  • The party substantially performed and is entitled to receive the contract price less any costs for damages
27
Q

Performance, Discharge, and Breach

What is a material breach of contract?

A
  • An unjustified failure to perform a substantial amount of work that is stated in the contract
  • It discharges the nonbreaching party from any obligation to perform
  • The nonbreaching party can seek damages or relief as a remedy for the breach
  • A breach is not material if the injured party substantially receives of the benefits that were stated in the contract
28
Q

Performance, Discharge, and Breach

What is the difference between novation and substituted contract?

A

Novation
* Substitutes a new party for the original party

Substituted Contract
* A new contract that involves all original parties
* Discharges the original duties and impose new duties

29
Q

Performance, Discharge, and Breach

What is repudication/anticipatory breach

A
  • An express or implied indication that a party has no intention to perform the contract
  • It discharges the nonbreaching party’s duty to perform
30
Q

Performance, Discharge, and Breach

What is commercial impracticability?

A
  • A contract is cancelled due to unforeseen and unjust hardship
  • It is less rigid than the impossiblity and impracticability doctrine
31
Q

Remedies

What type of damages can be recovered due to a breach of contract?

A
  • Compensatory
  • Foreseeability of damages
  • Mitigation of damages
  • Specific peformance

Punitive damages cannot be recovered in for a breach of contract

32
Q

Remedies

When are monetary damage remedy and specific performance remedy used?

A
  • Monetary damages is the primary remedy
  • Specific performance remedy is used when subject of the breached contract is land or other unique property, such as an intangible asset
33
Q

Remedies

What are liquidating damages?

A
  • The parties agree in advance to the damages to be paid if there is a breach
  • It is not intended as a penalty
  • It reasonably forecasts the probable loss due to the breach
  • The loss is difficult to calculate
  • The liquidating damage clause is void if it is used to prevent a breach and is not in good faith to estimate probable damages
34
Q

Contract Beneficiaries

What is a creditor beneficiary?

A

Has standing to enforce a contract where they are the third party

Example
* Person A owes Person B
* Person C is in contract with Person A to purchase goods
* Instead of Person C paying Person A, they pay Person B to satisfy the obligation owed

35
Q

Contract Beneficiaries

What is a third-party donee beneficiary?

A
  • A contract is entered into by the primary parties that directly benefits a third party
  • A doneed beneficiary occurs when the gift is promised to a third party
  • An example of a third-party donee beneficiary is a beneficiary that is name on a life insurance policy
36
Q

Assignment and Delegation

What type of contracts are assignable?

A
  • Option contract rights
  • Mortgage Payments
  • Car Payments
37
Q

Assignment and Delegation

What are assignments?

A
  • An assignment occurs when the person that receives services from the contract (i.e. bank for a loan) assigns the contract to another party
  • The new party has whatever rights that the previous owner had
  • The basic rule is that the assignment cannot materially change the original contract or increase the other party’s risk
  • The assignment must be made with the intent to transfer, otherwise the rights under the contract would be invalid
  • Contracts are generally assignable and the contract can be signed without the assignor’s consent
38
Q

Assignment and Delegation

When is it necessary to have both the original parties agree on an assignment?

A
  • When there is an amendment to the contract
  • Both parties must agree in order for the assignment to be enforceable
39
Q

Assignment and Delegation

When an assignment is made for value, what are the implicit warranties that the assignor makes to the assignee?

A
  • The assignor will do nothing to impair the value of the assignment
  • The right actually exists and is not subject to limitation
  • The right is genuine
39
Q

Assignment and Delegation

What type of contracts cannot be assigned?

A
  • Contracts that prohibits the rights to be assignable
  • Increases the other party’s risk
  • Personal services
  • Malpractice insurance policy rights
39
Q

Assignment and Delegation

What is delegation?

A
  • A person who has a duty to perform authorized another person to perform the duty
  • For example, a person buying a building from another person and taking over that person’s mortgage payments instead of getting their own financing
  • If either party breaches the agreement, then the effected party may sue either party

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