study guide Flashcards
is a contract a promise
yes, it’s essentially a promise or agreement between two or more parties, it outlines the obligations and rights of each party involved
what is special about a contract being a promise
it is legally binding, so if someone cant keep their promise in the contract, the other party can take legal action to enforce it
what is objective theory of contracts?
contracting parties shall only be bound by terms that can objectively be inferred from promises made
how does the objective theory of contracts work?
it focuses on the external actions of the parties invovled, rather than internal thoughts. It interprets the contracts based on what a reasonable person would understand from the parties actions and words
why does objective theory of contracts matter for contract disputes
it provides clear and consistent framework for interpreting and enforcing contracts
what are the requirements for a valid contract
agreement, consideration, contractual capacity, legality
what happens if the requirements of a valid contract are missing
Then if the contract is taken to court then it may not be enforceable
what are defenses to enforceability of a contract
- voidability
- void contract
- lack of capacity
4.illegality - mistake
how are contracts formed
1.the offeror must make a proposal to the offeree (offer)
2.the offeree agrees (acceptance)
3.both parties must exchange something of value(consideration)
4.parties entering in contract must have the legal capacity to do so (legal capacity)
5.the contract must have a lawful purpose and cannot involve illegal activities (legal purpose)
6. both parties must freely consent to the terms of the contract (mututal assent)
what are the two types of contracts
-express and implied
how are express and implied contracts formed
express is through explicit offer and acceptance, usually documented in writing. Implied are formed based on the conduct of parties without explicit agreement or written documentation
what are the parties called in a contract
offeror and offeree
what is acceptance
the agreement by the offeree to the terms of an offer, creating a binding contract between the parties
when can unilateral contracts be revoked
unilateral contracts is where one party makes a promise in exchange for the other party doing something, can be revoked before the act is performed bc the act is not complete so the offeror has not yet inccurred any obligation
what is the difference between formal and informal contracts
formal: typically in writing and have specific legal reqs. they involve complex transactions or agreements
informal: not necessarily in writing and may be based on verbal agreements or implied promises
why does the difference between formal and informal contracts matter
because it affects the enforceability, legal certainty, risk management, complexity, and legal compliance of the contract
what is e-signing
the process of signing documents digitally
what is the federal on e-siging and how does it interact with state laws on the subject
ESIGN act established the legality and validity of electronic signatures and records for most transactions
what is an express contract
the terms of the agreement are fully and explicitly stated in words, oral, or written
what is an implied contract
formed in whole or in part from the conduct of the parties
what is the difference between express and implied contracts
implied differs from express because in the conduct of the parties, rather than words, creates and defines at least some of the terms of the contract
what is a executed contract
contract that has been fully performed by both parties
what is executory contract
contract not yet been fully performed
what is the plain meaning rule
words and their plain ordinary meaning- determine the intent of the parties at the time they entered into the contract
when will court go outside a contract to understand its terms
when the language is ambiguous or unclear
what is consideration
the value given in return for a promise or performance in a contractual agreementq
what happens if consideration is lacking
the contract may lack enforceability, validity, and legal obligation
what is promissory estoppel
doctrine to enforce a promise when the promisee has justifiably relied on it and when justice will be better by served by enforcing the promise
5 elements of a promissory estoppel
- must be clear and definite promise
- promisor should have expected that the promisee would rely on the promise
- promisee reasonably relied on the promise by acting or refraining from some act
- the promisee’s reliance was definite and resulted in substantial detriment
5.enforcement of the promise is necessary to avoid injustice
what is the assumption about capacity for making a contract
the presumption that individuals have the legal capacity to enter into contracts unless proven otherwise
what are the exceptions of having the capacity to enter a contract
1.minors
2.mental incapacity
3.intoxication
4.duress(threatened into agreement)
what is usury
charging an illegal rate of interest
can you have a contract for an illegal practice
no, any contract that involves illegal activities or purposes are considered void and unenforceable
what can a non-breaching party do if there is a material breach
the nonbreaching party is excused from the performance of contractual duties and can sue for damages caused by the breach
what are the damages you can get for breach
compensatory, consequential, punitive, liquidated, and nomial
what is the difference between liquidated damages and penalties
the difference is their purpose and enforceability. Liquidated damages are meant to compensate the non breaching party, penalties are intended to punish the breaching party
How do you tell the difference between liquidated damages and penalties
depends on whether the provision is primarily intended to compensate the non-breaching party for losses or to punish the breaching party
how do restitution and reformation interact
they provide full relief to parties involved in a contract dispute. restitution aims to return parties to their pre-contractual positions, reformation seeks to correct errors or mistakes in the contracts terms
what sort of contract provisions limit remedies
limitation of liability clauses, exculpatory clauses, and liquidated damages provisions
