SU 17 - Contracts

Question 1

What is an express contract?

Answer 1

• it is a contract that is stated, either in writing or orally.(If you say you are going to purchase a car and sign a contract for $300. You have it in writing.

Question 2

What is an implied contract?

Answer 2

• A contract that are wholly or partially inferred from conduct and circumstances but NOT from written or spoken words. (When you go to the barber, make an appointment and allow them to cut your hair you are creating an implied contract. You are setting everything up and implying that you will pay.
• –>Implied in fact occurs when the facts indicate that a contract was formed.

Question 3

Implied in fact definition

Answer 3

A contract is established when all the facts indicate that a contract has been formed.

Question 4

What is the difference between a unilateral and a bilateral contract?

Answer 4

• A unilateral contract occurs when ONE party makes a promise. The other party an actor not a promisor. If the actor performs a defined action (an acceptance), the promisor is obligated to keep the promise. A unilateral contract can be accepted by performance. There is no need for a promise.
• –> If you promise your neighbor 10 bucks if they paint your deck they aren’t obligated to do it. If they choose to do it (an action is taken) then you the promisor owe them $10.
• A bilateral contract occurs when both parties make a promise.
• –> you promise lodging to Bill in September if he accepts and promises to pay $200 for the room

Question 5

What is an executory contract?

Answer 5

• a contract that is not yet fully performed. If any duty remains to be performed the contract is an executory.
• –> if there is still performance due when payment has been received then this is an executory contract.

Question 6

What is an executed contract?

Answer 6

A contract that has been completed by all parties.

Question 7

What is a valid contract?

Answer 7

A contract that has all the elements of a contract, and the law provides a remedy. It is legally binding on both parties involved.

Question 8

What is an unenforceable contract?

Answer 8

a contract that has all the elements of a contract, however the law will not enforce the contract because the contract does not comply with another legal requirement.

• –> It is illegal.
• –> When a contract of land is being discussed it must be in righting by law. If it is not then it is an unenforceable contract.

Question 9

What is a voidable contract?

Answer 9

A contract where a party may either enforce or nullify.
—> if Thresh entered a contract where Leona intentionally lied about the value, the contract is voidable to Thresh because of the fraudulent action by Leona. Thresh may void the contract and collect damages for any loss sustained due to fraud.

Question 10

What is a void contract?

Answer 10

A contract that is not binding. It CANNOT be ratified and made enforceable by the parties.
—> Ex: illegal goods contracts or to commit a crime

Question 11

What forms a contract?

Answer 11

When a party accepts an offer

Question 12

What is an offer?

Answer 12

A statement or other communication by which the offeror grants the offeree the power to accept and form an agreement.

Question 13

What must occur for an offer to be valid (4 things)

Answer 13

1. Must be communicated
2. Be in a communication authorized by the offeror
3. Indicate an objective intent to enter into a contract
4. Be sufficiently definite and certain
   - –> there is no special communication required. It can be orally.

Question 14

What is an offerer?

Answer 14

A person who is extending a contract or offering a contract.

Question 15

Who is an offeree?

Answer 15

A person receiving an offer from an offerer to enter into a contract

Question 16

What makes a offer legally binding?

Answer 16

It must indicate an intent to enter a contract.

• Basically would a reasonable person assume a contract was being made.
• Invitations to negotiate are not legally binding
• Advertisements are not offers, but if it uses clear, definite, and explicit language that leaves nothing open to negotiation it is considered an offer.

Question 17

What are the essential terms of a contract? (4 of them)

Answer 17

1. Names of the parties
2. Subject matter involved
3. Price and Quantity
4. Time and place of performance.
   - –> if any of the above are missing the courts can supply the information
   - –> if no time is stated a “reasonable time” is used by the courts
   - –> must supply the price

Question 18

What is an option contract?

Answer 18

A contract where the offeree exchanges something of value for the offeror’s promise to hold the offer open for a specified period.
—>This results in an irrevocable offer

Question 19

What is an irrevocable offer

Answer 19

An offer to buy or sell that includes the offeror’s commitment to keep it open for a stated date. If this offer is withdrawn the offeror becomes liable for damages related to breach of contract.

Question 20

What creates a termination of offer?

Answer 20

1. Lapse of time - it may be worded to be a specified time. If not then it is open for a reasonable time.
2. Death or incompetency - if either the offeror or offeree die or become incompetent
3. Destruction
4. Illegality
5. Revocation - the offeror can revoke an offer at any time PRIOR to an offeree’s acceptance
6. Rejection - An offeree’s implied or express intent to not take the offer.

Question 21

What is incompetence?

Answer 21

a lack of legally required qualifications or physical or psychological fitness to bind oneself to agreements.

Question 22

Does death/incompetency terminate an existing contract, including an offer contained in a valid option contract?

Answer 22

No the contract is still valid

Question 23

When must revocation occur in order to terminate a contract for the offeror?

Answer 23

The revocation must occur prior to the offeree’s acceptance.

• It is effective when received by the offeree
• –> this can be indirectly ( when a offeree sees the car that the salesman had offered being driven by another party)
• —-> If another party offers to buy the item in question does not revoke the offer.
• –> an option contract may not be revoked w/o legal consequences of the offeror.

Question 24

What is a rejection?

Answer 24

A termination of an offer. It is effective when received by the offeror.

• –> a counter offer by the offeree is a rejection with a new offer
• –> an inquiry does not count as a rejection
• –> if an offer states that acceptance is effective on receipt, rejection following receipt has no effect

Question 25

What is the mirror image rule?

Answer 25

It is an acceptance of terms and is positive, unequivocal, and unconditional

Question 26

What does a conditional acceptance mean?

Answer 26

You accept the terms, but there are things you don't agree with. This is a counter offer.

Question 27

How is acceptance communicated?

Answer 27

by any words or actions that a reasonable person would understand to be acceptance

Question 28

What are some types of acceptances?

Answer 28

- Performance by the offeree in a unilateral contract. - Taking possession of or exercising control over something - SILENCE accompanied by the appropriate circumstances from which an intent to accept may be inferred as acceptance. - --> an offeror generally cannot require the offeree to respond to avoid being contractually bound

Question 29

What is the mailbox rule?

Answer 29

acceptance is effectively communicated to the offeror at the moment of dispatch ( when the offeree sends the letter) if the offeree has (1)used an authorized medium of acceptance and (2) the offer is still open.

Question 30

When does acceptance occur in regards to the mailbox rule?

Answer 30

Once acceptance has been sent, it is in effect even if the offeror tries to revoke while the acceptance is in transit - -->if an offeree sends an acceptance following prior dispatch of a rejection the acceptance is effective when it gets mailed. If the revocation has not reached the offeror, but the acceptance is mailed before the revocation gets to the offeror then it is an acceptance. - --> if an offeror negates the mailbox rule by making acceptance effective upon receipt

Question 31

What is consideration?

Answer 31

Something of value given in a bargained-for exchange. Consideration can be viewed as the central core of the contract. It is the promise, action, or forbearance that parties agree too.

Question 32

What are the 2 elements that must be present to satisfy consideration?

Answer 32

1. Legal sufficiency | 2. A bargained-for exchange (mutuality of consideration)

Question 33

What is legal sufficiency?

Answer 33

The promisee incurs a legal detriment or if the promisor incurs a legal benefit.

Question 34

What does it take to incur a legal detriment for the promisee?

Answer 34

1. Do something they are not legally obligated to do (abstaining from whistling, etc) 2. Not do something they have the legal right too( whistling)

Question 35

What is a bargained-for exchange?

Answer 35

Both parties must receive something of legal value in exchange for incurring a legal detriment

Question 36

How does past consideration affect things?

Answer 36

It does not count as sufficient consideration. Past acts cannot be bargained for because they already happened.

Question 37

What are the items that do not count as sufficient consideration?

Answer 37

1. Past consideration 2. Moral consideration 3. Pre-existing legal duty (cops) 4. Part payment of an undisputed debt

Question 38

What are the 2 substitutes for consideration?

Answer 38

1. Promissory estoppel | 2. Quasi-contract

Question 39

What is promissory estoppel?

Answer 39

3 things must apply: 1. A promise is given that the promisor should reasonably expect to induce action or forbearance by the promisee 2. The promise induces the action or forbearance 3. Injustice can be avoided only by enforcing the promise. - --> Ex: If you win the lottery and promise a hospital that you are going to donate $1 million to them then after they started building a new hospital you tell them that you are no longer going to do this, you will be forced to because they started building the new hospital with your promise in mind.

Question 40

What is a quasi-contract?

Answer 40

occurs when no promises and no agreement is reached by two parties. However, one party is substantially benefited at the expense of the other party, and no adequate legal remedy is available. - --> This is a contract implied in law - -->This is to avoid unjust enrichment. The party providing the benefit is entitled to reasonable value of the services or property delivered EX: If a neighbor calls a roofer and asks him to reroof his house while he is out of town, but the roofer accidently roofs your house instead. You will owe the neighbor for reasonable value of the new roof on your house

Question 41

What is capacity?

Answer 41

The ability to logically understand that there is an agreement/contract occurring.

Question 42

When is a minor no longer able to disaffirm a contract ?

Answer 42

Even when a minor reaches majority, they are able to disaffirm a contract in a reasonable time.

Question 43

What groups of people lack capacity?

Answer 43

Minors, people lacking mental capacity, and intoxicated person.

Question 44

Define scienter

Answer 44

The intent to deceive or misrepresent

Question 45

What are the 5 elements of fraud

Answer 45

1. A false representation (or concealment) of a material facet 2. Intent to misrepresent(scieter) 3. Intent to induce reliance 4. Justifiable reliance by the innocent party on the misrepresentation 5. Damage (loss) suffered by the innocent party

Question 46

What is misrepresentation of fact?

Answer 46

The untrue application of a fact. It can be actual or implied. Can be spoken or written works, but if it is implied it can be from conduct.

Question 47

What is constructive fraud?

Answer 47

The misrepresentation that is made from a willful and reckless disregard for its truth or falsity rather than with the actual intent to deceive (scienter)

Question 48

Fraud in the inducement

Answer 48

occurs when the defrauded party is aware of entering into a contract and intends to do so