Test 2 Flashcards
What 4 categories are governed by the common law of contracts
Services, real estate, employment, insurance
Common law governs all contracts except when…
It has been modified or replaced by statutory law Or administrative agency regulations……………….I.e. Uniform commercial code
What contracts are governed by the UCC
Contracts for the sale and lease of goods
Contract law is designed to provide ….. For both buyers and sellers in hue market place
Stability, predictability, and certainty
Contract law assures the parties to private agreements that the promises they make will…..
That the promises they make will be enforceable
Why do many people keep promises
Because the parties involved
- feel a moral obligation
- it is in their moral self interest
Who is the person making the promise
The promisor
Who is the person to whom the promise is made
The promisee
In business law why are the rules of contract law often followed
To avoid potential disputes
Contract law is necessary to…
Ensure compliance with a promise or to entitle the innocent party to some form of relief
A contract is
An agreement that can be enforced in court
Who forms contracts
Two or more parties who agree to perform or to refrain from performing some act now or in the future.
What might happens if the contract is not followed
Party is subject to sanctions of the court
Might have to pay damages
May have to perform the promised act
How is intent determined..
By the objective theory of contracts, not by the belief of a party
A party’s intention to enter into a contract is judged by a reasonable person and what 3 objective facts
1) what the party said when entering Ito the contract
2) how the party acted or appeared (intent may be manifested by conduct as well as by oral or written words)
3) the circumstances surrounding the transaction
Underlying motive is not important
….
What are the four requirements of a valid contract
1) agreement
2) consideration
3) contractual capacity
4) legality
An agreement is
An agreement to form a contract includes an offer and an acceptance. One party must offer to enter into a legal agreement and another party must accept the terms of the offer
Describe consideration
Any promises made by the parties to the contract must be supported by legally sufficient and bargained for consideration (something of value received or promised such as money to convince a person to make a deal )
Describe contractual capacity
Both parties entering into the contract must have the contractual capacity to do so. The law must recognize them as possessing characteristics that qualify them as competent parties.
Describe legality
The contracts purpose must be to accomplish some goal that is legal and not against public policy.
If all the requirements of a contract are met can a contract still be unenforceable?
Yes
What are defenses to enforceability of contracts
1) Voluntary consent
2) form
Describe voluntary consent
The consent of both parties must be voluntary
If a contract was formed as a result of fraud undue influence mistake or duress the contract may not be enforceable
Describe form as a defense
Th contract must be in whatever form the law requires
The party making the offer
Offeror
Party to whom the offer is made
Offeree
Whether the contract is classified as bilateral or unilateral depends on
What the offeree must do to accept the offer and bind the offeror to a contract
Describe a bilateral contract
When the offeree can accept simply by promising to perform
I.e. A promise for a promise
- no performance need to take place for its formation
Comes into existence the moment the promises are exchanged
Describe a unilateral contract
It is formed at the moment when the contract is performed
I.e,promise for an act
For example.. If you do this I’ll give u …
Contests, lotteries, and other competitions involving prizes are examples of what type of contracts
Unilateral contracts
What is revocable mean
Capable of being taken back or canceled
Once performance has been substantially undertaken the offeror cannot revoke the offer
….
What problem arises in unilateral contracts
When the promisor attempts to revoke ( cancel) the offer after the promisee has begun performance but before the act has been completed. I.e. Boat example
What are formal contracts
Contracts that require a special form or method of creation (formation) to be enforceable
What are negotiable instruments
Formal contracts
They include checks, drafts,promissory notes, bills of exchange, and certificates of deposit.
They are formal because a special form and language are required to create them
What are letters of credit
A type of formal contract often used in international sales contracts
Agreements to pay contingent on the purchasers receipt of invoices and bills of lading
What are bills of lading
Documents evidencing receipt of and title to goods shipped
What are informal (simple) contracts
Contracts that are not formal.
They require no special form except those that just be written
Usually based on substance not form
Why do business persons typically put their contracts in writing
To ensure that there is some proof of a contract in case a dispute arises
What happens in an express contracts, describe it.
The terms of the agreement are fully and explicitly stated in words, oral or written
I.e,. A signed lease is an expressed written contract
If a classmate agrees over the phone to buy your books that is an express oral contract
Describe an implied contract
A contract that is implied from the conduct of the parties
How does an implied contract differ from an express contract
The conduct of the parties rather than their words creates and defines the terms of the contract
What are the requirements for an implied contract
1) the plantiff furnished some service or property
2) the plaintiff expected to be paid for hat service or property, and the defendant knew or should have known that payment was expected
3) the defendant had a chance to reject the services or property and did not
If you drop off all your tax forms at the accountants office and do not say nothing to the accountant what type of contract are you entering
An implied contract
Can a contract be both express and implied ?
Yes
Give an example of an implied and express contract
A homeowner asking the builder to make changes in the original specifications
What is an executed contract
A contract that has been fully performed on both sides
What is an executors contract
A contract that has not been fully performed by the parties
Some executory contracts are executed on one side and executory on the other
…..
A valid contract has…
Elements necessary to entitle at least one of the parties to enforce it in court
What elements make a contract valid…
….
Valid contracts maybe what…(3)
Voidable, unenforceable, void
Describe a void able contract
A valid contract where a party has the option of avoiding or enforcing the contractual obligation
If avoided both parties are released from it
If ratified both parties must fully perform their respective legal obligations
Give an example of a voidable contract
One with a minor, intoxicated or mentally incompetent person …it is voidable at their option
Under fraudulent conditions at he option of the defrauded party
Under legally defined duress or undue influence
What is an unenforceable contract
A valid contract that cannot be enforced because of a legal defense . It is unenforceable by some statue or law.
Not because a legal requirement of a contract (has nothing to do w that)
I.e. It not being in writing
What is a void contract
This is no contract at all …no contract exist or there is a contract without legal obligations
I.e court determines one of the parties mentally incompetent or the purpose of the contract was illegal
What is an enforceable contract
A valid contract that can be enforced because there are no legal defenses against it
What is ratify
Make valid
What are quasi contracts
Contracts implied in law, not actual contracts
Fictional contracts that courts can impose on the parties “as if” the parties had entered into an actual contract.they are equitable rather than legal contracts
What are quasi contracts imposed
To avoid the unjust enrichment of one party at the expense of another
Theory of unjust enrichment
Individuals should not be allowed to profit or enrich themselves inequitably at the expense of others
When the court imposes a quasi contract a plantiff may recover in..,
Quantum meruit
What is quantum meruit
As much as he or she deserves
Describe a limitation on quasi contractual recovery
Enrichment is not consider unjust when the company has retained a benefit that they have paid for
I.e, cell phone company selling insurance illegally but making commission on it . This is okay because he customers did get the insurance
When an actual contract exist can the doctrine of quasi contract be used
Generally no
Because a remedy already exist the nonbreaching party can sue the breaching party for breach of contract
Example:fung delivering the couch to grant who has be unjust enriched because Cameron didn’t follow the contract him and fung had
What does the plain meaning rule say
Meaning of the terms in a contract must be determined from the face of the instrument
The words and their plain ordinary meaning determine the intent of the parties at the time that they entered the contract
In what situations(4)will the court consider a contract ambiguous
1) when the intent of the parties cannot be determined from the contracts language
2) when the contract lacks a provision on a disputed term
3) when a term is susceptible to more than on interpretation
4) when there is uncertainty about a provision
What might a court do if a contract term is ambiguous
Consider extrinsic evidence
What is extrinsic evidence
Any evidence not contained in the document itself
I.e. Testimony of parties and witnesses,additional agreements or communication, or other relevant info
What happens if the court determines the terms of the contract are clear from the written doc alone
The plain meaning rule will apply and he contract will be enforced to what it clearly states
When a contract is clear and unambiguous can a court consider extrinsic evidence
No
What is the primary purpose of the rules of interpretation
To determine he parties intent from the language used in their agreement and to give effect to that intent
What rules does the court use to interpret contractual terms
1) as far as possible a reasonable lawful and effective meaning will be given to all of a contracts terms
2) a contract will be interpreted as a whole-all parts interpreted together
3) terms that were the subject of separate negotiation will be given greater consideration than standardized terms and terms that were not negotiated separately
4) a word will be given its ordinary, commonly accepted meaning and a technical word or term will be given its technical meaning unless the parties clearly intended something else
5) specific and exact wording will be given greater consideration than general language
6) written or typewritten terms will prevail over printed ones
7) a party who uses ambiguous express is held responsible for the ambiguities
8) evidence of usage of trade course of dealing and course of performance may be admitted to clarify meaning
Order of terms given the most weight
express terms Course of performance Course of dealing Custom Usage of trade
What 2events evidence an agreement
Offer and acceptance
Both parties must manifest their assent or voluntary consent to the same bargain
….
What is an offer
A promise or commitment to do or refrain from doing some specified action in the future
What are the three elements necessary for an offer to be effective
1) the offeror must have a serious intention to become bound by the offer
2) the terms of the offer must be reasonably certain or definite so that the parties and the court can ascertain the terms of the contract
3) the offer must be communicated to the offeree
How is intention determined
By a reasonable person
What about offers made in anger, jest, or undue excitement
They do not meet the -serious and objective intent test -because a reasonable person would realize that a serious offer was not being made.
Therefore no agreement
What case is an example of the objective theory of contracts
Lucy v. Zehmer in which the plaintiff Lucy won.
-about them being drunk and signing a contract and the wife even came in and agreed to the contract it was talked about for 45 min. Lost at trial court and appealed in the Supreme Court in which Lucy won.
Is an expression of opinion an offer
No
What an example of when an expression of option is made
A doctor saying you will probably heal in a week when you don’t heal for much longer
Is a statement of future intent an offer
No
What’s an example of statement for future intent
Saying I plan on doing something because that means I am just thinking about it not promising to do it
Is a request or invitation to negotiate an offer
No, it only expresses a willingness to discuss the possibility of entering into a contract
Is the invitation to submit bids an offer
No
Are the bids that are submitted offers
Yes and therefore if accepted can bind the person in a contract with the person who invited them
How are advertisements treated?
They are treated as invitations to negotiate not offers
What type of advertisement might be seen as an offer opposed to an invitation to negotiate
One offering a reward for the return of a lost dog
Because they had definite terms that invited acceptance
What are price list usually
Invitations to negotiate
Offers to sell an item via online auctions are what…
Invitations to negotiate
Who is the offeror and offeree in a a live auction
The bidder is the offeror and the auctioneer is the offeree
The offer is accepted when the auctioneer strikes the hammer, up until the bidder may revoke there offer
What happens When the auctioneer accepts a higher bid
he or she rejects all previous bids terminating here offers
What are the types of auctions
Those with a reserve and this without a reserve
Describe an auction with reserve
The seller (through the auctioneer) may withdraw the goods at any time by announcement or by the fall of the hammer Sales of goods are not final until the seller confirms
What are all auctions assumed to be
Those with reserve
Describe an auction without reserve
In this auction goods cannot be withdrawn by the seller and must be sold to the highest bidder
Are agreements to agree enforceable contracts
Yes if it is clear that the parties intended to be bound by the agreements . The emphasis is on the parties intent.
What are agreements agree
Agreements to agree to Material terms of a contract at some future date
Can a preliminary agreement be a contract
Yes
When does a preliminary agreement constitute a binding contract?
If the parties have agreed on all essential terms and no disputed issues remain to be resolved
When does a preliminary agreement not constitute a binding contract?
If other terms are left open for further negotiation
Parties are bound only in the sense that they have committed he selves to negotiate he undecided terms
An offer must have reasonably definite terms
What are the definite terms dependent upon
The yep of contract
What are he general definite ness terms and where are they
1) identification of the parties
2) the identification of the object or subject matter of the contract (also quantity when appropriate) including the work to be performed, with specific identification of such items as goods, services, and land
3) the consideration to be paid
4) the time of payment, delivery, or performance
Can acceptances make contracts definite
Yes, an offer may invite an acceptance to be worded in such specific terms that the contract is made definite
I.e. When A quantity being specified in the acceptance, the terms are definite and the contract is enforceable
If parties have clearly manifested an intent to form a contract what might a court do if needed
Supply a kissing term in a contract
If a parties expression of intent is too vague or uncertain what will a court do to help
Nothing, they will not rewrite a contract
Communication is important for an offer . The offer must be communicated to the offeree…..
Give an example…
A person returns a lost cat without knowing of the reward, usually the person cannot recover the reward because an element of the contract is communication and the one that claims the reward must have known it was offered.
Some states would allow recovery of the reward but not under contract principles , they could recover because it would be unfair to deny the person just because they did not know of the reward.
An effective offer to an offeree gives the offeree what power
How long does the power last
The power to turn the offer into in a contract if they accept it
Not forever, if can be terminated
How can an offer be terminated
Operation of law or action by The parties
What are the three ways an offer can be terminated by action of the parties
1) revocation
2) rejection
3) counteroffer
What is revocatio
The offer ors act of withdrawing an offer
When can an offeror revoke an offer and when can’t they
As long as the revocation is communicated to the offeree before the offeree accepts
What ways can revocation be accomplished
1) express repudiation of the offer (such as “I withdraw my previous offer of oct 17”)
2) performance of acts that are inconsistent with the existence of the offer and are made known to the offeree (for instance selling the offered property to another person in the presence of the offeree).
When does revocation become effective
When the offeree or the offeree a agent actually receives it
I.e. Not when it’s placed In the mail
How must an offer to the general public be revoked
In the same manner that the offer was originally communicated
When might the court refuse to allow an offeror to revoke an offer
When the offeree has changed position because of justifiable reliance on the offer
What is an irrevocable offer
An offer that cannot be withdrawn
What is an example of an irrevocable offer
“Firm Offers” made by merchants
What is an option contract
It is created when an offeror promises to hold an offer open for a specified period of time in return for payment (consideration) given by the offeree
I.e, used in real estate
Describe rejection
When an offeree rejects the offer by words or conduct.. Then the offer is terminated
Only effective when received by offeror or offeror’s agent
What if someone rejects and offer and then try’s to get it back, describe the situation
Roles switch, now the offeree is the offeror and the original offeror has the power of acceptance
What is a counteroffer
A rejection of the original offer and the simultaneous making of a new offer
Describe the mirror Image rule
A common law that requires the offered avceptance to match the offeror’s offer exactly -mirror the offer
Any change in or addition to the terms of the original offer automatically terminate the offer and substitutes the counteroffer
What are the events for termination by operation of law
Can be any 4
1) lapse of time
2) destruction of the specific subject matter of the offer
3) death or incompetence of the offeror or the offeree
4) supervening illegality of the proposed contract(a statute or court decision that makes an offer illegal automatically terminates the offer.)
When does a lapse of time occur
When the period of time specified in the offer has passed
If open il particular day , at midnight on that day
Time period begins when the offeree receives it
If no time specified it terminates at the end of a reasonable time
What is a reasonable time for contract to end based on
It depends on the subject matter of the contract, business, and market conditions and other relevant circumstances
Describe destruction of the subject matter
An offer is automatically terminated if the specific subject matter of the offer is destroyed before the offer is accepted
A death or incompetence of the offeror or offeree terminates a contract unless…
The offer is irrevocable
I.e. If someone entered a option contract and dies before time is up the offer is not terminated because it is irrevocable
Can a revocable offer be passed on to heirs guardians or estates
No because those offers are personal. This applies whether or not the other party had notice of the death or incompetence
A state or court decision that makes an offer illegal automatically terminates the offer
Talk about an example
If a statue is enacted after the offeree accepts the offer a valid contract is formed but the contract may still be unenforceable
What is acceptance
A voluntary act by the offeree that shows assent (agreement ) to the terms of an offer by words or conduct.
What must acceptance be (2 things)
Unequivocal and communicated to the offeror
Generally only the agent or offeree can accept
Describe unequivocal acceptance
It is the mirror image rule
-the offeree can be be dissatisfied and ask for a better price as they accept
For example “I accept, but can I get a better price”
The key is they accepted
No new conditions or change terms can be imposed
If someone say I accept if …what is this
A counteroffer
If someone says I accept. Please send documentation this is an ….
Acceptance , he acceptance still valid without the documentation
In what instances is silence acceptance
1)when an offeree takes the benefit of offered services even though he or she had an opportunity to reject them and knew that they were offered with the expectation of compensation
2)when the offeree has had prior dealings with the offeror.
I.e. Usually send defect products back so both r use to that but one time does not do that. So that’s acceptance
In a bilateral contract what form is acceptance in
A promise (not performance )
Is acceptance necessary for a bilateral contract
Yes because it is formed when the promise is made rather than when the act is performed
However it might not be necessary if the offer dispenses with the requirement or if the offer can be accepted by silence
Describe acceptance needed for a unilateral contract
Acceptance is usually evident and notification is therefor unnecessary
However acceptance might be necessary when the offeror requests notice of acceptance or has no way of determining whether the requested act has been performed
In a bilateral contract acceptance must be timely
…what does timely mean
Made before the offer is terminated
Describe the mailbox rule
Acceptance takes place at the time the offeree sends or delivers (dispatches) the communication via the mode expressly or implied lay authorized by the offeror
Not when it is received by the offeror
What is another name for the mailbox rule
Deposited acceptance rule
When does the mailbox rule not apply
When the parties are using instantaneous forms of communication
I.e. Face to face, telephone, fax, email
When is an email considered sent what acts states said rule
The uniform electronic transactions act .
Email is considered sent when it either leaves the control of the sender or it is received by the recipient
What is it when an offeror specifies how acceptance should be made
Express authorization
What if the offeree uses a mode of acceptance other than what is specified
The contract is not formed
What if the offeror does not expressly authorize a certain mode of acceptance
Acceptance can be made by any reasonable means
How do courts determine reasonable means for offeree acceptance
They look at prevailing business usages and the surrounding circumstances
If an offeror offers a certain mode of acceptance does that mean it is the only one the offeree can use
No, it usually means they can use the same or a faster means of acceptance
What is someone uses a substitute method that serves the same purpose
The acceptance by a substitute method is not effective on dispatch, no contract will be formed until acceptance is received by the offeror
What’s is e-contract stand for
Electronic contract
What are the requirements for an econtract
The same ones for paper contracts
What things might online contracts be formed for
Sale of goods, services, and licensing
Online terms should be what two things
Conspicuous and easy to view
How should websites display there offer
There website should include a hypertext link to a page contains the full contract in a readable format. The provisions should be reasonably clear.
What is the important rule to keep in mid when it comes toe contracts
The offeror (seller) controls the offer and thus the resulting contract
What provisions should an online offer include at minimum (7)
1) acceptance of terms
2) payment
3) return policy
4) disclaimer
5) limitation on remedies
6) privacy policy
7) dispute the resolution
Describe what acceptance of terms should include
A clause that clearly indicates what constitutes the buyers agreement to the terms of the offer such as a box containing the words I agree
Describe a payment provision
A provision specifying how payment for goods including any applicable taxes must be made
Describe return policy provision
A statement of the sellers refund and return policy
Describe a disclaimer provision
disclaimer for certain liability for certain uses of the goods
Describe limitation on remedies provision
A provision specifying the remixes available to the buyer if the goods are found to be defective or if the contract is other wise breached. Any limitations should be clearly spelled out.
Describe privacy policy provisions
A statement indicating how the seller will use the information gathered about the buyer
Describe dispute resolution provision
Provisions relating to dispute settlement such as an arbitration clause or a forum selection clause
What does a forum selection clause indicate
The forum or location such as court or jurisdiction in which contract disputes will he resolved
What does a choice of law clause specify
It specifies that any contract dispute will he settled according to the law of a particular jurisdiction such as state or countr
What does restatement (Second) of contracts state
It states that parties may agree to contract “by written or spoke words or by action or failure to act”
What is a click-on agreement
The act of clicking on a box indicating “I accept” or “I agree” to accept an online offer
What is another name for a click-on agreement
click-on license
click-wrap agreement
What is a shrink-wrap agreement/license
When the terms are expressed inside the box in which the goods are packages. i.e. one agrees by opening or keeping what is in the wrapping
who is the shrink-wrap agreement usually between
the manufacturer and the ultimate buyer-user of the product
When might a shrink-wrap agreement not be enforced
When the buyer purchases over the phone and is not informed of certain clauses. If the buyer discovers after they have entered into a contract it might not be enforceable.
How do browse -wrap terms differ from click-on agreements?
Browse-wrap terms do not require internet users to assent to the terms before downloading or using certain software
Are browse-wrap terms often enforceable
No because they do not satisfy agreement requirement of contract formation.
What is an e-signature
according to UETA
an electronic sound, symbol, or process attached to or logically associated with a record and executed or adopted by a person with the intent to sign the record
What does E-Sign Act stand for
Electronic Signatures in Global and National Commerce Act
What does the E-Sign act say
an electronic signature is as valid as a signature on paper and an e-document can be as enforceable as a paper one
What contracts and documents are exempt from the E-sign Act
court papers, divorce decrees, evictions, foreclosure, health-insurance terminations, prenuptial agreements, and wills
What is a partnering agreement
When a seller and a buyer who frequently do business with each other agree n advance on the terms and conditions that will apply to all transactions subsequently conducted electronically.
What is good about a partnering agreement
it reduces the likelihood that disputes will arise because partners have agreed in advance to the terms and conditions that will accompany each sale.
What is a record
information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form
What is the Uniform Electronic Transactions Act (UETA)
a signature may not be denied legal effect or enforceability solely because it is in electronic form
it is adopted by at least 48 states
What is the purpose of UETA
to remove barriers to e-commerce by giving them the same legal effect to electronic records and signatures as is given to paper documents and signatures
To what does UETA apply
only electronic records and electronic signatures relating to a transaction
What is a transaction
interaction between two or more people relating to business, commercial, or government activities
What specifically does UETA not apply
wills or testamentary trusts or to transactions governed by the UCC other than those covered by article 2 and 2A
transaction where the parties did not agree to conduct by electronic means (can be explicit or implied)
Can a party opt out of terms of UETA
Yes but, if they do not then UETA apples
What does UETA say about forgery or agents signing
it does not contain provisions about what constitutes fraud or whether an agent is authorized to enter a contract. State laws control this.
Does UETA require the use of security procedures
No it encourages it
What if a record was received but, no individual is aware of the receipt
it is still considered received
What are the two international treaties related to e-contrcts
The united nations convention on the use of electronic communication in international contracts
Hague convention on the choice of court agreements
What is consideration
The value (such as cash) given in return for a promise (in a bilateral contract) or in return for a performance (in a unilateral contract)
What are the two parts of consideration
1) something of legally sufficient value must be given in exchange for the promise
2) there must be a bargained for exchange
Something of legally sufficient value may include (3)
- A promise to do something that one has no prior legal duty to do
- The performance of an action that one is otherwise not obligated to undertake
- The refraining from an action that has a legal right to undertake ( called forbearance)
What is forbearance
the refraining from an action that one has a legal right to undertake
Each ___ constitutes consideration
Promise
i.e. in bi lateral contracts each promise is a consideration and in unilateral contracts one promise
Give an example of a forbearance
In return for a promise to pay a person refrains from pursuing a harmful habit i.e. tobacco usage
What is a case about consideration describe it and its outcome
The case Hamer v. Sidway
It was about the nephew who was represented by Hamer who provided legal sufficient consideration by giving up smoking, drinking, swearing, and gambling due to a promise of 5,000 from his uncle now represented by Sidway. Sidway said it was not considerate but Hamer won.
What distinguishes contracts from gifts
element of bargained for exchange
What if you do not have to give the offeror something of legal value in return for their promise
there is no bargained-for exchange (meaning there is no contract)
What is the bargained for exchange element state
The item of value must be given or promised by the promisor (offeror) in return for the promisee’s promise, performance, or promise of performance
What does adequacy of consideration concern
the fairness of the bargain
What doctrine do courts use that say parties decide what something is worth and parties are usually free to bargain as they wish
the doctrine of freedom of contract
What can indicate fraud, duress, or undue influence when it comes to consideration
inadequate consideration
i.e. when there is a large disparity in the amount or value of consideration exchanged
Describe preexisting duty
A promise to do what one already has a legal duty to do does not constitute legally sufficient consideration
it is meant to prevent extortion and the hold up game
When might the court allow an exception to the preexisting duty rule
when there are unforeseen difficulties
the court must find that the modification is fair and equitable in view of the circumstances not anticipated by the parties when the contract was made
What is rescission
the unmaking of a contract so as to return the parties to the position they occupied before the contract was made
What does rescind mean
to cancel
How can rescission make applying the rule of preexisting duty difficult
Sometimes the parties rescind a contract and make a new contract at the same time making it difficult to determine whether there was consideration for the new contract or whether the parties had a preexisting duty under the previous contract …
What if a new contract is made and the old one was rescinded and there was preexisting duty in the previous contract
the new contract is invalid because there was no consideration
Are promises made in return for actions or events that have already taken place enforceable
no
because they are missing the element of bargained for exchange
You can bargain for something to take place now or in the future but not for something that has already taken place
what rule is this
…
that of past consideration
What is past consideration
it is not consideration
What is a noncompete agreement
a.k.a. a convenant not to compete
When an employee agrees not to compete with the employer for a certain period of time after the employment relationship ends
What does illusory refer to
a promise lacking consideration and that is unenforceable
A promise is illusory when ..
it fails to bind the promisor
If the terms of the contract express such uncertainty of performance that the promisor has not definitely promised to do anything this is a ____promise
illusory
What if the promisor has the option to cancel the contract before performance has begun
the promise is illusory
What might an option to cancel contract look like
It might say reserving the right to cancel the contract at any time
how could an option to cancel contract be changed to a valid contract
it might say the promisor reserves the right to cancel the contract at any time after Chris has begun performance by giving Chris thirty day’s notice
if he fires him after 1 month has to pay him for 2 months
Describe a requirements contract
a buyer and a seller agree that the buyer will purchase from the seller all of the goods of a designated type that the buyer needs or requires
any french fries u need u will buy from me
Describe an output contract
a buyer and a seller agreed that the buyer will purchase from the seller all of what the seller produces or the sellers output
you will buy all the french fries i make
Uncertainty of performance is a characteristic of what contracts
requirements and output contracts
this has to do with consideration problems
What three agreements lack consideration
1- preexisting duty
2-past consideration
3-illusory promises
In what two ways are claims often settled
1) An accord and satisfaction
2) the signing of a release or a convenant not to sue
Describe an accord and satisfaction
a debtor offers to pay and a creditor accepts, a lesser amount than the creditor originally claimed was owed
What is an accord
An accord is an agreement in which one party undertakes to give or perform and the other to accept something other than that on which the parties originally agreed
What is satisfaction
the performance (usually payment) that takes place after the accord is executed
Can there be satisfaction with no accord
no
What must occur for an accord and satisfaction to occur
the amount of debt must be in dispute
If a debt is liquidated can an accord and satisfaction take place
no
what is a liquidated debt
one whose amount has been ascertained, fixed, agreed on, settled, or exactly determined
when both parties know the precise amount of the total obligation
What is an unliquidated debt
the amount of the debt is not settled, fixed, agreed on, ascertained, or determined, and reasonable persons may differ over the amount owed
What is a release
A contract in which one party forfeits the right to pursue a legal claim against the other party
What three requirements make a release binding
- The agreement is made in good faith (honesty)
- The release contract is in a signed writing ( required in many states)
- The contract is accompanied by consideration
describe convenient not to sue
parties simply substitute a contractual obligation for some other type of legal action based on a valid claim
What are three promises that may be enforced despite the lack of consideration
- promises that induce detrimental reliance, under the doctrine of promissory estoppel
- promises to pay debts that are barred by a statute of limitations
- promises to make charitable contributions.
Describe promissory estoppel (detrimental reliance)
a person who has reasonably and substantially relied on the promise of another may be able to obtain some measure of recovery
What (5) elements are required for promissory estoppel
- There must be a clear and definite promise
- the promisor should have expected that the promisee would rely on the promise
- the promisee reasonably relied on the promise by acting or refraining from some act
- the promises reliance was definite and resulted in substantial detriment
- Enforcement of the promise is necessary to avoid injustice
What happens to the promisor if promissory estoppel is used
the promisor will be estopped (prevented ) from asserting the lack of consideration as a defense
What doctrine is promissory estoppel similar to
the doctrine of quasi contract because both impose contract obligations on the parties to prevent unfairness even though no actual contract exist
What is the difference between the quasi contract and promissory estoppel
with a quasi contract no promise was made at all
With a promissory estoppel a promise was made and relied on but was unenforceable
Case example of promiser estoppel
Teresa suing her parers for not providing her with the deed after they encouraged her, she won
What is a charitable subscription
a promise to make a donation to a religious, educational, or charitable institution
sometimes promissory estoppel wins others consideration might be found in regard to other donations
A debtor who promises to pay a previous debt even though recovery is barred by the statue of limitations makes an enforceable promise that needs no consideration..
….
What is contractual capacity
the legal ability to enter into a contract
What is another name for minors in legal terminology
infants
can a mentally incompetent person form a legally binding contract
no if they are determined to be so by the court
what is the definition of the age of majority and what age is it usually
when a person is no longer a minor
18
but 21 for other purposes i.e. alcohol consumption
when does emancipation occur
When a child’s parent or legal guardian relinquishes the legal right to exercise control over the child
What are minors who leave home to support themselves typically considered
emancipated
Several jurisdictions permit minors themselves to petition a court for emancipation
…..
Can a minor enter into any contract that an adult can
Yes except contracts prohibited by law for minors i.e. purchase of alcohol
A contract entered into by a minor is voidable at the option of that minor
(subject to exceptions)
…..
What must a minor do to avoid a contract
manifest (clearly show) an intention not to be bound by it
How must a minor avoid a contract / what is it called
disaffirming
What is disaffirmance
the legal avoidance or setting aside of a contractual obligation
What must a minor do to disaffirm
express his or her intent through words or conduct not to be bound to the contract
Can a minor disaffirm a portion of a contract
No they must disaffirm the entire contract
Would a minor win a case against a company if they signed the waiver to partake in the activities
Yes , if they disaffirm the waiver
i.e. kelly v. the marines
Can an adult who entered into a contract with a minor avoid his or her contractual duties like the minor
No they are bound unless the minor disaffirms the contract
Once a minor disaffirms can they recover any property that he or she transferred to the adult as consideration even when the possession is in that of a third party
yes
Considering minority how long does a contract have to be disaffirmed
at any time during minority or for a reasonable period after reaching majority
reasonable time when it comes to minor disaffirmation may vary
vary
What do most states hold as the obligation on disaffirmance
the minor need only return the goods (or other consideration) subject to the contract, provided the goods are in the minor’s possession or control.
What if the minor returns the goods in a damaged state when disaffirming
Even if the minor returns damaged goods the minor often is entitled to disaffirm the contract and obtain a full refund of the purchase price.
What are more states starting to say about disaffirmance
The minor must restore the adult party to the position she or he held before the contract was made… i.e. they might be held responsible for damage and depreciation values
What contract can’t minors disaffirm
marriage contracts, contracts to enlist in armed services, ones where they misrepresented their age (in some states), and contracts for necessaries
Does misrepresentation of age make it so a contract cannot be disaffirmed
it depends on the state
What are necessaries
Basic needs such as food, clothing, shelter, and medical services
What about a minor who enters into a contract for necessaries
They may disaffirm the contract but remain liable for the reasonable value of the goods.
What is ratification
Act of accepting and giving legal force to an obligation that previously was not enforceable
What are the two ways a minor who has reached the age of majority can ratify a contract
expressly or impliedly
Describe express ratification
when the individual on reaching the age of majority, states orally or in writing that he or she intends to be bound by the contract
Describe implied ratification
When the minor on reaching the age of majority indicates an intent to abide by the contract
If a minor fails to disaffirm a contract within a reasonable time after reaching the age of majority then the court must determine whether the conduct constitutes …
ratification or disaffirmance
Generally Courts presume that executed contract (fully performed) are ratified
….If a minor fails to disaffirm a contract within a reasonable time after reaching the age of majority
Generally Executory contracts (not yet fully performed by both parties) are disaffirmed
…If a minor fails to disaffirm a contract within a reasonable time after reaching the age of majority
When are parents liable for contracts made by minor children
When they are required to cosign
Not when the minor is acting alone
What is intoxication
A condition in which a person’s normal capacity to act or think is inhibited by alcohol or some other drug
Is a contract entered to by an intoxicated person enforceable… why…
Yes because it is either voidable or valid
When might a contract entered into by an intoxicated person be voidable
If the person was sufficiently intoxicated to lack mental capacity
If intoxicated an the person understood the legal consequences of the agreement the contract will be
enforceable
Are many contracts avoided because the person was intoxicated…why
No because it is difficult to prove how impaired the person’s judgement was
If a contract is voidable because one party was intoxicated what can the intoxicated person do if they want out
They have the option of disaffirming it while intoxicated and for a reasonable time after becoming sober. They must return all consideration received unless the contract involved necessaries.
What about contracts involving necessaries for intoxicated people
they are voidable, but the intoxicated person is liable in quasi contract for reasonable value of the consideration received
What may an intoxicated person after becoming sober do
Ratify a contract expressly or impliedly
Describe implied ratification for an intoxicated person
The intoxicated person fails to disaffirm the contract in a reasonable time after becoming sober
What if the intoxicated person in a contract disaffirm and then continue to say use the property discussed in the voidable contract
the contract will become ratified
Contracts made by mentally incompetent persons can be
void, voidable, or valid
When might a contract be void for a mentally incompetent person
If the court has previously determined the person is mentally incompetent. The court appoints a guardian to represent the individual for legal obligations
When might a contract be voidable for a mentally incompetent person
If the court has not previously determined the person to be mentally incompetent. but the person was incompetent at the time the contract was formed. Or if the person did not know he or she was entering into the contract or lacked the mental capacity to comprehend its nature, purpose, and consequences. This is at the option of the mentally incompetent person not the other party
When might a contract be valid for a mentally incompetent person
If the person had capacity at the time the contract was formed ( whom a court ha not previously declared incompetent)
Do some people have temporary times of competence ..explain
if incompetent due to age or illness some people have lucid intervals temporary periods of sufficient intelligence, judgement, and will (they have legal capacity to enter contracts during said intervals)
What type of contracts are illegal
Ones to do something that is prohibited by federal or state statutory law and those to commit a tortuous act is contrary to public policy and therefore illegal.
Any contract to commit a crime is in violation of a statute and thus…
unenforcable
What if the object or performance of a contract is rendered illegal by a statute after the parties entered into the contract
the contract is discharged by law
what is it called when a lender makes a loan at an interest rate above the lawful maximum
usury
Describe usury
what is it called when a lender makes a loan at an interest rate above the lawful maximum
What do courts do when usury is found
it varies although usury contracts are illegal most states simply limit the interest that the lender may collect on the contract to the lawful maximum interest rate in that state. In some states the lender can recover the principal amount of the loan but no interest
Is usury sometimes allowed
Yes, sometimes to facilitate business transactions
What is gambling
creation of risk for the purpose of assuming it
Gambling contracts are
illegal
When might a contract about an unlicensed individual be deemed illegal and unenforceable
When the statue’s purpose is to protect the public from the unauthorized practitioners
When might a contract about an unlicensed individual be enforceable and just cause the person to get a fine
If the statues purpose is merely to raise government revenues
What is a contract not enforceable because of the negative impact it has on society called
contrary to public policy
what is a contract contrary to public policy
a contract not enforceable because of the negative impact it has on society
What about contracts that are in restraint of trade (anticompetitive agreements)
They adversely affect the public policy that favors competition in the economy and violate federal or state antitrust statutes
When might anticompetitive agreements be ok
when they are reasonable and contained in an ancillary (secondary or subordinate clause in a contract ) for say a sale of an ongoing business or employment contract
What is a covenant not to compete
a restrictive covenant (promise)
What is it called when a seller of a store agrees not to open a new store in a certain geographic area surrounding the old business
a covenant not to compete ( restrictive covenant)
Describe a noncompete agreement in an employment contract
when an employee agrees not to work for competitors or not to start competing business for a specified period of time after termination of employment (specified period of time and geographic restriction must be reasonable)
what is considered reasonable restriction for a noncompete agreement for employment
the restrain on competition must protect a legitimate business interest and must not be any greater than necessary to protect that interest
What is a common rule concerning covenants not to compete in state like Texas
The employee must receive some benefit in return for signing the noncompete agreement or the covenant is not enforceable
What state prohibits the convenient not to compete
California
How might a judge get involved in a noncompete covenant
when they reform it (to more reasonable terms)
The judge is now a party to the contract
Do courts do reformation to contracts a lot
no only when necessary to prevent undue burdens or hardships
what is an unconscionable bargain
a contract that is so unscrupulous or grossly unfair as to be void of conscience
what do you call a contract that is so unscrupulous or grossly unfair as to be void of conscience
unconscionable
under what provisions is unconscionable bargains
the uniform commercial code (UCC) its provisions in regard to sale and lease of goods
What are the two grounds for being unconscionable
procedural or substantive
What does procedural unconscionability involve
inconspicuous print, unintelligent language (legalese), or the lack of an opportunity to read the contract or ask questions about its meaning
When does procedural unconscionability often arise
When a party’s lack of knowledge or understanding of the contract terms deprived him or her of any meaningful choice or when a weaker party;s consent is not voluntary
What is a contract written exclusively by one party and presented to the other on a take it or leave it basis ( the party to whom the contract is presented has no opportunity to negotiate its terms)
adhesion contract
Are all adhesion contacts unconscionable
No only those that unreasonably favor the drafter
What is is called when contracts or portions of contracts are oppressive or overly harsh
substantive unconscionability
When does substantive unconscionability occur
when contracts or portions of contracts are oppressive or overly harsh
What do exculpatory clauses do
release a party from liability in the event of monetary or physical injury no matter who is at fault
This release a party from liability in the event of monetary or physical injury no matter who is at fault
exculpatory clauses
What exculpatory clauses are often unenforceable because they go against public policy
those for residential property leases and those of employers
When do courts usually enforce exculpatory clauses
When they are reasonable, don’t violate public policy, do not protect parties from liability for intentional misconduct, does not use ambiguous language, and parties have relatively equal bargaining power
What businesses use exculpatory clauses and for what
Those where their services are not essential. they do so to limit their liability for patron injuries
Also loan docs, real estate contracts, and trust agreements might include them
Describe a discriminatory contract
A contract in which a party promises to discriminate on the basis of race, color, national origin, religion, gender, age, or disability
Are discriminatory contracts enforceable explain
No, they are contrary to both statute and public policy and thus unenforceable
In general how do courts see illegal contracts
void and to never have existed –thus they will not aid either party
What is is called for illegal contracts when both parties are considered to be equally at fault
in pari delicto
Describe in pari delicto
when both parties are considered to be equally at fault concerning an illegal contracts
What if an illegal contract is executory or not yet fulfilled
neither party can enforce it
What if an illegal contract has been executed
neither party can recover damages
Why do courts not care about someone being unjustly enriched at the expense of another in an illegal contract
A plaintiff who has broken the law by entering into an illegal bargain should not be allowed to obtain help from the courts
what is it called when a courts hopes that a plaintiff who suffers a loss because of an illegal bargain will presumably be deterred from entering into a similar illegal bargain in the future
hoped-for deterrent effect
hoped-for deterrent effect
when a courts hopes that a plaintiff who suffers a loss because of an illegal bargain will presumably be deterred from entering into a similar illegal bargain in the future
What if in an illegal contract one of the parties is relatively innocent (has no reason to know that the contract is illegal)
That party can often recover any benefit conferred in a partially executed contract, courts will not enforce the contract but will allow the parties to return to their original positions or permit an innocent party who has fully performed under the contract to enforce the contract against the guilty party
what if a statute is clearly designed to protect a certain class of people …what can a member of that class do
enforce a contract in violation of the statue even though the other party cannot
i.e. an employee who is required to work more than the max. can recover for those extra hours of service.
What if the illegal part of a bargain has not yet been performed
The party rendering performance can withdraw from the contract and recover the performance of its value
Often one party to an illegal contract is more at fault than the other what can the other party do
They are allowed to recover for the performance or its value
What does a contract that is severable or divisible consist of
distinct parts that can be performed separately with separate consideration provided for each part
Describe an indivisible contract
It is when complete performance by each party is essential even if the contract contains a number of seemingly separate provisions
What if a contract is divisible into legal and illegal portions
A court may enforce the lego portion but not the illegal one so long as the illegal portion does not affect the essence of the bargain
What if a contract includes a clause stating that the parties intend the contract terms to be enforced to the “fullest extent possible”
The clause indicates the parties regard their contract as divisible, and in the event of a dispute want the court to strike out the illegal terms and enforce the rest
why might voluntary consent be lacking
because there is no true “meeting of the minds” or because of a mistake, misrepresentation, undue influence, or duress
Generally what can a party do if they can demonstrate that they did not agree to a contract
choose either to carry out the contract or to rescind (cancel) it
What types of mistakes make a contract voidable
mistakes of fact
What is a material fact
a fact that a reasonable person would consider important when determining his or her course of action
For a contract to be voidable when it comes to mistakes it must have
a mistake of fact and some material fact
Give an example of a mistake of value
when someone sells something for cheap when it is really worth a lot
what are the two forms of mistakes of fact
bilateral and unilateral
Describe a unilateral mistake
it is made by only one of the parties
Describe a bilateral (mutual) mistake
made by both of the contracting parties
is a unilateral mistake normally enforceable
yes, it does not give the mistaken party any right to relief from the contract
Give an example of an unilateral mistake
a typo of a price sent out by the offeror to the offeree
What are the two exceptions to a unilateral mistake making it unenforceable
1) The other party to the contract knows or should have known that a mistake of fact was made
2) error was due to substantial mathematical mistake that was made inadvertently and without gross( extreme) negligence
both situations must in love some material fact
Give an example of a bilateral contract
If a word or term in a contract that is subject to more than one reasonable interpretation and both parties interpret it wrong
Describe a mistake of value
The mistake concerns the future market value or quality of the object of the contract…it is normally enforceable
Why is a mistake of value normally enforceable
Value is variable
Parties should have assume the risk that value will change in the future or prove to be different from what he or she thought
Why can an innocent party who is fraudulently induced to enter a contract avoid it
Because the party has not voluntarily consented to its terms
What can the innocent party do when fraudulently induced
1) rescind the contract and be restored to his or her original position
2) enforce the contract and seek damages for any harms resulting from the fraud
What 4 elements make up fraudulent misrepresentation
1) A misrepresentation of a material must occur
2) There must be an intent to deceive
3) The innocent party must justifiably rely on the misrepresentation
4) To collect damages, a party must have been harmed as a result of the misrepresentation
Give an example of misrepresentation
this art was made by Michelangelo
Describe and give an example of misrepresentation by conduct
party takes a specific action to conceal a fact that is material to the contract
i.e. hiding the fact that the horse you are selling is sick
what is not usually covered by fraudulent misrepresentation
statements of opinion and representations of future facts (predictions) unless it is that of an expert then innocent party entitled to recession i.e. the dance class example
Does misrepresentation of the law ordinarily entitle a party to relief from a contract
No people are assumed to know state and local laws
What is an exception to the misrepresentation of the law general rule
if the misrepresenting party is in a profession that is known to require greater knowledge of the law than the average citizen i.e. real estate broker
Describe misrepresentation by silence
No party has a duty to come forward and disclose facts
unless asked about it, if asked about and lie that is fraudulent misrepresentation (misrepresentation by conduct)
What are defects that can not be readily ascertained
latent defects
latent defects
What are defects that can not be readily ascertained
What is a relationship of trust, such as partners, physician and patient, or attorney and client in which there is a duty to disclose material facts in which they have a duty to speak
fiduciary relationship
What is a fiduciary relationship
a relationship of trust, such as partners, physician and patient, or attorney and client in which there is a duty to disclose material facts
they have a duty to speak
What is scienter
guilty knowledge
What is the name for guilty and what does it mean
scienter
intent to decieve
When does scienter exists
- if a party knows a fact is not as stated
- party makes a statement that he or she believes is not true or makes a statement recklessly, without regard to whether it is true or false
- party says or implies that a statement is made on some basis such as personal investigation when it is not
when is a person guilty of innocent misrepresentation
When a person makes a statement that she or he believes to be try but that actually misrepresents material facts
What is it called when a person makes a statement that she or he believes to be try but that actually misrepresents material facts ..give an example
innocent misrepresentation
i.e. said the house was on 250 acres when it was actually 215 acres
What can the aggrieved part do when someone has committed innocent misrepresentation
rescind the contract but cannot seek damages
Describe negligent misrepresentaion
Party did not exercise readable care in uncovering or disclosing the facts or use the skill and competence that her or his business or profession requires
negligent misrepresentation is equal to
scienter, fradulent misrepresentation
Gie an example of negligent misrepresentation
certifying an elevator even though it has not been checked in years
What is a receiver, trustee
an independent impartial party appointed by a bankruptcy court to manage property in bankruptcy and dispose of it in an orderly manner for the benefit of the creditors
What does recession do
it returns the parties to the position they held before the contract was made
When the action is to rescind the contract does the court require a showing of injury
no
To recover damages caused by fraud what is required
proof of harm
measure of damages equal to the value had it been delivered as represented, less actual price
in fraud actions courts may award
punitive damages
When does undue influence arise
From relationships in which one party can greatly influence another party thus overcoming the partys FREE WILL
This relationships arises in when one party can greatly influence another party thus overcoming the partys FREE WILL
undue influence
What are instances when undue influence usually occur
guardians inducing young or elderly wards and fiduciary relationships
When does a presumption of undue influence arise
when the dominant party in a fiduciary relationship benefits from that relationship
When might the court issue a presumption of undue influence
If the non dominant party challenges the contract
How does one challenge the presumption of undue influence
show consideration to non dominant party
show the non dominant party received, if available, independent and competent advice before completing the contract
What is duress
the use of threats to force a party to enter into a contract i.e. blackmail or extortion
The use of threats to force a party to enter into a contract is called i.e. blackmail or extortion
duress
To establish duress there must be
proof of threat to do something that the threatening party has no right to do and must render the person incapable of exercising free will
what is economic duress
if the party exacting the price also creates the need… i.e wait to the last minute to offer something so person has to use you
What are contracts that are written exclusively by one party and presented to the other party on a take it or leave it basis
adhesion contracts
What are standard-form contracts
Contracts that contain fine-print provisions that shift a risk ordinarily borne by one party to the other
Contracts that contain fine-print provisions that shift a risk ordinarily borne by one party to the other
standard form contracts
To avoid enforcement of standard form contracts plaintiff must
show contract or particular term is unconscionable
This statute stipulates what contracts must be in writing
Statue of frauds
What must happen for statue of frauds
The party or parties against whom enforcement is sought must have signed the contract
What is the purpose of the statue of frauds
to prevent harm to innocent parties by requiring written evidence of agreements concerning important transactions
What if a contract is oral when required to be in writing
it is usually voidable by the party who does not wish to follow through with it
What contracts must be in writing
1) contracts involving interests in land
2) contracts that cannot by their terms be performed within one year from the day after the date of formation
3) Collateral, or secondary contracts such as promises to answer for debt or duty of another and promises by the administrator or executor of an estate to pay a debt of the estate personally-that is, out of her or his own pocket
4) Promises made in consideration of marriage
5) Under the uniform Commercial Code contracts for sale of goods priced $500 or more
What is land
real property and includes all physical objects that are permanently attached to the soil, i.e. building fences, trees, and soil
What must a contract about land do
describe the property being transferred with sufficient certainty for it to be identified
What is the one-year rule
contracts that cannot by their own terms be performed within one year from the day after the contract is formed must be in writing to be enforceable
When does the time period for the one-year period begin
the day after the contract is made
If performance is possible (doesn’t matter if it is likely) within one year, under contract terms ….
it does not fall under the statue of frauds and thus not be in writing
What if contract says provide services as long as business needs them does it need to be in writing
no because it is possible to perform within a year because the business could go out of business in 12months
Is an oral contract for lifetime employment fall under the statue of frauds …explain
no because the employee could die within in a year
What is a collateral promise
one made by a third party to assume the debts or obligations of a primary party to a contract if that party does not perform …must be in writing
What is a primary obligation
does it need to be in writing ..
third party’s promise to pay another person’s debt ( or other obligation) that is not condition on the person’s failure to pay (or perform) i.e. i’ll pay for my brothers hair cut
don’t have to be in writing
What is a secondary obligation
does it need to be in writing..
A promise to pay another’s debt only if that person fails to pay
yes it needs to be in writing
what is a person who makes a secondary obligation called
a guarantor
what is the main purpose rule
An oral promise to answer for debt of another is covered by the statue of frauds unless the guarantor’s main purpose in incurring a secondary obligation is to secure a personal benefit
need not be in writing
If guarantor’s main purpose is to get a personal benefit in incurring a secondary loan does it need to be in writing
yes
Describe promises made in consideration of marriage
does it need to be in writing
A unilateral promise to make a monetary payment or give property in consideration of a promise to marry
must be in writing
What are prenuptial agreements
do they need to be in writing
agreements made before marriage that define each partner’s ownership rights in the other partner’s property
must be in writing
Contracts for the sale of goods priced at $ 500 or more
need to be in writing?
yes
written evidence or an electric record
A contract need only state the quantity term
wil a written memorandum or series of communication evidencing a contract suffice
Yes as long as the party against who, the enforcement is sought has signed.
writing does not have to show designation, terms or price
What is specific performance
equitable remedy that requires performance of the contract according to precise terms
When might partial performance arise
when the purchaser has paid part of the price, taken possession of the property, and made permanent improvements to it
Describe admissions
If a party against whom enforcement of an oral contract is sought “admits” under oath that a contract for sale was made the contract is enforceable to the extent of the quantity admitted
With oral promises they can be enforced due to promissory estoppel explain
promisee must have justifiably relied on it to her or his detriment, and the reliance must have been foreseeable to the promsior must be no way to avoid injustice except to enforce the promise
What constitutes a signature
any signature in the contract, can be initals
the docs can just refer to other docs or just physically attached
What must be contained in the writing
essential terms of the contract
indication parties voluntarily agreed to the terms
in most states..
name of parties, subject matter, consideration
for land.. price and sufficiently clear description f the land
What it oral evidence called
parol evidence
Describe parol evidence
testimony or other evidence of communication between the parties that is not contained in the contract itself
What is the parol evidence rule
if a court finds hat a written contract represents the complete and final statement of the parties agreement, it will not allow either party to present parol evidence
When can parol evidence not be presented
if the evidence contradicts or varies the terms of the written contract
if the contract says this is the entire agreement can prior negotiations or other parol evidence be brought in
no just like with Gwen and the TKS, Inc situation
What are the 6 exceptions to the parol evidence rule
1) Contracts subsequently modified
2) voidable or void contracts
3) Incomplete Contracts
4) Prior dealing, course of performance , or usage of trade
5) Contracts subject to anomaly agreed-on condition precedent
6) Contracts with an obvious or gross clerical( or typographic) error that clearly would not represent the agreement of the parties)
What does contracts subsequently modified mean
evidence of any subsequent modification (oral or written) of a written contract can be introduced in court
Parol evidence can be introduced to show a contract was void or voidable
…
Parol evidence can be introduced to incomplete contracts
…
Parol evidence can be introduced to
show how customary practices develop ( prior dealings, course of performance, usage of trade)
…
What is it when parties agree that a condition must be fulfilled before a party is required to perform the contract
condition precedent
Describe condition precedent
parties agree that a condition must be fulfilled before a party is required to perform the contract
if a condition precedent is oral it can be used as parol evidence but
it only affects enforceability of the contract it does not change anything
If there is typographic error is parol evidence allowed to correct the mistake
yes
What is a contract called when outside evidence is excluded
an integrated contract
there are partially and completely integrated contracts
What evidence is allowed for partially integrated contracts
only that , that adds to the terms not that, that contradicts the writing
do most contracts internationally have to be in writing
no , due to the contracts for the International Sale of Goods
What is an assignment
the transfer of contractual rights to a third party
what is a delegation
the transfer of contractual duties to a third party
the transfer of contractual duties to a third party
delegation
the transfer of contractual rights to a third party
assignment
What instance is assignments used in give an example
many business financing situations
i.e. a bank may transfer (assign) its rights to receive payment to another firm
What is an assignor
party assigning the rights to a third party in an assignment i.e. bank
What is an assignee
party receiving the rights in an assignment
i.e. mortgage company
What is an obligee
the person to whom a duty or obligation is owed
i.e. mortgage company
what is an obligor
the person who is obligated to perform the duty
i.e. loan taker
the person to whom a duty or obligation is owed
obligee
i.e. mortgage company
the person who is obligated to perform the duty
obligor
i.e. loan taker
What rights does the assignee have
All the rights the assignor originally had
If there is a problem with the item when it has been assigned to someone else who does the obligor go to
the original person and they do not have to provide the right of payment to the new assignee
What form can assignments be in
oral or written but it is best to be in written form
What 4 rights cannot be assigned
1) The assignment is prohibited by statute
2) the contract is personal
3) the assignment significantly changes the risk or duties of the obligor
4) the contract prohibits assignment
State statute prohibits the assignment of future workers compensation benefits
…
What if a contract is for personal services can the right be assigned to someone else
no unless all that remains is a monetary payment because it would change the nature of the obligation
What is the prohibition of the transfer of land ownership ( real-estate rights)
alienation
What are the 4 exceptions to the general rule that a contract can prohibit assignments
1) A contract cannot prevent an assignment of the right to receive funds. This exception exists to encourage the free flow of funds and credit in modern business settings
2) The assignment of rights in real-estate cannot be prohibited because it is contrary to public policy
3) The assignment of negotiable instruments such as checks and promissory notes cannot be prohibited)
4) In a contract for the sale of goods, the right to receive damages for breach of contract or payment of an account owed may be assigned even though the sales contract prohibits such an assignment
Who should notify who during an assignment
The assignee should notify the obligor of the assignment
when is an assignment effective
immediately , whether or not notice is given
What two issues arise when notice is not given
Priority issues and Potential for discharge by performance to the wrong party
describe priority issues for notice of assignment
if the assignor assigns the same rights to two different people who has priority….in the u,s, usually the one who is first assigned the english rule is who gives notice to the obligor
describe potential for discharge by performance to the wrong party
Obligor can discharge his or her obligation by performance to the assignor discharging the assignee..however, one the obligor receives proper notice only performance to the assignee can discharge the obligors obligations…however the assignee still has a claim against the assignor
Party delegating duties
delegator
What is the delegator
party delegating duties
party to whom duties are delegated
delegatee
What is a delegate
party to whom duties are delegated
is the delegator relieved when they delegate their duties to the delegatee
no, a delegation of duties does not relieve the delegator of the obligation to perform in the event that the delegatee fails to do so
What makes an delegation effective
when the delegator express an intention to make the delegation, they do not even have to use the word delegate
When can duties not be delegated (3)
1) When duties are personal in nature
2) When performance by a third party will vary materially from that expected by the obligee
3) When the contract prohibits delegation
Describe when duties are personal in nature
When performance depends in personal skill or talents
it will only be okay when the obligee consents to it
What do you call a delegation that is not personal in nature
one that is routine and non personal and nature
What is an example of when a delegation is not allowed because performance by a third party will vary materially what is expected by the obligee
a company asking someone they trust to pick recipients and the person they trust delegates the duty to someone not trust worthy example 17.10
What is it called that prohibits delegation in a contract (hint…clause)
antidelegation clause
Cannot delegate to anyone at all not even if they are in the same firm
obligee must accept performance from the delegatee
obligee can only refuse if the duty is one that cannot be delegated
what if the obligee never gets what is owed to them do they sue the delegator or delegatee
They can sue both
An assignment of all rights may create
both an assignment of rights and a delegation of duties
what are the rights of a third party beneficiary/intended beneficiary
they have legal rights and can sue the promisor directly for breach of contract
what is a third party beneficiary
a third party that benefits from the contract or contract performance is rendered to them
If there is a problem who does the third party sue
the promisor
When a promise is made for the benefit of another he or for whose benefit it is made may bring an action for its breach
i.e. plaintiff won because it was clear fox owed the money
Lawrence v. Fox
What beneficiaries acquire legal rights in a contract
intended beneficiaries
What are the two types of beneficiaries
intended and incidental
what are the types of intended beneficiaries
creditor beneficiary
donee beneficiary
What is a creditor beneficiary
They benefit from a contract in which one party (the promisor) promises another (the promisee) to pay a debt that the promisee owes to a third party(the creditor beneficiary)
Describe a donee benficiary
When a contract is made for the express purpose of giving a gift to a third party , the third party (the donee beneficiary) can sue the promisor directly to enforce the promise
i.e. life insurance
What beneficiaries can sue to to enforce contracts made for their benefit
intended beneficiaries
What does vested mean
rights have taken effect and cannot be taken away
Describe an incidental beneficiary
They benefit from a contract even though their benefit is not the reason the contract was made, there benefit is unintentional
how to determine if one is an intended or incidental beneficiary use ..
the reasonable person standard and the following factors
1) perfomance is tended directly to the third party
2) the third party has the right to control the details of performance
3) the third party is expressly designated as a beneficiary in the contact
What is impossibility of performance
When supervening events (such as a fire) make performance impossible in an objective sense
When is performance impossible (3)
1) When one of the parties to a personal contract dies or becomes incapacitated
2) When the specific subject matter of the contract is destroyed
3) When a change in law renders performance illegal
What does discharge mean
to terminate one’s contractual duties
Whats the most common way to discharge a duty
by performance
what are promises that must be performed or the parties promising the acts will be in breach of contract
absolute promises
Describe absolute promises
promises that must be performed or the parties promising the acts will be in breach of contract
What is a condition
a qualification in a contract based on possible future event
Conditions are classified as either…
express or implied
What are the three types of conditions
conditions precedent, condition subsequent, concurrent conditions
Describe condition precedent
Its when a condition precedes the absolute duty to perform.
A condition must be fulfilled before a part’s performance can be required
Describe condition subsequent
When a condition operates to terminate a party’s absolute promise to perform i.e. if u fail the test u can no longer work here
Describe concurrent conditions
each part’s performance is conditioned on the other party’s performance
i.e. ill pay you when you deliver the goods
Describe complete (strict) performance
Conditions expressly stated in the contract must fully occur in all respects
Any deviation breaches the contract and discharges the other party’s obligations to perform
A breach of contract is…
the nonperformance of a contractual duty
What is the nonperformance of a contractual duty
A breach of a contract
What if performance is not at least substantial when it comes to a breach of contract
it is a material breach
What happens when there is a material breach
non breaching party is excused from the performance of contractual duties. that party can also sue the breaching party for damages resulting from the breach
What is a minor breach called
a non material breach
What happens to the non breaching party when breach is nonmaterial
their duty to perform can be suspended until breach is remedied but duty to perform is not entirely excused they must resume performance once breach has been cured their
Any breach entitles the non breaching party to sue for damages
…
only a material breach discharges the non breaching party from the contract
….
What is the material alteration of a contract rule state
If a party alters a contract without knowledge or consent of the other the innocent party can be discharged
Impossibility of performance
discharges a contract
What is the difference between objective and subjective impossibility
objective-“impossible for anyone to perform”
subjective -
“impossible for me to perform–does not discharge a contract –this s breach of contract
Describe what happens when temporary impossibility arises
performance is temporarily impossible and suspends performance until the impossibility ceases
what if the lapse of time and circumstances surrounding the contract make it substantially more burdensome for the parties to perform the promised acts
the contract is discharged
What is a remedy
relief provided for an innocent party when the other party has breached the contract. It is the means employed to enforce a right or redress an injury.
What is the relief provided for an innocent party when the other party has breached the contract.
A remedy
It is the means employed to enforce a right or to redress an injury
What are the two types of remedies
remedies at law and remedies in equity
What is the remedy at law
monetary damages
What are equitable remedies
rescission and restitution, specific performance, and reformation
damages compensate the breaching party for the loss of the bargain
….
innocent parties are to be placed in the position they would have occupied had the contract been fully performed
…
collecting damages through a court judgement requires litigation
…
What are the four types of damages
1) Compensatory (to cover direct losses and cost)
2) Consequential (to cover indirect and foreseeable losses)
3) Punitive (to punish and deter wrong doing)
4) Nominal(to recognize wrongdoing when no monetary loss is shown)
What are compensatory damages
they compensate the non breaching party for the loss of the bargain
they are said to make the person whole
What type of damages is it when one obtains performance from another source i.e. had to go find another house to paint
incidental damages
What is the measure of compensatory damages for the sale of goods
difference between the contract price and market price
if buyer breaches and seller has not produced goods what are the compensatory damages
lost of profits on the sale
What is the remedy for a seller’s breach of contract for a sale of real estate
specific performance
-buyer is awarded the parcel of property for which they bargained for
what is the remedy when the buyer is in breach during the sale of land
damages is the difference between the contract price and market price
When the seller breaches the contract for sale of land by selling the proper to someone one else
damages is the difference between the contract price and market price
What is the minority state rule when it comes to breach of contract for sale of land and it is non intentional
the perspective buyers damages are a refund of any down payments made plus any expenses incurred
these type of damages occur when there is no actual damage or financial loss from the breach of contract , only a technical injury is involved
nominal damages
nominal damages are only rewarded when
there is only technical injury involved
they are often small an establish the defendant acted wrongfully
What does mitigate mean
to reduce
mitigation of damages
landlord must seek new tenant
employe must take a similar job if one is available
(employer must prove said job existed)
What are liquidated damages
certain dollar amount to be paid in the event of a future default or breach of contract
what is a penalty
it specifies a certain amount to be paid in the event of a default or breach of contract it is designed to penalize the breaching party, not make the innocent party whole.
What is rescission
an action to undo or terminate a contract -to return the contracting parties to the positions they occupied prior to the transaction
What entitles one to rescind
failure of one party to perform
rescinding party must give prompt notice to the breaching party
What is restitution
returning proper, good, or funds previously conveyed or equal dollar amount if said items were consumed.
What is the remedy of specific performance
performance of act promised in the contract
Contracts for the sale of goods rarely qualify for specific performance
the legal remedy of monetary damages is ordinarily adequate
specific performance for the sale of goods contracts is only enforced opposed to monetary damages when the item is
unique or rare
does specific performance apply to land
yes because all land is unique only if the land is already sold will monetary damages be awarded
No enforced specific performance for personal service
…
what is reformation
When parties have imperfectly expressed their agreement in writing. it allows a court to rewrite the contract to reflect the parties true intentions
When might reformation occur
often happens before another remedy is sought
1-when fraud or mutual mistake is present
2-written contract incorrectly states the parties oral agreement
3-covenants not to compete
What is a waiver
when a non breaching party is willing to accept defective performance of a contract
What are the consequences to the waiver of a breach
contract continues as if the breach never occurred
waiver extends only to the matter waived and not the whole contract
What are limitations-of-liability clauses
provisions that affect the ail ability of certain remedies
provisions that affect the ail ability of certain remedies
limitations of liability clauses
