Test 2 Flashcards
verbal contracts
enforceable
can be difficult to prove
written contracts
clearly lay out terms of the agreement
certain types of contracts MUST be in writing
bilateral contracts
each side makes a promise to do something
“a promise for a promise”
unilateral contract
one party makes a promise that the other party can only accept by doing something
express contract
both parties explicitly state the terms of the contact (can be oral or written)
implied contract
the words and conduct of the parties indicate an agreement even if no words are spoken or written
executory contract
a contract that has been formed, but not yet fully performed by one or more of the parties
executed contract
a contract that has been fully performed by all parties
valid contract
meet all seven of the criteria
unenforceable contracts
parties intend to form a valid contract, but some rule or law forbids enforcement
void contract
contracts that neither party can enforce
treated as if they never existed in the first place
voidable contract
contracts that may be defective, but are still enforceable by the election of one of the parties
criteria for a valid and binding contract
offer acceptance consideration capacity legality genuine consent proper form
offeror
person making the offer
offeree
person to whom the offer is made
ways that an offer can be terminated
outright revocation lapse in time rejection counteroffer destruction of the subject matter
revocation
an offer can be revoked at any time prior to being accepted
rejection
terminate an offer and the offeree then loses the ability to accept unless the offer is put back on the table
counteroffer
reject an offer and put a different offer on the table
acceptance
saying or doing something to accept an offer
the mirror image rule
the acceptance has precisely the same terms as the offer
the mailbox rule
the offer has been accepted once the offeree has “dispatched” it or “placed it in the mail”
consideration
if one side gets all the benefit and the other gets nothing, then an agreement lacks consideration and is not an enforceable contract
money
engagement ring
three rules to consideration
- both parties must get something of measurable value from the contract
- a promise to give something of value counts as consideration
- the two parties must have bargained for whatever was exchanged and struck a deal
gift promises
gratuitous promises are unenforceable because they lack consideration
illegal consideration
a contract cannot be supported by a promise to refrain from doing an illegal act
contracts based on illegal consideration are void
preexisting duties and past consideration
a promise lacks consideration if a person promises to perform an act or do something he or she is already under an obligation to do or act that they have already done
the promise is unenforceable because no new consideration has been given
capacity
the ability to understand the terms of the contract and appreciate that the failure to perform its terms can lead to legal liability
without capacity the contract is voidable
burden to prove incapacity is always on the person asserting the incapacity
minors
the infancy doctrine
the minor still has the duty of restoration meaning that is disaffirmed, the minormust return the goods in the condition they are in at the time of the disaffirmance
obligated to pay for the necessaries of life that they contract for
the infancy doctrine
allows minor to disaffirm (cancel) most contracts that they enter into with adults
ratification
upon reaching the age of majority, the person may also “accept” the contract that they previously entered into as a minor
mentally incompetent people
the law protects people suffering from substantial mental incapacity from enforcement of contracts against them
law requires a person to have been legally insane
legal insanity
a state of contractual incapacity as determined by the law
adjudged insane
judge says you are insane, need to be in a mental hospital
contracts are void
insane, but not adjudged insane
haven’t been in front of a judge
contracts are voidable
who can’t enter into a contract?
drunks
mentally incapacitated
minors
intoxicated person
contracts are voidable
legality
the object of every contract must be lawful
contracts with an illegal object are void and unenforceable
contracts contrary to statutes
contracts contrary to public policy
contracts contrary to statutes
federal and state legislatures have enacted statutes that prohibit certain types of conduct
contracts to perform an activity that is prohibited by statute are illegal
contracts contrary to public policy
contracts that have a negative impact on society or that interfere with the public’s safety and welfare
such contracts are void
covenant not to compete
contracts contrary to the public
courts will look at
- line of businesses protected
- geographic area protected
- duration of the restriction
non-compete agreements
employment
enforceable only to the extent necessary to protect trade secrets, confidential information and customer lists developed over an extended period
unconscionable contract
some lawful contracts are so oppressive or manifestly unfair that they are unjust
to prevent to enforcement of such contracts, the courts have developed the equitable doctrine of unconscionability
unconscionable contracts
-elements that must be shown to prove that a contract or clause is unconscionable
- the parties possessed severely unequal bargaining power
- the dominant party unreasonably used its unequal bargaining power
- the adhering party had no reasonable alternative
genuine assent (consent)
the requirement that a party’s assent to a contract be genuine or real
- mistake
- fraud and misrepresentation
- duress
- undue influence
mistake
unilateral mistake: error made by only one party to the contract
mutual mistake: error made by both parties to the contract
fraud
the wrongdoer made a false representation of material fact
voidable at the option of the innocent party
material misrepresentation
BIG lie
can void contract
puffery
“puffing up” or making your product or services look more attractive
not fraud
innocent misrepresentation
occurs when a person unintentionally makes an assertion that is not in accord with the facts
the innocent party may rescind the contract but cannot recover damages
not fraud
duress
occurs when one party threatens to do some wrongful act unless the other party enters into a contract
undue influence
one person takes advantage of another person’s mental, emotional, or physical weakness and unduly persuade that person to enter into a contract
proper form
although many oral contracts are valid and enforceable, common law has traditionally required certain contracts to be in writing
statute of frauds
failure to adhere makes a contract unenforceable
statute of frauds
if the contract deals with certain things it needs to be in writing
- contracts regarding interests in land
- contracts that cannot be performed within one year
- contracts to pay another person’s debt if that person fails to pay (guarantee contract)
- contracts for the sale of more than $500 in goods
promissory estoppel
equitable doctrine that prevents the application of the statute of frauds
it permits the enforcement or oral contracts that should have otherwise been in writing under the statute of frauds to prevent injustice pr unjust enrichment
internet contracts
internet contracts are as enforceable as their “land-based” counterparts
“click-on acceptance” -generally considered to be signed consent
the parole evidence rule
“four corners rule”
if there is a written contract, any prior contemporaneous oral or written statements are inadmissible as evidence to alter or contradict the terms of the written contract
can’t look beyond the 4 corners of the document
privity
the state of two specified parties being in a contract
contracting parties have a legal obligation to perform the duties specified in their contract
can sue for breach if one party fails
intended beneficiary
a third person who the parties intend to benefit from the contract
life insurance
health insurance
“gift” contracts
incidental beneficiaries
cannot sue to enforce a contract entered into by others
assignment
giving someone else the benefit of your contract. you can only assign rights arising from the contract
transfers of contractual rights by the obligee to another party
delegation
giving someone else the responsibility to perform the contract on your behalf. only duties are delegated
assignor
the obligee who transfers the right
assignee
the party to whom the right has been transferred
delegation
a transfer of contractual duties by the obligor to another party for performance
delegator
The obligor who transferred his or her duty
delegatee
the party to whom the duty has been transferred
discharge by agreement
the parties agree to cancel the contract
discharge by impossibility
the contract is cancelled due to the complete inability of one party to perform
force majeure clauses
the parties may agree in their contract that certain events will excuse nonperformance of the contract
natural disasters
labor strikes
shortages of raw materials
breach of contract
the failure of one or both parties to perform the duties owed to the other party under the contract
statute of limitations
you do not have an unlimited amount of time to file a lawsuit
you must file your lawsuit within the limitations period for your state or else you will be forever precluded from bringing the suit
remedies for breach
when one party breaches, the other party may have several different interests
expectation remedies
designed to put the non-breaching party in the position they would have been if the contract had been fully performed
compensatory damages
consequential damages
you cant get punitive damages
compensatory damages
award of money intended to compensate a non-breaching party for the loss of the bargain
consequential damages
forseeable damages that arise from circumstances outside the contract
mitigation of damages
a plaintiff seeking to collect damages for breach on contract must prove that he attempted to mitigate the loss
mitigate
to reduce or lessen
equitable remedies
available if there has been a breach on contract that cannot be adequately compensated by a legal remedy
specific performance
situation where the court will compel the breaching party to uphold his end of the contract
most often used when the subject matter of the contract is unique
land contracts is the most common type
injunctions
court requires ones party to refrain from doing something
UCC (the uniform commercial code)
designed to simply, modernize and ensure consistency in the enforcement of certain contracts
sale of goods and warranties on the sale of goods
goods
any movable physical object other than money or securities
merchants
persons who routinely deal in particular goods
held to a higher standard than non-merchants under the UCC
contract formation under the UCC
protects people from merchants
allows merchant to merchant transactions to be easy
statute of frauds
generally common law rules
$500.00 or more must be in writing
writing must be signed by defendant
quantity of goods must be clear in the contract
breach on contract remedies under the UCC; cover
right of the buyer to obtain substitute conforming goods when necessary and then sue for the difference between the original contract price and the cover price plus any incidentals
warranty
seller’s assurance to the buyer that the goods meet certain standards of quality
express warranty
created when a seller or lessor makes an affirmation that the goods he is selling or leasing meet certain standards of quality, description, performance, or condition
particular item meets a particular need
affirmation of fact or promise “these tires will last for at least 150,000 miles”
descriptions “made of genuine leather”
models or samples
implied warranty of merchantability
when a merchant sells goods that are of average quality and fir for the ordinary purpose for which they are sold
does not apply to sales or leases by non-merchants or casual sales
foreign substance act
if the object that causes the injury is not normally found or could not expect to be found associated with the dish
reasonable expectation test
court must determine based on the totality of all of the circumstances if it was “reasonable” for the item to be found in the dish
implied warranty of fitness for a particular purpose
a warranty that arises where a seller warrants that the goods will meet the specific needs of the buyer as told to them
applies to both merchant and nonmerchant sellers
warranty disclaimers
warranties can be disclaimed or limited
if an express warranty is made, it can only be limited if the disclaimer and the warranty can be reasonably construed with each other
all implied warranties of quality may be disclaimed by expressions like as is, with all faults, or other language that makes it clear to the buyer that there are no implied warranties
warranties can only relate to a breach of contract
breach of contract: you have to be in the contract
tort case: you dont need to have a relationship or contract with the other person
strict products liability
related to torts
must prove:
defendant sold product in defective condition
plaintiff was injured
injury was caused by the defect
strict liability chain of distribution
all parties in the chain of distribution are strictly liable
sue everyone
defects in manufacture
defects in design
defects in packaging
failure to warn
debtor
the borrower in a credit transaction
creditor
the lender in a credit transaction
unsecured debt
debt that doesnt require any security/collateral to protect the payment of the debt
secured debt
debt that requires some thing of value to secure payment of the loan
commercial paper
a contract to pay money
notes: promisory note
2 party contract
draft: check
3 party
