Understanding Contract Law

Question 1

Contract

Answer 1

A legally enforceable agreement between two or more parties.

Question 2

Promisor

Answer 2

The party to a contract making a promise.

Question 3

Promisee

Answer 3

The party to a contract to whom a promise is made.

Question 4

Privity of contract

Answer 4

The relationship that exists between the parties to a contract.

Question 5

Third-party beneficiary

Answer 5

A person who is not a party to a contract but who benefits from it and has a legal right to enforce the contract if it is breached by either of the contracting parties.

Question 6

Breach of contract

Answer 6

The failure, without legal excuse, to fulfill a contractual promise.

Question 7

Offeror

Answer 7

The party to a contract who promises to give something in return for a promise or an act by another party.

Question 8

Uniform Commercial Code

Answer 8

A code of federal laws that govern commercial transactions in the United States.

Question 9

Bilateral contract

Answer 9

A contract in which each party promises a performance.

Question 10

Unilateral contract

Answer 10

A contract in which only one party makes a promise or undertakes the requested performance.

Question 11

Executed contract

Answer 11

A contract that has been completely performed by both parties.

Question 12

Executory contract

Answer 12

A contract that has not been completely performed by one or both of the parties.

Question 13

Express contract

Answer 13

A contract whose terms and intentions are explicitly stated.

Question 14

Implied contract

Answer 14

A contract whose terms and intentions are indicated by the actions of the parties to the contract and the surrounding circumstances.

Question 15

Implied-in-fact contract

Answer 15

A contract that is not express but that the parties presumably intended, either by tacit understanding or by the assumption that it existed.

Question 16

Implied-in-law contract

Answer 16

An obligation that is not an actual contract but that is imposed by law because of the parties’ conduct or some special relationship between them or because one of them would otherwise be unjustly enriched.

Question 17

Voidable contract

Answer 17

A contract that one of the parties can reject (avoid) based on some circumstance surrounding its execution.

Question 18

Void contract

Answer 18

An agreement that, despite the parties’ intentions, never reaches contract status and is therefore not legally enforceable or binding.

Question 19

Offer

Answer 19

A promise that requires some action by the intended recipient to make an agreement.

Question 20

Counteroffer

Answer 20

A proposal an offeree makes to an offeror that varies in some material way from the original offer, resulting in rejection of the original offer and constituting a new offer.

Question 21

Substantial performance

Answer 21

The performance of the primary, necessary terms of an agreement.

Question 22

Acceptance

Answer 22

The assent to an offer that occurs when the party to whom an offer has been made either agrees to the proposal or does what has been proposed.

Question 23

Forbearance

Answer 23

The act of giving up or the promise to give up a legal right.

Question 24

Competent party

Answer 24

A party to a contract who has the basic or minimal ability to do something and the mental ability to understand problems and make decisions.

Question 25

Competent party

Answer 25

A party to a contract who has the basic or minimal ability to do something and the mental ability to understand problems and make decisions.

Question 26

Voidable contract

Answer 26

A contract that one of the parties can reject (avoid) based on some circumstance surrounding its execution.

Question 27

Restitution

Answer 27

The return of specific property by court order.

Question 28

Duress

Answer 28

The use of restraint, violence, threats of violence, or wrongful pressure to compel a party to act contrary to his or her wishes or interests.

Question 29

Consideration

Answer 29

Something of value or bargained for and exchanged by the parties to a contract.

Question 30

Accord and satisfaction

Answer 30

An agreement (accord) to substitute performance other than that required in a contract and the carrying out of that agreement (satisfaction).

Question 31

Promissory estoppel

Answer 31

A legal principle that permits enforcement of a promise made without consideration in order to prevent injustice.

Question 32

Void contract

Answer 32

An agreement that, despite the parties’ intentions, never reaches contract status and is therefore not legally enforceable or binding.

Question 33

Insurable interest

Answer 33

An interest in the subject of an insurance policy that is not unduly remote and that would cause the interested party to suffer financial loss if an insured event occurred.

Question 34

Usury

Answer 34

The charging of an illegally high rate of interest on a loan.

Question 35

Exculpatory clause (exculpatory agreement)

Answer 35

A contractual provision purporting to excuse a party from liability resulting from negligence or an otherwise wrongful act.

Question 36

Negligence

Answer 36

The failure to exercise the degree of care that a reasonable person in a similar situation would exercise to avoid harming others.

Question 37

Noncompete agreement

Answer 37

An agreement between an employer (the principal) and an employee (the agent) to protect the employer’s customers, trade secrets, confidential information, and other items for a specific period after an employee relationship has been terminated.

Question 38

In pari delicto agreement

Answer 38

An illegal transaction in which both parties are equally at fault.

Question 39

Severable contract

Answer 39

A contract that includes two or more promises, each of which a court can enforce separately.