Understanding Contract Law, Part 2

Question 1

Mutual assent

Answer 1

The act of two or more parties coming together to agree to the terms of a contract.

Question 2

Fraud

Answer 2

An intentional misrepresentation resulting in harm to a person or an organization.

Question 3

Representation

Answer 3

A statement of alleged fact.

Question 4

Material fact

Answer 4

A fact that is significant to a decision or matter at hand.

Question 5

Rescission

Answer 5

A legal act of canceling something (like a contract) and making it void.

Question 6

Unilateral mistake

Answer 6

A perception by one party to a contract that does not agree with the facts.

Question 7

Bilateral mistake

Answer 7

A perception by both parties to a contract that does not agree with the facts.

Question 8

Undue influence

Answer 8

The improper use of power or trust to deprive a person of free will and substitute another’s objective, resulting in lack of genuine assent to a contract.

Question 9

Uniform Commercial Code (UCC)

Answer 9

A model code that has been adopted in whole or in part by each state and whose purpose is to provide a consistent legal basis for business transactions throughout the United States and its territories.

Question 10

Parol evidence rule

Answer 10

A provision that prevents the terms of a contract from being modified by evidence of oral or other agreements after the contract has been written.

Question 11

Statute of frauds

Answer 11

A law to prevent fraud and perjury by requiring that certain contracts be in writing and contain the signature of the party responsible for performing that contract.

Question 12

Real property (realty)

Answer 12

Tangible property consisting of land, all structures permanently attached to the land, and whatever is growing on the land.

Question 13

Parol evidence rule

Answer 13

A provision that prevents the terms of a contract from being modified by evidence of oral or other agreements after the contract has been written.

Question 14

Assignment

Answer 14

The transfer of rights or property.

Question 15

Assignor

Answer 15

The party to a contract who makes an assignment.

Question 16

Assignee

Answer 16

The individual or entity to whom property, rights, or interests have been transferred.

Question 17

Statute of frauds

Answer 17

A law to prevent fraud and perjury by requiring that certain contracts be in writing and contain the signature of the party responsible for performing that contract.

Question 18

Privity of contract

Answer 18

The relationship that exists between the parties to a contract.

Question 19

Third-party beneficiary contract

Answer 19

A contract between two parties that benefits a third party.

Question 20

Creditor beneficiary

Answer 20

A third-party beneficiary owed a debt that is to be satisfied by performance of a contract.

Question 21

Donee beneficiary

Answer 21

A third-party beneficiary who receives the benefit of a contract’s performance as a gift from the promisee, with the intent of the contracting parties.

Question 22

Incidental beneficiary

Answer 22

A third-party beneficiary who has no contractual rights but benefits from a contract even though that is not the intent of the parties to the contract.

Question 23

Discharge

Answer 23

The act of ending a contract, agreement, or obligation.

Question 24

Tender

Answer 24

An offer to perform one’s duties under a contract.

Question 25

Novation

Answer 25

The act of substituting a contract with another contract, an obligation with another obligation, or a party with another party or adding an obligation.

Question 26

Accord and satisfaction

Answer 26

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

Question 27

Condition precedent

Answer 27

An event that must occur before a duty of performance arises in a contract.

Question 28

Condition concurrent

Answer 28

An event that must occur at the same time as another condition in a contract.

Question 29

Condition subsequent

Answer 29

An event that, if it occurs, discharges a duty of performance in a contract.

Question 30

Breach of contract

Answer 30

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

Question 31

Repudiation

Answer 31

A party’s refusal to meet obligations under a contract.

Question 32

Anticipatory breach

Answer 32

A party’s unequivocal indication before contract performance is due that he or she will not perform when performance is due.

Question 33

Material breach of contract

Answer 33

Violation of the agreement that would justify a nonbreaching party’s termination of the contract.

Question 34

Compensatory damages

Answer 34

A payment awarded by a court to reimburse a victim for actual harm.

Question 35

Consequential damages

Answer 35

A payment awarded by a court to indemnify an injured party for losses that result indirectly from a wrong such as a breach of contract or a tort.

Question 36

Punitive damages (exemplary damages)

Answer 36

A payment awarded by a court to punish a defendant for a reckless, malicious, or deceitful act to deter similar conduct; the award need not bear any relation to a party’s actual damages.

Question 37

Bad faith

Answer 37

An insurer’s intentional or reckless act (extreme or outrageous in nature) or denial of coverage without proper cause, often causing emotional distress and resulting in extracontractual and/or punitive damages.

Question 38

Extracontractual damages

Answer 38

A payment awarded by a court that exceeds the usual contract damages for a breach of contract.

Question 39

Mitigation of damages

Answer 39

A duty owed by an injured party to a claim to take reasonable measures to minimize or avoid additional injury or loss.

Question 40

Liquidated damages

Answer 40

A reasonable estimation of actual damages, agreed to by contracting parties and included in the contract, to be paid in the event of a breach or for negligence.

Question 41

Uniform Commercial Code (UCC)

Answer 41

A model code that has been adopted in whole or in part by each state and whose purpose is to provide a consistent legal basis for business transactions throughout the United States and its territories.

Question 42

Specific performance

Answer 42

A court-ordered equitable remedy requiring a party to perform a certain act, often—but not always—as a result of breach of a contract.

Question 43

Injunction

Answer 43

A court-ordered equitable remedy requiring a party to act or refrain from acting.