Unit 1 Chapter 16

Question 1

Contracts

Answer 1

An agreement between 2 or more parties through a meeting of the minds pledged to perform or refrain
from performing some act

Question 2

Legal status of contracts

Answer 2

Valid – meets legal requirements for validity

Valid but unenforceable – contracts that meet validity requirements but are not in writing

Void – does not meet validity requirements, so is not a contract at all

Voidable – appears to be valid but can be rescinded by party who acted under some kind of disability or
was victim of duress, coercion, or fraud in creation of contract

Question 3

Criteria of valid contracts

Answer 3

Competent parties – legal age, mental competence, legitimate authority

Mutual consent – offer and acceptance without equivocation

Consideration – valuable consideration is valid; good consideration is not valid; sufficient consideration is
valid and necessary

Legal purpose – cannot be contracted for illegal purposes

Voluntary, good faith act – free and voluntary act, no duress, coercion, fraud, or misrepresentation

Question 4

Validity of contract conveyance

Answer 4

• Be in writing
• Contain legal description of property
• Signed by one or more parties
• Exception is lease contract for term of 1 year or less, which can be oral

Question 5

Factors that challenge validity

Answer 5

Negligence – failure to use due diligence in carrying out duty

Misrepresentation – misstatement of material fact that is detrimental to other party

Fraud – misrepresentation of material fact with intent to deceive other party who is then injured by
misrepresentation

Question 6

Enforcement limitations

Answer 6

Statute of limitations – injured party must rescind or disaffirm the contract within a limited time period

Statute of frauds – certain contracts must be in writing to be enforceable