05.04.01 Bus-Law - Contracts Law -Terms

Front 1

A ________ is an agreement giving rise to obligations which are enforced or recognized by law. In common law, there are 3 basic essentials to the creation of a contract: (i) agreement; (ii) contractual intention; and (iii) consideration.

Back 1

A Contract

Front 2

The parties to the contract must have a ________ and a mutual understanding of what the contract covers. For example, in a contract for the sale of a "mustang", the buyer thinks he will obtain a car and the seller believes he is contracting to sell a horse, there is no meeting of the minds and the contract will likely be held unenforceable.

Back 2

Mutual Assent

Front 3

To help clarify Mutual Consent issues, the law has developed some rules defining when an agreement legally exists. In deciding whether the parties have reached agreement, the courts will apply an ________.

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Objective Test

Front 4

________, during this phase the parties negotiate and agree on the terms, usually formalized in a written contract or some other documented evidence of the arrangement (such as a receipt or purchase order, for example).

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Reaching an Agreement Phase

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________ begins once the contract is in place, the parties are legally required to perform their mutual obligations. If one party fails to perform, the other can sue to enforce the deal.

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Performance and Enforcement

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________ is what each party has to promise or provide something of value to the other. Without this exchange, there is no contract. Something of value must be exchanged -- such as cash, services, or goods (or a promise to exchange such an item) -- for something else of value.

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Mutual Consideration

Front 7

There must be a clear or definite ________ to make the contract binding. The most basic rule of contract law is that a legal contract exists when one party makes an offer and the other party accepts it. For most types of contracts, this can be done either orally or in writing. For example, the offer "Do you want to buy this?" and an unqualified acceptance "Yes!".

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Offer and Acceptance

Front 8

The ________ of the agreement must not violate the law. For example, you won't be able to enforce a loan agreement that charges interest in excess of what is allowed by usury laws or a service agreement to hire someone to rob a bank or kill your mother-in-law.

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Legal Purpose

Front 9

________ to the contract must be competent and understand what they're doing. For example, there is a presumption that minors and insane people usually don't know what they're doing and, for that reason, contracts they enter into won't be enforced under certain circumstances.

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Capable Parties

Front 10

Unless an offer includes a ________, it remains open for a "reasonable" time. What's reasonable, of course, is open to interpretation and will vary depending on the type of business and the particular fact situation. Keep in mind that until there is an acceptance of the offer, either party may revoke the offer, counter offer, or modify the offer.

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Stated Expiration Date

Front 11

A ________ is an offer to modify the agreement. It is not an acceptance, and will typically be treated as a rejection of the offer. For example, if the buyer counter-offers to purchase the piano for $800.00, that typically counts as a rejection of the original offer for sale. If the seller accepts the counter-offer, a contract may be completed. However, if the seller rejects the counter-offer, the buyer will not ordinarily be entitled to enforce the prior $1,000.00 price if the seller decides either to raise the price or to sell the piano to somebody else.

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Counter-Offer

Front 12

________ may be subject to attack on the basis that it is illusory (e.g., one party receives only what the other party was already obligated to provide), or that there is a failure of consideration (e.g., the consideration received by one party is essentially worthless), these defenses will not let a party to a contract escape the consequences of bad negotiation. For example, if a seller enters into a contract to sell a piano for $100, and later gets an offer from somebody else for $1,000, the seller can't revoke the contract on the basis that the piano was worth a lot more than he bargained to receive.

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Validity of Consideration

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________ is a contract formed between two parties, but some or all of the contract is for the benefit of a third party who owes no obligations under the contract.The classic third-party beneficiary contract is a life insurance policy, which is intended to benefit a survivor.

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Third-parties Beneficiary Contracts

Front 14

A ________ is one that binds two or more parties to fulfill whatever is required, and a several obligation requires each party to fulfill the obligation in its entirety by its self. Foe example a parent may cosign on a loan for their child. In the event that the child fails on the obligation to repay the loan, it is the obligation of the parent to pay the loan.

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Joint Obligation

Front 15

________ is an obligation contemplated by the contract that must br must be completed as per the contract. For example, if the purchaser of a piano pays the $1,000 purchase price, he can enforce the contract to require the delivery of the piano. However, unless the contract provides that delivery will occur before payment, the buyer may not be able to enforce the contract if he does not "perform" by paying the $1,000. Similarly, again depending upon the contract terms, the seller may not be able to enforce the contract without first delivering the piano.

Back 15

Performance or Delivery