Blpr - Contracts , Insurance, Sales

Front 1

What is duress? What is its effect on a contract?

Back 1

the threat of harm to a party that forces him to enter into a contract with the person threatening him (or on whose behalf)
Ex: i'll kill your boyfriend if you don't do X
- Effect: contract is voidable by victim

Front 2

Define third beneficiary contracts

Back 2

contracts that are likely to benefit a person other than the contracting parties

Front 3

What is a creditor beneficiary? What rights do they have?

Back 3

- third person to whom a debt or other duty is owed by the promisee.
- debt/duty is discharged by promisor rendering performance to 3rd party. If they fail to perform, 3PBen can:
1. Sue the promisor on the contract
2. Recover original obligation from promisee, who is sec. liable

Front 4

Offer

Back 4

a proposal made by one party (the offeror) to another (the offeree) which manifests an intent to enter into a contract. The offeree has the power to create the contract by acceptance.

Front 5

What is a Unilateral Contract?

Back 5

promise for an act, typically a reward

(if exam lists bilateral or unilateral, usually the right choice!)

Front 6

What is a Void Contract?

Back 6

agreement that lacks one or more of the essential elements of a contract, and therefore has no legal effect, cannot sue for damages

- “Go take Grandpa for a ride and kill him”
- Covenant (promise) not to compete. Can’t restrain trade, contract doesn’t exist. If restraint is reasonable, courts will enforce
- Exoneration clauses – usually void, courts won’t support, cannot completely remove liability for negligence

Front 7

What is a Voidable Contract?

Back 7

valid, but one of the parties can disaffirm it. Remains binding if not rescinded.
Examples: contracts of infants, incompetents, and contracts obtained by fraud.
- Must show all 5 elements of fraud for a voidable contract (MSRID or MRRID)

Front 8

Elements of Actual Fraud

Back 8

o Misrepresentation of a material fact, not an opinion
o Scienter – intent to deceive
o Reliance – if you don’t rely on it, its not voidable
o Intent to rely on the misrepresentation
o Damages

Front 9

Elements of Constructive Fraud

Back 9

o Misrepresentation of a material fact, not an opinion
o Reckless disregard for the truth
o Reliance – if you don’t rely on it, its not voidable
o Intent to rely on the misrepresentation
o Damages

Front 10

What does joint and several mean?

Back 10

2 or more people under a joint duty to a single obligee. Either one can be held responsible for performance. Discharge of one does not discharge others, obligee only entitled to one performance

Front 11

Give examples of contracts that cannot be assigned.

Back 11

- personal service, or involves a confidential relationship between the parties
- if the duty of the obligor would be materially changed, the burden or risk materially increased, or the chances of obtaining return performance are materially impaired
- if prohibited by contract

Front 12

What is the effect of a party assigning all of their rights under a contract?

Back 12

- assignee takes whatever rights the assignor had against the obligor, but no more.
- Assignor no longer owns the right, and if they receive the assigned performance, the assignee can recover from him
- Can revoke a gratuitous assignment unless there is promissory estoppel, they deliver either a tangible document embodying the right assigned or a written assignment, or the assignee collects the obligation prior to the attempted revocation

Front 13

What can an injured party do if an innocent misrepresentation occurs?

Back 13

If an innocent misrepresentation is material, such misrepresentation gives rise to the following:


Defense A defense to an action to enforce the contract.

Grounds for Rescission Grounds for rescission; that is, a restoration of each party to its original position insofar as can equitably be accomplished, including the return of any benefits received.

Front 14

List the required elements to form a binding contract

Back 14

Agreement
Consideration
Statute of Frauds
Capacity
Offer
Legal subject matter
Acceptance

Front 15

Define consideration

Back 15

An act or a forbearance to act, or a promise to do either, given by one party to a contract in exchange for another party’s act or promise; the consideration must be understood by both parties to be the “quid pro quo,” or purchase price.

Front 16

Must consideration be fair and adequate between the parties?

Back 16

The general rule is that the law will not inquire into the adequacy of consideration, i.e., a contract need not be absolutely fair to both sides. Exceptions are:
- An exceedingly disadvantageous bargain may be evidence of fraud, duress, or unconscionability, which furnishes a court with reason to refuse enforcement.
- A contract to exchange unequal amounts of money or fungible goods at the same time is inadequate for lack of consideration. However, unequal amounts may be exchanged at different times.
-Nominal consideration, e.g., $1, for an act or promise of some value may raise the question of whether it was actually the quid pro quo. However, nominal consideration is usually adequate for an option contract.

Front 17

What effect does promissory estoppel have on consideration?

Back 17

The promisor is “estopped” (prevented) from asserting the lack of consideration for the promise if the following elements are present:
1. The promisor makes an express promise.
2. The promisor expects or should expect the promise to induce and it does induce the promisee to act or forbear to act in a substantial way.
3. The promisee in fact relied on the promise and this reliance was justifiable.
4. An injustice will result (not merely a legal detriment) to the promisee, unless the promise is enforced.

Front 18

Can past consideration satisfy the requirement of consideration?

Back 18

A promise in exchange for an act completed prior to the making of the promise (past consideration) will not be enforced because the act was not done in exchange for the promise, but independent of it.

Front 19

What are the 6 contracts that require a writing under the Statute of Frauds?

Back 19

- Sale of Goods $500 or more
- Real Estate Contracts
- Impossible to perform within one year from date contract is made
- Promise to pay the debt of another
- Promise of an Executor to be personally liable for the debt of the estate
- Promise in consideration of marriage

Front 20

In a writing under the Statue of Frauds:
1. How many parties must sign?
2. Must the terms be in one document?

Back 20

1. Can be signed by one, as long as it is the party to be charged. If one party signs the memo and the other does not, the contract can be enforced only against the one who signed.
2. The writing need not appear in a single document, so long as the several documents refer to the same transaction

Front 21

State exceptions when oral contracts impossible to perform in one year and oral contracts to sell land would be enforceable.

Back 21

If performance could occur within the one-year period, the contract is not within the statute and need not be written. An employment contract for life need not be written because performance could be completely performed within a year, i.e., if the employee dies.

An oral real estate contract will typically satisfy the statute if the buyer has possession of the land and made either partial payment or improvements.

Front 22

Explain the protection the law gives to minors making a contract.

Back 22

A contract made by an infant is voidable by the infant, i.e., s/he may avoid performance. The one exception to this rule is that an infant may not avoid contracts that supplied her/him with necessities, such as food, shelter, and clothing. The other party to a contract with an infant has no power to void the contract on the basis of infancy.

Front 23

When could a drunk disaffirm a contract?

Back 23

Intoxicated persons are treated like incompetents; a contract made by an intoxicated individual when s/he is unable to understand the nature of the transaction generally is voidable by the intoxicated individual.

Front 24

Can an advertisement or price quotation be an offer?

Back 24

Communications sent to large numbers of people (newspaper advertisements) are normally only invitations. However, when an ad limits the quantities or uses “first come, first served” language, it is probably an offer.

Front 25

Explain a counteroffer and when it is effective.

Back 25

A counteroffer, in which the offeree attempts to substitute different terms, is treated as a rejection and a new offer. However, a counteroffer may be worded so as to reserve the original offer for further consideration.

Front 26

Explain a rejection and when it is effective

Back 26

Any conduct communicated to the offeror, either by word or act, that indicates the offeree’s intention not to accept constitutes a rejection. A rejection is effective only upon receipt. Thus, the offeree can change her/his mind and accept if the offeree does so before the tendered rejection is received.

Front 27

What is a novation

Back 27

A substitution of a new contract between the same or different parties that discharges the old contract and extinguishes the outstanding obligations.

(usually the right answer!)

Front 28

What is the effect of death of a party on an offer and on a contract?

Back 28

In general, the death or supervening insanity of the offeror or a specific offeree terminates the offer.

Death excuses performance in a contract.

Front 29

What is the mailbox rule?

Back 29

If acceptance is sent by mail, it is effective when sent, even if it is thereafter delayed or lost.
"check's in the mail"

Front 30

What is Scienter

Back 30

-intention to deceive
-The knowledge that one’s statement is false or made in reckless disregard as to whether it is true or false.

Front 31

Explain the parol evidence rule

Back 31

If a contract is completely integrated into a written instrument, any evidence (written or oral) of a prior or contemporaneous agreement offered to modify or contradict the terms of the written instrument is inadmissible. Parties are presumed to have included every material term in the completed writing.

Front 32

Does the parol evidence rule exclude subsequent evidence?

Back 32

The rule does not apply to subsequent agreements varying the terms of a prior integrated written contract

Front 33

Does the parol evidence rule exclude evidence of fraud?

Back 33

Yes.

Front 34

What does a unilateral mistake have on a contract?

Back 34

A mistake made by only one party to the contract. The mistake is usually to the detriment of the mistaken party. In general, if the other party had no notice and acted in good faith, the mistaken party cannot avoid the contract. One major exception is that if the other party knew or had reason to know of the mistake and attempted to take advantage of it, the mistaken party may be able to avoid the contract.

Front 35

What effect does a mutual mistake have on a contract?

Back 35

A mistake made by both parties; both parties are mistaken as to the nature or existence of the subject matter, the terms of the contract, or other material facts.
- A mistake made by both parties; both parties are mistaken as to the nature or existence of the subject matter, the terms of the contract, or other material facts.

Front 36

What is an incidental beneficiary?

Back 36

A third person who benefits from a contract between others made without intent to benefit her/him. Incidental beneficiaries have no contract rights and no cause of action if parties fail to perform.

Front 37

What effect does a material breach by one side have on a contract?

Back 37

A major defect in performance that constitutes a failure of consideration and excuses the other party from her/his duty to perform.

Front 38

What are Conditions Precedent and what effect do they have on performance of a contract?

Back 38

An uncertain future event that must occur before there is a duty to perform.

Front 39

What are Conditions Subsequent?

Back 39

An uncertain future event that, if it occurs, relieves a party of a previously existing duty to perform.

Front 40

What are conditions concurrent?

Back 40

Two promises that are to be performed at or about the same time, one in exchange for the other.

Front 41

Explain an accord and satisfaction and its effect on a contract.

Back 41

An agreement to accept a performance in the future in substitution for a performance required under an existing contract. Performance of the substituted duty is the “satisfaction” that discharges the original duty. In the case of disputed or unliquidated debts where there is a question as to the amount actually owed on a contract, an accord can be used to settle the debt. In this situation, use of "PIF" on a check for an amt less than that claimed by the creditor may operate as an accord. Thus, an accord, or an offer to settle for a diff sum, will result if the amount is in dispute and the creditor has reasonable notice that the check is being tendered as full satisfaction. A satisfaction and acceptance of the accord occurs upon the cashing of the check.

Front 42

Explain a novation and its effect on a contract.

Back 42

A substitution of a new contract between the same or different parties that discharges the old contract and extinguishes the outstanding obligations.

Front 43

What is a recission?

Back 43

Undoing of the contract on both sides and placing the parties in their original position.

Front 44

What is the effect on a contract if performance becomes impossible?

Back 44

Unperformed contracts may be excused by operation of law - other party is entitled to recission.

Front 45

What is the statute of limitations?

Back 45

A statute of limitations is a statutorily created period of time within which a party must bring an action to enforce its rights. The expiration of the statute of limitations does not technically discharge a party’s performance, but operates to bar the bringing of an action against a nonperforming party.

Front 46

What if a breach is minor and the party substantially performs?

Back 46

A slight breach entitles the other party to at least nominal damages.

Front 47

What is a liquidated damage clause, and when is it enforceable?

Back 47

Liquidated damages are specific amounts provided in the contract to be recoverable in the event of a breach. If the liquidated damages are excessive, a court may interpret them as a penalty and refuse enforcement.
- They are enforceable if actual damage would be difficult to assess and the amount appears reasonable at time of contracting.

Front 48

What is specific performance and when can it be used?

Back 48

When the injured party cannot obtain complete relief through the award of damages, a court may order the breaching party to specifically carry out the terms of the breached contract
- Specific performance may be granted when the legal remedy of damages is insufficient. (unique goods, output, enfr. K not to compete)

Front 49

Explain the insurable interest requirement in fire and casualty insurance.

Back 49

There is both a legally recognized interest and the possibility of a pecuniary loss in the event the property is damaged or destroyed.

Front 50

When must the insurable interest requirement exist?

Back 50

an insurable interest must exist only at the time of loss.

Front 51

What is the minimum coverage requirement of coinsurance?

Back 51

-if the insured fails to carry insurance >= a stated % (usually 80%) of the value of the property insured, they become a coinsurer and must proportionally bear the loss.

Front 52

What is the share of the loss a coinsurer will have to pay?

Back 52

The share of that loss will be the lower of
1)property face value,
2)FMV of property on date of loss,
3)coinsurance amount

Front 53

What is the coinsurance formula?

Back 53

The amount of recovery for a partial loss is equal to (1) the face value of the insurance policy, divided by the coinsurance percent times the actual fair value of the property, times (2) the actual loss.

Recovery = (Face Value of Insurance /( Coinsurance% x FV of property) ) x Actual Loss

Front 54

What is the effect of total loss of property on coinsurance?

Back 54

If there is a total loss, the insured will collect the full amount of the insurance if it is the lowest of the three measures of recovery.

Front 55

What are the 3 types of irrevocable offers?

Back 55

1. Firm offer
2. Option contract
3. Unilateral contract

Front 56

What is a firm offer?

Back 56

a signed written offer by a merchant to buy or sell goods in which the merchant gives assurance that the offer will be held open
- irrevocable for the stated period of time

Front 57

If a buyer rejects goods after delivery, when does title revert to the seller?

Back 57

immediately

Front 58

Does an oral modification to an existing contract for the sale of goods need new consideration to be binding?

Back 58

NO.
If its less than $500, Statue of Frauds does not apply, and the oral modification is enforceable.

Front 59

When is a warranty of fitness for a particular purpose created?

Back 59

When the seller has actual or constructive knowledge of the particular purpose for which the goods are required

Front 60

When does a sale on approval become a sale?

Back 60

when the buyer accepts the offer