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158 Cards in this Set
- Front
- Back
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a set of legally enforceable promises
a binding agreement between 2 or more parties offeror makes an offer to an offeree offeree accepts or rejects the offer |
contract
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4 elements of a contract
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agreement
consideration capacity legality |
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consists of an offer by the offeror and an acceptance by the offeree
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agreement
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what each party gets in exchange for his/her promise
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consideration
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the legal ability to enter into a contract
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capacity
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the contract cannot be illegal
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legality
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2 bodies of law
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common/contract law
uniform commercial code |
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covers services, land and intangibles
every state has its own and they don't all have to be the same ie: if someone from Ohio is the offeror and someone from Florida is the offeree, which law will be used? they can use the uniform commercial code-- article 2 |
common/contract law
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statutory code
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uniform commercial code
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deals with contracts that involve the sale of goods
has been adopted by every state except Louisiana ie: if the seller extracts oil from the ground and sells it, that's a sale of a good, if the buyer extracts the oil, that is not the sale of a good if the buyer or seller cuts down a tree and sells it, that is the sale of a good-- either the buyer or the seller can cut down the tree |
article 2
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anything that is tangible and moveable
intangible goods are not covered by article 2 ie: tables, clothes, computers, pens, airplanes |
good
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a promise in exchange for a promise
offeror wants a promise from the offeree to form a contract offeror offers a promise and the offeree can accept or reject the offer a binding contract upon the exchange of the promises |
bilateral contract
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a promise for an act
offeror wants an act from the offeree to form a contract offeror wants the offeree to actually do something, not promise to do something once the offeree begins the act, the offeror must hold the offer open for a reasonable time to give the offeree time to complete the act not a binding contract until the act has been completed |
unilateral contract
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you have a dog and his name is storm, storm gets lost, you run an ad in the newspaper saying you will pay a reward of $1000 to anyone who finds storm
you made a unilateral offer because you are asking for someone to complete an act (find storm) when someone finds storm and returns him, they have accepted your offer if someone reads your ad and they call you and say they will find storm that is not a contract if someone finds storm, but they have not read the newspaper and they see on storm's tag where he lives and they bring storm back to you, that is not a valid contract because the offer was not communicated to the person who found storm |
unilateral contract example
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an agreement that meets all 4 of the legal requirements of a contract- agreement, consideration, capacity, and legality
a contract may be valid yet unenforceable |
valid contract
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a contract in which one party has the ability to get out of the contract
someone can get out of a contract for lack of capacity: someone who is a minor someone who is insane if someone perpetrates a fraud on you if someone exerts undue influence on you |
voidable contract
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someone who is 16 year old buys a car for $5000 from a dealer, the minor drives the car off a cliff a year later and survives but the car is totaled, the minor can set the contract aside (get out of it) and return the car to the dealer regardless of the condition it is in, and the minor will receive his/her $5000 back
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example of voidable contract
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not a contract at all
an agreement that has no legal effect and is not binding example: an illegal agreement |
void contract
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an oral or written contract
contracts do not have to be in writing terms are clearly specified |
express contract
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arise not from words but from the conduct of the parties
a binding contract terms are not clearly specified no words or very few words are used formed due to a meeting of the minds |
implied contract
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the plaintiff must have provided property or a service to the defendant
the plaintiff expected to be paid for the property or service and any reasonable person in the position of the defendant would have expected to be paid for the property or service the defendant could have rejected the property or service but chose not to |
3 requirements for a contract to be implied
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you walk into the barber shop and your barber cuts your hair, you have entered into an implied contract, if you walk out without paying, the barber can sue you
if you are at work and a landscaper cuts your grass while you are gone, you have no legal obligation to pay him because there was no meeting of the minds |
example of implied contract
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a court enforced contractual obligation to avoid unjust enrichment
not a contract because there is no meeting of the minds implied by law |
quasi-contract
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someone has fainted and a doctor comes up to them and saves their life, the doctor gives the person a bill for his services but the person doesn't want to pay, even though there is not a contract, the courts will still treat this as a contract
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quasi-contract examples
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a finished contract
when everyone has completed all of the terms of the contract both sides have done everything |
executed contract
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when some of the contract has not been completed
if neither side has done/finished their performance if one side has fully performed and the other has not if one side has started their performance and the other has not |
executory contract
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contracts that have a special form
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formal contract
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4 types of formal contract
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contracts under seal
recognizance letters of credit negotiable instruments |
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a contract that must be sealed in order to be legal
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contracts under seal
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a contract that arises in court when a person says he/she will perform an act or pay a price upon failure to do so
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regnizance
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a contract by the person who issues the letter to pay a sum of money on receipt of an invoice or other documents
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letters of credit
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written documents signed by someone that agrees to pay a sum of money at a certain time to the holder of the instrument
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negotiable instruments
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can be oral or in writing
99% of all contracts no formalities are required in making them any contract that is a formal contract |
simple contracts
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offeror makes an offer to the offeree
offer, rejection and revocation are valid/effective when they are received |
the offer
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when the offeror takes back an offer
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revocation
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intent
terms must be definite offer must be communicated |
requirements of a valid offer
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the offeror clearly expresses intent to make an offer
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intent
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an invitation to negotiate or an expression of possible interest in an exchange is not an offer because it does not express any willingness to be bound by an acceptance
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preliminary negotiations
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they are not offers, they are invitations for potential customers to make an offer
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advertisements
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two types of auctions
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with reserve
without reserve |
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the seller is expressing intent to receive offers
the auctioneer can withdraw the item from the auction at any time before his hammer falls (signals acceptance) the bidder can revoke his bid at any time prior to when the hammer falls |
with reserve
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the seller is treated as making an offer to accept the highest bid
the seller must accept the highest bid very few auctions |
without reserve
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to whom you are offering? what is the offer?
all material terms must be included in the contract the offer must be somewhat definite in its terms |
terms must be definite
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include price, subject matter, quantity, quality, and parties
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material terms
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offer must be clearly communicated to the offeree
offeree is the only one that can accept the offer |
offer must be communicated
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lapse of time
revoke the offer reject the offer death of either party insanity of either party destruction of the subject matter |
ways to terminate an offer
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the offeror has the power to revoke the offer at any time but if the offer states that it will be held open for a certain amount of time, the offer is terminated when that time ends
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lapse of time
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the offeror can take back the offer even if he says he will keep the offer open for a certain period of time
effective when received by the offeree |
revoke the offer
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an offeror can revoke an offer any time prior to acceptance
if you make an offer to someone and say that the offer will not be revoked for 30 days, you can still revoke the offer after 10 days if you want |
under common law
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an agreement where the offeree gives the offeror consideration in exchange for the offeror's agreement to hold the offer open for a certain amount of time
if the offeree gives the offeror consideration in exchange for the offeror's promise to hold the offer open, the offeror cannot revoke the offer |
option contract
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makes an offer irrevocable without consideration
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under the uniform commercial code
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contract must be for the sale of a good
offeror must be a merchant must be a written, signed offer offer must indicate that it is irrevocable |
4 requirements for 2-205 to apply
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sale of land? common law would apply, not the UCC- article 2
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contract must be for the sale of a good
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if it is your business or your livelihood, you are a merchant for the sale of your goods
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offeror must be a merchant
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signed by the offeror to the offeror's agent
offeree doesn't need to sign it |
must be a written, signed offer
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anything to indicate that the offer will remain outstanding and will not be revoked
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offer must indicate that it is irrevocable
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if the offeree rejects the offer, it is terminated
a counteroffer kills the original offer if you reject an offer and then decide you want to accept, you cannot accept the offer after you have already rejected it |
reject the offer
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an affer made by an offeree to his offeror relating to the same matter as the original offer and proposing a new offer that is different from the original offer
if you reject the offer and then make a new offer, you have done this |
counteroffer
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the offer is terminated immediately if the offeror/offeree dies
if the offeree does not know that the offeror has died, the offer is still terminated |
death of either party
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the offer is terminated immediately if the offeree loses the legal capacity to enter into the contract
if the offeree does not know that the offeror has lost legal capacity, the offer is still terminated |
insanity of either party
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if the subject matter of the offer is destroyed, the offer is terminated
ie: if I offer to sell you a car and then the car gets damaged, the offer is terminated |
destruction of the subject matter
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once an offer is made by an offeror, offeree has the power to accept the offer and form a contract
silence is not acceptance valid when it is sent-- under common law and code |
the acceptance
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intent
acceptance of definite terms acceptance must be communicated |
requirements of a valid acceptance
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the offeree must show intent to enter the contract by performance or a return promise
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intent
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when bilateral contract is being formed under common law, the mirror image rule applies
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acceptance of definite terms
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offer and acceptance must have the same terms (of perfect match)
if the terms do not match, no contract is formed and the attempted acceptance is a counteroffer |
mirror image rule
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modification of the original mirror image rule stating that an offeree may include in the acceptance terms that are different from or additional to the original terms of the offer as long as the new terms do not change the terms of the original offer, the offeror does not reject the new terms, and the offeror did not state in the original offer that all terms must be accepted exactly as proposed
when the offer and acceptance come together, they have different terms, so they must decide whose terms will control |
article 2-207
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when neither the offeror or the offeree is a merchant or only one party is a merchant
when the offeror and the offeree are both merchants |
2 sections
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the offeror's terms control and offeree's terms are mere proposals
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when neither the offeror or the offeree is a merchant or only one party is a merchant
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the offeree's terms control unless 1 of 3 exceptions apply:
if the new terms result in a material alteration if the offeror in his or her offer says "my terms and only my terms control" and the offeree accepts, there is a contract and the offeror's terms control if the offeror rejects the offeree's terms within a reasonable amount of time, the offeror's terms apply |
when the offeror and the offeree are both merchants
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the offeror can specify the means that the acceptance should be communicated and if certain means are specified, the offer is only valid if that form of communication is used
if no means of communication is specified, any reasonable means is accepted the means by which the acceptance can be communicated to the offeror can either be expressly stated in the offer (express authorization) or implied from the facts surrounding the communication of the offer to the offeree mailbox rule if an acceptance is received after a rejection, the acceptance is not valid because rejection terminated the offer if the acceptance is communicated to the offeror after a rejection is sent but not received by the offeror, the contract is valid and the rejection will have no effect when it is received |
acceptance must be communicated
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an acceptance is valid when sent but a revocation is valid only when received by the offeree
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mailbox rule
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what a person receives in return for a promise or act
required in every contract both sides each should receive a benefit and both sides should suffer a detriment |
consideration
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what constitutes consideration?
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money, property (real or personal), a service, the exchange of promises
love and affection do not constitute legal consideration |
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lack of consideration
adequacy of consideration illusory promise past consideration preexisting duty |
rules of consideration
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for a contract to be valid, there must be consideration
in a unilateral contract, one party's consideration is the promise and the other's is the act both sides must give consideration exce[tion: promissory estoppel |
lack of consideration
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when one party makes a promise knowing the other party will rely on it
usually applies to charitable organizations but can apply in other situations as well |
promissory estoppel
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must make a promise
must justifiably rely upon said promise must make a change in position |
requirements
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the court does not consider whether or not the consideration is a "good bargain" for either party
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adequacy of consideration
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not really a promise, so it is not consideration
ie: if you say you are going to buy all your coal from a company to heat your house and only from them, this is a contract |
illusory promise
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past consideration/moral consideration do not constitute consideration
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past consideration
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a promise to do something that you are already obligated to do is not valid consideration
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preexisting duty
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parties can modify a contract but any modification must be supported by additional consideration
both parties must give additional consideration |
modification of a contract under common law
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after 2 parties enter enter into a contract and they decide to modify it, under article 2, modifications do not require additional consideration
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under article 2-209
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there is no dispute on the amount of money you owe
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liquidated debt
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disputed debt
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unliquidated debt
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a person with legal capacity to enter into a contract is one who has the mental ability to understand his/her rights and responsibilities under the contract
both sides must have it when making a contract |
capacity
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minors
insane people intoxicated people |
people that lack capacity
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those under the age of 18
enter into voidable contracts at the election of the minor can disaffirm any time up to majority or for a reasonable time thereafter |
minors
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state that they will not be bound by the contract
minors have the right to do this to their contracts and adults that have entered into contracts with a minor do not if the minor wants to do this to the contract, he must return what he still has to the adult regardless of the condition of the item and the minor gets everything back |
disaffirm
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in some states, if a minor misrepresents his age, he gives up his right to disaffirm the agreement
contracts for necessaries are sometimes an exception |
exceptions
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an item is considered a necessity if your parents haven't provided it for you and you need it for something
the minor is in a voidable contract but is held liable for the reasonable value of the necessary under quasi contractual theory |
necessity
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can ratify the contract when they reach the age of majority
once ratified, a contract is no longer voidable |
minors
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when the person states that he intends to be bound by the contract he entered into as a minor
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express ratification
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when the person continues to comply with the contract after reaching the age of major that shows intent to ratify the contract
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implied ratification
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those suffering from a mental illness
anytime prior to becoming sane or a reasonable time after, the insane person can disaffirm the contract anytime after becoming sane, the insane person can ratify the contract |
insane people
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adjudicated insane
walking (unjudicated insane) |
2 types of insane people
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officially insane; determined by court to be insane
no capacity to enter into a contract any contracts that they enter into are void |
adjudicated insane
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unofficially insane
enter into voidable contracts at the election of the insane party in the insane person chooses to get out of the contract, they can but they must restore the other party to their status quo |
walking (unadjudicated) insane
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those under the influence of drugs or alcohol
if a person is so intoxicated that they do not know what they are doing, any contracts they enter into are voidable at the election of the person that was intoxicated if the intoxicated person wants to get out of the contract, they must restore the other party to their status quo the intoxicated person can disaffirm the contract before they become sober or a reasonable time after the intoxicated person can ratify the contract after they become sober or a reasonable time after |
intoxicated people
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the subject matter of the contract must be legal and it must be able to be performed legally
if the agreement is illegal, it is void because the purpose of the law is to protect a group of people, the court might come to the aid of the party who is less guilty |
legality
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contracts that violate state or federal statutes
ursury statute contracts contrary to public policy |
types of illegal contracts
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gambling
licensing statutes |
contracts that violate state or federal statutes
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agreements in which parties pay consideration for the chance to obtain money or property
chance and consideration are necessary for something to be considered gambling the lottery is not gambling anything that requires skill is not gambling betting someone that you will beat them in basketball card games investing is not gambling |
gambling
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people in certain fields must obtain a license before they can legally enter into an agreement to perform their service
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licensing statutes
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purpose is to give the government a way to regulate specific industries
goal is to protect the public by getting competent people into important positions people must take a test to get into the position if the person does not have the proper license when entering into an agreement, the agreement is void |
regulatory licensing statute
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purpose is to generate revenue
people must pay a fee to get a license if a person does not have a license and he/she enters into an agreement, the agreement is still valid but the person without the license may be subject to a fine |
revenue raising statute
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deals with interest rates
purpose is to prohibit people from charging an excessive rate of interest must be for a pure borrowing of money to violate the statute eliminates loan sharks if an interest rate exceeds the fair rate of interest, that violates the status corporations are not subject to these rates |
ursury statute
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the penalty is a loss of all interest
the penalty is a loss of all interest in excess of the legal rate- used by majority of the states the penalty is a loss of the interest and the principal |
if a person violates the usury statute, these 3 things may happen
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if public policy says it is not right, then it is illegal
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contracts contrary to public policy
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agreements that restrain trade and are seen as harmful to consumers
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contracts in restraint of trade
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when the restraint on trade is reasonable
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covenant not to compete
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2 types
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covenant not to compete as part of an employee contract
covenant not to compete as part of the sale of a business |
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if you leave a company, you agree to not work for a competitor in the same city
if the company can show that you caused no harm by going to work for another competitor, the court will not enforce this rule if a company can show that you took the magic formula of coke to another competitor, causing harm to the company you left, the court will enforce this rule |
covenant not to compete as part of an employee contract
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when the business is running and wants to continue running on its own
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covenant not to compete as part of the sale of a business
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a statement releasing one of the parties to an agreement from all liability regardless of who is at fault or what the injury suffered it
when you sign a form saying you won't sue the company if you get injured but, if the company is negligent, you can sue and the company must prove they were not negligent |
exculpatory clause
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contracts that contain multiple parts that can be performed separately
consideration is offered for each part numerous contracts in one if part of a contract is legal and part of it is illegal, the court can void only the parts of the contract that are illegal and enforce the remaining legal parts of the contract |
severable contracts
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contracts that require complete performance by both parties
must be enforced or rejected in their entiretyif part of a contract is legal and part of it is illegal and the contract cannot be separated (indivisible) the entire contract is void |
indivisible contracts
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both sides to the contract, in reality, must voluntarily and knowingly consent to have a valid contract
if both parties don't in reality give their consent, the agreement is voidable or void |
reality of consent
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duress
undue influence mistake fraud innocent misrepresentation mistake unconscionability |
situations in which someone did not knowingly or voluntarily give their consent
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to deprive someone of their own free will
to force someone to enter into a contract |
duress
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threat of physical harm (agreement is void)
threat of economic duress (agreement is voidable at the election of the party upon whom the duress was exerted) |
two types of duress
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where someone with a fiduciary position or trust position exerts influence on another person to make an agreement
you rely upon someone's judgment and they take advantage of you for their economic benefit the persuasive efforts of the dominant party have interfered with the ability of the other party to make an individual decision agreement is voidable at the election of the party that the undue influence is exerted upon |
undue influence
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an incorrect belief about the facts of a contract at the time the contract is concluded
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mistake
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unilateral mistake
bilateral mistake |
two types
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an error made by one person
if one person make a unilateral mistake and the other party has reason to know or should have known (obvious mistake), the contract is voidable if one person makes a unilateral mistake and the other party doesn't know/shouldn't have known the other party made a mistake, the contract is valid |
unilateral mistake
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both sides made a mistake
agreement is voidable by either party |
bilateral mistake
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where the party enters the contract but they don't know they are entering a contract
if you give someone a contract and they fail to read the contract, that doesn't matter if you sign something and you have no idea that it is a contract almost never occurs |
fraud in the execution
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the agreement is voidable by the election of the party that the fraud was perpetrated upon
silence is not fraud unless you have active concealment |
fraud in the inducement
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covering up the defect; it is fraud
if it a latent, hidden defect that you know about, you have a duty to disclose it if a defect is patent, you do not need to point it out |
active concealment
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misrepresentation of a material fact not of value
intent to deceive justifiable reliance on the false assertion injury or damages |
4 elements
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if i tell you that something is worth $2000 and it is worth $200 this is not fraud
if i tell you that my cow is a horse but it is actually a cow, that is fraud |
misrepresentation of a material fact not of value
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scienter
the party making the false assertion implies that he/she knows the accuracy of the assertion |
intent to deceive
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you got less than you bargained for in the contract, you were harmed or damaged financially
did not get what you were expecting |
injury or damages
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keep the items and sue for damages
rescind/ cancel the contract |
2 remedies
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results from a false statement about a material fact that the person making the statement believe to be true
fraud in the inducement without the second element- no intent to deceive the person making the claim lacks scienter the party that was misled by the false statement can rescind the contract but cannot sue the person who unknowingly made the false statement |
innocent misrepresentation
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no meeting of the minds
voidable agreement by either party contract is not enforceable |
bilateral (mutual) mistake
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one party makes a mistake
if one side makes a mistake and the other side doesn't know the other party made a mistake, it is voidable by the person who made the mistake |
unilateral mistake
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when one party has much more bargaining power than the other party so the dominating party dictates the terms of the agreement
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unconscionability
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the contract that results from an unfair amount of power possessed by one party to the contract, interfering with the other party's free will
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adhesion contract
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requires certain types of contracts to be in writing
as a general rule, most contracts do not have to be in writing if the agreement is valid but supposed to be in writing, the contract is valid but unenforceable the statute of frauds is a defense to get you out of a contract so you are not bound by it only a defense to executory contracts not a defense to an executed contract |
statute of frauds
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to ease contractual negotiations by requiring sufficient evidence to prove the specific terms of a contract
to prevent unreliable oral evidence from interfering with a contract to prevent parties from entering into contracts in which they do not agree |
3 main purposes
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promise in consideration of marriage
contracts dealing with the sale of land or interest in land contracts not possible to complete within a year promise to pay the debt of another administrator's/executor's promise to pay the debt of a decedent out of the executor's own pocket |
5 types of contracts that must be in writing to be enforceable under common law
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does not apply to mutual promises to marriage
if you can't get someone to marry you, you offer them something so that they agree to marry you |
promise in consideration of marriage
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an agreement two parties enter into before they get married stating the ownership rights each party has in the other party's property
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prenuptial agreement
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land includes anything attached to the land such as buildings and trees
interests in land include leases, easements, mortgages, etc. a lease must be for more than a year to be in writing |
contracts dealing with the sale of land of interest in land
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the one year period begins the day after the contract is signed
possibility of completion of the contract within one year is considered, not the likelihood that the contract could be completed within one year |
contracts not possible to complete within a year
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must be a secondary or collateral promise
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promise to pay the debt of another
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when a party outside a primary agreement promises to fulfill one of the original party's obligations if the original party does not fulfill his obligations
must be in writing |
secondary promise
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a situation where you have a secondary or collateral promise to pay but the reason you make the secondary promise to pay is for your own benefir
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exception: main purpose doctrine
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don't have to be in writing
debts incurred in a contract |
primary promise
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executor is not responsible for the debt of the deceased
if the estate doesn't have the money, executor will pay out of his own pocket |
administrator's/executor's promise to pay the debt of a decedent out of the executor's own pocket
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it must be in writing and the contract must be signed by the party being sued
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contracts for the sale of goods totaling more than $500
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specially manufactured goods that cannot be sold in the ordinary course of business
if you admit in a court of law you entered a contract, the court will enforce the contract for the quantity of goods admitted confirmation rule |
3 exceptions
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in order for this to apply, both parties have to be merchants
offeror and offeree have to be merchants if you can prove the person received the confirmation and didn't object to it, their signature is waived |
confirmation rule
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deals with oral or written statements made outside of the contract
only applies if there is a written contract oral or written statements made prior to or during the signing of the contract are inadmissible to alter the written contract oral or written statements made after the signing of the contact are admissible |
parol evidence rule
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prior to the execution
contemporaneously with the signing of the contract subsequent to the contract (after) |
3 different times oral or written statements can be made
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identification of the parties in the contract
subject matter consideration important terms in the contract contract must be signed by the party being sued usually both parties sign the contract contract doesn't have to be in any formal format |
writing elements required
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