Bus Law Today Ch. 7 Terms & Review 10Th Ed. Miller

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Promise

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A declaration that binds the person who makes it (the promisor) to do or not to do a certain act.

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Promisor

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A person who makes a promise.

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Promisee

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A person to whom a promise is made; and has a right to expect or demand that something either will or will not happen in the future.

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Contract

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A set of promises constituting an agreement between parties, giving each a legal duty to the other and also the right to seek a remedy for the breach of the promises or duties. Contracts are agreements that can be enforced in court. If the contractual promise is not fulfilled, the party who made it is subject to the sanctions of a court. That party may be required to pay monetary damages for failing to perform the contractual promise and, in certain limited instances, may be required to perform the promised act.

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Objective Theory of Contracts

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The view that contracting parties are bound only by terms that can be objectively inferred from promises made. Objective facts include (1) what the party said when entering into the contract, (2) how the party acted or appeared, and (3) the circumstances surrounding the transaction. In the discussion of express versus implied contracts, intent to form a contract may be manifested by conduct, as well as by words, oral or written.

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Requirements of a Valid Contract

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Four requirements must be met for a valid contract to exist:
(1) Agreement
(2) Consideration
(3) Contractual Capacity
(4) Legality

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Contractual Capacity

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Both parties entering into the contract must have the contractual capacity to do so, meaning that the law must recognize them as possessing characteristics that qualify them as competent parties.

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Legality

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The contract's purpose must be to accomplish some goal that is legal and not against public policy.

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Agreement

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A mutual understanding or meeting of the minds between two or more individuals regarding the terms of a contract. An agreement to form a contract includes and offer and acceptance. One party must offer to enter into a legal agreement, and another party must accept the terms of the offer.

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Consideration

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The value given in return for a promise or performance in a contractual agreement. Any promises made by the parties must be supported by legally sufficient and bargained-for consideration (something of value received or promised to convince a person to make a deal).

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Defenses to the Enforceability of a Contract

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A contract may be unenforceable if the following requirements are not met.
(1) Voluntary consent. The apparent consent of both parties must be voluntary. For instance, if a contract was formed as a result of fraud, mistake, or duress (coercion), the contract may not be enforceable.
(2) Form. The contract must be in whatever form the law requires. Some contracts must be in writing in order to be enforceable.

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Offeror

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A person who makes an offer; a promise to do or not do something and thus is also a promisor.

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Offeree

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A person to whom an offer is made.

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Bilateral Contract

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A type of contract that arises when a promise is given in exchange for a return promise; a "promise for a promise." No performance, such as the payment of funds or delivery of goods, need take place for a bilateral contract to be formed. The contract comes into existence at the moment the promises are exchanged.

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Unilateral Contract

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A contract that results when an offer can be accepted only by the offeree's performance; a "promise for an act" In other words, the contract is formed not at the moment when promises are exchanged but rather when the contract is performed.

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Formal Contract

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An agreement that by law requires a specific form for its validity.

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Informal Contract

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A contract that does not require a specific form or method of creation to be valid.

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Express Contract

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A contract in which the terms of the agreement are stated in words, oral or written.

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Implied Contract

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A contract formed in whole or in part from the conduct of the parties.

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Executed Contract

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A contract that has been fully performed by both parties.

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Executory Contract

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A contract that has not yet been fully performed.

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Valid Contract

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A contract that results when the elements necessary for contract formation: an agreement (offer and acceptance), consideration, legal purpose, and contract capacity) are present. Valid contracts may be enforceable, voidable, or unenforceable. Additionally, a contract may be void.

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Voidable Contract

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A valid contract that may be legally avoided at the option of one or both of the parties. The party having the option can elect either to avoid any duty to perform or to ratify (make valid) the contract. If the contract is avoided, both parties are released from it. If it is ratified, both parties must fully perform their respective legal obligations.

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Unenforceable Contract

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A valid contract rendered unenforceable by some statute or law.

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Void Contract

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A contract having to legal force or binding effect. The terms void and contract are contradictory. None of the parties has any legal obligations if a contract is void. A contract can be void because, for example, one of the parties is legally insane and thus lacked the capacity to enter into a contract.

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Quasi Contract

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An obligation or contract imposed by law (a court), in the absence of an agreement, to prevent the unjust enrichment of one party. They are equitable rather than legal contracts. Usually, quasi contracts are imposed to avoid the unjust enrichment of one party that expense of another.

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Offer

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A promise or commitment to perform or refrain from performing some specified act in the future. Three elements are necessary for an offer to be effective:
(1) There must be a serious, objective intention by the offerer.
(2) The terms of the offer must be reasonably certain, or definite, so that the parties and the court can ascertain the terms of the contract.
(3) The offer must be communicated to the offeree.

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Revocation

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The withdrawal of a contract offer by the offeror. Unless an offer is irrevocable, it can be revoked at any time prior to acceptance without liability; even if s/he has promised to keep it open, as long as the revocation is communicated to the offeree before the offeree accepts.

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Counteroffer

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An offeree's response to an offer in which the offeree rejects the original offer and at the same time makes a new offer.

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Mirror Image Rule

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A common law rule that requires that the terms of the offeree's acceptance adhere exactly to the terms of the offeror's offer for a valid contract to be formed.

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Option Contract

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A contract under which the offeror cannot revoke the offer for a stipulated time period (because the offeree has given consideration for the offer to remain open).

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Acceptance

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The act of voluntarily agreeing, through words or conduct, to the terms of an offer, thereby creating a contract.

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Mailbox Rule
(aka deposited acceptance rule)

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A common law rule that acceptance takes effect, and thus completes formation of the contract, at the time the offeree sends or delivers the acceptance via the communication mode expressly or impliedly authorized by the offeror. Under the mailbox rule (aka deposited acceptance rule), which the majority of courts follow, if the authorized mode of communication is the mail, then an acceptance becomes valid when it is dispatched (placed in the contract of the U.S. Postal Service) - not when it is received by the offeror. The mailbox rules does not apply to instantaneous forms of communication, such as when the parties are dealing face to face, by phone, or by fax. A separate rule applies to email.

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Uniform Electronic Transactions Act

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E-mail may be considered sent when it either leaves the sender's control or is received by the recipient. This rule, which takes the place of the mailbox rule (aka deposited acceptance rule) if the parties have agreed to conduct transactions electronically, allows an e-mail acceptance to become effective when sent.

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E-Contract

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A contract that is formed electronically. E-contracts must meet the same basic requirements (agreement, consideration, contractual capacity and legality) as paper contracts.

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Forum-Selection Clause

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A provision in a contract designating the court, jurisdiction, or tribunal that will decide any disputes arising under the contract.

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Click-On Agreement

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An agreement that arises when an online buyer clicks on "I agree" or otherwise indicates her or his assent to be bound by the terms of an offer.

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Shrink-Wrap Agreement

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An agreement whose terms are expressed in a document located inside a box in which goods (usually software) are packaged.

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Browse-Wrap Term

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A term or condition of use that is presented when an online buyer downloads a product but that the buyer does not have to agree to before installing or using the product.

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E-Signature

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An electronic sound, symbol or process attached to or logically associated with a record and adopted by a person with the intent to sign the record.

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Record

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Information that is either inscribed on a tangible medium or stored in an electronic or other medium and is retrievable.

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Consideration

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The value given in return for a promise or performance is a contractual agreement.

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Forbearance

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The act of refraining from an action that one has a legal right to undertake.

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Rescission

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A remedy whereby a contract is canceled and the parties are returned to the positions they occupied before the contract was made.

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Past Consideration

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An act that took place in the past and that ordinarily, by itself, cannot be consideration for a later promise to pay for the act.

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Accord and Satisfaction

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A common means of settling a disputed claim, whereby a debtor offers to pay a lesser amount than the creditor purports to be owed.

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Liquidated Debt

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A debt whose amount has been ascertained, fixed, agreed on, settled, or exactly determined.

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Release

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An agreement in which one party gives up the right to pursue a legal claim against another party.

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Covenant Not to Sue

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An agreement to substitute a contractual obligation for some other type of legal action based on a valid claim.

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Promissory Estoppel
(aka detrimental reliance)

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A doctrine that can be used to enforce a promise when the promisee has justifiably relied on it and when justice will be better served by enforcing the promise. Promissory estoppel allows a party to recover on a promise even though it was made without consideration. For the doctrine of estoppel to be applied, the following elements are required:
(1) There must be a clear and definite promise.
(2) The promisor should have expected that the promisee would rely on the promise.
(3) The promisee reasonably relied on the promise by acting or refraining from some act.
(4) The promisee's reliance was definite and resulted in substantial detriment.
(5) Enforcement of the promise is necessary to avoid injustice.

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Estopped

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Barred, impeded, or precluded.

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What is a contract? What is the objective theory of contracts?

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A contract is an agreement that can be enforced in court. It is formed by two or more parties who agree to perform or to refrain from performing some act now or in the future. The objective theory of contracts is that a party’s intent to en­ter into a contract is determined by objective facts, as interpreted by a reason­able person, rather than by the party’s subjective thoughts.

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What are the four basic elements necessary to the formation of a valid contract?

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The basic elements for the formation of a valid contract are an agreement, con­sid­eration, contractual capacity, and legality. Defenses to the enforcement of an oth­erwise valid contract include the lack of genuineness of assent and im­proper form.

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What elements are necessary for an effective offer? What are some examples of nonoffers?

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Three elements are necessary for an offer to be effective: (1) a serious, objective intent by the offeror; (2) reasonably certain, or definite terms; and (3) commu­nica­tion of the offer to the offeree. Nonoffers include expressions of opinion, state­ments of intent, preliminary negotiations, advertisements, cata­logs, and circulars. In an auction, the bidder, not the seller, is the offeror.

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How do shrink-wrap and click-on agreements differ from other contracts? How have traditional laws been applied to these agreements?

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With a shrink-wrap agreement, the terms are expressed inside the box in which the goods are packaged. A click-on agreement arises when a buyer, completing a transaction on a computer, is required to indicate his or her assent to the terms by clicking on a button that says, for example, “I agree.”

Generally, courts have enforced the terms of these agreements the same as the terms of other contracts, applying the traditional common law of contracts. Article 2 of the UCC provides that acceptance can be made by con­duct. The Restatement (Second) of Contracts has a similar provision. Under these provi­sions, a binding contract can be created by conduct, including con­duct accept­ing the terms in a shrink-wrap or click-on agreement.

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What is consideration? What is required for consideration to be legally sufficient?

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Consideration is the value exchanged for a promise. To be legally sufficient, consideration must be “something of legal value.” This may include (1) a promise to do something that one has no prior legal duty to do, (2) the performance of an act that one is otherwise not obligated to do, or (3) the refraining from an act that one has a legal right to do.