Business Law - Contracts

Front 1

Promise

Back 1

A person's assurance that the person will or will not do something

Front 2

Contract

Back 2

a promise or set of promises for the breach of which the law gives a remedy or the performance of which the law in some way recognizes as a duty.

Front 3

Requirements for a valid contract

Back 3

1. Agreement
2. Consideration
3. Contractual Capacity
4. Legality

Front 4

Agreement

Back 4

one party offers to enter into a legal contract and another party must accept the terms of the offer

Front 5

Consideration

Back 5

promises made by the parties to the contract must be supported by legally sufficient and bargained for consideration(something of value received or promised)

Front 6

Contractual Capacity

Back 6

both parties must be recognized by law as possessing characteristics that qualify them competent parties

Front 7

Legality

Back 7

contracts purpose must be to accomplish some goal that is legal and not against public policy

Front 8

Defenses to the enforceability of a contract

Back 8

1. Genuineness of Assent
2. Form

Front 9

Genuineness of assent

Back 9

apparent consent of both parties must be genuine. A contract formed as a result of fraud may not be enforceable

Front 10

Form

Back 10

contract must be whatever form the law requires, some must be in writing

Front 11

Bilateral contract

Back 11

a promise for a promise

Front 12

unilateral contract

Back 12

a promise for an act

Front 13

Formal contracts

Back 13

contracts that require a special form or method of creation to be enforceable

Front 14

Contracts under seal

Back 14

involves formalized writing with a special seal

Front 15

Letters of credit

Back 15

agreements to pay contingent on the purchaser's receipt of invoices and bills of lading

Front 16

Informal contracts

Back 16

no special form is required, usually based on substance rather than form

Front 17

Implied in fact contract

Back 17

implied from the conduct of the parties

Front 18

Requirements of an implied in fact contract

Back 18

1. The plaintiff furnished some service or property
2. The plaintiff expected to be paid for the service or property and the defendant knew or should have known.

Hint 18

3.The defendant had a chance to reject the service or property and did not.

Front 19

Executed contract

Back 19

a contract that has been fully performed on both sides

Front 20

Executory contract

Back 20

contract that has not been fully performed

Front 21

Valid contract

Back 21

has the elements necessary to entitle at least one of the parties to enforce it in court

Front 22

voidable contract

Back 22

a valid contract, but one that can be avoided at the option of one or both of the parties

Front 23

unenforceable contract

Back 23

a contract that cannot be enforced because of certain legal defenses against it.

Front 24

void contract

Back 24

is no contract at all- no legal obligations

Front 25

Quasi contracts

Back 25

contracts implied in law, are not actual contracts. Fictional contracts created by courts and imposed on parties in the interests of fairness and justice

Front 26

Objective theory of contracts

Back 26

a party's intention to enter into a legally binding agreement or contract is judged by outward, objective facts as interpreted by a reasonable person, rather than by the party's own secret

Hint 26

subjective intentions

Front 27

Agreement

Back 27

an essential element for contract formation, the parties must agree on the terms of the contract and manifest to each other their mutual assent to the same bargain.

Front 28

Offer

Back 28

a promise or commitment to do or refrain from doing some specified thing in the future

Front 29

3 elements of an effective offer

Back 29

1. The offeror must have a serious intention to become bound by the offer
2. The terms of the offer must be reasonably certain or definite, so that the parties and the court can ascertain the terms
3. The offer must be communicated to the offere

Front 30

Expressions of opinion

Back 30

not an offer, does not indicate an intention to enter into a binding agreement

Front 31

statements of future intent

Back 31

a statement of an intention to do something in the future is not an offer.

Front 32

Preliminary Negotiations

Back 32

a request or invitation to negotiate is not an offer, it only expresses a willingness to discuss the possibility of entering into a contract

Front 33

Agreements to agree

Back 33

agreements to agree to the material terms of a contract at some future date- not considered to be binding contracts

Front 34

Advertisements

Back 34

treated as invitations to negotiate

Front 35

Auctions

Back 35

a seller offers goods for sale through an auctioneer, but this is not an offer to form a contract

Front 36

A contract must include:

Back 36

1. The identification of the parties
2. The identification of the object or subject matter of the contract, including the work to be performed with specific identification of such terms as goods, services and land.
3. the consideration to be paid
4. the time of payment, delivery or performance

Front 37

Revocation

Back 37

offerors act of withdrawing (revoking) an offer

Front 38

Irrevocable offer

Back 38

contracts that cannot be cancelled or revoked

Front 39

option contract

Back 39

created when an offeror promises to hold an offer open for a specified period of time in return for a payment given by an offeree

Front 40

Promissory estoppel

Back 40

estop means to bar, impede, or preclude someone from something

Front 41

Rejection of the offer by the offeree

Back 41

if offeree rejects the offer, the offer is terminated

Front 42

counter offer

Back 42

a rejection of the original offer and the simultaneous making of a new offer

Front 43

Mirror image rule

Back 43

requires the offeree's acceptance to match the offeror's offer exactly - to the mirror the offer

Front 44

Termination by operation of law

Back 44

1. Lapse of time
2. Destruction of the specific subject matter of the offer
3. Death or incompetence of the offeror or the offeree
4. Supervening illegality of the proposed contract

Front 45

Mailbox rule

Back 45

if the authorized mode of communication is the mail, then acceptance becomes valid when dispatched, not when received by the offeror.

Front 46

Oral contracts

Back 46

are valid, but have a hard time proving contracts without written evidence. Contracts in written form in order to give evidence when parties disagree.

Front 47

Supervening Illegality

Back 47

when a statute or court decision makes the proposed contract illegal, the offer automatically terminates.

Front 48

unequivocal acceptence

Back 48

mirror image rule, must agree without constraints or conditions

Front 49

Consideration

Back 49

the value given in return for a promise or in return for a performance

Front 50

Legally sufficient value

Back 50

1. a promise to do something that one has no prior legal duty to do
2. the performance of an action that one is otherwise not obligated to do
3. Forbearance: refraining from an action that one has legal right to undertake.

Front 51

Bargained for exchanged

Back 51

the promise given by the pormisor must induce the promises to offer a return promise, performance or a forbearance, and the promisee's promise, performance or forbearance must induce the promisor to make the promise.

Front 52

Pre-existing Duty

Back 52

a promise to do what one already has a legal duty to do does not constitute legally sufficient consideration.

Front 53

Unforseen difficulties

Back 53

exception to pre existing duty

Front 54

Rescission

Back 54

unmaking of a contract so as to return the parties to the position's they occupied before the contract was made

Front 55

Past consideration

Back 55

no consideration, promises made in return for actions or events that have already taken place are unforceable

Front 56

Illusory Promises

Back 56

if terms of the contract express such uncertainty of performance that the promisor has not definitely promised to do anything- without consideration and unenforceable

Front 57

Requirements contracts

Back 57

a buyer and a seller agree that the buyer will purchase from the seller all the goods of a designated type that the buyer needs or requires

Front 58

Output contract

Back 58

the buyer and seller agree that the buyer will purchase from the seller all of what the seller produces, or the seller's output

Front 59

accord and satisfaction

Back 59

involves a debtor's offer of payment and a creditor's acceptance of a lesser amount that the creditor originally claimed was owed

Front 60

liquidated debts

Back 60

if a debt is liquidated accord and satisfaction cannot take place

Front 61

release

Back 61

a contract in which one party forfeits the right to pursue a legal claim against the other party

Front 62

covenant not to sue

Back 62

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

Front 63

exceptions to the consideration requirement

Back 63

1. promises that induce detrimental reliance under the doctrine of promissory estoppel
2. promises to pay debts that are barred by a statue of limitations
3. promises to make charitable contributions

Front 64

Requirements to state a claim by promissory estoppel

Back 64

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 promisees reliance was definite and resulted is subtantial detriment
5. enforcement of the promise is necessary to avoid injustice

Front 65

Silence

Back 65

Silence in not an acceptance

Front 66

Contractual capacity

Back 66

must be held by the parties of the contract in order for that contract to be valid

Front 67

age of majority

Back 67

when a person is no longer a minor for contractual purpose is 18 years old.

Front 68

emancipation

Back 68

when a child's parent or legal guardian relinquishes the legal right to exercise control over the child

Front 69

disaffirmance

Back 69

the legal avoidance or setting aside of a contractual obligation - a minor must express his or her intent through words or conduct, not to be bound to the contract

Front 70

Necessaries

Back 70

items that fulfill basic needs

Front 71

ratification

Back 71

the act of accepting and giving legal force to an obligation that previously was not enforceable

Front 72

fraud/misrepresentaion

Back 72

misrepresentation of age prohibits the right of disaffirmant

Front 73

intoxication

Back 73

a person sufficiently intoxicated to lack of mental capacity, the contract may be voidable. If person understood contract it is still enforceable

Front 74

mental incompetence

Back 74

if a court has declared a person to be mentally incompetent, any contract made by that person is void from the outset

Front 75

Contracts to commit a crime

Back 75

a contract in violation of a statute are not enforceable

Front 76

usury

Back 76

when a lender makes a loan at an interest rate above the lawful maximum interest rate

Front 77

Sabbath laws

Back 77

prohibit the formation of performance of certain contracts on a Sunday

Front 78

Blue Laws

Back 78

from the blue paper on which New Haven CT printed its town ordinance in 1781 that prohibited work and required businesses to close on Sunday

Front 79

Contracts in restraint of trade

Back 79

adversary affect public policy that favors competition in the economy

Front 80

Covenant not to compete

Back 80

ancillary clauses in contracts concerning the sale of an ongoing business. Created when a seller agrees not to open a new store in a certain geographical area surrounding an existing store.

Front 81

unconscionable

Back 81

unscrupulous or grossly unfair

Front 82

Adhesion contract

Back 82

a contract written exclusively by one party (the dominant party, usually the sller or creditor) and presented to the other (the adhearing party, usually the buyer or borrower) on a take-it-or-leave-it basis - no negotiation

Front 83

Substantive unconscionability

Back 83

contracts or portions that are oppressive or overly harsh

Front 84

exculpatory clauses

Back 84

clauses that release a party from liability in the event of monetary or physical injury no matter who is at fault

Front 85

in paridelicto

Back 85

equally at fault

Front 86

Discriminatory contracts

Back 86

party promises to discriminate on the basis of race, color, national origin, religion, gender, age, or disability are contrary to both statute and public policy unenforceable

Front 87

severable

Back 87

or divisible consists of distinct parts that can be performed separately, with separate consideration provided for each part

Front 88

Lucid interval

Back 88

people have periods of lucid thought and action, within a normally non-lucid period in life.

Front 89

dying declaration

Back 89

person is about to die and make a declaration, law presumes they are correct, people don't lie on their death bed.

Front 90

Legal capacity

Back 90

anybody who understands what it means to make a keep a promise

Front 91

Mistakes of fact

Back 91

a bilateral or mutual mistake occurs when both parties are mistaken as to an existing material fact - a fact important to the subject matter of the contract. only a mistake of fact may allow a contract to be avoided

Front 92

unilateral mistake of fact

Back 92

when only one party is mistaken on a material fact

Front 93

Mistakes of value

Back 93

if a mistake concerns the future market value or quality of the object of the contract. Can be bilateral or unilateral - do not serve as a basis for avoiding a contract.

Front 94

Fraudulent misrepresentation

Back 94

refers to the misrepresentation that is consciously false and is intended to mislead another
1. a misrepresentation of a material fact must occur
2. there must be an intent to deceive
3. the innocent party must justifiably rely on the misrepresentation

Front 95

misrepresentation by concealment

Back 95

when one party takes specific action to conceal a fact that is material to the contract

Front 96

Misrepresentation of law

Back 96

does not ordinarily entitle a party to relief from a contract

Front 97

misrepresentation by silence

Back 97

contract cannot be set aside because certain pertinent info is not volunteered

Front 98

duty to prospective employees

Back 98

duty to disclose information may arise in an employment context, when an employer either misrepresentation or conceals information prospective employees

Front 99

intent to deceive

Back 99

scienter - "guilty knowledge"
if a party knows a fact is not as stated

Front 100

Innocent misrepresentation

Back 100

if a person makes a statement that they believe to be true, but that actually misrepresents material facts

Front 101

negligent misrepresentation

Back 101

if a person fails to exercise reasonable care in uncovering or disclosing the facts or does not use the skill and competence that their business or profession requires

Front 102

undue influence

Back 102

arises from special kinds or relationships in which one party can greatly influence another party, thus overcoming that party's free will.

Front 103

Genuineness of assent

Back 103

an examination of the apparent agreement by the court to determine if the parties truly intended to be bound by the agreement

Front 104

fiduciary duty

Back 104

have to look out for someone else and not yourself

Front 105

Statue of Frauds

Back 105

certain agreements are required by law to be in writing

Front 106

Contracts that fall within the statue of frauds

Back 106

1. contracts involving interests in land
2. Contracts that cannot by their terms be performed within one year from the day after the date of formation
3. Collateral or secondary contracts such as promises by the administrator or executor of an estate to pay a debt of the estate personally that is, out of her or his own pocket
4. promises made in consideration or marriage (prenups)
5. Under the uniform commercial code (UCC) contracts for the sale of goods priced at $500 or more

Front 107

Collateral promises

Back 107

or secondary promise is one that is ancillary (subsidiary) to a principle transaction or primary contractual relationship

Front 108

Primary Obligations

Back 108

one which is the principal object of the contract

Front 109

Secondary Obligations

Back 109

Incidental obligation (such as payment of damages upon failure to perform) that proceeds from the primary obligation of a contract or transaction.

Front 110

Prenuptial agreements

Back 110

agreements made before marriage that define each partners ownership rights in the other partner's property.

Front 111

Parol evidence rule

Back 111

is a court finds that the parties intended their written contract to be a complete and final statement of their agreement the it will not allow either party to present parol evidence (testimony or other evidence of communications between the parties that are not contained in the contract itself)

Front 112

exceptions to Parol evidence rule

Back 112

1. contracts subsequently modified. Evidence of any susquent modification (oral or written) of a written contract can be introduced into court.
2. Voidable or void contracts
3. contracts containing ambiguous terms
4. incomplete contracts
5. prior dealing, course of performance, or usage of trade
6. contracts subject to an orally agreed on condition precedent
7. Contracts with an obvious or gross clerical (or typographic) error that clearly would not represent the agreement of the parties.

Front 113

Integrated contracts

Back 113

determining whether evidence will be allowed basically depends on whether the written contract is intended to be a complete and final statement of the terms of the agreement. If it is so intended it is referred to as an integrated contract.

Front 114

General Rule

Back 114

Oral agreements are just as valid as written agreements
only issue is with evidential proof

Front 115

One year rule

Back 115

A contract that cannot by its own terms be performed within one year from the day after the contract is formed must be in writing to be enforceable

Front 116

Privity of contract

Back 116

a contract is a private agreement between the parties who have entered into it and traditionally these parties alone have rights and liabilities under the contract

Front 117

assignment

Back 117

the transfer of contractual rights to a 3rd party

Front 118

delegation

Back 118

the transfer of contractual duties to a 3rd party

Front 119

obligee

Back 119

the person to whom a duty or obligation is owed

Front 120

obligor

Back 120

the person who is obligated to perform the duty

Front 121

contract prohibits assignment

Back 121

1. a contract cannot prevent an assignment of the rights to receive monetary payments
2. Assignment or rights in real estate often cannot be prohibited b/c such a prohibition is contrary to public policy
3. The assignment of negotiable instruments cannot be prohibited
4. in a contract for the sale of goods, the right to receive damages for breach of contract or payment of an account awed may be assigned even though the sales contract prohibits such an assignement

Front 122

delegator

Back 122

party making the delegation

Front 123

delegatee

Back 123

party to whom the duty has been delegated

Front 124

duties that cannot be delegated

Back 124

1. duties personal in nature
2. when performance by a 3rd party will vary materially from that expected by the obligee
3. when the contract prohibits delegation

Front 125

Third party beneficiary

Back 125

when original parties in contract intend at the time of contract the the performance directlty denefits a 3rd party

Front 126

Intended beneficiary

Back 126

has legal rights and can sue the promisor directly for breach of contract

Front 127

vested

Back 127

rights have taken effect and cannot be taken away

Front 128

when do 3rd party rights vest

Back 128

1. the 3rd party materially changes his or her position in justifiable reliance on the promise
2. the 3rd party brings a lawsuit on the promise
3. the 3rd party demonstrates her or his consent to the promise at the request of the promisor or promisee.

Front 129

Incidental beneficiary

Back 129

unintentional benefits from a contract cannot sue to enforce contract

Front 130

standing

Back 130

has something involved, can lose something

Front 131

discharge

Back 131

to terminate one's contractual duties

Front 132

performance

Back 132

completing the contractual duties

Front 133

condition

Back 133

a possible future event, the occurrence or non occurrence or which will trigger the performance of a legal obligation or terminate on existing obligation under a contract

Front 134

condition subsequent

Back 134

when a condition operates to terminate a party's absolute promise to perform

Front 135

concurrent conditions

Back 135

occur only when the contract calls for the parties to perform their respective duties simultaneously

Front 136

express conditions

Back 136

are provided for by the parties agreement prefaced with if provided after or when

Front 137

implied in fact conditions

Back 137

similar to express in that they are understood to be part of the agreement but they are not found in the express language

Front 138

tender

Back 138

in an unconditional offer to perform by a person who is ready, willing and able to do so

Front 139

complete performance

Back 139

when a party exactly as agreed, there is no question as to whether the contract has been performed

Front 140

substantial performance

Back 140

when a party who in good faith performs substantially all the terms of the contract, can enforce the contract against the other party

Front 141

breach of contract

Back 141

the non performance of a contractual performance

Front 142

anticipatory repudiation

Back 142

before either party has a duty to perform one of the parties may refuse to carry out his or her contractual obligations

Front 143

mutual rescission

Back 143

the parties must take another agreement that also satisfies the legal requirements for a contract

Front 144

novation

Back 144

occurs when both of the parties to a contract to substitute a third party for one of the original parties
1. a previous valid obligation
2. an agreement by all the parties to a new contract
3. the extinguishing of the old obligation
4. a new contract that is valid

Front 145

substantial agreement

Back 145

2 original parties to the contract from a different agreement to substitute for the original one

Front 146

Discharge in bankruptcy

Back 146

enforcement of most of the debtor's contracts by the creditors

Front 147

impossibility of performance

Back 147

supervening events may make performance impossible in an objective sense.

Front 148

commercial impracticability

Back 148

the anticipated performance must become significantly more difficult or costly than originally contemplated at the time the contract was formed.

Front 149

frustration of purpose

Back 149

a contract will be discharged if supervening circumstances make it impossible to attain the purpose both parties had in mind when making the contract

Front 150

Damages

Back 150

compensation for a party harmed as a result of another's wrongful act

Front 151

compensatory damages

Back 151

to cover losses and costs

Front 152

consequential damages

Back 152

to cover indirect and foreseeable losses

Front 153

punitive damages

Back 153

to punish and deter wrongdoing

Front 154

nominal damages

Back 154

to recognize wrongdoing when no monetary loss is shown

Front 155

Incidental damages

Back 155

expenses that are caused directly by a breach of contract - such as incurred to obtain performance from another source

Front 156

mitigation of damages

Back 156

when a breach of contract occurs the innocent injured party is held to a duty to mitigate or reduce the damages that he or she suffers

Front 157

Liquidated damages provision

Back 157

specifies that a certain dollar amount is to be paid in the event of a future default or breach of contract

Front 158

Penalty

Back 158

specifies a certain amount to be paid in the event of a default or breach of contract and is designed to penalize the breaching party

Front 159

Court will ask 2 questions about penalty

Back 159

1. when the contract was entered into was it apparent that damages would be difficult to estimate in the event of a breach?
2. was the amount set as damages a reasonable estimate and not excessive

Front 160

Restitution

Back 160

to rescind a contract both parties must make restitution to each other by returning good property or funds previously conveyed.

Front 161

specific performance

Back 161

calls for the performance of the act promised in the contract

Front 162

reformation

Back 162

is an equitable remedy used when the parties have imperfectly expressed their agreement in writing

Front 163

requirements of a Quasi contract

Back 163

1. the party has conferred a benefit on the other party
2. the party conferred the benefit with reasonable expectation of being paid
3. the party did not act as a volunteer in conferring the benefit
4. the party receiving the benefit would be unjustly enriched by retaining the benefit w/out payment

Front 164

conferred

Back 164

to bestow

Front 165

waiver

Back 165

the knowing relinquishment of a legal right

Front 166

e-contract

Back 166

contract entered into electronically

Front 167

forum-selection clause

Back 167

which indicates the forum or place for the resolution of any dispute arising under the contract

Front 168

click-on agreement

Back 168

when an online buyer indicates their assent to be bound by the terms of the offer by clicking on some on-screen prompt

Front 169

shrink-wrap agreements

Back 169

an agreement whose terms are expressed inside a box in which the goods are packaged

Front 170

browse-wrap terms

Back 170

do not require an internet user to assent to the terms before, say downloading or using software

Front 171

e-signature

Back 171

an electronic sound, symbol, or process attached to or logically associated with a record and executed or adapted by a person with the intent to sign the record

Front 172

UETA

Back 172

Uniform electronic transactions act - declares that a signature may not be denied legal effect or enforceability solely because it is in electronic form

Front 173

E-SIGN act

Back 173

same as UETA, does not apply to all documents court papers, divorce decrees, evictions, foreclosures, health insurance, terminations, pre-nups, and wills

Front 174

partnering agreements

Back 174

a seller and a buyer who frequently do business with each other agree in advance on the term and conditions that will apply to all transactions subsequently conducted electronically

Front 175

attribution

Back 175

refers to the procedures that may be used to ensure that the same person sending an electronic record is the same person whose e-signature accompanies the record

Front 176

Notarization

Back 176

UETA provides that this requirement is satisfied by the electronic signature of a notary public or other person authorized to verify signatures

Front 177

signature

Back 177

any mark that evidences your intent to be bound

Front 178

UCC Article 2

Back 178

Sales contracts - contracts for the sales of goods when conflict arises btwn common law contract rule and UCC - the UCC controls except when it is silent and common law governs

Front 179

sale

Back 179

the passing of title from the seller to the buyer for a price

Front 180

good

Back 180

an item of property must be tangible and movable tangible property has physical existence, it can be touched or seen. Good must be movable, therefore real estate is excluded

Front 181

predominant factor test

Back 181

to determine whether a contract is primarily for the sale of goods or for the sale of services

Front 182

Merchant

Back 182

when he or she acting in a mercantile capacity possesses or uses an expertise specifically related to the goods being sold

Front 183

Lease agreement

Back 183

a lessor and lesee's bargain with respect to the lease of goods and found in their language and as implied by other circumstances

Front 184

consumer leases

Back 184

1. lessor who regularly engages in the business of leasing
2. a lessee who leases the goods promarily for a personal family or household purpose
3. total lease payments that are less than 25,000

Front 185

Finance leases

Back 185

involves a lessor, lessee and a supplier. the lessor buys the leases goods from a supplier and leases or subleases them to the lessee

Front 186

Requirements contract

Back 186

the buyer agrees to purchase and the seller agrees to sell all or up to stated amount of what the buyer needs or requires

Front 187

output contract

Back 187

the seller agrees to sell and the buyer agrees to buy up all or up to a stated amount of what the seller produces

Front 188

firm offer

Back 188

arises when a merchant -offeror gives assurances in assigned writing that the offer will remain open

Front 189

course of dealing

Back 189

is a sequence of previous actions and communications btwn parties to a particular transaction that establishes a common basis for their understanding

Front 190

usage of trade

Back 190

as any practice or method of dealing having such regularity of observance in a place vocation or trade as to justify an expectation that will be observed with the respect to the transaction in question.

Front 191

CISG

Back 191

governs international contracts only countries have ratified CISG

Front 192

choice of language clause

Back 192

designates the official language by which the contract will be interpreted in the event of a disagreement

Front 193

Force-majeure clause

Back 193

stipulate that in addition to acts of God a number of other eventualities may excuse a party from liability for nonperformance