Business Law Final

Front 1

What are the 6 components of a Contract?

Back 1

Agreement
Between competent parties
Based on parties' genuine assent
Supported by consideration
Made for a lawful purpose
In the form required by law

Front 2

Offeror

Back 2

Makes Promise

Front 3

Offeree

Back 3

Receives Promise

Front 4

Express Contract

Back 4

In words; spoken or written

Front 5

Implied Contract

Back 5

Acts and conduct of parties form the agreement.
(Example--contractor who fixes something without asking)

Front 6

Bilateral Contract
(Most contracts are bilateral)

Back 6

Promise in exchange for a promise
(Bargain for exchange)

Front 7

Unilateral Contract

Back 7

Promise in exchange for an act
(Ex--the woman who stands in line for the mink coat)

Front 8

Option

Back 8

The absolute right to enter into a contract at a later date
(Ex--the movie deal)

Front 9

Quasi Contract

Back 9

Not a true contract, made by the courts to prevent unjust enrichment

Front 10

An Offer...

Back 10

MUST be communicated to the offeree and must have contractual intention. Newspaper ads count as invitations to negotiate.

Front 11

A revocation of an offer...

Back 11

must be communicated to offeree, but an offer CAN be revoked indirectly. It's effective upon RECEIPT.

Front 12

Three things that terminate an offer

Back 12

-Counteroffer
-Rejection of an offer by offeree\
-Death or disability of either party

Front 13

Mailbox Rule

Back 13

Acceptance is effective when Sent (dropped in the mailbox).

Revocation is not effective until received!

Front 14

Who is making the offer and who is accepting in an AUCTION?

Back 14

Raising your number is an OFFER...auctioneer's hammer is ACCEPTANCE

Front 15

Contractual Capacity

Back 15

The ability to understand the binding nature of contracts and the nature of present contract.

Front 16

Minor

Back 16

Under age 18

Front 17

Contracts entered into by a minor are...

Back 17

voidable by the minor during minority and a reasonable time after reaching majority.

Front 18

Ratification

Back 18

An intent to be bound by the contract.

Contracts may be ratified by minors anytime after attaining majority.

Front 19

Necessaries

Back 19

Something essential to existence (Ex--medical expenses, shelter, food.

A minor may be held liable for necessaries when parents are unwilling to pay.

the Schmidt case

Front 20

Unilateral Mistake

Back 20

A mistake by one of the parties does not affect the contract; parties are still bound (unless the other party knows of the mistake and failed to mention anything.)

Front 21

Mutual Mistake

Back 21

agreement is void if both parties make the same mistake.

(Mattson case)

Front 22

Fraud

Back 22

The making of a material misrepresentation of fact with
1) knowledge of its falsity or reckless indifference to its truth
2) the intent that the listener rely on it.
3) the result that the listener does so rely
4) the consequence that the listener is harmed.

Front 23

Negligent Misrepresentation

Back 23

a negligently made false statement; non disclosure.

Front 24

Rule of nonliability

Back 24

A party to a contract has no duty to volunteer information to the other party.

Front 25

Exceptions to the Rule of nonliability

Back 25

1) unknown defect or condition
2) if parties stand in a confidential relationship
3) Active concealment

Front 26

Pressure

Back 26

when an agreement is not voluntary

Front 27

Physical duress (type of pressure)

Back 27

the threat of physical harm to person or property

Front 28

Economic duress (type of pressure)

Back 28

the threat of financial loss

Front 29

Consideration

Back 29

Bargained for exchange, usually money

Front 30

Forbearance

Back 30

Type of consideration, giving up a legal right to do something

Front 31

Past consideration...

Back 31

is NOT consideration.
Ex-pre-existing legal obligation, moral obligation, gift.

Front 32

Good Faith Adjustment

Back 32

pay a contractor a higher amount for the performance of the original contract when there are extraordinary circumstances caused by unforeseeable difficulties and when the additional amount promised the contractor is reasonable under the circumstances.

Front 33

Promissory estoppel

Back 33

A promisor may be prevented from asserting that her promise is unenforceable because the promisee gave no consideration for the promise.

Front 34

When does the promissory estoppel apply?

Back 34

1) the promisor makes a promise that lacks consideration.
2) the promisor intends or should reasonably expect that the promisee will rely on the promise
3) the promisee in fact relies on the promise in some definite and substantial manner.
4) enforcement of the promise is the only way to avoid injustice.

Front 35

Illegality...

Exceptions to illegality...

Back 35

generally voids the contract.

1)protection of one party
2) When the parties are not equally guilty

Front 36

What constitutes Unconscionability?

Back 36

When the court believes a contract gives too much of an advantage over a buyer.

Front 37

substantive unconscionability

Back 37

focuses on the actual terms of the contract itself. It's indicated when the contract terms are very extreme.

Front 38

procedural unconscionability

Back 38

has to do with matters of freedom of assent resulting from inequality of bargaining power.

Front 39

Contracts of adhesion

Back 39

companywide standardized form contracts imposed on a take-it-or-leave-it basis by a party with superior bargaining strength.

(procedural unconscionable)

Front 40

Lottery

Back 40

Private lotteries containing these three elements- prize, chance, consideration, are ILLEGAL

Front 41

Covenants/agreements not to compete

Back 41

-permissible to protect goodwill
-must be reasonable in time and area

*sale of business
*emplyoment contract

Front 42

Statue of Frauds...

Back 42

requires that certain kinds of contracts be evidenced by a writing or they cannot be enforced. If oral, the contract is unenforceable.

*Can only be used as a DEFENSE! Party suing cannot use the fact that they signed as an offense.

Front 43

Contracts that must be evidence by a writing:

Back 43

1) Agreement that cant be performed w/ in 1 year.
2) Interests in Real Property (real estate, mortgages, apartments)
3) Promise to answer for the debt/default of another
4) promise by executor to pay a claim against the estate from personal funds.
5) promise made in consideration of MARRIAGE
6) Sale of goods for $500 +

Front 44

Parol Evidence Rule

Back 44

Parol evidence (oral testimony) will not be allowed to modify or contradict the terms of a written contract.

Front 45

When does the Parol Evidence Rule NOT apply?

Back 45

1) if written contract is ambiguous (oral testimony can clarify)

2) if evidence will be used to show fraud, duress, or mistake.

3) to prove existence of contract

4) to modify contract

Front 46

Intended beneficiary

Back 46

when a contract is intended to benefit a 3rd person or specific class

Front 47

Donee beneficiary

Back 47

an intended beneficiary to whom the promisee's primary intent in contracting is to give a benefit.

(ex-life insurance contract)

Front 48

Creditor beneficiary

Back 48

when primary intent is to discharge a duty owed to a 3rd party

Front 49

Incidental beneficiary

Back 49

the benefit under the contract was not intneded for this party. not named, CANNOT sue under the contract.

ex-members of the public
*new rochelle humane society question

Front 50

Assignment

Back 50

the transfer of contractual rights to a 3rd party.

-the right to receive money in the future is often assigned to raise capital faster.

*MUST GIVE NOTICE OF ASSIGNMENT, NO CONSIDERATION REQUIRED.

-the asignee acquires all rights of the assignor

Front 51

Assignor

Back 51

party making the assignmnet

Front 52

Asignee

Back 52

the 3rd party to whom the assignment is made

Front 53

Obligor

Back 53

owes duty or debt under the contract

Front 54

Obligee

Back 54

the party to whom the debt is owed

Front 55

Delegation of duties

Back 55

transfer of duties to another person who is to perform them...allowed if STANDARDIZED AND NONPERSONAL

ex-contract obtains someone else to perform the work under the contract

Front 56

When are assignments NOT permitted?

Back 56

1) if burden of performance is increased
2) personal services
3) if someone poses a different credit risk

Front 57

Condition Precedent

Back 57

a condition that must occur BEFORE there is an obligation to perform.

ex-home must pass inspection before buyer goes through with contract

Front 58

Condition Concurrent

Back 58

mutual duties of performance take place simultaneously.

ex-pay for a sandwich with cash

Front 59

Condition subsequent

Back 59

an event that occurs later on that that extinguishes the duty to perform

ex-employment contract conditioned on passing monthly drug tests)

Front 60

Tender

Back 60

an offer to perform

Front 61

payment by check...

Back 61

a conditional payment

Front 62

when time for performance is not specified...

Back 62

obligation to perform is w/in a reasonable time

Front 63

Substantial Performance

Back 63

if performance is not perfect, but the contract has been substantially performed in good faith.

ex-when a contractor has substantiall constructed the project, he is entitled to be paid the contract for his price but that price will be off-set by the cost of completion damages.

Front 64

Discharge by agreement
by....
(6 different ways)

Back 64

1) the terms of the contract
2) mutual cancellation
3) mutual rescission (annul & reutrn to original positions b4 the contract)
4) substitution of a new contract
5) novaton (substitue & add a new party)
6) accord & satisfaction (disagreement, new agreement discharges original obligation)

Front 65

Discharge by impossibility

Back 65

discharge is allowed in limited circumstance if performance is rendered impossible.

*a party is NOT discharged from performance when it becomes more burdensome or costly than originally contemplated.

Front 66

commericial imcracticability

Back 66

a developing doctrine

available only when the performance is made impractical by the subsequent occurrence of an event whose nonoccurrence was a basic assumption on which the contract was made.

Front 67

breach of contract

Back 67

failure to perform or defective performance

Front 68

Anticipatory repudiation

Back 68

a breach in advance of performance date.
one party states that performance will not be made when required.

Front 69

When breach of contract occurs the other party has several options...

Back 69

1) waiver (ignore breach)
2) sue and collect damages
3) make a new contract

Front 70

Direct damages

Back 70

damages directly caused by or those which flow directly from the breach

CONTRACT PRICE-MARKET PRICE

(also include incidental damages (cost f extras like renting a truck for the day due to breach)

Front 71

Consequential damages

Back 71

special damages...may only be recovered if it was reasonably FORESEEABLE to the defendant that the nonbreaching party would sustain the loss if the contract was broken.

Front 72

mitigation of damages

Back 72

you can't sit back with your feet up when someone is in breach...you must mitigate the damages...can't run up the bill.

Front 73

liquidated damages clause

Back 73

when parties stipulate that a certain amount must be paid if there is a breach...can't be excessive.