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157 Cards in this Set

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The party who makes an offer to enter into a contract:
offeror
A contract in which the offeror's offer can be accepted only by the performance of an act by the offeree:
unilateral contract - a "promise for an act."

(contract cannot be created w/ a promise; there is no contract until the offeree performs the act.)
A contract in which agreement between parties has been inferred from their conduct:
implied-in-fact contract
Withdrawal of an offer by the offeror that terminates an offer:
revocation
What is the doctrine of quasi-contract intended to prevent?
1) unjust enrichment
2) unjust detriment
A contract that has been fully performed on both sides:
Executed contract (completed)
States that the intent to contract is judged by the reasonable person standard and not by the subjective intent of the parties:
objective theory of contracts
The manifestation by 2 or more persons of the substance of a contract:
agreement
A contract entered into by way of exchange of promises of the parties:
bilateral contract - a "promise for a promise."

(no act or performance is necessary to create the contract.)
The enactment of a statute, regulation, or court decision that makes the object of an offer illegal:
Supervening illegality (this terminates the offer)
A contractual agreement that is expressed in written or oral words:
express contract
Something of legal value given in exchange for a promise:
consideration
An equitable doctrine that provides that the court may award monetary damages to a plaintiff for providing work or services to a defendant even though no actual contract existed between the parties:
Quasi-contract (also called "implied-in-law" contract)
The party to whom an offer to enter into a contract is made:
offeree
A rule that states that an acceptance is effective when it is dispatched, even if it is lost in transmission:
Mailbox rule
A contract that has not been fully performed by either or both sides:
executory contract
Something a person is already under an obligation to do:
preexisting duty
A promise that is unenforceable because it lacks consideration:
gift promise
A response by an offeree that contains terms and conditions different from or in addition to those of the offer:
counteroffer - (terminates an offer)
A contract that meets all the essential elements to establish a contract:
Valid contract - (contract is enforceable by at least one of the parties).
A doctrine that allows minors to disaffirm (cancel) most contracts they have entered into w/ adults:
infancy doctrine
An exchange that parties engage in that leads to an enforceable contract:
bargained-for exchange
Express words or conduct by the offeree that rejects an offer:
rejection
A manifestation of assent by the offeree to the terms of the offer in a manner invited or required by the offer, as measured by the objective theory of contracts:
acceptance
A stated time period after which an offer expires:
lapse of time - (if no time is stated, an offer terminates after a reasonable time).
A rule that states that in order for there to be an acceptance, the offeree must accept the terms as stated in the offer:
Mirror image rule
A promise to refrain from doing an illegal act:
illegal consideration - (this promise will not support a contract)
A contract in which the essential elements to create a valid contract are met but there is some legal defense to the enforcement of the contract:
unenforceable contract
The act of a minor to rescind a contract under the infancy doctrine:
disaffirmance
A person who has been determined to be insane by a proper court or administrative agency:
adjudged insane - (contract into by such a person is void)
A contract into which parties enter but one or both of the parties can choose not to perform their contractual obligations:
Illusory promise - (contract that lacks consideration)
States that if a minor has transferred money, property, or other valuables to the competent party before disaffirming the contract, that party must place the minor back into status quo:
Competent party's duty of restitution
The manifestation of willingness to enter into a bargain, so made as to justify another person in understanding that his assent to that bargain is invited and will conclude it:
offer
A promise that is based on a prior act or performance:
past consideration
A contract that has no legal effect; a nullity:
void contract
Statutes that make certain forms of gambling illegal:
gambling statutes
A person who is under contractual incapacity because of ingestion of alcohol or drugs to the point of incompetence:
intoxicated person
A minor's obligation to return the goods or property at the time of disaffirmance:
Minor's duty of restoration
The act of a minor after he has reached the age of majority by which he accepts a contract entered into when he was a minor:
ratification
A law that prohibits or limits the carrying of certain secular activities on Sundays:
Sabbath law
A contract to perform an illegal act:
illegal contract - (cannot be enforced by either party to the contract)
The transfer of contractual rights by an obligee to another party:
assignment
A person who is insane but has not been adjudged insane by a court or administrative agency:
insane, but not adjudged insane
A third party who is not in privity of contract but who has rights under the contract and can enforce the contract against the obligor:
intended beneficiary
A contractual provision that relieves one (or both) parties to the contract from tort liability for ordinary negligence:
exculpatory clause
A contract whose objective is the commission of an act that is considered immoral by society:
immoral contract
The reasonable value of food, clothing, shelter, medical care, and other items considered necessary to the maintenance of life for which a minor must pay after he or she contracts for them:
necessaries of life
A contract that unreasonably restrains trade:
contract in restraint of trade
An obligee who transfers a right:
assignor
An agreement where a person agrees not to engage in a specified business or occupation w/in a designated geographical area for a specified period of time following the sale:
noncompete clause
A party who is unintentionally benefited by other people's contract:
incidental beneficiary
A law that sets an upper limit on the interest rate that can be charged on certain types of loans:
usury law
A contract that has a negative impact on society or interferes w/ the public's safety and welfare:
contract contrary to public policy
A contract in which one or both parties have the option to void their contractual obligations:
voidable contract
A party to whom a right has been transferred:
assignee
A statute that requires a person or business to obtain a license from the government prior to engaging in a specified occupation or activity:
licensing statute
What 3 elements must be established to create an implied-in-fact contract?
1) The plaintiff provided property or services to the defendant.

2) The plaintiff expected to be paid by the defendant for the property or services and did not provide them gratuitously.

3) The defendant was given an opportunity to reject the property or services provided by the plaintiff but failed to do so.
Contracts that have been fully performed by one side but not by the other:
executor contracts
How is the intent to enter into a contract determined?
Intent is determined using the OBJECTIVE THEORY OF CONTRACTS, i.e., whether a reasonable person viewing the circumstances would conclude that the parties intended to be legally bound.
What type of contract would a contract to commit a crime be classified as?
a VOID CONTRACT
What 2 requirements must an agreement contain?
An OFFER and an ACCEPTANCE
What are the 4 essential elements of a valid contract?
The contract must:
1) consist of an AGREEMENT between the parties.
2) be supported by legally sufficient CONSIDERATION.
3) be formed between parties w/ CONTRACTUAL CAPACITY.
4) accomplish a LAWFUL OBJECT.
What 2 elements must be established for a contract supported by legal value?
1) The promise suffers a LEGAL DETRIMENT.
2) The promisor receives a LEGAL BENEFIT.
A contract that provides that one of the parties has to perform their obligation only if he or she chooses to do so:
illusory contract
What are the 3 elements required for an offer to be effective?
1) The offeree must OBJECTIVELY INTEND to be bound by the offer.
2) The terms of the offer must be DEFINITE or reasonably CERTAIN.
3) The offer must be COMMUNICATED to the offeree.
When are contracts based on the preexisting duty of the promisee enforceable?
The promise is enforceable if:
1) the parties rescind the contract and enter into a new contract.
2) there are unforseen difficulties.
What 2 elements must be established in a contract supported by consideration?
1) Something of LEGAL VALUE must be given.
2) There must be a BARGAINED-FOR EXCHANGE.
Any age below the statutory age of majority:
period of minority
What must be given in order for a contract that is based on a party's past consideration to be enforceable?
New consideration must be given.
Who are the 2 parties to a contract?
1) OFFEROR - makes an offer to enter into a contract

2) OFFEREE - person to whom an offer to enter into a contract is made
What are quasi-contracts based on?
The doctrine of equity
What rights can and cannot be assigned?

TYPE OF RIGHTS:
1) Personal service contracts

2) Future rights

3) Contracts where assignment would materially
alter the risk

4) Legal actions involving personal rights

5) Legal actions involving breach of contract
1) PERSONAL SERVICE CONTRACTS
Generally cannot be assigned

2) FUTURE RIGHTS
Do not currently exist; cannot be assigned

3) CONTRACTS WHERE ASSIGNMENT WOULD MATERIALLY ALTER THE RISK
Cannot be assigned

5) LEGAL ACTIONS INVOLVING BREACH OF CONTRACT
Can be assigned
Why are gift promises unenforceable?
They lack consideration.
Only _____ has the legal power to accept an offer and create a contract.
The offeree
An invitation to make an offer:
general advertisement
A third party to whom a benefit or gift is intended:
Donee beneficiary
An agreement whereby the parties agree to accept something different in satisfaction of the original contract:
accord
What rule requires the offeree to accept the offeror's terms?
The mirror image rule
Courts that settled disputes where an award of monetary damages would not be a proper remedy, or where fairness required the application principles:
equity courts
A clause that prohibits the assignment of rights under the contract:
anti-assignment clause
An unconditional promise to perform:
covenant
An original creditor who becomes a beneficiary under the debtor's new contract:
Creditor beneficiary
The settlement of a contract dispute:
accord and satisfaction
Nonperformance that is excused if an extreme or unexpected development or expense makes it impractical for the promisor to perform:
commercial impracticability
A condition, if it occurs, that automatically excuses the performance of an existing contractual duty to perform:
condition subsequent
The performance of an accord:
satisfaction
Contract law developed primarily by state courts:
common law of contracts
A clause that permits the assignment of the contract only upon receipt of an obligor's approval:
approval clause
Exchange that parties engage in that leads to an enforceable contract:
bargained-for exchange
A contract entered into with the intent to confer a benefit or gift on an intended third party:
donee beneficiary contract
A doctrine that permits judges to make decisions based on fairness, equality, moral rights, and natural law:
Doctrine of equity
The agreement whereby parties agree to settle a contract dispute by accepting something different than provided in the original contract:
accord
A stipulation in the offer that says the acceptance must be by a specified means of acceptance.
express authorization
A term in a contract which can reasonably be supplied by the courts:
implied term
When a minor voluntarily leaves home and lives apart from his or her parents:
emancipation
A qualified promise that becomes a covenant if it is met:
conditional promise
When both parties are equally at fault in an illegal contract:
in pari delicto
What doctrine is intended to prevent unjust enrichment or unjust detriment?
Quasi- or implied-in-law contract
What type of consideration is not considered legally sufficient in many states?
nominal consideration
What are the special types of contracts for which minors may be liable?
1)Medical, surgical, and pregnancy care
2)Psychological counseling
3)Health and life insurance
4)Performance of duties relating to stock and bond transfers, bank accounts, etc.
5)Educational loan expenses
6)Contracts to support children
7)Contracts to enlist in the military
8)Artistic, sports, and entertainment contracts
What happens to the contract if a person is adjudged insane?
The contract is VOID, and neither party can enforce the contract.
What are the remedies for an unconscionable contract?
Court can:
1) refuse to enforce the contract.

2) refuse to enforce the unconscionable clause but enforce the remainder of the contract.

3) limit the applicability of any unconscionable clause to avoid any unconscionable result.
What serves as a basis for many of our daily activities?
Contracts
What are 4 exceptions involving illegal contracts?
1) Innocent persons who were justifiably ignorant of the law or fact that made the contract illegal.
2) Persons who were induced to enter into the contract by fraud, duress, or undue influence.
3) Persons who entered into an illegal contract withdraw before the illegal act was performed.
4) Persons who were less at fault than the other party for entering into an illegal contract.
Parties may voluntarily perform a contract that is ____.
unenforceable
A contract must arise from a _____.
bargained-for exchange
What do attorneys and judges refer to for guidance in contract disputes?
The Restatement (Second) of Contracts
What happens to the contract if a person is insane, but not adjudged insane?
The contract is VOIDABLE by the insane person, but the competent party cannot void the contract.
What is the major source of contract law in the United States?
The common law of contracts
What are the 3 elements of an unconscionable contract?
1) The parties possessed severely unequal bargaining power.

2) The dominant party unreasonably used its unequal bargaining power to obtain oppressive or unfair contract terms.

3) The adhering party had no reasonable alternative.
Who has the burden of proof to show that a contract is unlawful?
The party who asserts its illegality.
Tom and Jerry bet on who would win the Olympics. Tom lost and paid Jerry the $1,000 they bet. Later Tom learned that gambling was illegal where they had bet. Tom now wants his money back, and has sued Jerry. Who will the court rule in favor of?
Jerry, because the court will leave the parties where it found them.
In a contract for the sale of an automobile, which set of contract rules will primarily govern this transaction?
Uniform Commercial Code
Mason advertised the sale of his bicycle for $400. Joe saw the ad and told Mason that he wished to accept. Mason said nothing. Based on these facts, has a contract been formed?
No, because Mason's ad was not an effective offer.
Joe hired Bob to mow Joe’s lawn and Bob mowed Susan’s lawn by mistake. Susan peers out her window and sees Bob mowing, yet says nothing to Bob about his mistake since Susan needs to have her lawn mowed. When Bob approaches Susan for payment, Susan refuses, arguing that she never asked Bob to mow her lawn. Under these circumstances, Bob can recover payment from Susan under:
quasi contract
When can the offeror effectively revoke his/her offer?
Only before a contract has been formed.
Joe sent an offer to Susan via mail on February 24. This offer was received by Susan on February 27. On February 26 Joe’s secretary told Susan about Joe’s offer. Susan sent her acceptance of this offer on February 28. When did Joe’s offer become effective?
On February 27
Alice offers to sell her computer to Brad for $300. Brad says he will accept if Alice includes her printer. What is the contract?
There is no contract, because Brad has made a counteroffer.
On Feb. 22 you enter into a contract with a landscape company to provide services from May 1 until March 1 of next year. This contract is oral only, not written or signed. Is this contract enforceable?
No, because it is long term.
Maria went to her dentist. Neither party discussed the payment terms.

Later, Maria's dentist sent her a bill for dental services. Is Maria is obligated to pay the dentist's bill?
Yes - she is obligated to pay the bill under the implied contract theory.
Death or insanity of the offeror has what legal effect on the offer?
It automatically terminates the offer.
If there is no time specified for the acceptance of an offer, when does the offer terminate?
After a reasonable period of time.
Gary mails an offer to Brian on June 15. Brian receives the offer on June 16. Gary mails a revocation of the offer on June 17. Brian mails a letter of acceptance on June 18. Brian receives the revocation on June 19. Was a contract formed?
Yes, on June 18.
Joe works at a Dallas-based accounting firm. The firm's employment contract contains the following clause: "Employee agrees that he will not practice accounting in Dallas for six months after termination of his employment with this firm." Joe signs the contract, works for five years, and then resigns and immediately opens his own accounting firm in Dallas. His former employer sues him for breach of contract. Who will win this case?
Joe's former employer will win, because this non-competition clauses is reasonable.
Jim saw an advertisement in the Daily News stating the Wolf Sporting Goods Store was “offering to sell Browning shotguns, model 100, for $400.” Jim went the next day to Wolf’s store and said “here is $400, I accept your offer to sell me a Browning model 100 for $400”. Has an enforceable contract been formed?
No, because the ad was not a contract offer.
Abe, a builder, contracts with the city of Moscow to build a new mall. O’Malley is a hotel owner near the new mall, so he stands to benefit once the mall is built. However, Abe backs out of the contract to build the mall. O’Malley wants to sue Abe for his loss. What is the result?
O’Malley is an incidental beneficiary and cannot sue Abe.
When is the revocation of an offer effective?
When it is received by the offeree
Carlos tells Sally he will sell her his car for $5,000. Sally agrees. The exchange is to take place in ten days. The contract between Carlos and Sally is now:
bilateral, executory, and express
Evan wrote a letter to his friend Fred offering to sell Fred an 80-acre farm for $200,000. After mailing the letter, Evan learns that the farm is actually worth $300,000 and he changes his mind about selling. Can Evan do anything?
Evan can revoke his offer at any time before acceptance, because there is no consideration to keep the offer open.
Ted, while he was a minor, failed to disaffirm a contract during his minority or for a reasonable period after becoming an adult. This contract was automatically:
ratified
Edna is the leading brain surgeon in the U.S. She enters into a contract to perform a difficult brain operation on Ben. Edna is very busy and wants to assign this contract to a less experienced surgeon, Charles. This would be Charles’ first operation of this type. Can anyone prevent this assignment?
Yes - Ben can prevent this assignment because there is a personal services contract.
Betty, age 16, buys a car and wrecks it one week later. She takes it back to the seller and demands all her money back. Is she entitled to get all her money back even though the car is now damaged?
Yes, regardless of the condition of the car, because this was a voidable contract.
A court has held that a certain contract violates public policy. This contract will be treated the same as:
An illegal contract
Sarah is 16 years old. She left home at age 15; her parents no longer support her. Sarah entered into a contract with Best Groceries for the purchase of $100 of groceries on credit. The groceries consisted of basic, necessary items. However, their reasonable value is only $80. If Sarah discovers that she has been overcharged and refuses to pay, what is Best entitled to collect?
$80
A contract may be enforced by a third party beneficiary if that beneficiary is a(n):
intended beneficiary
Otto was 17 years old when he purchased a new Hummer for $70,000. When Otto turned 20 years old he wanted to disaffirm this contract. Does he have this right?
No, because Otto impliedly ratified this contract.
Damages that are agreed upon at the time the contract is entered into:
liquidated damages
Bill is 17 years old. His parents no longer support him. He purchases bread and eggs from a grocer on credit, then does not pay. Does the grocer have a right to payment from Bill for these items?
Yes, because these items are “necessaries”. (only the REASONABLE value)
Jack was so drunk that all his judgment was impaired. While he was drunk, Jack entered into a contract with Sam, who sold Jack a used car. What will happen to the contract?
The contract may be voidable at the option of Jack.
Will, a car salesman, sells Al a car and states that it is "the best little honey in town," but makes no other guarantee. Jones buys the car and on the way home, the
engine blows up. Did the salesman breach a contract?
No - the words of the salesman are considered ''puffery.''
Mindy purchased a stereo when she was 16 years old. Mindy has used the stereo for a year, and she now wants to avoid the contract. Can she?
Yes - she can disaffirm the contract, and the seller must repay all money paid by Mindy.
Suppose Sue confronts Bob and says, "Are you interested in selling your building for $2 million?" Bob replies, "That sounds reasonable to me." Does a valid contract exist?
No - because no valid contract results from PRELIMINARY NEGOTIATIONS.

Sue's question was only an invitation to make an offer or an invitation to negotiate.
Suppose a fire destroys an office building that has been listed for sale. Can Bob still try and buy the office building?
No - the offer is now terminated b/c the subject matter (building) of the seller's offer was destroyed.
What action simultaneously terminates an offeror's offer and creates a new offer?
A COUNTEROFFER by the OFFEREE
What is the lapse of time for an offer made face-to-face or during a telephone call?
The lapse of time usually expires after the conversation.
An offer (and contract) must generally contain what 4 terms?
1) identification of the parties.
2) identification of the subject matter & quantity.
3) consideration to be paid.
4) time of performance.
Joe is at a car dealership and finds one he likes. The salesman makes him an offer of $16,000. Joe replies, "Okay, I'll take the car, but I sure wish you would make me a better deal." Did Joe make an acceptance?
Yes - a "grumbling acceptance" is still a legal acceptance.
Suppose Mr. Jones, the CEO of Ace Co., decides to sell his business to Baker Co. & puts the offer in writing. Assume that the offer is on Mr. Jones's desk. Mr. L, an agent for Baker Co., sees the offer on Mr. Jones's desk & tells the CEO of Baker about the offer. Will an offer result?
No - the offer is not acceptable b/c Mr. Jones never communicated it to the CEO of Baker Co.
Is this statement a valid offer?

"I will buy your house for $5 million."
Yes - because it indicates the offeror's present INTENT TO CONTRACT.
Harry, sales manager of ABC Co., offers to sell 100 computers to Ted for $250,000. Harry's offer is made on August 1, but Ted tells Harry he is not interested. Ted later decides that he DOES want to purchase the computer. Can Harry still sell Ted the computers?
When Ted told Harry that he was not interested the first time Harry made an offer, Ted's rejection TERMINATED the offer. If Ted later decides that he does want to purchase the computers, and ENTIRELY NEW CONTRACT must be formed.
Phil, who has worked for Acme Co. for 20 years, is retiring. The president of Acme says, "Because you were such a loyal employee, Acme will pay you a bonus of $10,000." Later, Acme refuses to pay Phil the money and Phil sues. Who wins?
Acme Co. will win - the contract is unenforceable b/c it is based on past consideration.
What protects unsophisticated borrowers from loan sharks and other who charge huge rates of interest?
usury laws
Suppose a bank offer to loan ABC Co. $5 million at an 18% interest rate. Prior to ABC's acceptance of the offer, the state legislature enacts a statute that sets a usury interest rate of 12%. Does the bank's offer still stand?
No - the bank's offer automatically terminated when the usury statute became effective; it is a SUPERVENING ILLEGALITY.
Why do many states prohibit police officers from accepting reqards for apprehending criminals?
Because the police officers have a PREEXISTING DUTY, which lacks consideration.
When is an offer made by an offeror effective?
When it is received by the offeree.
During what instances can offers be terminated operation of law?
Offer can be terminated through:
1) a lapse of time.
2) destruction of the subject matter.
3) death or incompetence of the offeror or offeree.
4) a supervening illegality.
In what 3 ways can a minor dissafirm a contract?
He/she can disaffirm the contract:
1)orally
2)in writing
3)by his conduct