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103 Cards in this Set
- Front
- Back
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Consideration
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The value given in return for a promise or performance in a contractual agreement.
Elements: 1. something of Legally sufficient value 2. there must be bargained–for exchange |
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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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Recission
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A remedy whereby a contract is canceled and the parties are returned to the positions they occupied before the contract is made.
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Past Consideration
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An act that has already taken place at the time a contract is made(and that ordinarily by itself cannot be consideration for a later promise to pay for the act).
Promises made in return for actions and events that have already taken place are unenforceable because there is a lack of consideration. The lack of consideration stems from the lack of bargained–for exchange. You can't bargain for something in the past, but for something in the present and the future |
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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.
The accord is the agreement under which one of the parties promises to give or perform, and the other to accept, something other than that which the parties originally agreed. Satisfaction is the performance(usually payment) which takes place after the accord has been executed. There can be no satisfaction without an accord. The amount of debt must be in dispute for accord and satisfaction to occur. |
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Liquidated Debt
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A debt whose amount has been ascertained, fixed, agreed on, settled, or exactly determined.
Accord and satisfaction cannot occur on this type of debt; acceptance of a lesser sum than the entire liquidated debt is not satisfaction because the debtor has no consideration for the obligation of paying the lesser balance to the creditor due to the preexisting duty of paying the entire debt. |
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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.
bars any further recovery beyond the terms stated in the release. Will generally be binding if: 1. given in good faith 2. stated in a signed writing 3. accompanied by consideration |
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Convenant 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(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.
Allows a party to recover even without consideration Court may enforce an otherwise unenforceable promise. |
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Estopped
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barred, impeded, or prevented
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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.
Evidenced by two events: 1. An offer 2. An acceptance One party offers a certain bargain to another party, who then accepts that bargain |
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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 necessary for it to be effective: 1. There must be a serious, objective intention by the offeror 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. Once an effective offer has been made, the offeree's acceptance of that offer creates a legally binding contract(if the other essential elements for a valid and enforceable contract are present) |
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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.
May be exercised by an express of repudiation of the offer( I withdraw my previous offer) or by the performance of acts that are inconsistent with the existence of the offer that re made known to the offeree. General rule followed by most states is that a revocation becomes effective when the offeree or the offeree's agent actually receives it. |
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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 the terms of the offeree's acceptance to exactly match 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.
Must be unequivocal and must communicated to the offeror. |
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Mailbox Rule(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.
If authorized mode of communication is mail, then an acceptance becomes valid when it is dispatched, not when it is received by the offeror. Does not apply to instantaneous forms of communication(face to face, email, fax, phone) |
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E–contract
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A contract that is formed electronically.
Disputes tend to center on contract terms and whether the parties voluntarily agreed to those terms. |
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Click–on Agreement
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An agreement that rises when an online buyer clicks on "I agree," or otherwise indicates her or his assent to be bound by the terms of an offer.
The law generally does not require the parties to read all the terms in a contract for it to be effective. |
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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.
Usually, the party who opens the box is told that she or he agrees to the terms by keeping whatever is in the box. Usually between manufacturer and the ultimate buyer–user, rather than retailer and a buyer. Terms generally concern warranties, remedies, and other issues associated with the use of the product. |
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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 does not require the buyer's explicit agreement.
Are often unenforceable because they do not satisfy the agreement requirement of contract formation. |
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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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Partnering agreement
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An agreement between a seller and buyer who frequently do business with each other concerning the terms and conditions that will apply to all subsequently formed electronic contracts.
Can establish special access and identification codes to used by the parties reduces likelihood that disputes will arise |
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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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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.
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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.
Disputes generally arise from a promise of future performance, in which a party may not fulfill the promise and is thus subject to pay monetary damages or to perform the promised act(rare). |
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Objective Theory of Contracts
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The view that contracting parties shall only be bound by terms that can objectively be inferred from promises made.
Element of intent is of prime importance and objective intent is determined by this by interpreting objective facts through the perspective of a reasonable person and objective facts include: 1. What the party said when entering into the contract. 2. How the party acted or appeared 3. the circumstances surrounding transactions |
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Offeror
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A person who makes an offer
Also the 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; promise for a promise.
Comes into the existence the moment 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.
Contract formed when 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; require a special code and language to be formed
ex: negotiable instruments: checks, drafts, promissory notes, and certificates of deposit |
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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.
Based on substance rather than form; some of these types of contracts are required to be in writing. |
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Express Contract
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A contract in which the terms of the agreement are stated in words, and written.
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Implied contract
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A contract formed in whole or in part from the conduct of parties.
Differs from express contract in that the conduct of the parties, rather than the words, creates and defines at least some of the terms of the contract. Requirements: 1. The plaintiff furnished some service or property 2. The plaintiff expected to be paid for that service or property, and the defendant knew or should have known that payment was expected(based on the objective theory of contracts) 3. The defendant had a chance to reject the services or property and did not. |
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Exectued 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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Has the 4 elements necessary for contract formation:
1. An agreement(offer and acceptance) 2. Supported by legally sufficient consideration 3. for a legal purpose 4. made by parties who have the legal capacity to enter into the contract. |
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Voidable contract
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A contract that may be legally avoidable at the option of one or both of the parties.
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Unenforceable contract
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A valid contract rendered unenforceable by some statute or law.
ex: If contract is required to be in writing but is not. |
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Void contract
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1. A contract having no legal force or binding effect.
2. Is no contract at all. 3. The terms void and contract are contradictory 4. None of the parties have legal obligations under a void contract 5. Ex: Contract can be void if the contract had illegal purposes |
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Quasi Contract(implied–in–law 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.
Equitable and fictional contracts that courts can impose on the parties "as if" the parties had entered into an actual contract. Plaintiff may recover a quantum meruit(the extent of compensation due to plaintiff under the quasi contract). |
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Enforceable Contract
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A valid contract that can be enforced because there are no legal defenses against it.
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Contractual Capacity
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The capacity required by the law for a party who enters into a contract to be bound by that contract.
Mentally incompetent person generally cannot form a legally binding contract with another party. A party may have the capacity to enter a contract, but may waive the right to avoid liability under it, such as with minors or infants. |
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Emancipation
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In regard to minors, the action of being freed from parental control.
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Disaffirmance
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The legal avoidance, or setting aside, of a contractual obligation.
To disaffirm, a minor must do so through his words or conduct his or her intent not to be bound by the entirety(not a portion) of the contract. A contract can be disaffirmed at any time during minority or a reasonable amount of time after coming of age. In some states, a minor cannot disaffirm a contract for the sale of land until he or she reaches the age of majority. What constitutes a reasonable time for disaffirmance varies and depends on the circumstances. Minors can disaffirm executed contracts. |
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Necessaries
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Necessities required for life, such as food, shelter, clothing, and medical attention.
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Ratification
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The acceptance or confirmation of an act or agreement that gives legal force to an obligation that previously was not enforceable.
Expressed Ratification: Occurs when the individual on reaching the age of majority, states orally or in writing that he intends to be bound by the terms of the contract. Implied ratification: If the actions of the minor upon reaching the age of majority are inconsistent with disaffirmance. If a minor fails to disaffirm a contract in a reasonable time after reaching the age of majority, the court must determine whether the conduct is implied ratification or disaffirmance. Courts generally hold that executed contracts were ratified, while executory contracts were disaffirmed. |
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Usury
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Charging an illegal rate of interest.
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Covenant not to compete
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A contractual promise in which one party agrees not to compete in business with another party for a certain period of time and within a specified geographical area.
Is enforceable despite being a restraint on trade(which is typically rendered void because it's contrary to public policy). |
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Reformation
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A court ordered correction of a written contract so that it reflects the true intentions of the parties.
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Unconscionable Contract or Clause
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A contract or clause that is void on the basis of public policy because one party was forced to accept terms that are unfairly burdensome and that unfairly benefit the stronger party.
1. Procedural unconscionability a. adhesion contract 2. substantive unconscionability |
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Adhesion contract
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A standard–form contract in which the stronger party dictates the terms.
Included in situations that have procedural unconscionability where there is uneven bargaining power between the parties in which the weaker party's consent to the contract terms is involuntary. Standard–form contract written exclusively by one party and presented to the other on a take–it–or–leave–it basis. Adhering party has no chance to negotiate the terms of the contract Not all adhesion contracts are unconscionable, only those that unreasonably favor the drafter. |
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Exculpatory Clause
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A clause that releases a contractual party from liability in the event of monetary or physical injury, no matter who is at fault.
Courts view them with disfavor, and sometimes deem them to be unconscionable. Usually not enforceable: 1. rental agreements for commercial property are frequently held to be contrary to public policy, and almost always enforceable in residential property leases 2. in employment context when they attempt to remove employer's potential liability to employees for injuries. However, if they do not contravene public policy, are not ambiguous, and do not claim to protect parties from liabilities for misconduct, they enforce them. In the cases that exculpatory clauses are enforced, the services are deemed to be nonessential, and the firms to not have relative bargaining strength, and the customers to be contracting for the services voluntarily. Ex: health clubs, racetracks, amusement parks, skiing facilities, horse-rental operations, golf-cart concessions, and skydiving organizations use exculpatory clauses to limit liability for patrons' injuries. |
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Blue Sky Laws
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State laws that regulate the offering and sale of securities for the protection of the public.
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Voluntary Consent
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Knowledge of, and genuine assent to, the terms of a contract.
Without it, an otherwise valid contract will be unenforceable. No genuine meeting of the minds without it May be lacking because of mistake, fraudulent misrepresentation, undue influence, or duress. |
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Unilateral Mistakes
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A mistake that occurs when one party to a contract is mistaken as to a material fact.
Generally does not give the give the mistaken party right to relief from the contract, meaning the contract is normally enforceable against the mistaken party. Has two exceptions: 1. The other party knows or should have known that a mistake was made 2. The error was due to a significant mathematical mistake in addition, subtraction, division, or multiplication and was made inadvertently without gross negligence. |
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Material Fact
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A fact to which a reasonable person would attach importance in determining his or her cause of action.
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Bilateral Mistake
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* A mistake that occurs when both parties to a contract are mistaken about the same material fact.
1. mutual misunderstanding concerning a basic assumption on which the contract was made. 2. Contract can be rescinded when both parties are mistaken about the same material fact. 3. Usually voidable by the adversely affected party and can be rescinded. 4. Word or term in a contract may be subject to one or more reasonable interpretation 5. If the parties attach materially different meanings to the term, their mutual misunderstandings may allow the contract to be rescinded. |
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scienter
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Knowledge by a misrepresenting party that material facts have been falsely represented or omitted with an intent to deceive.
generally signifies intent to deceive exists if a party knows that a fact is not stated statement made known not to be true or statement made recklessly implied statement made on some basis such as personal knowledge or personal investigation, when it is not. |
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Undue Influence
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Persuasion that is less than actual force but more than advice and that induces a person to act according to the will or purposes of the dominating party.
contracts lack voluntary consent and are voidable In various types of relationships, one party may have an opportunity to unfairly influence and dominate another party, such as minors and elderly people under the influence of guardians. Party may take advantage of another for personal gain. Can arise from confidential and fiduciary relationships, such as attorney–client. party being taken advantage of does not exercise free will in entering into a contract. physical or mental impairment not enough; there must be clear and convincing evidence that the person did not act out of his free will. |
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Duress
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Unlawful pressure brought to bear on a person, overcoming the person's free will and causing him or to do what he or she otherwise would not have done.
ex: force, blackmail, extortion Both a defense to enforcement of a contract and a ground for recission of a contract. Must be proof of threat to establish duress, and the threatened act must be wrongful, illegal, and render the personal incapable of exercising his free will. threatening to sue someone is usually is not duress. |
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Statute of Frauds
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A state statute that requires certain types of contracts to be in writing to be enforceable.
Does not apply to fraud, but rather in an effort to prevent fraud, denies the enforceability to certain contracts that do not comply with its requirements. Fall under statute of frauds and require a writing: 1. Contracts involving interests in land 2. Promises in consideration of marriage 3. Contracts that cannot be performed within one year from the day after the date of formation 4. Under UCC, contracts for the sale of goods priced at $500 or more. 5. Collateral contracts, such as promises to answer for the debt or duty of another |
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Collateral Promise
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A secondary promise to a primary transaction, such as a promise made by one person to pay the debts of another if the latter fails to perform.
Third party assumes debts or obligations of primary party to a contract if the party doesn't perform. |
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Prenuptial Agreement
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An agreement made before marriage that defines each partner's ownership rights in the other partner's property.
Must be in writing to be enforceable given more credence when accompanied by consideration |
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Parol Evidence Rule
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A rule of contracts under which a court will not receive into evidence prior or contemporaneous oral statements and agreements that contradict the terms of the parties' written contract.
parol evidence–– testimony or other evidence of communication between the parties that is not contained in the contract itself. |
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Integrated Contract
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A written contract that constitutes the final expression of the parties' agreement. Evidence extraneous to the contract that contradicts or alters the meaning of the contract in any way is inadmissible.
Determination of whether evidence will be allowed excludes extraneous evidence. Can either be partially or completely integrated. Completely integrated when it contains all the terms to the contract Partially integrated when it contains only some of the terms the parties agreed on. Evidence of consistent additional terms is admissible to supplement partially integrated agreements. For both partially and completely integrated contracts, courts exclude any evidence that is contradictory to the writing and allows parol evidence only to supplement the partially integrated contract. |
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Incidental Damages
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Damages that compensate for expenses directly incurred because of a breach of contract, such as those incurred to obtain performance from another source.
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Consequential Damages(special damages)
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Foreseeable damages that result from a party's breach of contract but are caused by special circumstances beyond the contract itself.
Differ from compensatory damages in that they are caused by special circumstances beyond the contract itself and flow from the consequences or results of a breach. Flow from consequences of a breach Court may award consequential damages to nonbreching party in the event that the breaching party fails to deliver goods, knowing that the buyer is planning to use or resell those goods immediately; breaching party must know(or have reason to know) that special circumstances will cause the nonbreaching party to suffer an additional loss. |
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Nominal Damages
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A small monetary award(often one dollar) granted to a plaintiff when no actual damage was suffered.
Damages awarded are usually small, usually merely establish that defendant acted wrongfully, and brought as a matter of principle under the theory that a breach has occurred and some damages must imposed regardless of actual loss. |
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Mitigation of damages
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The requirement that a plaintiff must do whatever is reasonable to minimize the damages caused by the defendant.
1. Employment contracts 2. rental agreements |
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Liquidated damages
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An amount, stipulated in a contract, that the parties to the contract believe to be a reasonable estimation of the damages that will occur in the event of a breach.
Frequently used in construction contracts because it is difficult to estimate the amount of damages that would be caused by a delay in completing the work. |
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Penalty
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A contract clause that specifies a certain amount to be paid in the event of a default or breach of contract but is unenforceable because it is designed to punish the breaching party rather than to provide a reasonable estimate of damages.
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Restitution
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An equitable remedy under which a person is restored to his or her original position prior to loss or injury, or placed in the position he or she would have been in had the breach not occurred.
Done by both parties to rescind a contract by returning goods, funds, or property previously conveyed; if consumed, restitution must be made in an equivalent dollar amount. Recaptures benefit conferred on the defendant that has unjustly enriched him. Several advantages over damages: 1. available in situations when damages cannot be proved or are difficult to prove 2. used to recover specific property 3. sometimes results in greater overall award. Not limited to rescissions; parties can seek restitution in tort actions, and other types of actions, such as when funds have been transferred by mistake, fraud, or incapacity. |
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Specific performance
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An equitable remedy granted by the court in which the parties are ordered to perform as promised in the contract. Is normally granted when the legal remedy(monetary damages) is inadequate.
Provides exact bargain promised in the contract. Avoid problems inherent in a suit for monetary damages, such as collecting a judgement and arranging another contract. Actual performance may be more valuable to the promisee than monetary damages. normally only granted when legal remedy is inadequate; thus, sales contracts usually don't qualify for specific performance, but in cases of unique goods, courts may grant specific performance. 1. Sale of Land 2. Contracts for personal services |
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Privity of Contract
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The relationship that exists between the promisor and the promisee of a contract; third parties have no rights in contracts to which they're not parties
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Assignment
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The transfer to another of all or part of one's rights arising under a contract.
In bilateral contract, one contract has a right to require the party to perform some task, and the other has a duty to perform it. |
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Assignor
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A party who assigns(transfers) his or her rights to another party(assignee).
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Assignee
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A party to whom the rights under a contract are transferred, or assigned.
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Obligee
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One to whom an obligation is owed.
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Obligor
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One who owes an obligation of to another.
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Delegation of Duties
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The transfer to another of all or part of one's duties arising under a contract.
Does not relieve the delegator of the obligation to perform in the event that the delegatee fails to perform. |
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Delegator
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A party who transfers(delegates) her or his obligations under a contract to another party(delegatee)
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Delegatee
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A party to whom contractual obligations are transferred, or delegated.
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Third Party Beneficiary
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One for whose benefit a promise is made in a contract but is not a party to the contract.
Creates exception to privity of contracts |
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Intended beneficiary
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A third party for whose benefit a contract is formed. An intended beneficiary can sue the promisor if the contract is breached.
Types: 1. Creditor beneficiary 2. Donee beneficiaries |
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Incidental beneficiary
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A third party who benefits from a contract even though the contract was not formed for that purpose. Has no rights under the contract and cannot sue to have it enforced.
1. One who benefits from a contract but whose benefit was not the reason for the contract 2. Has no rights in the contract 3. Cannot sue to enforce the contract |
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Discharge |
The termination of an obligation such as occurs when the parties to a contract have fully performed their contractual obligations. |
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Performance |
The fulfillment of one's duties under a contract--the normal way of discharging one's contractual obligations. |
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Condition |
A qualification, provision, or clause in a contractual agreement, the occurrence or nonoccurrence of which creates, suspends, or terminates the obligations of the contracting parties. If not satisfied, obligations of parties are discharged. |
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Condition Precedent |
A condition in a contract that must be met before a party's promise becomes absolute. condition precedes the absolute duty to perform Generally common. |
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Condition Subsequent |
A condition in a contract that, if it occurs, operates to terminate a party's absolute promise to perform. condition that follows the absolute duty to perform. If the condition occurs, the party need not perform any further.Generally rare. |
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Concurrent Conditions |
Conditions that must occur or be performed at the same time--they are mutually dependent. No obligations arise until these conditions are simultaneously performed. Only exist when parties expressly or impliedly are to perform their respective duties simultaneously. |
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Tender |
An unconditional offer to perform an obligation by a person who is ready, willing, and able to do so. party that tenders does everything possible to carry out the term of the contract. accomplishes performance. |
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Breach of contract |
The failure, without legal excuse, of the promisor to perform the obligations of a contract. Any breach entitles the nonbreaching party to sue for damages, but only a material breach discharges the nonbreaching party from the contract. |
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Anticipatory repudiation |
An assertion or action by a party indicating that he or she will not perform a contractual obligation. |
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Novation |
The substitution, by agreement, of a new contract for an old one, with the rights under the old one being terminated. Requires: 2. Agreement by all the parties to a new contract 3. Elimination of the old obligation(discharge of the prior party) 4. A new, valid contract.Expressly or impliedly revokes and discharges a prior contract. |
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Impossibility of performance |
A doctrine under which a party to a contract is relieved of his or her duty to perform when performance becomes objectively impossible.
Applied when parties could not have reasonably foreseen the event or events that rendered performance impossible. Performance may become so difficult or costly that courts will consider it commercially unfeasible or impracticable. Objective impossibility must be distinguished from subjective impossibility. Subjective impossibility does not discharge a contract, and nonperforming party may be held in breach of contract. |
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Commercial impracticability |
anticipated performance must become extremely difficult or costly Added burden of performance must not have been known by the parties when the contract was made. |
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Frustration of purpose |
A court-created doctrine under which a party to a party will be relieved of his or her duty to perform when the objective purpose of performance no longer exists(due to reasons beyond the party's control). Supervening event must not have been foreseeable at the time of the contracting. |
