Contracts Definitions

Front 1

Mutual Assent

Back 1

Mutual assent relates to the requirement of an initial agreement between the parties to
enter into a contractual relationship and is established if a valid offer has been made by one party with a
valid acceptance having been given by the other prior to the termination of the offer.

Front 2

Offer

Back 2

An offer is a manifestation of present contractual intent which includes certain and definite terms and is communicated to the offeree.

Front 3

Acceptance

Back 3

An unequivocal assent to the terms of an offer

Front 4

Consideration

Back 4

Consideration is that which is bargained for and given in exchange for a promise. It may
be an act, a forbearance to act, or a return promise on the part of the promisee.

Front 5

Bilateral contract

Back 5

A Bilateral Contract results from an offered promise that is accepted by the giving of a
return promise.
-Adams v. Lindsell: The case of Adams v. Lindsell holds that an acceptance of an offer for a bilateral
contract, dispatched by an authorized mode of communication, is effective when posted.

Front 6

Unilateral Contract

Back 6

A Unilateral Contract results from an offered promise that must be accepted by
giving the performance specified. A mere promise to perform does not constitute acceptance in such a
case.

Front 7

Option

Back 7

An Option is an agreement supported by consideration that involves a promise to hold an offer open for a specified length of time.

Front 8

Firm Offer

Back 8

A Firm Offer is an offer which is irrevocable either because an option has been paid for by one
of the parties or because it was made by a merchant pursuant to UCC Section 2-205, the merchant having signed the offer in writing giving assurance that the offer will remain open for a certain or reasonable
length of time.

Front 9

Caldwell v. Cline

Back 9

Caldwell v. Cline: The case of Caldwell v. Cline holds that when an offer states that it will be open for a
certain number of days the first day is considered to be the day the offeree receives the offer.

Front 10

Revocation

Back 10

Revocation results from the canceling, annulling, or otherwise voiding of an offer.
-A revocation is deemed to be effective upon its receipt
by the offeree. A minority view holds that the revocation becomes effective when sent by the offeror.

Front 11

Unilateral Contract-Revocation of Offer Rule

Back 11

The offeror in a unilateral contract may not revoke the
offer for the time stated in the offer or if no time is stated in the offer, then for a reasonable length of time if the offeree begins performance.

Front 12

Rejection

Back 12

A rejection is a manifestation by the offeree that he or she does not intend to accept the offer
or give it further consideration.
-A rejection becomes effective upon receipt by the offeror.

Front 13

Counteroffer

Back 13

A counteroffer is an offer by the original offeree regarding the same transaction but
containing terms that differ from those proposed in the original offer made by the offeror.

Front 14

Counteroffer as an Implied Rejection

Back 14

A counteroffer is an implied rejection of the original offer. It is, in effect, a new offer available for acceptance.

Front 15

Illusory Promise

Back 15

An illusory promise is an expression which resembles promissory terms, but in actuality imposes no obligation upon the party making it.

Front 16

Promissory Estoppel

Back 16

The doctrine of Promissory Estoppel provides a substitute for the element of
consideration under certain circumstances involving foreseeable detrimental reliance upon a gratuitous
promise, where a remedy against the non-performing promisor may be necessary in order to avoid injustice in the particular case.

Front 17

Moral Obligation Rule

Back 17

The doctrine of "Moral Obligation" applies where the promisor has received
something from the promisee of value in the form of money or other material benefits under such circumstances as to create a moral obligation to pay for what they have received, and a later promise to do so, resulting in a finding of consideration for such a promise. The doctrine most often applies in situations involving promises to pay for previously entered gratuitous services, promises to pay debts barred by the statute of limitations and promises to pay debts discharged in bankruptcy. The promise can be implied by a mere acknowledgment of a debt or by part payment of the debt. Use of the doctrine supplies the element of consideration in situations where it would otherwise be missing from the bargain.

Front 18

Legal Detriment

Back 18

A legal detriment is a promise to do something that one is not legally obligated to do or
to refrain from doing something that one is legally privileged to do

Front 19

Failure of Consideration

Back 19

Failure of consideration occurs when one of the parties to a contract fails to
perform as required by the terms of the contract or the subject matter of the consideration ceases to exist
or becomes worthless even though valid consideration was present when the parties first contracted

Front 20

Want of Consideration

Back 20

Want of consideration refers to the parties' failure to make a contract because
there was no consideration present from the beginning of the transaction.

Front 21

Executed Contract

Back 21

A contract that has been fully performed by all of the parties
to the contract.

Front 22

Executory Contract

Back 22

An executory contract is a contract that remains to be completed in the future by at
least one of the contracting parties.

Front 23

Sufficiency of Consideration

Back 23

Generally, courts do not require that the consideration benefit the offeree,
or that it be of any substantial value, as long as it serves as an inducement for the promise of the other
party. However, some courts have held that nominal consideration may not constitute a valid contract if
Page 30
the promisor's promises are valued considerably higher than those of the promisee.

Front 24

Meeting of the Minds

Back 24

Most jurisdictions hold that a contract is not formed until there has been a "meeting of the minds" according to the intentions of the parties.

Front 25

Outward Manifestation Theory

Back 25

Other jurisdictions apply the "Outward Manifestation" theory stating that
contracts are formed according to outward manifestations in accordance with the understanding of the supposed "reasonable man."

Front 26

Merit Music v. Sonneborn

Back 26

The court held that in the absence of
fraud duress or material mistake a party to a contract with the capacity to understand a written document
will be bound by his or her signature whether or not they read the document.

Front 27

Express Contract

Back 27

A contract which is manifested by words either written or oral.

Front 28

Implied in Fact Contract

Back 28

A contract that is inferred by the law because the acts or
conduct of the parties and the surrounding circumstances make it reasonable to assume that a contract
exists between them even though the contract is never manifested by words.

Front 29

Quasi Contract

Back 29

An implied in law contract is one that is imposed by operation
of law to do justice even though it is clear that no promise was ever manifested by words or ever intended.
The creation of such a contract will occur where one party accepts or retains benefits that have been
conferred upon him by another party who expected to be paid and who was not a volunteer.

Front 30

Quantum Meruit

Back 30

refers to the reasonable value deserved for one's labor

Front 31

Quantum Valebant

Back 31

Quantum valebant refers to reasonable value that is deserved as payment for goods.

Front 32

Requirement Contract

Back 32

A contract to supply all of a certain type of goods or
merchandise that a particular party may have a need for over a certain period of time.

Front 33

Output Contract

Back 33

A contract to supply all of a certain type of goods or merchandise
that a particular party may produce.

Front 34

Option Contract

Back 34

An option contract is a contract wherein the promisor for consideration agrees to make
a certain offer irrevocable.

Front 35

Void Contract

Back 35

A void contract is a contract which cannot be enforced by either of the parties

Front 36

Voidable Contract

Back 36

A voidable contract is a contract that can be disaffirmed by one or more of the parties
for reasons related to legal immaturity or mental incapacity.

Front 37

Power of Disaffirmance

Back 37

A legally immature or mentally incapacitated person has the power to disaffirm a contract but for all other purposes the contract is valid unless and until it is disaffirmed. The disaffirmance occurs when the legally immature or mentally incapacitated person manifests to the other party an unwillingness to continue to be bound by the contract.

Front 38

Exculpatory Clause

Back 38

An exculpatory clause is a provision in a contract that is intended

Front 39

Contract of Adhesion

Back 39

A contract of adhesion is one wherein the provisions have been drafted giving one
party an unequal bargaining power.

Front 40

Unconscionable Contract

Back 40

An unconscionable contract is a contract with a provision that no fair and honest person would make and no person in his or her right mind would accept. Such contracts are usually agreed to through "oppression" in that the promisee knows that he or she is giving up his or her rights but is forced to if he or she wishes to purchase the subject product. Or, he or she is not aware of the
rights that are being given up but through "unfair surprise" (such as small print or vagueness in terms)
signs the contract anyway.

Front 41

Condition Precedent

Back 41

A condition precedent is related to an event which must occur before a duty on the
part of the defendant will arise. It may arise out of an express or implied term of the contract, or by
operation of law under the doctrine of constructive conditions.

Front 42

Condition Concurrent

Back 42

A condition concurrent is a type of condition precedent which exists when the
parties to a contract are bound to render performance at the same time.

Front 43

Condition Subsequent

Back 43

A condition subsequent is related to an event which, by agreement of the parties,
operates to terminate a duty of performance after it has arisen.

Front 44

Express Conditions

Back 44

Express conditions arise out of a stated provision in the contract

Front 45

Implied in Fact Conditions, in performance

Back 45

Implied in fact conditions are those which are necessary to the performance
of the contract between the parties and therefore are deemed to have been intended by the parties, but
are not expressly stated.

Front 46

Constructive Conditions, in performance

Back 46

Constructive conditions are those that the law will imply even though the parties did not and possibly would not have included them in the contract. Such conditions will be implied
by the law to promote justice.

Front 47

Doctrine of Constructive Conditions

Back 47

The Doctrine of Constructive Conditions holds that the fulfillment
of a promise in a bilateral contract can be construed to be a condition of the other party's performance even in the absence of an express provision to that effect.

Front 48

Implied Condition of Cooperation

Back 48

An Implied Condition of cooperation is implied in a contract whenever the cooperation of the promisee is necessary for the performance of the promise

Front 49

Substantial Performance

Back 49

The doctrine of Substantial Performance holds that a plaintiff who has failed to
perform a constructive condition in some minor or immaterial respect may nevertheless recover on the
contract.

Front 50

Waiver of Condition, regarding performance

Back 50

A waiver of condition results when a party to a contract voluntarily relinquishes his
or her known right to assert the non-performance of a condition. Such waivers can be given by express agreement or through the conduct of a party.

Front 51

Excuse of Conditions, regarding performance

Back 51

An excuse of conditions occurs when one party's failure to perform a condition occurred because said party was reacting to a material default on the part of the other party. Accordingly, the other party is barred from asserting the failure of a condition or conditions as a defense against the first party (usually the plaintiff).

Front 52

Divisible (or Severable) Contracts

Back 52

A divisible or severable contract is a bilateral contract wherein the
performance is divided into two or more separate units, either as to subject matter or time, and
performance of each part by one party is the agreed exchange for a corresponding part by the other party.
Examples are construction contracts, contracts for the sale of goods and employment contracts.

Front 53

Assignment

Back 53

An assignment is a transfer of a contractual right. An assignment is not a contract involving
a promise to do something in the future, but is a present transfer of intangible property. This intangible property is a contractual right called a “chose in action.” When a valid assignment has been made the
person receiving the transfer, the assignee, steps into the shoes of the person making the transfer, the assignor, and is now the proper party to enforce the contractual rights. An assignment only involves the
transfer of a contractual right and not a contractual obligation. The transfer of a contractual obligation is a separate issue which is handled under the title of delegation and assumption of duties.

Front 54

Delegation and Assumption of Duties

Back 54

A delegation and assumption of duties involves a situation in
which the assignor transfers his or her duty of performance to another. The person transferring the duty of
performance is known as the delegator and the person who assumes the duty is known as the delegatee.

Front 55

Third Party Beneficiary Contract

Back 55

A third party beneficiary contract is a contract wherein performance by one party, the promisor, will confer a benefit upon third party beneficiary, that is, a person or entity other than the promisee.

Front 56

Lawrence v. Fox

Back 56

The landmark case of Lawrence v. Fox held that a third party beneficiary has the right
to enforce the contract which will confer a benefit upon said third party.

Front 57

Creditor Beneficiary

Back 57

A creditor beneficiary is one who receives the benefit of a contract in satisfaction of
an actual or supposed debt or obligation that existed between the third party beneficiary and the promisee
to the contract.

Front 58

Donee Beneficiary

Back 58

A donee beneficiary is one who receives the benefit of a contract wherein the promisee has expressed intent to bestow a gift upon said beneficiary.

Front 59

Intended Beneficiary

Back 59

An intended beneficiary is one in whom the creation of an obligation in his or her
favor was contemplated by the original parties to the contact. A third party must be an intended beneficiary in order to have a "Standing to Sue" when attempting to enforce the provisions of the contract.

Front 60

Incidental Beneficiary

Back 60

One who may receive the benefit of the performance
of the contractual provisions only incidentally and was neither intended to receive the performance as a gift nor in satisfaction of a debt. An incidental beneficiary does not have standing to sue for purposes of attempting to enforce the contract.

Front 61

Distinguishing Between Donee and Creditor Beneficiary

Back 61

The reason for distinguishing between donee
and creditor beneficiary is related to the rules of "vesting." The First Restatement of contracts held that the
donee's rights vested upon the making of the contract, and that the creditor's rights vested when he brought suit or otherwise materially changed his position in reliance upon the third party beneficiary contract. However, the majority rule today is that the rights of both the donee and creditor vest upon the beneficiary's learning of the third party beneficiary contract and manifesting assent thereto. Therefore, the original parties retain the power to defeat or alter the beneficiary's rights up until the time that the beneficiary 1) materially changes his or her position including the bringing of a lawsuit or 2) manifests his
or her assent to the contract after learning of its existence.

Front 62

Rights Against The Promisee

Back 62

A third party "donee" beneficiary has no rights against the promisee by
reason of the promisor's failure to perform the contract. The "creditor" beneficiary, however, can sue the
promisee on the original obligation since it remains unaffected by the third party beneficiary contract.

Front 63

Guaranty

Back 63

A guaranty is a promise to answer for the debt, default, or miscarriage of another

Front 64

Statute of Frauds

Back 64

It was established to guard against fraud and perjury in contract actions by requiring that certain types of contracts be evidenced by a writing signed by the party to be charged,
the defendant in a civil action. Those contracts which are customarily within the Statute of Frauds are as follows:
a. A contact which by its terms is not to be performed within one year from the making thereof,
b. A promise to answer for the debt or default of another,
c. A promise in consideration of marriage,
d. A contract for the sale at real property,
e. A contract for the sale at goods of a value in excess of a certain amount.

Front 65

Parol Evidence Rule

Back 65

The Parol Evidence Rule provides that where the parties have entered into an
agreement that has been reduced to writing with the intent being to make that writing a final and complete
expression of their contract, no evidence of a prior or contemporaneous agreement can by introduced to
change the terms of that writing. Even though the term "Parol" is generally used to mean the same thing
as "oral," the Parol Evidence Rule as traditionally applied makes it such that any evidence of a prior or contemporaneous agreement whether written or oral cannot be introduced to change the terms of the
written agreement. Therefore, the purpose of the rule is to lend certainty to the terms of written contracts
by making it such that the parties to the contract are prevented from later contending that the contract did
not really represent the full understanding of the parties.

Front 66

Modification

Back 66

A modification is a subsequent agreement entered into for consideration for purposes of
modifying the prior contract. Only evidence related to agreements made prior to or at the same time as the
written contract will be excluded as inadmissible under the previously mentioned Parol Evidence Rule.
Therefore, the Parol Evidence Rule does not apply to modifications

Front 67

The Collateral Agreement Doctrine

Back 67

Holds that additional terms
included in a separate agreement and which were, in fact, intended by the parties even though they were
not included in the original written contract may be enforced if this "Collateral Agreement" is one which 1)
does not contradict any express provision of the main agreement, and 2) might naturally be made as a
separate agreement between the parties. Therefore evidence related to a Collateral Agreement will not be
excluded as inadmissible under the Parol Evidence Rule.

Front 68

Termination by Accord and Satisfaction

Back 68

An accord is an agreement to compromise an existing
obligation which has become the subject of a good faith dispute. Satisfaction is the acceptance by one party to a contract of the agreed compromise, or accord. This acceptance of the accord results in the satisfaction, meaning that the original obligation has been terminated with the accepting party no longer being able to charge the performing party with a breach of contract.

Front 69

Termination By Novation

Back 69

A Novation is a new contract that is, in effect an immediate discharge of a preexisting
contractual duty which creates a new duty in its place. It requires the replacement of one of the
previously contracting parties with a new party to this new contract one who neither owed the previous duty nor was entitled to its performance.

Front 70

Termination by Release

Back 70

A Release at common law was a complete discharge of existing contractual obligations given by one party to the contract to the other in a written document under seal. Modernly, in those jurisdictions that do not use the formal seal, a Release is generally considered valid if supported by consideration.

Front 71

Termination by Mutual Rescission

Back 71

A mutual rescission is an agreement by the parties to an existing executory (non-performed) contract to consider their contract null and void. This rescission is a contract in
itself and requires mutual assent and consideration. The consideration for rescission is usually found in
the fact that each party incurs a legal detriment by giving up their right to sue the other. In a case involving an executed (already performed) contract or a unilateral contract, an attempted rescission by mutual
agreement would be lacking in consideration. Since the party who has received full performance is not giving up any right against the other, he or she is incurring no legal detriment. And, remember that as to
the unilateral contract, the offeror has the power to revoke the offer and terminate all obligations if revocation of the offer is communicated to the offeree before the offeree has materially changed his or her
position in reliance upon the offer.

Front 72

Merger

Back 72

A merger is said to have occurred in a contractual situation when one contract supersedes or incorporates another.

Front 73

Termination by Impossibility of Performance

Back 73

A party to a contract will be released from an obligation
to perform pursuant to the terms of a contract when neither from his or her act nor from his or her neglect and prior to being in default, it has become impossible for said party to perform.

Front 74

Termination by Economic or Commercial Impracticability

Back 74

A party to a contract will be freed from an obligation to perform even in situations where performance has not become totally impossible, yet unanticipated difficulties have made the performance vastly different than that intended by the parties.

Front 75

Termination by Frustration of Purpose

Back 75

A party to a contract will be freed from an obligation to perform in situations where the performance is still possible but because of unexpected events which have occurred after the formation of the contract, the main purpose of the parties has become so frustrated to make it such that the benefit to be received by one party from the other party is now totally destroyed or materially impaired.

Front 76

Breach of Contract

Back 76

A breach of contract occurs when one party to a contract fails to perform pursuant to the terms of the contract.

Front 77

Anticipatory Breach

Back 77

An anticipatory breach is an unequivocal repudiation of the contract before performance has become due. The promisee may elect to sue immediately for damages or may wait until after performance has become due to then file suit.

Front 78

Material vis-à-vis Minor Breach

Back 78

If the breach is material in nature, the plaintiff is justified in treating the entire transaction as ended and may thereafter sue for damages. However, if the breach is minor in nature the plaintiff has a cause of action for damages caused by the breach; but the contract remains in effect.

Front 79

Prospective Failure of Condition

Back 79

A prospective failure of condition occurs when an anticipatory breach is present and will excuse the non-breaching party from his or her performance

Front 80

Liquidated Damages

Back 80

Liquidated damages are those damages that are agreed to in a contract in advance of any breach of contract and will be enforced by the courts if deemed reasonable

Front 81

Compensatory Damages

Back 81

Compensatory damages are those damages that are awarded to the nonbreaching
party to place that party back into the same position that he or she would have been in had the contract been performed as agreed to.

Front 82

Consequential Damages

Back 82

Consequential damages are no different than compensatory damages. The terms mean the same thing. However, this term reflects the "foreseeability" requirement that arose out of
the case of Hadley v. Baxendale years ago in England. It was held in this case that compensation in a breach of contract case should be given only for those injuries that the defendant, at the time the contract was made, had reason to foresee as the probable result of his or her breach. Therefore, consequential or compensatory damages are those that normally follow the breach. Damages that do not normally follow such a breach may be held to be unforeseeable and therefore uncollectible.

Front 83

Nominal Damages

Back 83

Nominal damages are those damages that are given by the court to a non-breaching
party who has suffered no damages or who has been unable to prove such damages at the trial, but who nevertheless have been wronged and is entitled to a judgment for technical breach of contract.

Front 84

Punitive or Exemplary Damages

Back 84

Punitive damages, which are also called Exemplary Damages, are damages that are granted to a plaintiff in lawsuit for purposes of punishing the defendant for malicious or
wanton or willful conduct and are awarded to make an "example" of the defendant's conduct; so that such conduct will not be repeated again. Punitive or exemplary damages are traditionally not allowable in cases related to causes of action for breach of contract.

Front 85

Mitigation of Damages

Back 85

Mitigation of Damages refers to efforts of the non-breaching party to mitigate, or
limit, his or her damages that could occur from the other party's non-performance. The law requires that the non-breaching party make an effort to mitigate damages.

Front 86

Under U.C.C. § 2-206

Back 86

Under U.C.C. § 2-206:
(1) Unless otherwise unambiguously indicated by the language or circumstances
(a) an offer to make a contract shall be construed as inviting acceptance in any manner and by any medium reasonable in the circumstances;
(b) an order or other offer to buy goods for prompt or current shipment shall be construed as inviting acceptance either by a prompt promise to ship or by the prompt or current shipment of conforming or non-conforming goods, but such a shipment of non-conforming goods does not constitute an acceptance if the seller seasonably notifies the buyer that the shipment is offered only as an accommodation to the buyer.
(2) Where the beginning of a requested performance is a reasonable mode of acceptance an offeror who is not notified of acceptance within a reasonable time may treat the offer as having lapsed before acceptance.