Contracts Test Terms

Front 1

Acceptance

Back 1

A voluntary act by the offeree that shows assent (agreement) to the terms of an offer.

Front 2

Accord and Satisfaction

Back 2

An agreement for payment (or other performance) between two parties, one of whom has a right of action against the other. After the payment has been accepted or other performance has been made, the “accord and satisfaction” is complete and the obligation is discharged.

Front 3

Age of Majority

Back 3

The age at which an individual is considered legally capable of conducting himself or herself responsibly. A person of this age is entitled to the full rights of citizenship, including the right to vote. In contract law, the age at which one is no longer an infant and can no longer disaffirm a contract.

Front 4

Agreement

Back 4

A meeting of two or more minds in regard to the terms of a contract; usually broken down into two events: an offer by one party to form a contract, and an acceptance of the other by the person to whom the offer is made.

Front 5

Anticipatory Breach

Back 5

An assertion or action by a party indicating that he or she will not perform an obligation that the party is contractually obligated to perform at a future time.

Front 6

Assignee

Back 6

The person to whom contract rights are assigned.

Front 7

Assignment

Back 7

The act of transferring to another all or part of one’s rights arising under a contract.

Front 8

Assignor

Back 8

The person who assigns contract rights.

Front 9

Bilateral Contract

Back 9

A type of contract that arises when a promise is given in exchange for a returned promise.

Front 10

Breach of Contract

Back 10

The failure, without legal excuse, of a promisor to perform the obligations of a contract.

Front 11

Collateral Promise

Back 11

A secondary promise that is ancillary (subsidiary) to a principal transaction or primary contractual relationship, such as a promise made by one person to pay the debts of another if the latter fails to perform. A collateral promise normally must be in writing to be enforceable.

Front 12

Concurrent Conditions

Back 12

Conditions in a contract that must occur or be performed at the same time; they are mutually dependent. No obligations arise until these conditions are simultaneously performed.

Front 13

Condition

Back 13

A possible future event, the occurrence or nonoccurrence of which will trigger the performance of a legal obligation or terminate an existing obligation under a contract.

Front 14

Condition Precedent

Back 14

A condition in a contract that must be met before a party’s promise becomes absolute.

Front 15

Condition Subsequent

Back 15

A condition in a contract that operates to terminate a party’s absolute promise to perform.

Front 16

Consequential Damages

Back 16

Special damages that compensate for a loss that is not direct or immediate (for example, lost profits). The special damages must have been reasonably foreseeable at the time of the breach or injury occurred in order for the plaintiff to collect them.

Front 17

Consideration

Back 17

Generally, the value given in return for a promise or a performance. The consideration, which must be present to make the contract legally binding, must be something of legally sufficient value and bargained for.

Front 18

Contract

Back 18

An agreement that can be enforced in court; formed by two or more parties, each of whom agrees to perform or to refrain from performing some act now or in the future.

Front 19

Contractual Capacity

Back 19

The legal ability to enter into contracts. The threshold mental capacity required by law for a party who enters into a contract to be bound by that contract.

Front 20

Counteroffer

Back 20

An offeree’s response to an offer in which the offeree rejects the original offer and at the same time makes a new offer.

Front 21

Covenant Not to Compete

Back 21

A contractual promise to refrain from competing with another party for a certain period of time and within a certain geographic area. Although covenants not to compete restrain trade, they are commonly found in partnership agreements, business sale agreements and employment contracts. If they are ancillary to such agreements, covenants not to compete will normally be enforced by courts unless the time period or geographic area is deemed unreasonable.

Front 22

Covenant Not to Sue

Back 22

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

Front 23

Delegatee

Back 23

One to whom contact duties are delegated by another, called the delegator.

Front 24

Delegation

Back 24

The transfer of a contractual duty to a third party. The party delegating the duty (the delegator) to the third party (the delegate) is still obliged to perform on the contract should the delegate fail to perform.

Front 25

Delegator

Back 25

One who delegates his or her duties under a contract to another, called the delegatee.

Front 26

Disaffirmance

Back 26

The legal avoidance, or setting aside, of a contractual obligation.

Front 27

Discharge

Back 27

The termination of an obligation. (1) In contract law, discharge occurs when the parties have fully performed their contractual obligations or when events, conduct of the parties, or operation of the law releases the parties from performance. (2) In bankruptcy proceedings, the extinction of the debtor’s dischargeable debts.

Front 28

Discharge in Bankruptcy

Back 28

A proceeding in bankruptcy attempts to allocate the debtor’s assets to the creditors in a fair and equitable fashion. Once the assets have been allocated, the debtor receives a discharge in bankruptcy.

Front 29

Emancipation

Back 29

In regard to minors, the act of being freed from parental control; occurs when a child’s parent or legal guardian relinquishes the legal right to exercise control over the child. Normally, a minor who leaves home to support himself or herself is considered emancipated.

Front 30

Estoppel

Back 30

The principle that a party’s own acts prevent him or her from claiming a right to the detriment of another who was entitled to and did rely on those acts.

Front 31

Exculpatory Clause

Back 31

A clause that releases a contractual party from liability in the event of monetary or physical injury, no matter who is at fault.

Front 32

Executed Contract

Back 32

A contract that has been completely performed by both parties.

Front 33

Executory Contract

Back 33

A contract that has not as yet been fully performed.

Front 34

Express Contract

Back 34

A contract in which the terms of the agreement are fully and explicitly stated in words.

Front 35

Forbearance

Back 35

The refraining from an action that one has a legal right to undertake.

Front 36

Formal Contract

Back 36

A contract that by law requires a specific form, such as being executed under seal, to be valid.

Front 37

Forum-Selection Clause

Back 37

A provision in a contract designating the court, jurisdiction, or tribunal that will decide any disputes arising under the contract.

Front 38

Frustration of Purpose

Back 38

A court-created doctrine under which a party to a contract will be relieved of his or her duty to perform when the objective purpose for performance no longer exists (due to reasons beyond that party’s control.

Front 39

Implied Contract

Back 39

A contract formed in whole or in part from the conduct of the parties (as opposed to an express contract). Also known as implied-in-fact contract.

Front 40

Impossibility of Performance

Back 40

A doctrine under which a party to a contract is relieved of his or her duty to perform when performance becomes impossible or totally impracticable (through no fault of either party).

Front 41

Incidental Beneficiary

Back 41

A third party who incidentally benefits from a contract but whose benefit was not the reason the contract was formed; an incidental beneficiary has no rights in a contract an cannot sue to have the contract enforced.

Front 42

Incidental Damages

Back 42

Expenses that are caused directly by a breach of contract; such as those incurred to obtain performance from another source.

Front 43

Informal Contract

Back 43

A contract that does not require a specified form or formality in order to be valid.

Front 44

Innocent Misrepresentation

Back 44

A false statement of fact or an act made in good faith that deceives and causes harm or injury to another.

Front 45

Integrated Contract

Back 45

A written contract that constitutes the final expression of the parties’ agreement. If a contract is integrated, evidence extraneous to the contract that contradicts or alters the meaning of the contract in any way is inadmissible.

Front 46

Intended Beneficiary

Back 46

A third party for whose benefit a contract is formed; an intended beneficiary can sue the promisor if such a contract is breached.

Front 47

Laches

Back 47

The equitable doctrine that bars a party’s right to legal action if the party has neglected for an unreasonable length of time to act on his or her rights.

Front 48

Latent Defects

Back 48

A defect that is not obvious or cannot readily be ascertained.

Front 49

Liquidated Damages

Back 49

An amount, stipulated in the contract, that the parties to a contract believe to be a reasonable estimation of the damages that will occur in the event of a breach.

Front 50

Liquidated Debt

Back 50

A debt that is due and certain in amount.

Front 51

Mailbox Rule

Back 51

A rule providing that an acceptance of an offer becomes effective on dispatch. Acceptance takes effect, thus completing formation of the contract, at the time the offeree sends or delivers the communication via the mode expressly or impliedly authorized by the offeror.

Front 52

Mirror Image Rule

Back 52

A common law rule that requires, for a valid contractual agreement, that the terms of the offeree’s acceptance adhere exactly to the terms of the offeror’s offer.

Front 53

Mitigation of Damages

Back 53

A rule requiring a plaintiff to have done whatever was reasonable to minimize the damages caused by the defendant.

Front 54

Mutual Rescission

Back 54

An agreement between the parties to cancel their contract, releasing the parties from further obligations under the contract. The object of the agreement is to restore the parties to the positions they would have occupied had no contract ever been formed.

Front 55

Necessaries

Back 55

Necessities required for life, such as food, shelter, clothing and medical attention; may include whatever is believed to be necessary to maintain a person’s standard of living or financial and social status.

Front 56

Negligent Misrepresentation

Back 56

Any manifestation through words or conduct that amounts to an untrue statement of fact made in circumstances in which a reasonable and prudent person would not have done (or failed to do) that which led to the misrepresentation. A representation made with an honest belief in its truth may still be negligent due to (1) a lack of reasonable care in ascertaining the facts, (2) the manner of expression, or (3) the absence of the skill or competence required by a particular business or profession.

Front 57

Nominal Damages

Back 57

A small monetary award (often one dollar) granted to a plaintiff when no actual damage was suffered or when the plaintiff is unable to show such loss with sufficient certainty.

Front 58

Novation

Back 58

The substitution, by agreement, of a new contract for an old one, with the rights under the old one being terminated. Typically, there is a substitution of a new person who is responsible for the contract and the removal of an original party’s rights and duties under the contract.

Front 59

Objective Theory of Contracts

Back 59

A theory under which the intent to form a contract will be judged by outward, objective facts (what the party said when entering into the contract, how the party acted or appeared, and the circumstances surrounding the transaction) as interpreted by a reasonable person, rather than by the party’s own secret, subjective intentions.

Front 60

Obligee

Back 60

One to whom an obligation is owed.

Front 61

Obligor

Back 61

One who owes an obligation to another.

Front 62

Offer

Back 62

A promise or commitment to perform or refrain from performing some specified act in the future.

Front 63

Offeree

Back 63

A person to whom an offer is made.

Front 64

Offeror

Back 64

A person who makes an offer.

Front 65

Option Contract

Back 65

A contract under which the offeror cannot revoke his or her offer for a stipulated time period and the offeree can accept or reject the offer during this period without fear that the offer will be made to another person. The offeree must give consideration for the option (the irrevocable offer) to be enforceable.

Front 66

Parol Evidence Rule

Back 66

A substantive rule of contracts under which a court will not receive into evidence the parties’ prior negotiations, prior agreements, or contemporaneous oral agreements if that evidence contradicts or varies the terms of the parties’ written contract.

Front 67

Partnering Agreement

Back 67

An agreement between a seller and a buyer who frequently do business with each other on the terms and conditions that will apply to all subsequently formed electronic contracts.

Front 68

Past Consideration

Back 68

Something given or some act done in the past, which can not ordinarily be consideration for a later bargain.

Front 69

Penalty

Back 69

A sum inserted into a contract, not as a measure of compensation for its breach but rather as punishment for a default. The agreement as to the amount will not be enforced, and recovery will be limited to actual damages.

Front 70

Performance

Back 70

In contract law, the fulfillment of one’s duties arising under a contract with another; the normal way of discharging one’s contractual obligations.

Front 71

Prenuptial Agreement

Back 71

An agreement made before marriage that defines each partner’s ownership rights in the other partner’s property. Prenuptial agreements must be in writing to be enforceable

Front 72

Privity of Contract

Back 72

The relationship that exists between the promisor and the promisee of a contract.

Front 73

Promise

Back 73

A person’s assurance that he or she will or will not do something.

Front 74

Promisee

Back 74

A person to whom a promise is made.

Front 75

Promisor

Back 75

A person who makes a promise.

Front 76

Promissory Estoppel

Back 76

A doctrine that applies when a promisor makes a clear and definite promise on which the promisee justifiably relies; such a promise is binding if justice will be better served by the enforcement of the promise.

Front 77

Quantum Meruit

Back 77

Literally, “as much as he deserves”; an expression describing the extent of liability on a contract implied in law (quasi contract). An equitable doctrine based on the concept that one who benefits from another’s labor and materials should not be unjustly enriched thereby but should be required to pay a reasonable amount for the benefits received, even absent a contract.

Front 78

Quasi Contract

Back 78

A fictional contract imposed on parties by a court in the interests of fairness and justice; usually, quasi contracts are imposed to avoid the unjust enrichment of one party at the expense of another.

Front 79

Ratification

Back 79

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

Front 80

Reformation

Back 80

A court-ordered correction of a written contract so that it reflects the true intentions of the parties.

Front 81

Release

Back 81

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

Front 82

Rescission

Back 82

A remedy whereby a contract is canceled and the parties are returned to the positions they occupied before the contract was made; may be effected through the mutual consent of the parties, by their conduct, or by court decree.

Front 83

Restitution

Back 83

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.

Front 84

Revocation

Back 84

In contract law, the withdrawal of an offer by an offeror. Unless an offer is irrevocable, it can be revoked at any time prior to acceptance without liability.

Front 85

Scienter

Back 85

Knowledge by the misrepresenting party that material facts have been falsely represented or omitted with an intent to deceive.

Front 86

Specific Performance

Back 86

An equitable remedy requiring the breaching party to perform as promised under the contract; usually granted only when money damages would be an inadequate remedy and the subject matter of the contract is unique (for example, real property).

Front 87

Statute of Frauds

Back 87

A state statute under which certain types of contracts must be in writing to be enforceable.

Front 88

Tender

Back 88

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

Front 89

Third Party Beneficiary

Back 89

One for whose benefit a promise is made in a contract but who is not in a party to the contract.

Front 90

Unconscionable

Back 90

A contract or clause that is void on the basis of public policy because one party, as a result of his or her disproportionate bargaining power, is forced to accept terms that are unfairly burdensome and that unfairly benefit the dominating party.

Front 91

Unenforceable Contract

Back 91

A valid contract rendered unenforceable by some statute or law.

Front 92

Unilateral Contract

Back 92

A contract that results when an offer can only be accepted by the offeree’s performance.

Front 93

Unliquidated Debt

Back 93

A debt that is uncertain in amount.

Front 94

Usury

Back 94

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

Front 95

Valid Contract

Back 95

A contract that results when elements necessary for contract formation (agreement, consideration, legal purpose, and contractual capacity) are present.

Front 96

Voidable Contract

Back 96

A contract that may be legally avoided (cancelled, or annulled) at the option of one of the parties.

Front 97

Voluntary Consent

Back 97

The element of agreement in the formation of a contract. The knowledge of, and assent to, the terms of a contract.

Front 98

Waiver

Back 98

An intentional, knowing relinquishment of a legal right.