question

What are the elements of a contract?

answer

Offer Acceptance Consideration Legality Capacity Consent Writing

question

Contract

answer

a legally enforceable agreement

question

Noncompetition agreement

answer

a contract in which one party agrees not to compete with another

question

Bilateral contract

answer

a promise made in exchange for another promise

question

Unilateral contract

answer

a contract in which one party makes a promise that the other party can accept only by actually doing something

question

Executory contract

answer

an agreement in which one or more parties has not yet fulfilled its obligations

question

Executed contract

answer

an agreement in which all parties have fulfilled their obligations

question

Valid contract

answer

a contract that satisfies all of the law's requirements

question

Unenforceable agreement

answer

occurs when the parties intend to form a valid bargain, but a court declares that some rule of law prevents enforcing it

question

Voidable contract

answer

an agreement that may be terminated by one of the parties

question

Void agreement

answer

a contract that neither party can enforce, because the bargain is illegal or one of the parties had no legal authority to make it

question

Express contract

answer

an agreement with all the important terms explicitly stated

question

Implied contract

answer

the words and conduct of the parties indicate that they intended an agreement

question

Promissory estoppel

answer

a possible remedy for an injured plaintiff in a case with no valid contract, where the plaintiff can show a promise, reasonable reliance, and injustice

question

Quasi-contract

answer

a possible remedy for an injured plaintiff in a case with no valid contract, where the plaintiff can show benefit to the defendant, reasonable expectation of payment, and unjust enrichment

question

Quantum meruit

answer

"as much as he deserves" - the damages awarded in a quasi-contract case

question

What does the UCC govern?

answer

"Goods", meaning anything movable, except for money, securities, and certain legal rights

question

Offer

answer

an act or statement that proposes definite terms and permits the other party to create a contract by accepting those terms

question

Offeror

answer

the person who makes an offer

question

Offeree

answer

the person to whom an offer is made

question

Letter of intent

answer

a letter that summarizes negotiating progress

question

Consumer protection statute

answer

outlaws false advertising

question

Gap-filler provisions

answer

UCC rules for supplying missing terms

question

Output contract

answer

obligates the seller to sell all of his output to the buyer, who agrees to accept it

question

Requirements contract

answer

obligates a buyer to obtain all of his needed goods from the seller

question

How can an offer be terminated?

answer

-revocation - rejection - expiration - operation of law - can be made temporarily irrevocable

question

How can an offer be made temporarily irrevocable?

answer

- option contracts (all types of contracts) - firm offers (UCC contracts)

question

Mirror image rule

answer

requires that acceptance be on precisely the same terms as the offer

question

Mailbox rule

answer

acceptance is generally effective upon dispatch. Terminations are effective when received

question

Act

answer

any action that a party was not legally required to take in the first place

question

Forbearance

answer

refraining from doing something that one has a legal right to do

question

Rescind

answer

to cancel an agreement/contract

question

Liquidated debt

answer

a debt in which there is no dispute about the amount owed

question

Unliquidated debt

answer

a debt that is disputed because the parties disagree over its existence or amount

question

Accord and satisfaction

answer

a completed agreement to settle a debt for less than the sum claimed

question

Exculpatory clause

answer

a contract provision that attempts to release one party from liability in the event the other is injured

question

Bailment

answer

giving possession and control of personal property to another person

question

Bailor

answer

one who creates a bailment by delivering goods to another

question

Bailee

answer

a person who rightfully possesses goods belonging to anoter

question

Oppression

answer

one party uses its superior power to force a contract on the weaker party

question

Adhesion contracts

answer

standard form contracts prepared by one party and presented to the other on a "take it or leave it" basis

question

Disaffirm

answer

to give notice of refusal to be bound by an agreement

question

Restitution

answer

restoring an injured party to its original position

question

Ratification

answer

words or actions indicating an intention to be bound by a contract

question

Bilateral mistake

answer

occurs when both parties negotiate based on the same factual error

question

Unilateral mistake

answer

occurs when only one party enters a contract under a mistaken assumption

question

Duress

answer

an improper threat made to force another party to enter into a contract

question

What are the three basic questions relating to promises that must be asked and answered?

answer

1. Is it certain that the defendant promised to do something? 2. If she did promise, is it fair to make her honor her word? 3. If she did NOT promise, are there any unusual reasons to hold her liable anyway?

question

What must the plaintiff show to be able to rely upon promissory estoppel?

answer

1. That the defendant made a promise knowing that the plaintiff would likely rely on it 2. The plaintiff DID rely on the promise 3. The only way to avoid injustice is to enforce the promise

question

What must the plaintiff show to be compensated in a quasi contract?

answer

1. The plaintiff gave some benefit to the defendant 2. The plaintiff reasonably expected to be paid for the benefit and defendant knew this 3. The defendant would be unjustly enriched if he did not pay

question

Two sources of contract law?

answer

- common law - Uniform Commercial Code

question

Uniform Commercial Code

answer

a body of law that reflects modern commercial methods and provides uniformity

question

What are the two questions that must be asked to determine if a statement is an offer?

answer

1. Do the offeror's words and actions indicate INTENTION to make a bargain? 2. Are the terms of the offer reasonably definite?

question

An advertisement/auction is a ________ for an offer

answer

request

question

A consumer protection statute outlaws _________ ___________________

answer

false advertising

question

Under common law - what terms must be present for an offer to be definite?

answer

Price/quantity

question

How is an offer accepted?

answer

The offeree must say or do something to accept

question

What is the rule for acceptance of an offer?

answer

Mirror-image rule

question

Acceptance under a bilateral contract

answer

following through with terms in the contract

question

Acceptance under a unilateral contract

answer

requires the offeree to make/do the action

question

What is the difference between common law and UCC in terms of what constitutes a valid offer?

answer

UCC doesn't have to have a definite price/quantity, whereas common law does

question

Consideration

answer

a bargained-for exchange in the contract

question

3 Rules of Consideration

answer

1. Both parties must get something of measurable value from the contract 2. A promise to give something of value 3. Two parties must have bargained for whatever was exchanged and struck a deal

question

Courts __________ inquire into the adequacy of consideration (how often)

answer

seldom

question

When will a compromise (of a debt) be enforced?

answer

if.... 1. the debt is unliquidated 2. parties agree that the creditor will accept as full payment a sum less than she has claimed 3. the debtor pays the amount agreed upon

question

Is preexisting duty consideration? Why or why not?

answer

No, because it is a promise to do something that a party is already obligated to do

question

Is an illusory promise consideration? Why or why not?

answer

No, because there is no actual COMMITMENT, there was no contract, neither party can enforce the deal, hence no consideration

question

What are 4 types of insurable interests?

answer

1. You 2. Family connection 3. Business association 4. Creditor-debtor status

question

What is the effect of a licensing requirement upon a contract? Does it make a difference if the license requirement is designed to raise revenue?

answer

When a licensing requirement is designed to protect the public, any contract made by an unlicensed worker is unenforceable. When a licensing requirement is designed merely to raise revenue, a contract made by an unlicensed person is generally enforceable

question

A gambling contract is illegal unless.....

answer

....it is a type of wagering SPECIFICALLY AUTHORIZED by state statute

question

What is the rule under usury laws about interest rates on loans?

answer

Usury laws prohibit charging excess interest on loans

question

Restraint of trade: Noncompete Agreements - to be valid, an agreement not to compete must be ancillary to what?

answer

a legitimate bargain

question

When a non-compete agreement is ancillary to the sale of a business,it is enforceable if reasonable in what 3 things?

answer

1. time 2. geographic area 3. scope of activity

question

When is an exculpatory clause generally unenforceable?

answer

1. when it attempts to exclude an intentional tort or gross negligence 2. when the affected activity is in the public interest (such as medical care), public transportation, or some essential service 3. when the parties have greatly unequal bargaining power 4. unless the clause is clearly written and readily visible

question

Non-compete agreement in employment is generally _________________ only if essential to the employer, fair to the employee, and ___________ to the general public.

answer

enforceable, harmless

question

Unconscionable contract

answer

a contract that a court refuses to enforce because of fundamental unfairness (ex: cashing out annuity)

question

What two factors may lead to the court finding unconscionability?

answer

Oppression Surprise

question

Capacity

answer

the legal ability of a party to enter a contract in the first place

question

How does capacity pertain to the "minor" party in a contract?

answer

a minor lacks legal capacity, so they can normally only create a voidable contract

question

A minor who wishes to escape from a contract generally may ___________ it

answer

disaffirm

question

How does restitution relate to a minor?

answer

a minor who disaffirms a contract must return the consideration he has received, to the extent he is able

question

What is the rule regarding timing of disaffirmance and ratification as it relates to a minor?

answer

A minor can disaffirm the contract at any time until her actions/words indicate an intention to be bound by a contract

question

What is the exception rule of necessaries?

answer

A minor must pay for the value of the benefit received

question

What is the rule of misrepresentation of age as it relates to a minor?

answer

A minor generally cannot disaffirm the contract because it shows premeditated deceit

question

When is a person considered mentally impaired?

answer

A person suffers from a mental impairment if, by reason of mental illness or defect, he is unable to understand the nature and consequences of the transaction

question

What kind of contract does a person suffering from a mental impairment create?

answer

a voidable contract

question

What does the law presume in regards to mental capacity?

answer

if a person has been adjudicated insane, then all of the future agreements are void

question

What is the rule in terms of intoxication as it rules to a contract?

answer

When one party is so intoxicated that he cannot understand the nature and consequences of the transaction, the contract is voidable

question

What must a mentally infirmed person who seeks to void a contract do in terms of restitution?

answer

If a party succeeds with a claim of mental impairment, the court will normally void the contract but will require the impaired party to give back whatever she got

question

What are four claims that can be made when a party to a contract makes an effort to rescind a contract based upon lack of valid consent?

answer

1. Fraud 2. Mistake 3. Duress 4. Undue influence

question

What three things must be proved by a party to a contract and who wishes rescind a contract based upon misrepresentation or fraud?

answer

1. The defendant knew that his statement was false, or that he made the statement recklessly and without knowledge of whether it was false 2. The false statement was material 3. The injured party justifiably relied on the statement

question

Puffery

answer

a statement that a reasonable person would realize is a sales pitch, representing the exaggerated opinion of the seller

question

Does puffery/opinion amount to fraud?

answer

NO

question

Materiality

answer

the statement must be important and substantial enough to sway a party one way or another

question

Justifiable Reliance

answer

the injured party actually relied on the false statement and that his/her reliance was reasonable

question

Does a party to a contract have a duty to investigate the other party's factual statement?

answer

No, it is optional

question

Plaintiff's remedy for misrepresentation or fraud

answer

In the case of fraud, the injured party generally has a choice of rescinding the contract or suing for damages or, in some cases, doing both.

question

Innocent misrepresentation

answer

if all elements of fraud are present except the misrepresentation of fact was not made intentionally or recklessly

question

UCC code for rescinding and suing for damages when fraud is committed?

answer

the UCC permits a party to rescind a contract and then sue for damages when fraud is committed

question

In what four situations does silence or non-disclosure of a fact amount to misrepresentation?

answer

1. where disclosure is necessary to correct a previous assertion 2. where disclosure would correct a basic mistaken assumption that the other party is relying on 3. where disclosure would correct the other party's mistaken understanding about a writing 4. where there is a relationship of trust between the two parties

question

True or False: A seller generally must report any latent defect he knows about that the buyer should not be expected to discover himself.

answer

True

question

When one party naturally expects openness and honesty, based on a ____________________, the other party must act accordingly

answer

close relationship

question

What is the rule as to the contract when there is a bilateral mistake?

answer

If the parties contract based on an important factual error, the contract is voidable by the injured party

question

What is the rule regarding conscious uncertainty as it relates to the thing being exchanged?

answer

No rescission is permitted where one of the parties knows he is taking on a risk; that is, he realizes there is uncertainty about the quality of the thing being exchanged.

question

What is the rule regarding the rescission of a contract due to a unilateral mistake?

answer

To rescind for unilateral mistake, a party must demonstrate that she entered the contract because of a BASIC FACTUAL ERROR and EITHER.... 1. enforcing the contract would be UNCONSCIONABLE 2. the nonmistaken party KNEW of the error

question

What is the rule of contract made under duress?

answer

If a party makes an improper threat that causes the victim to enter into a contract, and the victim had no reasonable alternative, the contract is voidable.

question

When a court analyzes the claim of economic duress, what four factors will the courts consider?

answer

1. acts that have no legitimate business purpose 2. greatly unequal bargaining power 3. an unnaturally large gain for one party 4. financial distress to one party

question

What two things must the injured party prove in a claim of undue influence?

answer

1. A relationship between the two parties either of trust or of domination 2. Improper persuasion by the stronger party

question

Acceptance is effective upon __________

answer

dispatch

question

Revocation is effective upon ___________

answer

receipt

question

Covenants not to compete are common features of employment contracts. Currently, courts _____________ enforce these clauses.

answer

usually

question

With ___________, you can add terms to an agreement, but with ______________ you cannot.

answer

UCC, common law

question

A _________________ eliminates the original offer

answer

counter-proposal

question

The offeror may not revoke an offer during the ________ period.

answer

option

question

When an offer specifies a time limit for acceptance, that period is ____________ (termination by expiration)

answer

binding

question

If the offer specifies no time limit, the offeree has a ______________ period in which to accept (termination by expiration)

answer

reasonable

question

If an offeror ___________ or becomes ______________, the offer terminates automatically and immediately

answer

dies, mentally incapacitated

Business Law Chapters 10-14 – Flashcards

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