Business Law: Contract Elements

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Offer Requirements
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Present intent to contract, specificity/definiteness, and communication from the offeror to the offeree
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Offeror
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The person making the offer to someone
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Offeree
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The person receiving the offer
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Present Intent
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Intent to enter the contract upon acceptance
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Definiteness
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Completeness and specifics included in the offer
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Special Offer Types
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Advertisements, rewards, auctions, and bids
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Advertisements
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Classified as an invitation to offer
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Rewards
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Classified as an offer for a unilateral contract
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Auctions
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Generally classified as making an invitation to offer, so acceptance only occurs when the auctioneer strikes the goods off to the highest bidder.
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Bids
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Bids are typically classified as offers to the owner, but can be reversed if the owner includes terms that state otherwise (like saying “will sell to lowest bidder”)
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Termination of Offers
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Can be done by stated terms within the offer, a lapse of time (reasonable amount), and revocation (any time before acceptance, even with a promise to hold offer open).
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Option
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A separate contract created to promise to hold an offer open for a certain amount of time. Must include consideration ($$$)
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Unilateral Contract Termination
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Can only be terminated before the offeree begins performance on the contract
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Promissory Estoppel
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When the offeree relies on the offer being kept open, is enforceable in court if offeror tries to terminate offer
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Firm Offer
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Applies to sale of goods only, and is similar to an option. Required to be made by an offeror that is a merchant, be contained in signed writing, and gives assurance that the offer will be kept open
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Rejection
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Opposite of acceptance, can also be done by creating a counteroffer.
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Acceptance
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A manifestation of assent to the terms of the offer made by the offeree in the manner invited or required by the offer
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Evidence of Acceptance
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1. The offeree intended to enter the contract 2. The offeree accepted on the terms proposed by the offeror 3. The offeree communicated his acceptance to the offeror
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Mirror Image Rule
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The acceptance must exactly match the offer stated or it is not an acceptance, it is a counteroffer that rejects the offer. Exception is made for UCC contracts, which don’t have to be identical.
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Communication of Acceptance
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Must be in the way the offeror said to communicate the acceptance if stated. If not stated, must be reasonable form of communication.
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Mailbox Rule
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Acceptance of offer is effective upon dispatch
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Acceptance in Unilateral Contracts
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Must perform the requested act to show acceptance
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Silence as Acceptance
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Silence cannot be treated as acceptance unless specified BY THE OFFEREE, not the offeror.
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Elements of Consideration
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Legal value, bargained-for and given in exchange for an act or promise
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Legal Value
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Has this if it is something they had no prior legal duty to do, or refrains from something that they have a legal right to do
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Bargained-For Exchange
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It must be the price that the promisor asked for in exchange for making his promise
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Illusory Promise
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A promise that is not specific enough to meet consideration (such as “if I feel like it” or “as much as you have”)
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Preexisting Duty
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Cannot be seen as consideration if they already are required to do it/refrain from it, either by law or by preexisting contractual duties
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Liquidated Debts
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Debts that are both due and certain, therefore cannot dispute the charge. A creditor’s promise to discharge a liquidated debt for part payment is therefore unenforceable
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Unliquidated Debts
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A good faith dispute can be made on the amount of debt due to uncertainty. If the liquidator cashes in the check for less than the amount they expected, they are accepting the discharge as full payment
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Accord and Satisfaction
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The settlement of an unliquidated debt
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Composition Agreements
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Agreements by two or more creditors to accept a stated percentage of the amount they are owed as full payment because the debtor will like file bankruptcy otherwise
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Forbearance to Sue
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An agreement by a promisee to refrain/forbear from pursuing a legal claim against a promisor
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Past Consideration
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An act or other benefit given in the past that was not given in exchange for the promise in question, and is therefore not valid consideration
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Promissory Estoppel in Consideration
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Some contracts are enforceable without consideration, such as donations, debt-paying barred by statute of limitations, and debt-paying barred by bankruptcy discharge
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Ratification
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A person who has the right to rescind the contract chooses not to do so
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Misrepresentation
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Innocent mistake in the giving of information in making a contract
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Fraud
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Intentional mistake in the giving of information in making the contract, can also be charged for punitive damages due to tort of deceit
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Scienter
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A knowledge of falsity that represents the difference between innocent misrepresentation and fraud
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Rescission Requirements for Misrepresentation
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1. Untrue assertion of fact 2. The fact asserted was material 3. The complaining party entered the contract because of his reliance on the asseration 4. The reliance of the complaining party was reasonable
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Untrue Assertion of Fact
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Includes concealment and nondisclosure, and must be a past or existing fact (not an opinion on the future)
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Actual Reliance
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The person pursues some course of action because of their faith in an assertion made to him
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Justifiable Reliance
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The reliance must be justified, so the assertion cannot be obviously false or not be taken seriously
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Mistake
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A belief about a fact that is not in accord with the truth
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Requirements for Mutual Mistake
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1. The mistake relates to a basic assumption on which the contract was made 2. The mistake has material effect on the agreed-upon exchange 3. The party adversely affected by the mistake does not bear the risk of the mistake
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Requirements for Unilateral Mistake
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Same as mutual mistake, plus: 1. The nonmistaken party caused or had reason to know of the mistake 2. It would be unconscionable to enforce the contract
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Duress
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Wrongful coercion that induces a person to enter or modify a contract
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Requirements for Duress
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1. The contract was induced by an improper threat 2. The victim had no reasonable alternation but to enter the contract
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Economic Duress
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Threats made by large companies with more resources on companies with reliance on the larger company
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Undue Influence
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Unfair persuasion, typically while the person is in a position of weakness (death in the family, etc.)
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Capacity
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The ability to incur legal obligations and acquire legal rights
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Disaffirmance
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The exercising of the right to avoid a contract when you do not have full capacity
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Emancipation
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The termination of a parent’s right to control a child and receive services and wages from them
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Exculpatory Clauses
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A provision in a contractthat purports to relieve one of the parties from tort liability, and are often suspect by courts
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Enforceability of Noncompetition Clauses
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1. Clauses must serve a legitimate business purpose 2. The restriction on competition must be reasonable in time, geographic area, and scope 3. The noncompetition clause should not impose an undue hardship
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Contracts of Adhesion
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Contracts in which stronger party is able to determine the terms of the contract, leaving the weaker party no practical choice but to adhere to them
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Unconscionablility
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A contract that is oppressively unfair
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Specific Performance
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The court forces the breaching party to perform their contract
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Statute of Frauds
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Forces certain agreements to be in writing to be enforceable
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State of Limitations
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Amount of time to file suit from the time of incident
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Usury
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Higher interest than allowed by law
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Nolle Prosequi
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Dismissal
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Bankruptcy
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Chapter 7: Liquidation proceeding (insolvent, sells assets to distribute money to creditors) Chapter 11: Busines reorganization (pay-off plan over period of time) Chapter 13: Wage-earners plan (proposal for plan for non-business entities)
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Automatic Stay
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A hold on the payment of debts to creditors during bankruptcy proceedings
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Reformation
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A remedy to correct a written instrument that fails to express the terms agreed upon by the parties
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Parole Evidence Rule
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Allows introduction of extrinsic evidence when there is ambiguity
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Necessaries
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Things you require (food, shelter, clothing). Enforceable contracts for minors
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Forum Selection Clause
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A clause identifying how all disputes will be resolved
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Integration Clause
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An agreement that the contract is complete and final
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Choice-of-Law Clause
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A contract provision where parties stipulate that any dispute between them arising from the contract shall be determined in accordance with the law of a particular jurisdiction

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