Objective Theory of Contracts: Key Terms and Concepts, Quizzes of Business and Labour Law

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TERM 1 Objective Theory of Contracts DEFINITION 1 A theory that says the intent to contract is judged by the reasonable person standard and not by the subjective intent of the parties A TERM 2 No valid contract results from: DEFINITION 2 o Preliminary negotiations o Offers that are made in jest, anger, or undue excitement Examples: o BMW o Zehmer v. lucy TERM 3 Advertisements DEFINITION 3 A general advertisement is an invitation to make an offer A specific advertisement is an offer TERM 4 Rewards DEFINITION 4 An offer to pay a reward is an offer to form a unilateral contract To collect a reward, the offeree must: o Have knowledge of the reward offer prior to completing the requested act o Perform the requested act TERM 5 Auctions with reserve DEFINITION 5 o an auction with reserve, i.e., the seller retains the right to refuse the highest bid and withdraw the goods from auction TERM 6 Counteroffer DEFINITION 6 A response by an offeree that contains terms and conditions different from or in addition to those of the offer A counteroffer terminates an offer A rejection of an old offer and acceptance of a new offer TERM 7 Acceptance DEFINITION 7 A manifestation of assent by the offeree to the terms of an offer in a manner invited or required by the offer as measured by the objective theory of contracts TERM 8 Mirror Image Rule DEFINITION 8 o requires the offeree to accept the offerors terms TERM 9 Mailbox Rule DEFINITION 9 o : A rule that states that an acceptance is effective when it is dispatched, even if it is lost in transmission TERM 10 Consideration DEFINITION 10 Consideration=value o Something of legal value given in exchange for a promise TERM 21 Settlement of Claims DEFINITION 21 The law promotes the voluntary settlement of disputed claims TERM 22 Accord DEFINITION 22 an agreement whereby the parties agree to accept something different in satisfaction of the original contract o New agreement TERM 23 Satisfaction DEFINITION 23 : the performance of an accord o Satisfies new agreement and old one TERM 24 What if the accord is not satisfied? DEFINITION 24 the other party can sue to enforce either the accord or the original contact TERM 25 Promissory Estoppel DEFINITION 25 Detrimental reliance A doctrine that prevents the withdrawal of a promise by a promisor if it will adversely affect a promisee who has adjusted his or her position in justifiable reliance on the promise TERM 26 Contracts Contrary to Statutes: Licensing statutes DEFINITION 26 o If you have to have a license to do something you and you do not have it, the contract is illegal TERM 27 Contracts contrary to public policy: Exculpatory Clauses True or False: Some exculpatory clauses are contract to public policy and are therefore illegal. DEFINITION 27 True TERM 28 Effect of Illegality DEFINITION 28 The court will generally leave the parties where it finds them TERM 29 Exceptions to the general rule DEFINITION 29 o Persons who were introduced to enter into an illegal contract by fraud, duress, or undue influence TERM 30 Using a Covenant Not to Compete with a Sale of a Business DEFINITION 30 o The line of business protected. (Narrow) Only forbids the seller from doing what they were doing o The geographical area protected. (Within 75 miles) o The duration of the restriction. (2 years) TERM 31 Fraud by Concealment DEFINITION 31 Occurs when one party specifically conceals a material fact from the other party Example: o Home seller conceals structural defect o Leaky rook Did not purposefully deceive a party TERM 32 Duress DEFINITION 32 Occurs where one party threatens to do a wrongful act unless the other party enters into a contract Blackmail and extortion TERM 33 The following elements must be shown to prove undue influence DEFINITION 33 o A fiduciary relationship or confidential relationship must have existed between the parties Fiduciary relationship: Special trust within the relationship (family, agent) o The dominant party must have unduly used his or her influence to persuade the servient party to enter into a contract TERM 34 Contracts required to be in writing by Statute of Frauds DEFINITION 34 MYLEGS o Marriage o Year o Land o Executor o Goods o Surety TERM 35 One-year rule DEFINITION 35 An executor contract that cannot be performed by its own terms within one year of its formation must be in writing TERM 46 Parol Evidence DEFINITION 46 o Any oral or written words outside the four corners of the written contract TERM 47 Merger, or Integration Clause DEFINITION 47 o A clause in a contract that stipulates that it is a complete integration and the exclusive expression of the parties agreement o Parol evidence may not be introduced to explain, alter, contradict, or add to the terms of the contract. TERM 48 Privity of Contract DEFINITION 48 o The state of two specified parties being in a contract o Contracting parties have a legal obligation to perform the duties specified in their contract TERM 49 Third Party Rights: True or False: Third parties generally do not acquire any rights under other peoples contracts DEFINITION 49 True TERM 50 Assignment of Future Rights DEFINITION 50 o Usually, a person cannot assign a currently nonexistent right that he or she expects to have in the future o Example: o Granddaughter/grandfather TERM 51 Contracts Where Assignment Would Materially Alter the Risk DEFINITION 51 o A contract cannot be assigned if the assignment would materially alter the risk or duties of the obligor TERM 52 Delegation DEFINITION 52 o Corresponds to duties TERM 53 Assignment DEFINITION 53 o Corresponds to rights TERM 54 Duties that Can and cannot be delegated DEFINITION 54 o Duties can normally be delegated, but not personal duties TERM 55 Assignment and Delegation True or False: Assignment of all rights means the assignment of rights and delegation of duties DEFINITION 55 True TERM 56 Intended Beneficiary DEFINITION 56 o A third party who is not in privity of contract o Has rights under the contract o Can enforce the contract against the obligor TERM 57 Incidental Beneficiary DEFINITION 57 o A party who is unintentionally benefited by other peoples contracts o An incidental beneficiary has no rights to enforce or sue under other peoples contracts o Example: o Bain v. Gillespie TERM 58 Covenants DEFINITION 58 promises TERM 59 Conditions Precedent DEFINITION 59 o Avoid personal satisfaction test contract o Time of performance may be a condition precedent o Events that must occur before a party is obliged to perform under a contract o Example: o Paint the bike blue TERM 60 Conditions Subsequent DEFINITION 60 o This occurs when a contract provides that the occurrence or nonoccurrence of a specific event excuses performance of a contractual duty o Example: o CPA/CPA Exam TERM 71 Rescission DEFINITION 71 o An action to undo the contract o Available if there has been: o A material breach of contract o Fraud o Undue influence o Mistake TERM 72 Restitution DEFINITION 72 o Returning of goods or property received from the other party to rescind a contract o If the actual goods or property is not available, a cash equivalent must be made TERM 73 Reformation DEFINITION 73 o Court rewrites a contract to express the parties true intentions o Usually used to correct clerical errors TERM 74 Injunction DEFINITION 74 o Court order that prohibits a party from doing a certain act TERM 75 Torts Associated with Contracts DEFINITION 75 o Intentional Interference with Contractual Relations o Breach of the Implied Covenant of Good Faith and Fair Dealing o Breach of contract is not a tort TERM 76 Intentional Interference with Contractual Relations DEFINITION 76 o A tort that arises when a third party induces a contracting party to breach the contract with another partyBreach of the Implied ir TERM 77 Breach of the Implied Covenant of Good Faith and Fair Dealing DEFINITION 77 o Under this covenant: o The parties to a contract are held to the express terms of the contract, and o They are also required to act in good faith and deal fairly in all respects in obtaining the contract