Contract Law: Understanding Contract Terms and Capacity, Quizzes of Business and Labour Law

Download Contract Law: Understanding Contract Terms and Capacity and more Quizzes Business and Labour Law in PDF only on Docsity! TERM 1 Contract DEFINITION 1 A contract is an agreement that is enforceable by a court of law or equity Voluntarily entered into by parties TERM 2 The terms of the contract become ______ between the parties DEFINITION 2 Private Law. Never go to jail for contract breaches TERM 3 Sources of Contract Law DEFINITION 3 The Common Law of Contracts The Uniform Commercial Code (UCC) The Restatement of Law of Contracts TERM 4 The Common Law of Contracts DEFINITION 4 Contract law developed primarily by state courts TERM 5 The Uniform Commercial Code (UCC) DEFINITION 5 Comprehensive statutory scheme that includes laws that cover aspects of commercial transactions TERM 6 The Restatement of the Law of Contracts DEFINITION 6 Compilation of model contract law principles drafted by legal scholars The Restatement is NOT Law TERM 7 Parties to a Contract DEFINITION 7 Every contract involves at least two parties: Offeror Offeree TERM 8 Offeror DEFINITION 8 The party who makes an offer to enter into a contract TERM 9 Offeree DEFINITION 9 The party to whom an offer to enter into a contract is made TERM 10 Classifications of Contracts DEFINITION 10 Bilateral and Unilateral Contracts Expressed and Implied-in-Fact contracts Quasi-contract (implied-in-law) Formal and Informal contracts Valid, void, voidable, and unenforceable contracts Executed and executory contracts TERM 21 Voidable Contracts DEFINITION 21 Contracts where one or both parties have the option to avoid their contractual obligations If a contract is avoided, both parties are released from their contractual obligations TERM 22 Unenforceable Contract DEFINITION 22 A contract where the essential elements to create a valid contract are not meet however there is some legal defense to the enforcement of the contract TERM 23 Executed Contract DEFINITION 23 A contract that has been fully performed on both sides A completed contract TERM 24 Executory Contract DEFINITION 24 A contract that has not been fully performed by either or both sides TERM 25 Elements of a Contract DEFINITION 25 Agreement Lawful Object Consideration Contractual Capacity TERM 26 Agreement DEFINITION 26 There must be agreement between the parties This requires an offer by the offeror and an acceptance of the offfer by the offeree There must be mutual assent by the parties OFFER, ACCEPTANCE, MUTUAL ASSENT TERM 27 Consideration DEFINITION 27 The promise must be supported by a bargained-for consideration that is legally sufficient Gift promises and moral obligations are not considered supported by valid consideration Has nothing to do with the amount of time you use to review the agreement TERM 28 Contractual Capacity DEFINITION 28 The parties to a contract must have contractual capacity Certain parties, such as persons adjudged to be insane, do not have contractual capacity TERM 29 Lawful Object DEFINITION 29 The object of the contact must be lawful Contracts to accomplish illegal objects or contracts that are against public policy are void TERM 30 Agreement: Requirements of an Offer DEFINITION 30 For an offer to be effective: The offeror must OBJECTIVELY INTEND to be bound by the offer The terms of the offer must be definite or reasonably certain The offer must be communicated to the offeree TERM 31 Objective Theory of Contracts DEFINITION 31 A theory that says the intent to contract is judged by the reasonable person standard and not by the subjective intent of the parties No valid contract results from: Preliminary negotiations Offers that are made in jest, anger, or undue excitement Offers that are an expression of opinion TERM 32 Definiteness of Terms DEFINITION 32 The terms of an offer must be clear enough to the offeree to be able to decide whether to accept or reject the terms of the offer If the terms are indefinite, the court cannot enforce the contract or determine an appropriate remedy for its breach TERM 33 Definiteness of Terms An offer (and contract) must contain the following terms: DEFINITION 33 Identification of the parties Identification of the subject matter and quantity Consideration to be paid Time of performance TERM 34 Definiteness of Terms: Implied Terms DEFINITION 34 The court can supply a missing term if a reasonable term can be implied Term that are supplied in this way are called implied terms TERM 35 Communication DEFINITION 35 An offer cannot be accepted if it is not communicated to the offeree by the offeror or a representative or agent of the offeror TERM 46 destruction of the subject matter DEFINITION 46 The offer terminates if the subject matter of the offer is destroyed through no fault of either party prior to its acceptance TERM 47 Death or incompetency of the offeror or offeree DEFINITION 47 The death or incompetency of either party terminates the offer TERM 48 Supervening Illegality DEFINITION 48 The enactment of a statute, regulation, or court decision that makes the object of an offer illegal TERM 49 Lapse of Time DEFINITION 49 An offer terminates when a state time period expires TERM 50 Acceptance DEFINITION 50 A manifestation of assent by the offeree to the terms of the offer in a manner invited or required by the offer as measured by the objective theory of contracts TERM 51 Acceptance 2 DEFINITION 51 Only an offeree can legally accept an offer and create a contract The offeree's acceptance must be unequivocal mirror image rule: requires the offeree to accept the offeror's terms Silence is not consideration acceptance even if the offeror states that it is TERM 52 Time and Mode of Acceptance DEFINITION 52 Contract Law Mailbox rule Proper Dispatch Rule TERM 53 Contract Law DEFINITION 53 Establishes the following rules concerning the time and mode of acceptance: mailbox rule proper dispatch rule mode of acceptance express authorization implied authorization TERM 54 Mailbox Rule DEFINITION 54 A rule that states that an acceptance is effective when it is dispatched, even if it is lost in transmission also called the acceptance-upon-dispatch rule if an offeree first dispatchs a rejection and then sends an acceptance, the mailbox rule does not apply to the accpetance REJECTION IS UPON RECEIPT TERM 55 Proper Dispatch Rule DEFINITION 55 The acceptance must be properly dispatched The acceptance must be properly addressed, packaged, and iposted to fall within the mailbox rule Under common law, if an acceptance is not properly dispatched, it is not effective until it is actually received by the offeror TERM 56 Mode of Acceptance: Express Authorization DEFINITION 56 A stipulation in the offer that says the says the acceptance must be by a specified means of communication Use of an unauthorized means of communication makes acceptance not effective TERM 57 Mode of Authorization: Implied Authorization DEFINITION 57 Mode of acceptance that is implied from what is customary in similar transactions, usage of trade, or prior dealings between the parites TERM 58 Consideration DEFINITION 58 Something of legal value given in exchange for a promise Consideration is a necessary element for the existence of a contract common types of consideration are: A tangible payment Performance of an act TERM 59 Consideration consists of two elements DEFINITION 59 Something of legal value must be given and There must be a bargained-for exchange TERM 60 Legal Value DEFINITION 60 Under the modern law of contracts, a contract is considered supported by legal value if: The promisee suffers a legal detriment or The promisor receives a legal benefit TERM 71 Settlement of Claims DEFINITION 71 Accord Satisfaction TERM 72 Settlement of Claims: Accord DEFINITION 72 An agreement whereby the parties agree to accept something different in satisfaction of the original contract TERM 73 Settlement of Claims: Satisfaction DEFINITION 73 The performance of the accord If the accord is not satisfied, the other party can sue to enforce either the accord or the original contract TERM 74 Promissory Estoppel DEFINITION 74 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 75 For the doctrine of promissory estoppel to be applied, the following must be shown DEFINITION 75 The promisor made a promise The promisor should have reasonably expected to induce the promisee to rely on the promise The promisee actually relied on the promise and engaged in an action or forbearance of a right of a definite and substantial nature Injustice would be caused if the promise were not enforced TERM 76 Capacity DEFINITION 76 The law presumes that the parties to a contract have the requisite contractual capacity to enter into the contract certain persons do not have this capacity: minors insane intoxicated The person asserting incapacity bears the burden of proof TERM 77 Minors DEFINITION 77 Common law defines minors as: females under the age of 18 and males under the age of 21 many states have enacted statues that specify the age of majority the most prevalent age of majority is 18 years of age for both males and females TERM 78 Key Issues Relating To Minors and Contracts DEFINITION 78 The Infancy Doctrine Ratification Necessaries of Life Parents' Liability to their children's contracts TERM 79 The Infancy Doctrine DEFINITION 79 A doctrine that allows minors to disaffirm ( or cancel) most contracts they have entered into with adults doctrine based on public policy that reasons that minors should be protected from unscrupulous behavior of adults TERM 80 The Infancy Doctrine: Disaffirmance DEFINITION 80 Act of a minor to rescind a contract under the infancy doctrine may be done orally, in writing, or by the minor's conduct TERM 81 The Infancy Doctrine: Competent Party's Duty of Restitution DEFINITION 81 If the minor has transferred consideration to the competent party before disaffirming the contract, that party must place the minor in status quo TERM 82 The Infancy Doctrine: Minor's Duty of Restoration DEFINITION 82 A minor is obligated only to return the goods or property he or she has received from the adult in the condition it is in at the time of disaffirmance TERM 83 The Infancy Doctrine: Minor's Duty of Restitution DEFINITION 83 Most states provide that the minor must put the adult in status quo upon disaffirmance of the contract if the minor's intentional or grossly negligent conduct caused the loss of value to the adult's property TERM 84 The Infancy Doctrine: Misrepresentation of Age DEFINITION 84 Minors who misrepresent their age must place the adult in status quo if they disaffirm the contract A minor who has misrepresented his or her age when entering into a contract owes the duties of restoration and restitution when disaffirming it TERM 85 Ratification DEFINITION 85 If a minor does not disaffirm a contract either during the period of minority or within a reasonable time after reaching the age of majority: the contract is considered ratified (accepted) Minor (now adult) is bound by the contract right to disaffirm the contract has been lost TERM 96 Elements that must be shown to prove that a contract or clause is unconscionable DEFINITION 96 The parties possessed severely unequal bargaining power the dominant party unreasonably used its unequal bargaining power the adhering party had no reasonable alternative TERM 97 Defenses to the enforcement of a contract DEFINITION 97 Genuineness of asset writing and form TERM 98 Genuineness of Assent DEFINITION 98 The consent of the parties to create a contract must be genuine TERM 99 Writing and Form DEFINITION 99 Law requires that certain contracts be in writing or in a certain formFailure of these contracts to be in writing or be in proper form may be raised against the enforcement of the contract TERM 100 Equity DEFINITION 100 A doctrine that permits judges to make decisions based on fairness equality, moral rights, and natural law TERM 101 Genuineness of Asset is an issue in the areas of DEFINITION 101 Mistake Misrepresentation Duress Undue Influence TERM 102 Mistakes DEFINITION 102 Occurs where one or both of the parties have an erroneous belief about the subject matter, value, or some other aspect of the contract may be either: Unilateral Mutual TERM 103 Rescission DEFINITION 103 An action to undo the contract The law permits rescission of some contracts made in mistake TERM 104 Unilateral Mistake DEFINITION 104 When one party is mistaken about a material fact regarding the subject matter of the contract Generally, the mistaken party will not be permitted to rescind the contract The contract will be enforced on its terms TERM 105 Three types of situations where the contract may not be enforced: DEFINITION 105 One party makes a unilateral mistake of fact and the other party knew ( or should have know) that a mistake was made A unilateral mistake occurs because of a clerical or mathematical error that is not the result of gross negligence The mistake is so serious that enforcing the contract would be unconscionable TERM 106 Mutual Mistakes: Mutual Mistake of Fact DEFINITION 106 A mistake made by both parties concerning a material fact that is important to the subject matter of the contract The contract may be rescinded on the ground that no contract has been formed because there has been no "meeting of the minds" between the parties TERM 107 Mutual Mistakes: Mutual Mistake of Value DEFINITION 107 A mistake that occurs if both parties know the object of the contract, but mistake as to it value The contract remains enforceable by either party becasue the identity of the subject matter of the contract is not an issue TERM 108 Fraudulent Misrepresentation DEFINITION 108 Misrepresentation Intentional Misrepresentation TERM 109 Misrepresentation DEFINITION 109 An assertion is made that is not in accord with the facts TERM 110 Intentional Misrepresentation DEFINITION 110 Occurs when one person consciously decides to induce another person to rely on a misrepresentation also called fraud TERM 121 Statutes of Frauds DEFINITION 121 Requires certain types of contract to be in writing TERM 122 Most states require the following types of contract to be in writing DEFINITION 122 Involving interest in land contracts that by their own terms cannot possibly be performed within one year Collateral contracts where a person promises to answer for the debt of another Promises made in consideration of marriage Real estate agents' contract Agents' contracts where the underlying contract must be in writing promises to write a will pay debts barred by the statute of limitation or discharged in bankruptcy TERM 123 Most states require the following types of contract to be in writing CONT DEFINITION 123 Contracts to pay compensation for servics rendered in negotiation the purchase price of a business Contracts fro the sale of goods for 500 or more finders fee contracts TERM 124 Contracts Involving interest in land: Part Performance Exception DEFINITION 124 An equitable doctrine that allows the court to order an oral contract for the sale of land or transfer of another interest in real property to be specifically performed if it has been partially performed and performance is necessary to avoid injustice TERM 125 One Year Rule DEFINITION 125 An executory contract that cannot be performed by its own terms within one year of its formation must be in writing TERM 126 Collateral Promises DEFINITION 126 Occurs wehre one person agres to answer for the dbts or duties of another person TERM 127 Collateral Promises: Main Purpose Exception DEFINITION 127 If the main purpose of a transaction and an oral contract is to provide pecuniary benefit to the guarantor the collateral contract is treated like an original contract does not have to be in writing to be enforced TERM 128 Contracts for the Sale of Goods: Equal Dignity Rule DEFINITION 128 A rule that states that agents' contracts to sell property covered by the statute of Frauds must be in writing to be enforceable TERM 129 Promissory Estoppel DEFINITION 129 An equitable doctrine that permits enforcement of oral contracts that should have been in writing where this doctrine applies, the promisor is estopped (prevented) from raising the statute of frauds as a defense to the enforcement of the oral contract TERM 130 Promissory Estoppel CONT Three Conditions that need to be met DEFINITION 130 The promise induces action or forbearance of action by another the reliance on the oral promise was foreseeable Injustice can be avoided only by enforcing the oral promise TERM 131 Sufficiency of the Writing DEFINITION 131 Formality of the Writing Required Signature Integration of Several Writings TERM 132 Formality of the Writing DEFINITION 132 Generally, the law only requires a writing containing the essential terms of the parties' agreement any writing can be enforceable under this rule TERM 133 Required Signature DEFINITION 133 The statute of frauds and the UCC require the written contract, whatever its form, to be signed by the arty against whom enforcement is sought TERM 134 Integration of Several Writing DEFINITION 134 The combination of several writing to forma single contract The entire writing does not have to appear in one document to be an enforceable contract TERM 135 Parol Evidence DEFINITION 135 Any oral or written words outside the four corners of the written contract TERM 146 Personal Service Contracts DEFINITION 146 Contracts for the provision of personal services are gnerallly not assignable TERM 147 Assignment of Future Rights DEFINITION 147 Usually a person cannot assign a currently nonexistent right that he or she expects to have in the future TERM 148 Contracts where assignment would materially alter the risk DEFINITION 148 A contract cannot be assigned if the assignment would materially alter the risk or duties of the obligor TERM 149 Assignment of Legal Actions DEFINITION 149 Legal actions involving personal rights cannot be assigned TERM 150 Effect of An Assign of Right DEFINITION 150 The assignee "stands in the shoes of the assignor" and is entitled to performance from the obligor TERM 151 Notice of Assignment DEFINITION 151 To protect his or her rights, the assignee should immediately notify the obligor that: The assignment has been made Performance must be rendered to the assignee TERM 152 Anti-Assignment Clause DEFINITION 152 Clause that prohibits the assignmnet of rights under the contractUsed when obligor doesn't want to deal with or rnender performance to an unknown third party TERM 153 Approval Clause DEFINITION 153 A clause that permits the assignment of the contract only upon receipt of an obligor's approvalApproval cannot be unreasonably withhled TERM 154 Covenants DEFINITION 154 An unconditional promse to performNonperformance of a convenant is a breach of contract that gives the other party the right to sue TERM 155 Conditions DEFINITION 155 A qualified or conditional promise that becomes a cvenant is met TERM 156 Conditions of Performance DEFINITION 156 Conditions PrecedentConditions SubsequentConcurrent Conditions TERM 157 Conditions Precedent DEFINITION 157 Event that must occur before a party is obliged to perform under a contractMay be based upon meeting the party's satisfaction Personal Satisfaction Test Reasonable person testTime of performance may be a condition precedent TERM 158 Conditions Subsequent DEFINITION 158 This occurs when a contract provides that the occurrence or nonoccurrence of a specific event excuses performance of a contractual duty TERM 159 Concurrent Conditions DEFINITION 159 Parties to a contract must simultaneously render performanceEach party's absolute duty to perform is based on the other party's absolute duty to perform TERM 160 Express and Implied Conditions DEFINITION 160 Express conditions exist if parties expressly agree to termsImplied-in-fact conditions are implied from the circumstances surrounding the contract and conduct of the parities TERM 171 Liquidated Damages DEFINITION 171 CANNOT SERVE AS A PENALTYDamages to which parties to a contract agree in advance if the contract is breached TERM 172 Nominal Damages DEFINITION 172 Damages awarded when non breaching party sues the breaching party even if no financial loss has resulted from the breach TERM 173 Enforcement of Remedies DEFINITION 173 can use a writ of attachment or writ of garnishment if breaching party refuses to pay TERM 174 Agency Relationships are formed by: DEFINITION 174 The mutual consent of a principal and an agent TERM 175 An Agency is the: DEFINITION 175 Fiduciary relationship "which results from the manifestation of consent by one person to another that the other shall act in his behalf and subject to his control, and consent by the other so to act" TERM 176 Agency Law DEFINITION 176 The large body of common law that governs agency it is a mixture of contract law and tort law TERM 177 Principal DEFINITION 177 The party who employs another person to act on his or her behalf TERM 178 Agent DEFINITION 178 the party who agrees to act on behalf of another TERM 179 Who can initiate an agency relationship DEFINITION 179 any person who has the capacity to contract can appoint an agent to act on his or her behalf persons who lack contractual capacity cannot appoint an agent TERM 180 Kinds of Employment Relationships DEFINITION 180 Employer-Employee Relationship Principal-Agent Relationship Principal-Independent contractor Relationship TERM 181 Employer-Employee Relationship DEFINITION 181 A relationship that results when an employer hires an employee to perform some form of physical services An employee is not an agent unless he or she is specifically empowered to enter into contracts on the principal employer's behalf TERM 182 Principal-Agent Relationship DEFINITION 182 An employer hires an employee and gives that employee authority to act and enter into contracts on his or her behalf The extent of this authority is governed by any express agreement between the parties and implied from the circumstances of the agency TERM 183 Principal-Independent Contractor Relationship DEFINITION 183 Principals employ persons or businesses who are not employees to perform certain tasks on their behalf TERM 184 Crucial factor determining whether a person is employee or independent contractor is DEFINITION 184 THE DEGREE OF CONTROL that the principal has over that person TERM 185 Formation of Agency Relationship DEFINITION 185 Express Agency Implied Agency Apparent Agency Agency by Ratification TERM 196 Termination of an Agency DEFINITION 196 Can be terminated by Acts of the Parties Operation of the Law TERM 197 Termination by Acts of the Parties- An agency may be terminated by the following acts: DEFINITION 197 Mutual Agreement Lapse of Time Purpose achieved occurrence of a specified event TERM 198 Notification Required DEFINITION 198 The principal is responsible to give certain third parties notification of the agency termination TERM 199 Irrevocable Agency DEFINITION 199 An agency coupled with an interest: Special type of agency relationship Irrevocable by the principal Not terminated by the death or incapacity of either the principal or the agent Terminates only when the agent's obligations are performed TERM 200 Termination by Operation of Law DEFINITION 200 Death of the principal or agent insanity of the principal or agent bankruptcy of the principal Impossibility of performance Changed Circumstances War between the principal's and agent's countries TERM 201 Wrongful Termination of Agency or Employment Contract DEFINITION 201 The termination of an agency contract in violation of the terms of the agency contract TERM 202 Agent's Duties to the Principal DEFINITION 202 Performance Notification Loyalty Accountability TERM 203 Loyalty DEFINITION 203 An agent owes a fiduciary duty not to act adversely to the interest of the principal TERM 204 Contract Liability to third parties DEFINITION 204 A principal who authorizes an agent to enter into a contract with a third party is liable on the contract TERM 205 An agent can be held liable in some circumstances DEFINITION 205 Fully disclosed agency partially disclosed agency undisclosed agency TERM 206 Fully Disclosed Agency DEFINITION 206 When the third party entering into a contract knows: That the agent is acting as an agent for a principal and The actual identity of the principal Principal is liable to the third party agent is not liable TERM 207 Partially Disclosed Agency DEFINITION 207 The agent discloses his or her agency status but does not reveal the principal's identity, and The third party does not know the principal's identity from another source Both principal and agent are liable to the third party if the principal fails to perform TERM 208 Undisclosed Agency DEFINITION 208 Third party is unaware of either: The existence of an agency or The principal's identity Both are liable TERM 209 Agent Exceeding the Scope of Authority DEFINITION 209 If the agent exceeds the scope of his or her authority, the principal is not liable on the contract unless the principal ratifies it the agent is liable to the third party for breaching the implied warrant of authority TERM 210 Tort Liability to Third Parties DEFINITION 210 The principal is liable for the tortious conduct of an agent who is actin within the scope of his or her authority The agent is only liable for the tortious conduct of the principal if he or she directly or indirectly participates in or aids and abets the principal's conduct