Term
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Definition
| an agreement that can be enforced in court; formed by two or more parties who agree to perform or to refrain from performing some act now or in the future |
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Term
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Definition
| the person who makes the offer |
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Term
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Definition
| the person receiving the offer |
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Term
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Definition
| one of the parties who was obligated to do/not do something under the contract failed to do that (we say they "breached" the contract and as a result may be liable to the non-breaching party for monetary damages) |
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Term
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Definition
the contract can be canceled (or rescinded by the damages/injured party)
EX: you enter into a contract with someone as a result of their fraud, you may be able to cancel/get out of having to perform your obligations under the contract |
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Term
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Definition
| offer, acceptance, valid consideration, AND no defenses to the formation or enforcement of the contract can apply |
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Term
| Functional and Social Utility of Contacts |
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Definition
| enables us to facilitate private business planning, know what to expect, and also know that we can call upon the law to ensure that such agreements will be honored |
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Term
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Definition
| involves a promise in return for a promies |
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Term
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Definition
| involves a promise in return for some type of an act or performance |
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Term
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Definition
| parties expressly create a contract either by words (oral) or in writing |
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Term
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Definition
| parties create a contract by their CONDUCT |
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Term
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Definition
| situation where one person relies on a promise made by another, but because one or more of the required elements of a contract is missing, a contract has not been created |
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Term
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Definition
| a promise which the promisor should REASONABLY EXPECT to INDUCE action or forbearance (i.e. reliance) on the part of the promisee/a third part and which does not induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise |
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Term
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Definition
| RELIANCE-should the promisor foresee that the promisee is likely to rely on his promise? |
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Term
| Contract Estoppel Damages |
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Definition
| court will either enforce the promise, or, allow the plaintiff to recover his/her losses/damages |
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Term
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Definition
| not a contractual obligation created by the parties, but is instead an obligation imposed by the law in order to avoid the UNJUST ENRICHMENT of one party at the other party's expense |
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Term
| Quasi Contract in Matter of Law |
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Definition
the benefited party usually is required to pay the REASONABLE VALUE OF THE BENEFITS AND SERVICES he/she received
-In order for doctrine to apply, the benefited party must have KNOWINGLY ACCEPTED AND RETAINED the benefit |
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Term
| Background-Uniform Commercial Code (UCC) |
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Definition
-created by ALI and National Conference of Commissioners on Uniform State Laws
-All states have adopted some version of the UCC except Louisiana |
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Term
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Definition
| to promote uniformity among the states where commercial transactions are involved; create a body of rules which would realistically and fairly solve common problems which occur in commercial transactions; formulate rules which would promote fair dealing and higher moral and ethical standards in the market place |
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Term
| Nature of Article 2 of the UCC |
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Definition
| involves the SALE OF GOODS; note contract for a "good" is different than a contract to provide a service |
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Term
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Definition
| Defines goods as "tangible, movable, personal property"; goods DO NOT include real estate, stocks, bonds, etc.; DOES NOT APPLY TO SERVICE CONTRACTS |
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Term
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Definition
| a contract that has both a good and a service component to it |
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Term
| The "Predominant Factor Test" |
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Definition
| if the good aspect/component of the transaction/ contract "dominates", then the UCC and its rules apply |
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Term
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Definition
a promise or commitment to perform or refrain from performing some specified act in the future
-courts look to determine whether an offer has been made is some OBJECTIVE indidcation/evidence of a PRESENT INTENT TO CONTRACT; "meeting of the minds" |
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Term
| Defectiveness or Certainty of the Terms |
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Definition
the more defective and certain the terms, the more likely an offer
NOTE: preliminary negotiations, invitations to deal, expressions of opinion, statements of intention, etc. ARE NOT OFFERS
NOTE: "objective" means what would a reasonable person conclude here?"
NOTE: "terms" refers to such things as price, quantity, identity of the subject matter of the contract, time of delivery, method and time payment, any warranties, etc. |
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Term
| General Rule of Communication to Offeree |
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Definition
the offeror must also communicate the offer to the offeree
Rationale-if the offeror did not communicate the offer to the offeree, this is good evidence that he lacked the present the present intent to contract which is necessary for the offer! |
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Term
| Special Offer Problem Areas-Advertisements |
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Definition
General Rule-Ads are generally NOT regarded as an offer b/c they are not certain or definitive enough and instead are viewed as only INVITATIONS from the merchant-seller to deal/bargain/negotiate to and with the consumer
RATIONALE-such important terms such as price, duration, subject matter, etc. are generally not discussed or made clear in the ad so how could it be an offer?
EXCEPTION-if the terms ARE certain or definitive enough (objective) |
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Term
| Special Offer Problem Areas-Rewards |
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Definition
General Rule-public offer for reward is an offer, but it is a UNILATERAL OFFER (in order to accept, the offeree MUST perform the requested act)
-To collect reward(s)most states require the offeree to have performed that act with knowledge of/because of the offer |
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Term
| Special Offer Problem Areas-Auctions |
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Definition
WITH Reserve-person making the bid is the offeror and the seller of the item is the offeree; acceptance ONLY occurs when the auctioneer (who is the seller's agent) brings the ha,,er down and says "sold". The auctioneer may withdraw the goods at any time before acceptance
WITHOUT Reserve- The seller of the item is treated as the offeror and the bidders are the offerees. After the auctioneer (the seller's agent) calls for bids on the property, the autioneer cannot withdraw the property (unless no bids are made). The item sold to the highest bidder. A bidder's retraction does not revive a previous bid. |
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Term
| Special Offer Problem Areas-Bids |
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Definition
advertisements for bids are generally treated as invitations to deal unless ad states the contrary, e.g., "the contract will be awarded to the lowest bidder". Those who submit bids are treated as the offerors. Bidders can withdraw bid any time before acceptance.
NOTE: for government contracts special rules and statutes apply |
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Term
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Definition
1) by the offer itself
2) revocation |
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Term
| Termination of Offer by Offer Itself |
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Definition
-Remember the offeror is the "master of his offer" and can therefor give it the length of life he wants, lay down the ground rules for how it needs to be accepted, etc.
-An offer can terminate itself when the conditions necessary to timely accept it are not satisfied |
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Term
| Termination of Offer by Revocation |
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Definition
General Rule-offeror can revoke his/her offer at any time, even if he promises to hold it open for a certain period of time
4 EXCEPTIONS |
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Term
| Termination of Offer by Revocation Exceptions |
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Definition
1) EXCEPTION: option contract supported by consideration
2) EXCEPTION: UCC 'Firm Offer'-a writing, signed by merchant, promising to buy or sell goods, AND which promises to hold the offer open for a certain period of time
3) EXCEPTION: Unilateral contract is involved and the offeree starts to perform the requested act
4) EXCEPTION: Promissory Estoppel; the offeree RELIES on the offer being kept open and the offeree will suffer an injustice if the offeror is allowed to revoke, so the doctrine of promissory estoppel can operate to prevent the offeror from revoking his/her offer prior to acceptance |
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Term
| Effectiveness of Revocation |
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Definition
General Rule: upon receipt by the offeree
EXCEPTION: the offeree indirectly learns that the offeror has revoked the offer |
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Term
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Definition
-Can be express, implied by conduct, making of a counteroffer, etc.
-Effect is to automatically terminate the offer
-Offeree cannot later go back and try to "revive" it and then accept it; if he does so, he has made his own OFFER/COUNTEROFFER |
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Term
| Effectiveness of Rejection |
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Definition
| Rule: upon receipt of rejection by the offeror |
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Term
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Definition
| If no time stated as to how long offer will remain open, then law deems it to remain open for a "reasonable" period of time |
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Term
| Death or Insanity of Either Party |
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Definition
automatically terminates the offer without notice
Rationale-a meeting of the minds is impossible when one of the parties has died or become insane |
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Term
| Destruction of the Subject Matter of the Contract |
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Definition
| -If, prior to acceptance, subject matter of the contract destroyed WITHOUT knowledge or fault of either party, offer is AUTOMATICALLY terminated |
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Term
| Automatic Revocation of Offer |
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Definition
-Lapse of time
-Death or insanity of either party
-Destruction of the subject matter of the contract
-Intervening illegality |
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Term
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Definition
voluntary act by the offeree that shows assent, or agreement, to the terms of an offer. It can take place by words and/or conduct
-Look at whether: 1) intention to accept-did offeree indicate a PRESENT INTENT to accept?, 2) intent and acceptance of the offeror's terms-mirror image rule |
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Term
| Common Law "Mirror Image Rule" of Acceptance |
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Definition
| The offeree's acceptance must exactly mirror the terms of the offer. If anything at all is changed or modified when the offeree attempts to accept the offer, then there is no acceptance, an the offeree's attempt to accept the offer was/is really a counteroffer/his own offer |
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Term
| Instantaneous Communication of Acceptance |
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Definition
| Instantaneous-generally no problem or issue b/c parties dealing face to face, by phone, etc. |
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Term
| Non-Instantaneous Acceptance |
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Definition
Mailbox Rule-acceptance is effective and valid upon posting/dispatch by offeree
EXCEPTION: offer expressly says acceptance only effective upon RECEIPT by the offeror
EXCEPTION: if the acceptance was improperly addressed or the postage was incorrect , it is effective upon RECEIPT by the original offeror |
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Term
| Stipulated Means of Communication |
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Definition
If offerror expressly conditioned acceptance upon use of a certain medium and offeree used another medium trying to accept, no acceptance upon dispatch b/c attempted acceptance varies from the terms of the offer
-Instead attempted acceptance become offer/counteroffer itself which will be effective upon RECEIPT by the ORIGINAL offeror |
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Term
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Definition
silence cannot/is not acceptance
EXCEPTION: custom in the industry is otherwise; or, past/prior relationship b/w parties is/was otherwise |
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Term
| Acceptance in Unilateral Contracts |
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Definition
| -offeree MUST perform the requested act |
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Term
| Acceptance in Bilateral Contracts |
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Definition
| -offeree must generally make the promise requested by the ofer; expressly or implicitly |
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Term
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Definition
-promotion of STABILITY AND PREDICTABILITY in commercial transactions by denying potential legal challenges made after the fact regarding the enforceability of a contract based upon inequality of the exchange, etc.
-"legal value, bargained for and given in exchange for an act or a promise"; "bargained for exchange" of something; "glue that holds bargain together" |
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Term
| Adequacy of Consideration |
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Definition
-promotion of STABILITY AND PREDICTABILITY in commercial transactions by denying potential legal challenges made after the fact regarding the enforceability of a contract based upon inequality of the exchange, etc.
-"legal value, bargained for and given in exchange for an act or a promise"; "bargained for exchange" of something; "glue that holds bargain together" |
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Term
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Definition
| "I will was h your car if I feel like it" is NOT valid consideration b/c promisee is not really legally binding himself to do anything |
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Term
| The Preexisting Legal Duty Rule |
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Definition
1) Common Law Rule: promise to do what one is already legally obligated to do is NOT valid consideration (because no legal detriment or benefit has been received or incurred)
2) UCC contract modification rule-agreement to modify a contract for the SALE OF GOODS does NOT need a new consideration in order to be binding |
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Term
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Definition
| Rule: agreeing to do something that has already taken place in the past is NOT valid consideration |
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Term
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Definition
| Rule: promises based on moral obligations are also generally held to lack adequate/valid legal consideration and are therefore unenforceable |
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Term
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Definition
| Rule: Generally not enforceable b/c no bargaining took place and consideration therefore fails! |
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Term
| Substitutes for Consideration |
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Definition
1) Doctrine of Promissory Estoppel
2) UCC Firm Offer
3) UCC Contract Modification Rule |
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Term
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Definition
If:
-Defendant made a promise knowing that the plaintiff would likely rely on it
-Plaintiff DID rely on the promise
-Only way to avoid injustice is to enforce the promise |
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Term
| Fraudulent Misrepresentation |
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Definition
ELEMENTS:
1) Untrue assertion of a PAST OR EXISTING fact must have been made by the defendant
2) Fact assessed must have been MATERIAL
3) Assertion knowingly made by defendant to plaintiff with "intent to deceive"
4) Complaining party must have entered into contract b/c of REASONABLE AND JUSTIFIABLE RELIANCE on assertion
5) Relying/complaining party much have been INJURED OR SUFFERED DAMAGE |
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Term
| Untrue Assertion Problem Areas |
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Definition
-Assertion re: a future event, not fraud
-Passive Silence; traditional-not enough for fraud, modern-enough
-Statement of Opinion: GENERAL RULE-statements of opinion usually NOT actionable b/c not "statement of a past or existing fact"; EXCEPTION-a. relationship of trust exists b/w parties, b. relying party unusually susceptible/vulnerable, c. relying party reasonably believes that person whose opinion he is relying has superior skill or judgment |
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Term
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Definition
| a belief about a past or existing fact (not a future fact/event) that is not in accord with the truth. Unlike fraud misrep. in that erroneous belief is not result of other party's untrue statements |
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Term
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Definition
| occurs when BOTH parties to a contract have erroneous assumptions about the SAME fact |
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Term
| Mutual Mistake Defense Elements |
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Definition
1) Mistake related to same basic assumption on which the contract was made
2) Mistake has a MATERIAL effect on the agreed-on exchange AND
3) Party adversely affected by the mistake does not bear risk of the mistake |
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Term
| Unilateral Mistake Defense |
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Definition
| only one of the parties makes a mistake about the basic assumption on which he made the contract |
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Term
| Unilateral Mistake Defense |
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Definition
1) Mistake made by mistaken party must be related to a basic assumption on which contract was made
2) Mistake must have had material effect on the agreed upon exchange
3) Mistaken party must not have borne the risk of that mistake AND
4) Non-mistaken party caused OR had reason to know of the mistake made by the mistaken party |
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Term
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Definition
| the wrongful coercion such as physical compulsion, threats of physical, emotional harm, etc. |
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Term
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Definition
1) Contract induced by an IMPROPER threat AND
2) Victim had no REASONABLE alternative but to enter into or modify the contract
-PROBLEM AREA: economic duress; traditional-not enough, modern-can be enough if facts and situation call for it/are egregious enough |
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Term
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Definition
| unfair PERSUASION, as opposed to coercion |
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Term
| Under Influence Defense Elements |
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Definition
1) Relationship b/w parties is either one of trust and confidence or one which person exercising the persuasion dominates the person being AND
2) Persuasion is "unfair" |
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Term
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Definition
ability to incur legal obligations and acquire legal rights
EFFECT: makes the contract voidable option of the person who lacked it (capacity)...not the other party |
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Term
| Minor's Right to Disaffirm |
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Definition
GENERAL RULE: minor can disaffirm any contract he/she enters into
EXCEPTIONS: statutory exceptions, emancipated minor, necessities (minor not liable for contract price, but the REASONABLE VALUE of the item in question) |
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Term
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Definition
a) contract can be disaffirmed by minor as soon as it is formed
b) NOTE: minor's power to cancel the contract does not automatically end upon reaching the age of majority; minor can still disaffirm contract withing a REASONABLE TIME AFTER REACHING AGE OF MAJORITY |
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Term
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Definition
after minor reaches majority, he can ratify the contract; if does so then bound and cannot later change his mind and try to disaffirm the contract
-Express or implied |
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Term
| Duty to Return Consideration Upon Disaffirmance |
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Definition
-Neither party performed or exchanged agreed upon consideration, parties' relationship canceled by disaffirmance
-An exchange made then both parties must return to the other any consideration that the other has given; if minor unable to return consideration then most courts still permit disaffirmance |
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Term
| Must disaffirming minor make restitution? |
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Definition
Majority of States: NO
Minority of States: YES |
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Term
| Minor's Misrepresentation of Age: Traditional |
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Definition
| Minor's misrepresentation of age does NOT affect his right to disaffirm the contract and/or create any obligation to reimburse the adult for damages or pay for the benefits received |
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Term
| Minor's Misrepresentation of Age: Modern |
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Definition
| In many states, minor who misrepresents his age will be ESTOPPED from asserting his minor status as a defense to the enforcement of a contract |
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Term
| Contracts of Intoxicated Persons |
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Definition
1) intoxication by alcohol and/or drugs
2) Intoxication ground for lack of capacity only when so extreme that person is unable to understand the nature of the business at hand; also, non-intoxicated person must know or have reason to know of the other party's intoxicated state
3) Rules governing capacity for intoxicated person are very similar to those applied to mentally incapacitated persons (courts have been generally less sympathetic and RARE for person to get out of contract based on intoxication) |
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Term
| Test for Mental Incapacity |
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Definition
A COGNITIVE test where courts will ask whether the person had "sufficient mental capacity to understand the nature and effect of the contract"
NOTE-Encompasses: mental illness, brain damage, retardation, senility, etc.; person can still suffer mental illness or defect and still have legal capacity to contract |
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Term
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Definition
| does not take into account the fact that a person suffering from a mental illness or defect may be unable to CONTROL his conduct |
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Term
| Restatement of Contracts Test |
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Definition
a person's contracts are voidable if he is unable to ACT in a reasonable manner in relation to the transaction AND to the other party has reason to know of his condition
-Alternative to MI Test; minority of courts sometimes use |
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Term
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Definition
a) If contract voidable, only the person who lacked capacity at the time the contract was made has right to disaffirm the contract
b) Person formerly incapacitated can ratify a contract if he regains his capacity; regains capacity then must disaffirm w/in reasonable to,e pr deemed to have ratified it
c) Disaffirming minors, person disaffirming contract on basis of MI must return any consideration given by other party that remains in his possession
d) MI person is liable for the reasonable value of necessities in the same manner as are minors |
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Term
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Definition
to charge excessive interest on a loan
-some states only allow for lender to recover the principal and LEGAL RATE of interest, California it's 10%; other states will allow lender to ONLY recover principal as penalty for usurious interest |
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Term
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Definition
| Neither party has any financial stake or interest in the uncertain event except for the stake that he/she has created by making the bet |
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Term
| Contract Covered by Certain Licensing Statutes Defense |
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Definition
| Comes up for people such as doctors, attorneys, stockbrokers, accountants, real estate agents, engineers, architects, contractors, hairstylists, etc. who are required by statute to get some kind of license or permit to practice their trade/profession and they fail to do so |
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Term
| Protection of Public Statutes |
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Definition
| EX: In dispute of bill, if applies to person of this profession, then better make sure license/permit complied with relevant statute or client will be able to raise this defense against you as a bar to the enforcement of your claim/fees against the client |
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Term
| Revenue Raising Statutes Distinction |
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Definition
| contract will probably still be enforceable |
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Term
| Contracts to Commit Crime/Violate the Law |
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Definition
1) BOTH parties aware their contract is illegal, courts will not enforce, or allow either party to recover/get back what they parted with
2) Ignorance of the law?
a. if BOTH parties ignorant, court won't permit them to enforce agreement, but will allow them to recover/get back what they parted with
b. if only one party knows illegal, then illegality a relative minor character AND innocent party pulls out of contract before learning of illegality, he/she can sometimes recover against other party for breach of that agreement |
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Term
| Contracts in Restraint of Trade of Competition (covenant not to compete) |
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Definition
| unenforceable unless they are "reasonable" in scope, time, geographic area, serve a legitimate business interest, etc. |
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Term
| Contracts that Contain Overbroad Exculpatory Clauses/Release from Liability Clauses/Waiver from Liability Clauses |
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Definition
| GENERAL RULE: clauses unenforceable if: attempt to exclude an intentional tort OR gross negligence; affected activity is an important public interest or important public policy is involved; parties have greatly unequal bargaining power; clause is not clearly written and/or visible |
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Term
| Unconscionable Contracts/Clauses |
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Definition
where contract (or some of its terms)are so harsh, oppressive, unintelligible, contains inconspicuous print, etc. and/or one of the parties to the contract was legitimately victimized
-questionable part or entire contract may be declared by court to be unconscionable and therefore unenforceable |
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Term
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Definition
-Enacted in 1677
-States that certain contracts are so important they MUST be in writing and signed by the party to be charged in order to be enforced
-FORMS: collateral, transfer of ownership interest in real property, cannot be performed within 1 year from date of formation, for SALE OF GOODS ($500 or more), marriage is consideration, promise of an executor of estate to personally pay decedent's debt (if paying out of PERSONAL funds, not if out of estate funds) |
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Term
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Definition
| Guarantor agrees to pay debt or obligation that a 2nd person (principal debtor) owes to a third person (the obligee) if principal debtor fails to perform |
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Term
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Definition
1) Essential terms of the contract required
2) Identity of parties required
3) Subject matter of the contract must be identified w/reasonable certainty
-Under UCC more flexible than traditional, only enforceable for quantity of goods stated in memo-no indication of quantity = NOT satisfy UCCs writing requirement
4) must be signed by the PARTY TO BE CHARGED or his authorized agent |
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Term
| Promissory Estoppel and SOF |
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Definition
when one of the parties would suffer serious losses b/c of reliance on oral contract, other part is estopped from raising SOF as defense
Policy: SOF (designed to prevent injustice) shouldn't be allowed to work an injustice |
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