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Contracts 1
Contracts course
53
Law
Professional
12/03/2012

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Cards

Term
Implied at Law (Quasi Contract)
Definition
- Not a contract at all
- No meeting of the minds
- law creates an obligation to a person who received a benefit and would be unjustly enriched by the benefit
Term
Bilateral Contract
Definition
A promise for a promise

offerer offers a promise in exchange for the offeree's return promise

exchange of mutual promises
Term
price quote presumtion
Definition

ordinarily price quotes are not offers, but invitations for offers

 

- However, where clear,definitive, and explicit terms, particularly express language of commitment

 

THEN - the presumption may be overcome

Term
Mutual mistake
Definition
  • both parties share the same erroneous belief as to a basic assumption
  • test --> Both parties erroneously believed ___
  • defense to enforcement of a contract 
Term
hierarchy
Definition
breach of contract
:
Promissory estoppel
:
unjust enrichment
Term
rescission
Definition
- parties agree to release each other of their respected obligations

1. the rescission itself is another contract
2. the consideration is each party's agreement to forbear from enforcing the obligations incurred under the original contract
Term
rewards (as unilateral contracts)
Definition
PRIVATE SECTOR- offer must know of the offer and must voluntarily perform the requested act

PUBLIC SECTOR- offer does NOT need to know about the offer in order to accept
Term
CONSIDERATION
Definition
1. something of legal value
2. intentional bargain for exchange

confers a benefit upon promisor OR causes a detriment to the promisee and must be an act, forbearance or return promise bargained for and given in exchange
Term
certainty of terms :tradition common law
Definition
it is not the function of the courts to fix terms for parties ( it shows parties have NOT reached complete meeting of the minds)

Courts leave it along because
1. it cannot determine whether there has been a breach
2. it cannot fashion a proper remedy
3. it will not impose a contract on a party who did not manifest intent to a contract
Term
settlement agreements
Definition
(contracts and subject to consideration requirement)

-forbearance from suit as consideration for a promise
- sufficient if there is reasonable ground for the claimants belief that it is just to try to enforce his claim. Must be asserting claim in good faith
- forbearance on clearly invalid claim= insufficient consideration
- forbearance/surrender of a valid claim
Term
employee handbook/ policy statement forms a contract when..
Definition
1. the language of the policy statement must contain a promise fear enough that an employee would reasonably believe an offer has been made

2. statement must be disseminated to the employee in such a manner that the employee is aware of its contents and reasonably believe it to be an offer

3. employee must accept the offer by commenting or continuing to work after learning of the policy statement
Term
past consideration
Definition
is nO consideration

- events that occur prior to the making of the promise
Term
unliquidated
Definition
parties not in agreement on amount


- if i pay more than what i thought it was, but it can be less that what you thought it was :: constitutes an accord & satisfaction
Term
elements of a contract
Definition
1.contractual intent
2. offer
3. acceptance
4. consideration
5. certainty of terms
Term
PACO FIFI MUD
Definition
Promissory estoppel
Acceptance
Consideration
Offer

Fraud
Illegality
Statute of FRAUDS
Incapacity

Mistake
Unconscionability
Duress
Term
liquidated
Definition
both parties agree on amount

- if debtor sends creditor amount less than, in full satisfaction ... not in accord and satisfaction
Term
disputed
Definition
entire liability disputed !

I owe you nothing!
Term
certainty of terms:

MINORITY
Definition
look at the intent of the parties

(nobody else looks at intent)
Term
pre-existing legal duty
Definition
a promise to do what one is already legally obligated/ or promising to refrain from doing what one is legally forbid
Term
blue pencil rule
Definition
some courts will strike the offensive portion of a restrictive covenant or rewrite it and enforce the reformed one
Term
unconscionability
Definition
agreements that shock the conscience of the court

1. procedural unconscionability (the way it was formed , unfair bargaining advantage)
2. substantive unconscionability (substance , unfair terms)

only use if NO other traditional defense is available
Term
defenses to a contract
Definition
IDU/FMU

incapacity
duress
undue influence

fraud
mutual mistake
unconscionability
Term
unilateral mistake
Definition
(modern trend)

Test:
1. one party makes a mistake
2. the mistake is to a basic assumption of the bargain
3.the mistake is about something material
4.the party seeking to avoid does not bear risk
5. enforcement of contract would be unconscionable
OR
other party had reason to know of mistake
OR
other party caused mistake
Term
what constitutes as a necessity for minors
Definition
1. goods/services important/required for maintenance of minor

2. Minor has actual need for good/service and it is urgent/immediate

3.minor relies upon his own credit(minot is emancipated or parents are destitute(poor)
Term
illegality exceptions
Definition
1. where the party is not equally at fault (party is not in pari delicto)
2. where a party withdraws from the illegal transaction before serious wrongdoing or harm occurs and willingly cooperates with authorities (locus poenitentiae)
3. where enforcement would better serve public policy than denying enforcement
Term
WE look at adequacy when..
Definition
the plaintiff seeks extraordinary relief in the form of equitable remedies ( inductive relief, declatory judgment, specific performance)

- inadequate consideration or grossly disproportionate consideration may be relevant to establish a defense to contract enforcement if it is unconscionable (shocks the conscience)
Term
advertisements
Definition
are generally invitations to deal

Exception: it is an offer if it is clear, definite, and explicit, and leaves nothing open for negotiation

(e.g duration , price quantity, time)
Term
Notice of acceptance
Definition
Modern law

Unilateral: where the offeror looks to a unilateral contract, the contract is formed when the act is PERFORMED

Bilateral- NO acceptance until the offer notifies the offeror of the acceptance or at lease employs reasonable diligence in attempting to do so
Term
termination of offer: BY revocation

EXCEPTION
Definition
OPTION CONTRACTS

ordinarily rejection of an offer held open under an option does not terminate

EXCEPTION:
if the optionor has materially changed his position in reliance upon the optionee's rejection, then the option AND the offer will terminate prior to piton's expiration date
Term
termination of offer: Lapse of reasonable time
Definition
if the offeror does not express a duration , and offer expires at the end of a reasonable time

generally, face-to-face offers are deemed to continue only until the end of that conversation and cannot be accepted after
Term
Lifetime employment
Definition
Majority--> oral agreement = enforcement
- does not fall within S/F
-b/c completion is possible in 1 year with possible death of employee



Minority
- must be written to be enforceable
-permanent employment promise
anticipating a relationship of more than a year
Term
promissory estoppel remedies
Definition
tradition: out - of -pocket expenses only

modern--< some courts allow damages based on the expected benefit of bargain
Term
express contract
Definition
occurs when the parties assent to a contract terms is expressed through and offer and acceptance
Term
termination of offer:
by death or incapacity
Definition
by death: offer revoked by death of offeror or offer even without notice
Exception: option contracts are not


by incapacity: revokes with notice
exception: option contracts are not terminated by incapacity of offeror/offeree
Term
unjust enrichment (and extra work)
Definition
no quantum meruit recovery amy be had for extra work beyond the scope of the contract
- or for additional services rendered after expiration of the contract term
Term
Termination of offer:

Revocation of offer
Definition
-an offeror retains the power to terminate an offer by revoking it
- can revoke even before lapse of express term(unless prevented by option.firm offer,act)
- must be done directly or indirectly
Term
duress
Definition
(goes hand in hand with consideration and preexisting legal duty rule)

1. through a wrongful coercive act (bad faith act; not necessarily illegal)
2. act leaves the victim no alternative but to agree to other party's terms
3. coercive act was CUASED by other party
Term
Termination of offers
Definition
1. BY express time
2. by lapse of reasonable time
3. By revocation
4. By counteroffer/rejection
5. by death
6.by incapacity
Term
silence as acceptance
Definition
an offeree's silence ordinarily will not serve as acceptance

Exceptions
1.where an offer takes the benefit of service with reasonable opportunity to reject them and reason to know that they were offered with the expatiation of compensation
2. offeror has stated or given the offer reason to understand that assent may be manifested by silence or inaction
3. b/c of previous dealings or otherwise it is reasonable that the offer should notify the offeror if he does NOT intend to accept
Term
Termination of offer :

rejection/counteroffer
Definition
rejection: statement by the offer that he/she does not intend to accept the offer

Counteroffer : an offer made by the offer to the offer that contains the same subject matter as original offer but differs in terms
-serves as a rejection and a new offer
- distinguished from mere inquires " can you lower?"
- after rejecting can't reeve by tendering acceptance (exception : option)
Term
defenses to contract formation: incapacity: MENTAL INFIRMITY
Definition
VOIDABLE within reasonable time
- by incompetent's guardians or individual himself or when they acquire competence
-same restitution , dissipation, and necessaries for minor

Cognitive test (subjective)-can avoid if incompetent does not understand nature of transaction even if other party did not know or have reason to know of condition


Reasonable manner test (objective)--> if incompetent was unable to act in a reasonable manner in relation to transaction and the party knew or had reason to know of condition
Term
misunderstanding
Definition
one party believes A

One party believes B

courts typically with rule that one person is right and the other is wrong
Term
termination of offer : by revocation

DIRECTLY
Definition
offer may terminate only by clearly and directly communicating to the offer an intention to revoke or withdraw the offer
Term
defenses to contract formation: INCAPACITY : MINORS (restitution)
Definition
-minors must perform restitution , to the extent possible by returning whatever is left of the consideration
- minor has no obligation to restore consideration if it has been naturally used up through no fault of minor (dissipation)

EXCEPTION: if minor maliciously dissipates he has an obligation to restore
Term
promissory estoppel
Definition
(detrimental reliance theory)

1. promisor makes a promise
3. promiser should have reasonably expected prose would induce reliance by promisee or 3rd party
4. Promisee reasonably relied on promsie AND
5. enforcement of promise if needed to avoid injustice
Term
unjust enrichment (and extra work)
Definition
no quantum meruit recovery amy be had for extra work beyond the scope of the contract
- or for additional services rendered after expiration of the contract term
Term
Termination of offer : BY revocation: directly
Definition
offer may terminate only by clearly and directly communicating to offer an intention to revoke or withdraw the offer
Term
Defenses to contract formation: incapacity : Minors: Restitution
Definition
Minor must perform recitation to the extent possible by returning whatever is left of the consideration

Except: minor has no obligation to restore consideration if it has been naturally used up through no fault of minor (dissipation)

Exception to exception: If minor maliciously dissipates he has an obligation to restore
Term
promissory estoppel (elements)
Definition
(detrimental reliance )

1. promisor made a promise
2. promisor should have reasonably expected would induce reliance by promisee or 3rd party
3. promisee reasonably relied on promise to his/her detriment
4. enforcement is needed to avoid injustice
Term
mailbox rule (exceptions)
Definition
1. 2nd thought acceptances that follow rejections(unless acceptance arrives first)
2. when an offer sends acceptance first but rejection is received before acceptance ( courts usually hold that a contract is formed unless offeror relies on the rejection before receiving the acceptance, offer will be estopped from enforcing the agreement
3. doesn't apply to option offers/ or offers at all
4 doesn't apply to email and phone
Term
mailbox rule
Definition
acceptance is generally effective upon dispatch

- does not apply to offers
- if letter of acceptance is properly dispatched, the offeror will be bound even if the letter is lost and never received.
Term
agreements that fall within the statute of frauds
Definition
1. sale of goods $500 or more
2. sale of any interest in real estate(leases of more than a year)
3.surety agreements
4. cannot be completed within a year
5. agreements in contemplation of marriage
Term
exceptions to statute of frauds
Definition
1. full performance : by the party claiming the benefit of the oral agreement
2.partial performance: where it is not otherwise possible or practical to restore the sat us quo or compensate the claimant for the value of his performance
3.equitable estoppel- if a misrepresentation has been made
4.promissory estoppel- if the promisor made a promise designed to induce the promisee, the promisee acted in reliance and the only way to avoid injustice is to enforce the promise (PE not available in IL for S/F especially employment)
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