Term
| What are some sources of contract law? |
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Definition
1) Common law for all contracts except for sales and leases
- Sales and lease contracts go under uniform commercial code
- UCC only comes into play when at least one of the parties is a business venfor |
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Term
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Definition
| A promise to do or refrain from doing something you have a legal right to do or not do. |
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Term
| What is the function of contract law? |
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Definition
| Provides stability and predictability for commerce. |
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Term
| What is the definition of a contract? |
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Definition
| A promise or a set of promises, for breach of which the law provides a remedy, or the performance of which the law recognizes as a duty. Legally binding agreement between two or more parties who agree to or not perform some act. |
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Term
| What is the objective theory of contracts? |
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Definition
- circumstances to determine intent of parties
Objective facts include:
- what a party SAID when entering into it
- how the party ACTED or appeared ( inferred)
- Circumstances surrounding the transaction.
( circumstances again based on the REASONABLE PERSON STANDARD ) ie what would a reasonable person intereperet |
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Term
| What are the requirements of a valid contract? |
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Definition
1) AGREEMENT ( offer and acceptance)
2.) CONSIDERATION ( bargained for exchange)
3.) CONTRACTUAL CAPACITY
4.) LEGALITY ( purpose of contract must be legal at the TIME of the EXECUTION) |
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Term
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Definition
| What someone is giving in exchange for a promise. Ex: if you give me a ride to the train station, ill give you five dollars. So I've offered 5 dollars for a ride. If you promise to give me the ride i promise to give you the five dollars. |
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Term
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Definition
| ABILITY to enter into a contract, competency |
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Term
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Definition
| you cant enter into a contract for providing beer for 18 year old; cant contract for a crime or a tort, contract is invalid and won't be enforced by the courts. |
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Term
| What are defenses to enforceability? |
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Definition
1.) VOLUNTARY CONSENT
2.) FORM: some types of contracts must be in writing. |
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Term
| What is voluntary consent? |
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Definition
| If you do not enter the contract voluntarily, the contract can be voided. ie duress, fraud, undue influence, or stress. |
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Term
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Definition
| NOT a mistake of value, but a mistake of FACT. Ex:you sell some old ugly painting because it doesnt look like an actual person for 10 dollars. Turns out, it's a picasso and worth 50 million. You're fucked. |
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Term
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Definition
| Some kinds of contracts must be in writing to be enforceable ( Statute of frauds) |
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Term
| What are the types of contract formation? |
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Definition
| Bilateral, Unilateral, formal, informal, expresses, implied. |
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Term
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Definition
| A promise for a promise ( ie train station ride example ) |
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Term
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Definition
| a promise for an act ( missing pet reward poster) |
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Term
| What is a formal contract? |
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Definition
| Requires special form for creation |
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Term
| What is an informal contract? |
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Definition
| Requires no special form for creation |
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Term
| What is an expressed contract? |
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Definition
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Term
| What is an implied contract? |
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Definition
| Formed by the conduct of the parties. |
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Term
| What is a bilateral contract? |
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Definition
| Offeror accepts offerees promise to perform ( a promise for a promise ) |
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Term
| What are some examples of bilateral and unilateral contracts? |
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Definition
| Ex: Ill give you 5000 to drive my car to miami, if you say " I agree to drive your car, its a bilateral contract, a promise for a promise. If you take my keys, and hop in and start driving, once my car is in miami, my obligation has matured i owe you 5k. |
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Term
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Definition
Revocation of offers for unilateral contracts? Offeror cannot revoke promise once a performance has begun, for a reasonable time period.
ex: Lawn mowing. I say to you, ill give you 50 dollars to mow my lawn, and in an hour you show up with your lawnmower and start mowing. I can not run out before you cut the last peice of grass and say " I revoke my offer".
If i make the same offer, and you dont show up for 3 weeks, I can revoke my offer in that time. Time matters in unilateral contracts. |
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Term
| What is a formal contract? |
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Definition
| Formal- must be in writing to be enforceable. It requires a certain form, 1) Contracts under seal, Recognizances, Negotiable instruments ( checks), Letters of credit. |
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Term
| What is an informal contract? |
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Definition
All other contracts not in writing
- Most people will want the contract in writing so there is something to show the court. Goes back to the objective theory of contracts. |
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Term
| What is an expressed contract? |
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Definition
| Expressed: Words, oral or written. Terms and conditions are spelled out. |
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Term
| What is an implied contract? |
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Definition
Implied: Conduct creates and defines the terms of a contract.
Requirements:
- PL furnished good or service
- PL expected to be paid
- DEF had chance to reject and did not
Ex: Restaurant example. You walk in, sit down, order something from the menu. Your conduct has created a contract - you promise to pay for your meal, the restaurant promises to bring you what you ordered. |
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Term
| What two categories are under contract performance? |
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Definition
1) Executed - A contract that has been fully performed on both sides.
2) Executory - A contract that has not been fully performed on either side.
- Executory can be executory on one side, while executed on other side.
ie: I agree to deliver a truckload of Iphones to you, you agree to pay me. If I deliver them, my part of the contract is executory until paid. |
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Term
| What categories go under contract enforceability? |
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Definition
1) Valid - agreement, consideration, contractual capacity, and legality.
2) Voidable - ( Unenforceable ) : Valid contract can be avoided or rescinded based on certain legal defenses.
3) Void - No contract
- voidable: One or both parties have the option of voiding the contract and releasing BOTH parties from the contract
- Void = no contract |
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Term
| What are the three types of valid contracts? |
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Definition
1.) Enforceable, voidable, unenforceable contract
- void contract means no contract |
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Term
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Definition
- An essential element for contract formation is agreement
- The parties must mutually assent to the same bargain
- An agreement has two components: An OFFER and an ACCEPTANCE
- offer = a promise
- Acceptance - agreeing to be bound
Agreement - Intent to be bound by the contract terms by both parties. |
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Term
| What are the requirements of the offer? |
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Definition
- An offer is a promise to do or not do something in the future.
- The common aw requires three elements for an effective offer
1.) Offerors serious intention
2) Reasonably certain items
3) Communication to offeree |
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Term
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Definition
| Offeror must intend to be bound by terms of the contract. Ex: Ill bet you 1 million dollars i do better on the next exam than you do. No intent, would a reasonable person think there was a contract? |
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Term
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Definition
terms - terms have to be clear enough that a court can determine what they are
Ex: I agree to sell you a book for some amount of some time in the future, which book? how much? when? |
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Term
| What is communication to the OE? |
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Definition
| one cant agree to a contract without knowing it exists? |
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Term
| What is the offer: serious intention? |
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Definition
- A contract is judged by what a reasonable person in the offeree's position would conclude about the offer. ie Lucy vs Zehmer
- Lucy wants to buy a farm from zehmer. Sit around all night and drink and they agree to sell a farm to lucy for 50k. Contract goes on a few rewrites, mrs. Zehmer signs it as well, 40 minutes worth of discussion leads court to believe there was a K.
- Courths have a 4 corners rule: they look to the 4 corners of the contract to determine parties intentions. |
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Term
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Definition
| Not offers ( Invitations to negotiate ) Wholesaler sends out a price list, says to call for quotes. Not an offer, more of a invitation to call to discuss place. |
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Term
| What is an agreement to agree? |
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Definition
| How much is to be determined? how much is open for negotiation, etc. |
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Term
| What are the terms ( expressed or implied )? |
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Definition
1) Identification of the parties ( who the parties are )
2) Object or subject matter ( what the contract is about )
3) What the dollar amount it
4) The time of payment, deliver goods, or perform. |
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Term
| What are some key facts about the defiteness of terms? |
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Definition
- A offer can require specific terms to make a contract definite.
- A court can supply missing terms if the parties intend to form a contract.
Ex: I have to order textbooks; publisher sends me a written form and says to pick a number 100-200, to make the K definite. then we have a contract.
UCC- cant be to vague, the court will only substitute its judgment when the intent is clear. Usually done for payment or delivery terms. |
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Term
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Definition
- Offeree's knowledge of the offer:
- Directly by the offeror, or use of agents.
- OE has to communicate back to or accept OR's offer.
- OE has to know of offer; applies only to unilateral contract. |
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Term
| An offer may be terminated by: |
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Definition
1) Action of parties
2) Operation of Law
Action of parties:
- OR expressly telling OE that the offer is revoked BEFORE the OE accepts- OE must recieve notice.
- Offer to sell something to multiple parties, then selling it to someone else before offer is accepted. |
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Term
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Definition
Action of the parties: Revocation is calling the offer offer.
- Offer can be withdrawn anytime before offeree accepts the offer.
- effective when the offeree or offerees' agent recieves it. |
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Term
| What is the mailbox rule? |
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Definition
Acceptance occurs when the acceptance is communicated back to OR, so if I put something in the mailbox today and you try to revoke it tomorrow before the mail arrives, too late.
Revocation occurs when the revocation is communicated to OE. |
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Term
| What is an irrevocable offer? |
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Definition
offeree has changed position based on justifiable reliance on the offer.
Ex: If I offer you 2k to paint my house. You go out, buy paint, ladders, etc and I revoke the offer. You can sue to say the offer is still valid because you've your position ( spent money ) based on the offer. At least, you should get paid back for your expenses ( goal of K law) |
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Term
| What are option contracts? |
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Definition
| Promise to hold an offer open for a specified period of time in return of consideration. ie stock options |
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Term
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Definition
Rejection of the offer by the offeree:
- rejection by the offeree ( ecpressed or implied ) terminated the offer
- Effective only when it is recived by the offeror or offeror's agent.
Ex: I say ill give you 1 dollar to drive me to greensboro. you say no, the offer is then terminated.
Same as revocation, effective upon receipt. |
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Term
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Definition
counteroffer by the offeree: rejection of original offer and the simultaneous making of a new offer.
ie- ill give you 1 dollar to drive me to raleigh. you say ill drive you to greensboro for 100 dollars. my offer to you is terminated, and you now have made an offer to me. |
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Term
| What is the mirrior image rule? |
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Definition
| At common law, any change in terms automatticaly terminated the offer and substitutes the counteroffer. |
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Term
| What is meant by lapse of time? |
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Definition
Offer terminates by law when the period of time specified in the offer has passed.
If no time period for acceptance is specified, the offer terminates at the end of a reasonable time.
- if no time period, we get back to reasonable.
reasonable lapse of time for selling perishable goods would be shorter than for durable goods. |
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Term
| What is supervening illegality of the proposed contract? |
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Definition
leglislation or court decision automatically terminates offer or renders contract unenforceable.
Ohio wild animals - i have a tiger i agree to sell to you. Before we complete the sale, the OH leglislature passes a law banning people people keep large wild animals as pets. No K |
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Term
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Definition
Acceptance is a : voluntary act ( expressed or implied ) by the offeree that shows assent ( agreement) to the terms of an offer.
- unequivocal acceptance.
- mirrior immage rule |
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Term
| What is the mirrior image rule? |
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Definition
All terms offered must be the same ones accepted. If there is any difference, the original offer is terminated and the counteroffer is now on the table.
Language matters - I accept, please send a written K. vs. I accept if you send a written K, are two different things. |
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Term
| What is meant by silence as acceptance? |
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Definition
General rule: offeree should not be legally obligated to affirmatively reject an offer.
when the offeree has duty to speak:
- he takes benefit of services with opportunity to reject.
- prior dealings with offeror. |
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Term
| What is Quantum merlut / Prior dealings. |
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Definition
1) Quantum merlut - unjust enrichment
2) Prior dealing - you run a bar, every month the bud distributor shows up with 10 kegs, they send you a bill for 10 kegs and only then do you tell them i only wanted 5 this month, I wont pay for the other five. |
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Term
| How is communication handled for bilateral and unilateral contracts? |
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Definition
bilateral- communication of acceptance is necessary because there is a mutual exchange of promises.
unilateral - acceptance is evident, notification not necessary. |
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Term
| What is the mode and timeliness of acceptance |
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Definition
| general rule: In bilateral contracts, acceptance is timely if done before offer is terminated ( mailbox rule) |
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Term
| How does the mailbox rule relate to acceptance? |
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Definition
acceptance is effective when offeree uses authorized means of acceptance.
- if U.S. Mail, acceptance is effective upon dispatch
- If no means specified, acceptance can be any reasonable means.
- mailbox rule is not applicable to face to face dealings, phone convos or taxes. |
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Term
| What are the exceptions to the mailbox rule? |
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Definition
- if offeror specifies that acceptance will not be effective until it is recieved.
- if acceptance is sent after rejection, whichever is recieved first is given effect.
ie: OR sends offer 3/21 then changes his mind on 3/23 and sends a recission letter.
OE sends acceptance on 3/24 via US mail.
Whoever gets their letter first, that determines whether the offer is still valid or has been revoked. |
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Term
| What is the substitute method of acceptance? |
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Definition
effective if the substitute serves the same purpose ( fed ex vs UPS)
not effective on dispatch
effective when recieved by the offeror. |
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Term
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Definition
generally, consideration must have:
- legally sufficient value
- bargained for exchange |
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Term
| What is legally sufficient value: |
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Definition
- promise ( bilateral K )
- Performance ( unilateral K )
- Forbearance - promise NOT to do something you have a right to do. |
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Term
| What is a bargained for exchange? |
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Definition
must provide basis for the bargain.
- something of legal value ( A promise, or a performance ) must be exchanged between the parties.
- the promise must be either legally detrimental to the promisee, or legaly beneficial to the promisor.
- PR has to recieve some benefit
- PE has to incur some sort of detriment
Gifts are not K;s |
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Term
| What is adequacy of consideration? |
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Definition
- courts typically will not consider.
- law does not protect a person from entering into an unwise contract.
- cases of shockingly inadequate consideration, may raise a red flag, and be ruled unconscionable.
50 dollars for a porsche in a divorce case
unconscionable- may raise red flags that there was fraud or duress, that someone entered a K he or she didnt mean to or want to. |
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Term
| What are agreements that lack consideration? |
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Definition
preexisting duty: Promise to do what one already has a legal duty to do does not constitute legally sufficient consideration.
- unforseen difficulties
- recission and new contract
ex: you agree to paint my house for 500 dollars. About halfway through you realize you don't like painting and say " I'll finish the job, but you have to pay me another 500. I can't find someone else to come in and finish it, so i pay it.
remedy- sue you to get the 500 dollars back. Done to prevent hod ups.
class example ( 100 dollars a cass ) there can be modification for unforseen difficulties ( excavation for a house.) |
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Term
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Definition
| both sides agree to unmake the current K |
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Term
| What is past consideration? |
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Definition
Agreement that lack consideration. Past consideration is no consideration because the bargained for exchange element is missing.
Ex: Out of the goodness of your heart, you agree to drive me to the train station. A week later I say thanks, next week ill give you 10 dollars, there is no contract. You did;t bargain anything for it, the 10 dollars is a gift. |
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Term
| What are promissory Estoppel |
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Definition
- detrimental reliance
elements:
must be definite promise
promisor should expect promisee to rely on the promise.
promisee must justifiably rely on the promise.
reliance is substantial
justice will be served enforcing promise
ie: subcontractors. |
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Term
| What is contractual capacity? |
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Definition
Minors: at 18 years, a person is emancipated, and has the legal capacity to enter into any contract that an adult can.
- however , a contract entered into by a minor is voidable at the option of that minor, and can be disaffirmed. |
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Term
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Definition
| legal ability to enter into a contract |
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Term
| A minor has the ability to: |
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Definition
| Avoid the entire Contract |
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Term
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Definition
| can still be held to the terms under quantum meriut. |
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Term
| What are some key facts about minors: |
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Definition
- A contract can be dissaffirmed at any time during minority, or for a reasonable period after minor is emancipated.
- Minor must disaffirm the entire contract. Disaffirmance can be expressed or implied. |
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Term
| How does intoxication affect contractual capacity? |
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Definition
- Lack of capacity at the time the contract is being made. Contract is either voidable or valid, depending on the circumstances.
- dissafirmance ( voidable)
- Ratification: after "sobering up"
Must prove that intoxication prevented the ability to comprehend consequences or reach valid agreement |
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Term
| What is mental incompetence? |
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Definition
| void:: person is adjudged mentally incompetent by a court of law and a guardian has been appointed. |
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Term
| Mental incompetence is voidable when: |
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Definition
| person does not know she is entering into the contract or lacks the mental capacity to comprehend its nature, purpose, and consequences. |
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Term
| Mental incompetence is valid when |
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Definition
| When person is able to understand the nature and effect of entering into a contract but may lack capacity to engage in other activities ( known as lucid intervals ). If you're lucid at the moment you enter into a contract than the contract is valid. |
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Term
| What are some key facts about legality? |
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Definition
- A contract must be formed for a legal purpose
- A specific clause in contract can be illegal, but rest of contract can be enforceable
- contract to commit a tortious act is illegal
Cant have a contract for a hit man - not only illegal but not a K breach issue.
Tortious- pertaining to torts |
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Term
| What are contracts contrary to statute? |
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Definition
- prohibited by federal or state statutory law is illegal and therefore void ( never existed.)
- contracts to commit a crime
- contracts for usury
Usury is ridiculously high interest rates; think payday loan places and loan sharking. |
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Term
| How do gambling and licensing statutes relate to contracts contrary to statute? |
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Definition
gambling- distribution of property based on chance among persons who have paid valuable consideration.
Licensing statutes: contract's enforceability depends on purpose.
Ex: you make a bet on the final 4 , taking UK-9.5 for 10000. UK wins by 12, you want to collect, bookie doesnt pay, not a breach issue.
Licensing statutes: if purpose of licensure is to protect citizens ( Dr. Atty) then K is illegal and void.
If purpose of licensure is to raise revenues, then the K may be enforced. |
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Term
| Contracts contrary to public policy are: |
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Definition
void.
- COntracts in restraint of trade are generally void.
- exception is covenant not to compete and sale of an ongoing business.
ex: K to hack FB page and post embarassing pics.
Restraint of trade- must be reasonable
Covenant not to compete- YY example |
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Term
| Covenant not to compete in employment: |
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Definition
is enforceable as long as time and geographic terms are reasonable.
- Covenant can't be too broad or for too long; otherwise it's not reasonable
Done to avoid stealing of clients or trade secrets. |
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Term
| What are the parts of Procedural unconscionability? |
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Definition
1.) Procedural unconscionability- inconspicuous print or legalese.
- Depends on a party's lack of knowledge or expertise.
Substantive Unconscionability - contracts are oppressive or overly harsh; that deny a remedy for nonperformance.
- not just a bad bargain, but really taking advantage of someone.
Pro un: fine print, confusing language, no chance to read the K ie: Eula
adhesion K- take it or leave it. Think of an EMT asking for 100 dollars to begin CPR
Sub un: overly harsh language; no chance to be compensated for breach. |
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Term
| What are exculpatory clauses? |
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Definition
Release a party from liability in the event of monetary or physical injury, no matter who is at faut.
- enforeceable when they are not against public policy, are not ambiguous, and do not shield parties from intentional conduct. |
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Term
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Definition
1) Not against public policy
2) terms are clear
3) Protects against accidents, not intentional reckless conduct. |
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Term
| What is voluntary consent? |
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Definition
| A contract may be unenforceable if the parties have not genuinely assented to its terms by mistake, duress, undue influence, or misrepresentation. |
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Term
| What is meant by mistakes? |
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Definition
Mistakes of fact: allow a contract to canceled.
Bilateral ( mutual ) mistake: Concerns the same material fact, and can be rescinded by either party.
Ex : painting we both think it's a picasso, I sell it to you for 2 million, find out later its not - we can both rescind the contract. |
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Term
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Definition
Allow a contract to be canceled.
Unilateral mistakes CANNOT be canceled unless:
other party to the contract knows or should have known or mistake was due to an inadvertant mathematical mistake and was not grossly negligent.
Unilateral mistake - not a mistake in value.
knowledge - written car offer for 10 dollars
Math: 1000 IPads @ 100, offer comes through as 10000 due. |
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Term
| What is a mistake of value: |
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Definition
generally, the contract is enforceable by either party
exception: mistake of vaue because a mistake of material fact.
value not usually a remedy, unless it's a mistake of material fact ( picasso example) |
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Term
| What is fraudulent misrepresentation? |
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Definition
Contract is voidable by innocent party
consists of the following elements:
- misrepresentation of material fact.
- intent to decieve
- reliance on misrepresentation
- injury to the to innocent party.
Have to enter K voluntarily
If induced by fraud, not a voluntary entry, K can be voided by defrauded party.
Ex: Picasso
1) I know its not
2) Intent
3) You rely on the lie
4) You pay 2 million |
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Term
| What is a statement of fact vs statement of opinion? |
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Definition
statements of opinion are not actionable
opinions from experts can be actionable, and injured party can seek recission or reformation.
SOF- its a picasso
SOO - It looks like a picasso |
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Term
| What is misrepresentation by conduct? |
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Definition
| Occurs when a party takes a specific action to conceal a fact that is material to the contract. |
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Term
| What is misrepresentation of law? |
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Definition
Does not entitle party to relief.
Ex: Selling a car with a bad engine. Sellcheck example from the book.
Misrep of law - should have checked |
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Term
| What is misrepresentation by silence? |
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Definition
- ordinarily neither party has duty to disclose facts.
- however seller will be liable if she knows of a material defect that cannot be reasonably discovered by buyer.
Ex: Selling an animal that has been sterilized. |
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Term
| When parties are in a fiduciary relationship, failure to disclose facts may be... |
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Definition
| fraud ( misrepresentation by silence) |
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Term
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Definition
Contract lacks voluntary consent and is VOIDABLE
- confidentiality, fiduciary, or relationship of dependance.
- undue influence or persuasion is presumed if a weaker party talked into doing something not beneficial to him or herself.
Last point - especially if benefiting party is the one exerting undue influence. |
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Term
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Definition
Forcing a party to enter into a contract under fear or threat makes the contract voidable.
- threatened act must be wrongful or illegal and render a person incapable of exercising free will
- threat of civil suit is not duress.
ex: blackmail or duress voids a contract
Civil suit is not duress ( EEOC ) |
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Term
| What is form and the statute of frauds? |
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Definition
some contracts must be in writing to be enforceable.
- contracts with an interest in land
- contracts involving one year rule
- collateral or secondary contracts
- promises made in consideration of marriage
- contracts for sales of goods over 500 dollars.
Land - title searches
1 year - Ill give you 1000 dollars if you graduate from law school
Secondary K - cosigning a loan. |
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Term
| What are third party rights? |
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Definition
Privity of contract: only original parties to a contract have rights and liabilities under the contract.
Exceptions: assignments, delegations, and third party beneficiary contracts.
Privity- only the OR and the OE were the parties who bargained. |
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Term
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Definition
Terminology
Assignor: Party assigning rights to a third party.
Assignee: Party recieving rights.
Obligee: person to whom a duty or obligation is owed.
Obligor: Person who is obligated to perform the duty. |
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Term
| What is the effect of the assignment: |
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Definition
Effect of an assignment: when rights of assignor are unconditionally assigned, her rights are extinguished.
the third party ( assignee) has right to demand performance from original party to contract.
Ex: ill seel you the mustang for 5k, tell you to write the check to the neighbor, ive assigned my rights to neighbor ( AR to AE )
I have no rights anymore neighbor can still sue. |
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Term
| For rights that cannot be assigned: |
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Definition
i) when a statute expressly prohibits assignment, ii) when a contract is personal in nature, iii) when the assignment materially changes rights or duties of obligor iv) when an assignment will significantly change the risk or duties of the obligor
ii) personal service contract
iii) deliver 100 Iphones in person to me for 100 dollars, then i assign my rights to my friend sam. |
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Term
| What are some exception to prohibition of assignment of rights? |
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Definition
- cannot prevent right to recieve money
- cannot prevent rights in land
- negotiable instruments
- damages in sales of goods |
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Term
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Definition
contractual duties in a bilateral contract that are delegated to a third party.
terminology -
delegator: party making the delegation of duty.
delegatee: party to whom the duty is delegated.
Ex: ride to the train station, you and I K. your car wont start so you delegate duties to your roommate. |
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Term
| Delegations are prohibited when: |
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Definition
- when the duties are personal in nature ( special trust )
- When performance by a third party will vary materially from that expected by the obligee
When the contract prohibits delegation
1) attorney/ client, doctor/ patient
2) Vera Wang dress |
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Term
| the delegator remains liable... |
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Definition
even after delegation.
Delegatee is liable if delegation contract creates a third party beneficiary relationship in the obligee.
DR is still on the hook if DE doesnt perform. |
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Term
| Third party beneficiaries: |
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Definition
2nd exception to privity of contract
- original parties to the contract intend at the time of contracting to directly benefit a third person. |
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Term
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Definition
| a creditor beneficiary benefits from a contract in which promisor promises the promisee to pay a debt the promisee owes to a third party ( creditor or beneficiary) |
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Term
| What is the donee beneficiary? |
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Definition
| contract is made for the express purpse of promisor giving a gift to a third party ( donee), the donee can sue the promisor directly if the promisor breaches the contract. |
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Term
| What is meant by intended? |
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Definition
| Intended: promisee intended to confer on the beneficiary the right to bring suit to enforce the contract. |
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Term
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Definition
A third party beneficiary's benefit from contract between two parties is unintentional.
- incidental beneficiary cannot sue to enforce the contract. |
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