Term
| Bilateral vs. Unilateral Contract |
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Definition
• Bilateral contract: Agreement where all of the parties make promises to each other
• Unilateral contract: Agreement where one party makes a promise and another party performs (instead of making a promise) |
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Term
| Express vs. Implied Contract |
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Definition
• Express contract: Agreement where the terms are expressly stated, verbally or in writing
• Implied contract: Agreement where the terms are not expressed, but are implied by the circumstances and the parties’ actions |
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Term
| Requirements of a Quasi-Contract |
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Definition
1. One party confers a benefit on another; and
2. The other party knowingly accepts the benefit; and
3. It would be unjust to allow the party to keep the benefit without paying the reasonable market value for it |
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Term
| Requirements of Promissory Estoppel |
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Definition
1. One party makes a promise (the promisor); and
2. The promisor should reasonably expect that the promisee will rely on the promise; and
3. The promisee does actually rely on the promise, and
4. The promisee’s reliance on the promise is reasonable; and
5. The promisee will be damaged if the promise isn’t enforced |
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Term
| 3 Requirements of an Offer |
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Definition
1. Present Intent to Contract; and
2. Sufficiently Definite Terms; and
3. Communicated to Offeree |
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Term
| Sufficient Terms requirements (Common Law and UCC) |
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Definition
Common Law: Offer must state all essential terms
UCC: Offer can leave out terms as long as it (1) indicates an intent to contract, and (2) provides a reasonable basis for enforcing a contract |
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Term
| How are advertisements handled in regards to being valid offers? |
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Definition
• General rule: Advertisements, signs, flyers, catalogs, price lists, price quotes, etc., are not offers to contract, they are invitations for others to make offers
• Except: Where ads contain specific and definite terms about the nature and quantity of items offered for sale and exactly what is required to accept
-- (“while supplies last,” “first come, first served”) |
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Term
| What types of contracts are Rewards? |
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Definition
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Term
| How can offers of rewards be accepted? |
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Definition
| • Only by performing the action requested to earn the reward |
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Term
| In legal reference, what are bids? |
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Definition
• By placing an item up for auction, sellers are inviting bidders to make bids (offers)
• Bids are offers to contract
• The auctioneer accepts the bidder’s offer
➢ Auctioneer may withdraw an item without accepting a bid |
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Term
| What types of items in an auction cannot be withdrawn? |
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Definition
• Items auctioned “without reserve” are offers to sell the item to the highest bidder
➢ Seller cannot withdraw an item offered “without reserve” unless no bids are received within a reasonable time after the bidding opens |
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Term
| How are bids handled in regards to offering/acceptance? |
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Definition
• Requests for bids are generally treated as invitations for others to make offers
• A party who submits a bid is making an offer
• General rule: Bids can be withdrawn any time prior to acceptance |
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Term
| What type of previously announced rules can alter the ability to make or accept offers of bids? |
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Definition
➢ By offering the contract to the lowest bidder
➢ By creating a basis for promissory estoppel |
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Term
| List of ways an offer can be terminated |
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Definition
1. Terms of the offer;
2. Lapse of time;
3. Revocation;
4. Rejection;
5. Death or insanity of a party;
6. Destruction of the subject of the offer; or
7. Intervening illegality |
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Term
| When will an offer terminate itself (in terms of lapse of time)? |
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Definition
| It will terminate if it is not accepted in a reasonable time |
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Term
| General Rule of Revocation |
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Definition
| • General rule: Offers can be revoked at any time before acceptance, even if the offeror promises to keep it open |
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Term
| Exceptions of revoking an offer |
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Definition
1. Option contracts
2. Offer for a unilateral contract where offeree begins to perform
─ Offer cannot be revoked until the offeree has been given a reasonable time to complete performance
3. Promissory estoppel
4. “Firm offers” for goods under the UCC |
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Term
| What constitutes a "firm" offer under the UCC? |
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Definition
─ Offer by a merchant (a party that regularly deals in the goods); and
─ Contained in a signed writing; and
─ Gives assurances that the offer will stay open
─ Offers cannot be “firm” (irrevocable) for more than three months |
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Term
| When is revocation of an offer effective? |
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Definition
| Revocation is effective only when it is received by the offeree |
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Term
| When is rejection effective? |
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Definition
| • Rejection is effective only when it is received by the offeror |
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Term
| 3 Requirements for an Acceptance |
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Definition
1. Present intent to contract;
2. Acceptance on the offer’s terms; and
3. Communication of acceptance to the offeror |
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Term
| What is common law's rule in regards to Acceptance? |
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Definition
| Mirron Image Rule: Acceptance must mirror the offer’s material terms, or it is a counteroffer |
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Term
| Battle of the Forms basic rule |
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Definition
| • An acceptance is valid, even if it includes different or additional terms than the offer, if there is “a definite and timely expression of acceptance” |
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Term
| 3 Rules for Battle of the Forms |
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Definition
1. Agreed-upon terms are part of the contract
2. Different terms “knock out” each other and are replaced, as needed, with UCC “gap-filling” rules
3. Additional terms are part of the contract unless... (exceptions) |
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Term
| 4 Exceptions to the Battle of the Forms which voids additional terms of contracts |
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Definition
a) One of the parties is not a merchant; or
b) The offer expressly limits acceptance to its terms; or
c) The offeror objects to the new terms within a reasonable time after receiving the “acceptance”; or
d) The new terms would “materially alter” the offer |
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Term
| If there is a counteroffer under UCC rules and the offeror does not accept, when can it still be treated as having a contract? |
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Definition
| if they proceed to act as if they have a contract (e.g., by performing) |
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Term
| How can a unilateral contract be accepted? |
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Definition
| Offeree does not need to communicate acceptance at all—merely begin performing the contract |
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Term
| 3 Ways bilateral contracts can be accepted |
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Definition
1. The means specified in the offer; or
2. If not specified in the offer, then by any reasonable means of communication; or
3. [UCC] If not specified in the offer and offer is for goods, then by an unreasonable means of communication that is actually received in the time that acceptance by a reasonable means would have been received |
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Term
| When are the only times silence can be treated as acceptance? |
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Definition
➢ Customary trade practice
➢ Prior dealings between the parties
➢ Where offeree indicates that silence means acceptance (e.g., “If you don't hear from me by 3 p.m., I accept”)
➢ Where the offeree accepts the offeror’s performance knowing what is expected in return |
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Term
| How can an order requesting prompt shipment of goods be accepted? |
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Definition
| by (1) prompt shipment of the goods; or (2) a prompt promise to ship the goods |
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Term
| What happens if a party ships non-conforming goods to another party without notifying the offeror? |
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Definition
| The shipping party both accepts and breaches the contract |
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Term
| What happens if the shipping party ships non-conforming goods as an accommodation and notifies the offeror within a reasonable amount of time? |
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Definition
| The shipment is treated as a counteroffer, not an acceptance |
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Term
| Common Law Rules regarding when acceptance is effective |
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Definition
➢ Acceptance is effective “upon dispatch” if sent by an authorized means of communication (Mailbox Rule)
➢ Acceptance is not effective if sent by an unauthorized means of communication |
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Term
| UCC rules in regards to when Acceptance is effective |
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Definition
➢ Acceptance is effective “upon dispatch” if sent by an authorized means of communication
➢ If offer does not specify the means to accept, an acceptance sent by unreasonable means of communication is effective “on dispatch” if it is actually received in the same time acceptance by a reasonable means of communication would have been received |
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Term
| Required elements of Consideration |
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Definition
• Consideration is something of legal value that is bargained for and given in exchange for an act or promise
• Purely gratuitous promises are not enforceable because they are not supported by consideration |
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Term
| What constitutes as having "legal value" in regards to consideration? |
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Definition
1. Refrains from doing something the person has the legal right to do; or
2. Does something the person had no prior legal duty to do |
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Term
| 3 exceptions when courts will examine the adequacy of consideration |
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Definition
1. “Grossly inadequate” consideration
2. “Nominal” consideration
3. Mere recitals of non-existent consideration |
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Term
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Definition
| • The promisee’s act or promise must have been bargained for and given in exchange for the promisor’s promise |
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Term
| 3 Types of Exchanges that are not consideration |
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Definition
• Illusory promises
• Preexisting duties
• Past consideration |
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Term
| Definition of Illusory Promise |
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Definition
| • If the promisee’s promise really does not bind the promisee to do or refrain from doing anything, the promise is illusory and cannot serve as consideration |
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Term
| Output and Requirement contracts |
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Definition
➢ Promises to buy all of a party’s production (output) or supply all of a party’s needs (requirement)
➢ Enforceable because the law implies a duty to act reasonably and in good faith |
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Term
| How are Cancellation and Termination clauses viewed in terms of Consideration? |
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Definition
➢ Not consideration if a party can cancel or terminate at any time, for any reason, without notice
– Time, reason, or notice restrictions are consideration |
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Term
| Exclusive Dealing Contracts (regards to consideration) |
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Definition
| ➢ Enforceable, and the law will imply a duty to use best efforts in supplying or selling goods (unless the parties agree otherwise) |
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Term
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Definition
Performing or agreeing to perform a preexisting duty is not consideration
➢ The promisor in such cases effectively has made a gratuitous promise to do something it already had a duty to do
• Includes public duties (e.g., obey the law) and preexisting contractual duties |
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Term
| Contract Modification rules in regards to Consideration |
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Definition
• General rule: An agreement to modify an existing contract requires new consideration
Exceptions to general rule:
➢ Modification due to unforeseen circumstances that a party could not reasonably foresee does not require new consideration
➢ UCC: Agreement to modify a contract for goods does not require new consideration |
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Term
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Definition
Debts in which parties have no dispute about the existence or amount of the debt
➢ A promise to discharge a liquidated debt for part payment of the debt at or after its due date is unenforceable for lack of consideration
- Must either pay early or in a different medium for their to be consideration |
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Term
| How are situations of unliquidated debt handled in terms of consideration? |
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Definition
| ➢ A promise to discharge an unliquidated debt for part payment of the debt at or after its due date is enforceable because there is consideration |
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Term
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Definition
• Past consideration is an act or benefit given in the past that was not given in exchange for the promise in question, thus it cannot be consideration
- Promising to give someone a bonus for the work that they've done is not enforceable because there is no consideration |
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Term
| Exceptions to Consideration |
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Definition
1. “Firm offers” under the UCC
2. Modifications to contracts under the UCC
3. Promissory estoppel
4. Promise in writing to pay a debt barred by statute of limitations
5. Promise in writing to pay a debt discharged by bankruptcy, which is not revoked within 30 days
6. Charitable subscriptions on which the organization relies |
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Term
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Definition
A false statement that may be negligent (innocent) or fraudulent (made with knowledge of falsity and intent to deceive)
➢ Either way, injured party may void (rescind) the contract |
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Term
| What constitutes as a "false assertion of fact"? |
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Definition
➢ a false statement of fact; or
➢ active concealment of facts or
➢ failure to disclose facts where (1) the party only volunteers partial information that is misleading; (2) the parties have a relationship of trust and confidence; or (3) the person has information not readily available to the other party |
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Term
| 3 Requirements for Innocent Misrepresentation |
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Definition
1. Defendant made a false assertion of fact;
2. The false assertion was material; and
3. The complaining party reasonably relied on the false assertion in entering the contract |
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Term
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Definition
1. Defendant made a false assertion of fact;
2. The false assertion was fraudulent; and
➢ knowingly false and intended to deceive
3. The complaining party reasonably relied on the false assertion in entering the contract |
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Term
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Definition
• A mistake is a belief about a fact that is not in accord with the truth
• Mistake must not be caused by other party’s statements (fraud or misrepresentation)
• Mistake must relate to facts (not opinion or prediction) as they exist at the time the contract is created |
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Term
| 3 Requirements for Mutual Mistake |
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Definition
1. Mistake relates to a basic assumption on which the contract is based; and
2. Mistake materially affects the contract; and
3. The party adversely affected by the mistake does not bear the risk of the mistake |
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Term
| 2 ways a party may "bear the risk of the mistake" |
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Definition
➢ Express assumption of risk (e.g., buying “as is”); or
➢ Implied assumption of risk by being consciously aware of ignorance or limited information about an aspect of the contract (i.e., “knows that s/he does not know”) |
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Term
| Requirements for Unilateral Mistake |
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Definition
• Same elements of mutual mistake, plus one of the following:
1. The non-mistaken party caused the mistake or had reason to know of the mistake; or
2. It would be unconscionable ( i.e., “unreasonably harsh or oppressive”) to enforce the contract |
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Term
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Definition
• Duress is a wrongful threat or act that coerces a person to enter or modify a contract
➢ Threats of physical, emotional, or economic harm
➢ Threats to file frivolous lawsuits or to breach a contract unless a party agrees to modify it
• Victim has no reasonable alternative but to enter the contract |
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Term
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Definition
| • Undue influence involves unfair persuasion exerted on a vulnerable person during the bargaining process |
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Term
| 2 elements of Undue Influence |
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Definition
1. Relationship of trust and confidence or where one person dominates the other; and
➢ Vulnerable person
➢ Trust and confidence (e.g., lawyer/client)
➢ Dominance (e.g., one party is dependent on, or overpowered by, the other person)
2. Unfair Persuasion
➢ Isolated and rushed into agreement without time to consult an attorney or others
➢ Unusual time, manner, or place for entering contract
➢ Lopsided or grossly unfair agreement |
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Term
| 2 Requirements for Rescission |
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Definition
| ➢ Must be (1) prompt and (2) unequivocal |
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Term
| Ratification of a Contract |
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Definition
➢ A party can ratify a contract only after learning of the misrepresentation, fraud, or mistake, or being free from the duress or undue influence
➢ The non-consenting party can ratify the contract expressly, or can ratify it impliedly by (1) unreasonably delaying in rescinding; (2) continuing to perform the contract; or (3) accepting benefits under the contract |
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Term
| Covered Contracts in the Statute of Frauds |
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Definition
Collateral contracts
Contracts for real estate
Contracts for more than one year
Contracts for the sale of goods for $500 or more
Executor’s promise
Marriage as consideration |
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Term
| Collateral Contracts and Exception |
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Definition
One person (guarantor) agrees to perform the obligations of a second person (principal debtor) owed to a third person (obligee) if the principal debtor fails to perform
Exception: Under the main purpose or leading object rule, no writing is required for a collateral contract where the main purpose or leading object of the guarantor’s collateral promise is to obtain personal economic advantage |
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Term
| Contracts for the Sale of an interest in Real Estate |
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Definition
| Contracts that affect an interest in real estate typically include sales contracts, mortgages, options, easements (but usually not leases) |
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Term
| Excepted to the Real Estate contracts under Statutes of Frauds |
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Definition
The seller has fully performed (e.g., delivered deed, turned over possession); or
Either party partially performs the contract, reasonably relies on the contract (e.g., by making payments, making improvements), and changes position so that enforcing the contract is the only way to prevent injustice |
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Term
| When does the Statute of Frauds apply in terms of marriage contracts? |
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Definition
Does not apply to agreements involving only mutual promises to marry
Applies where a party makes a promise (other than to marry) in exchange for another’s promise to marry
Offeror can be a party to the marriage or a third party |
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Term
| Written Memorandum Requirements for Common Law and UCC |
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Definition
Common Law: Memo must identify (a) the essential terms of the contract, (b) the parties, and (c) the subject of the contract
UCC: Memo is sufficient, even if terms are omitted, if it indicates (a) the parties have made a contract, and (b) the identity and quantity of the goods to be sold
Separate documents may satisfy the memo requirement if the documents contain all the required elements and relate to same agreement |
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Term
| 2 Requirements of the Writing of Statute of Frauds contracts |
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Definition
Written Memorandum
Signature of the Party to be charged |
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Term
| 4 UCC Exceptions to the Statue of Frauds |
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Definition
Confirmatory Memorandum
Part Payment or party delivery
Admission in pleadings or court
Specially manufactured goods |
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Term
| Requirements of a confirmatory memorandum as an exception to the Statutes of Frauds |
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Definition
(1) between merchants;
(2) sent within a reasonable time after contract is made;
(3) sufficient to bind person who sent it (i.e., signed by sender and indicates a contract was made and the identity and quantity of goods); and (4) other party fails to object in writing within 10 days of receipt |
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Term
| Requirements for Specially Manufactured goods to be exempt from the Statute of Frauds |
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Definition
Goods not suitable for sale in the ordinary course of business
Does not apply to completely executory oral contracts
Seller must begin to make the goods, or make commitments to have them made, before receiving notice repudiating the contract |
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Term
| 2 Main exceptions to the Writing Requirements of the statute of frauds |
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Definition
UCC 2-201: Types of Evidence that Satisfy the Statute of Frauds
Promissory Estoppel |
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