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L201 Test 2
N/A
84
Business
Undergraduate 2
02/28/2013

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Term
Bilateral Contract
Definition
Both parties exchange promises and the contract is formed as soon as the promises are exchanged
Term
Unilateral Contract
Definition
Only one party makes a promise
Term
Valid Contract
Definition
A contract that meets all of the legal requirements for a binding, enforcable in court
Term
Voidable Contract
Definition
Contracts in which one or more of the parties have the legal right to cancel their obligations under the contract, induced by fraud or duress is voidable at the election of the injured party
Term
Void Contract
Definition
Agreements that create no legal obligations and for which no remedy will be given, contracts to commit crimes
Term
Express Contract
Definition
Parties have directly stated the terms of their contract orally or in a writing at the time the contract was formed. However the mutual agreement necessary to create a contract may also be demonstracted by the conduct of the parties
Term
Implied Contract
Definition
When the surrounding facts and circumstances indicate that an agreement has in fact been reached
Term
Two bodies of law that govern contracts today:
Definition
1. Article 2 of the UCC 2.Common law
Term
Article 2 of the UCC
Definition
Statutory law in every state except Louisiana, purpose was to establish a uniform set of rules to govern commerical transactions (often conducted across state lines.) Also create a body of rules that would realistically and fairly solve the common problems occuring in everyday commercial transactions, and to promote fair dealing and higher standings in the market place, expressly applies only to the contracts for the sale of goods (tangible, movable personal property)
Term
Common Law of Contracts
Definition
Court made law that, like all court made law, is in a constant state of evolution, govern contracts for the sale of real estate, services and intangibles
Term
Basic Differences between two bodies of law that govern contracts?
Definition
Article 2 concerned with rewarding people's legitimate expectations than with the technical rules. A court that applies Article 2 is more likely to find that the parties had a contract than is a court that applies to the common law. Article 2 sometimes gives less weight to technical requirements such as consideration. Article 2 expressly recognizes the concept of unconscionable contracts-one that is grossly unfair or one-sided and it gives the court broad discretionary powers to deal fairly with such contracts
Term
Define merchant (in regards to Article 2 contracts)
Definition
If a person regularly deals in the kind of goods being sold, or pretends to have some special knowledge about the goods, or employed an agent in the sale who fits either of these two descriptions, that person is a merchant for the purposes of the contract in question
Term
What is an offer?
Definition
An offer is the critically important first step in forming a contract, "this is it-if you agree to these terms, we have a contract"
Term
Who is the person who makes an offer?
Definition
Offeror
Term
Person to whom the offer is made
Definition
Offeree
Term
Requirements for an offer
Definition
Courts look for some objective indication of a present intent to contract on the part of the offeror, courts look for specificity or definiteness in the terms of the alleged offer, courts look to see whether the alleged offer has been communicated to the offeree
Term
Intent to contract
Definition
Offeror must indicate present intent to contract for a proposal to be considered an offer
Term
What is present intent?
Definition
the intent to enter the contract upon acceptance, offeror is not joking
Term
What is a problem with forming contracts?
Definition
Lack of specificity
Term
Reason for requirement of definiteness?
Definition
Definiteness and specificity in an offer indicate intent to contract, indefiniteness indicates parties are still negotiating and havent reached an agreement
Term
In the common law: what if the price is not mentioned?
Definition
No offer
Term
In the UCC: what if there is no mention of price
Definition
Still an offer, reasonable price
Term
Special offer problem areas: advertisements
Definition
For sale of goods at specific prices generally not considered offers but invitations to offer or negotiate
Term
Exceptions to advertisements being offers
Definition
Ads offering rewards for lost property, info, or animals treated as unilateral contracts. To receive award offeree must perform request
Term
Special offer problem areas: Auctions and bid
Definition
Sellers at auctions and ads for bids are invite to offer, if individual bids seller may accept or reject
Term
How can an offer be terminated?
Definition
By revocation if revoked and communicated to offeree before the offer is accepted
Term
Unambiguous statement (in revocation)
Definition
Offeror to offeree of unwillingness or inability to contact
Term
Unambiguous conduct (in revocation)
Definition
by offeror indicating an unwillingness or inability to contrac that oferee is aware of
Term
Exceptions to revocation: option contract
Definition
offeror agrees not to revoke the offer for a stated time in exchange for some valuable consideration
Term
Exceptions to revocation: offers for unilateral contracts
Definition
the start of performance persuant to an offer to enter into a unilateral contract makes that offer irrevocable for a resasonable time to complete
Term
Exception to revocation: promissory estoppel circumstances
Definition
an offer cannot be revoked if there has been detrimental reliance by the offerree that is reasonably foreseeable
Term
Exceptions to revocation: firm offers for the sale of goods
Definition
An offer cannot be revoked for up to three months If: 1. contract for sale of goods 2. Signed, written promise to keep the offer open 3. The party is a merchant
Term
Exceptions to revocation: rejection by offeree
Definition
Offeree expressly rejets offer or impliedly rejects the offer by making a counteroffer
Term
What happens if death or disability happens to either party of an offer?
Definition
Terminates offer
Term
What happens if destruction of subject matter occurs in an offer?
Definition
without the knowledge or fault of either party, offer terminated
Term
What happens if performance becomes illegal in an offer?
Definition
Offer will be terminated if performance becomes illegal before the offer is accepted
Term
What is acceptance?
Definition
A manifestation of assent to the terms of the offer made by the offeree in the manner invited or required by the offer
Term
In determining if an offeree accepted an offer and created a contract a court will look at:
Definition
1. The offeree intended to enter into the contract 2. The offeree accepted on the terms proposed by the offeror 3. The offeree communicated his/her acceptance to the offeror
Term
Common Law: Mirror Image Rule
Definition
Acceptance must be in the mirror image of the offer on all material terms, offerree can not cahnge the terms
Term
Common Law, Accepting: No rejection implied if…
Definition
Inquiry regarding the terms: the oferee merely asks about the terms of an offer without indicating his rejection, or offeree accepts offer while complaining about it
Term
UCC, Accepting: Mirror image?
Definition
Changed mirror image rule for contracs involving sale of goods, allows formation of a contract even when there is some variance in the offer and the acceptance
Term
Who can accept an offer?
Definition
Original offeree
Term
If the parties are both merchant, the additional terms become part of the contract unless:
Definition
1. the offer expressly limited acceptance to its own terms 2. the new terms would materially alter the offer 3. the offeror gives notice of objection to the new terms within a reasonable time after receiving the acceptance
Term
When does acceptance occur with an offer for Bilateral contract
Definition
Offer is open as to method of acceptance so start of the performance can be acceptance
Term
When does acceptance occur with an offer for a Unilateral contract:
Definition
Offers require performance for acceptance so that start of performance is not acceptance, completion of performance is required
Term
Can an offer be accepted if the oferee promises to perform?
Definition
Yes
Term
If an oferee sends its acceptance in the mail is this valid?
Definition
If invited to accept by mail, generally accpetance is effective when acceptance is sent
Term
If the seller of the goods sends the wrong goods
Definition
Breach of contract
Term
If the offeree is silent is this acceptance?
Definition
General rule: no, if oferee agrees that silence is acceptance than yes
Term
Forms of consideration (4)
Definition
Performance (doing something not legally obligated to) Forbearance (not doing something legally entitled to) Promise to Perform, Promise to forbear
Term
Consideration: Common Law: General Rule:: Pre-existing contractual or statutory duty rule
Definition
Performance of preexisting contractual or legal duty not consideration
Term
Consideration UCC, Sale of Goods: Pre-existing contractual or statutory duty rule
Definition
Does not have a pre-existing legal duty rule; good fait his the test for changes in the existing sale of goods contract
Term
Part payment of a debt as consideration for promise to forgive the balance of the debt- when is this valid?
Definition
Key is whether the debt is due and undisputed. If due and undisputed part payment is not consideration for release
Term
Defenses to contracts: Mutual mistake
Definition
When both parties are mistaken about facts relating to agreement, contract may be voidable if mistake concerns basica assumption contract made, mistake has a material effect on the agreed upon exchange, and the party seeking avoidance didn’t assume the risk of the mistake
Term
Defenses to contracts: unilateral mistake
Definition
Where only one of the parties is mistaken about the facts of the agreement, mistake wont prevent formation of a contract
Term
Defenses to contracts: capacity
Definition
A person must have the ability to give consent befor he can be legally bound to an agreement- capacity is the ability to incur legal obligations and acquire legal rights
Term
People who lack capacity?
Definition
Minors, mentally diabled, intoxicated
Term
What if an adult makes a contract with a minor?
Definition
Adult's contractual promises are binding, child is voidable
Term
What are agreements that may violate public policy (illegal)?
Definition
Commit a crime, promote violations of statutes, perform an act for which the person is not properly licenses
Term
What is non-compete clause?
Definition
Contract where you can't work for a competitor
Term
When is a non-compete clause enforced?
Definition
serves legit business purpose, restriction is in reasonable time and georaphic area, doesn't impose an undue hardship
Term
What situations to statue of frauds control?
Definition
situations in which a promise that is not in writing can be denied enforcement
Term
What is the purpose of statute of fraud?
Definition
prevent fraud by requiring written evidence before enforcing certain types of contracts
Term
Contracts covered by the statute of frauds:
Definition
Collateral contracts in which a person promises to perform obligation to another person, contracts for sale of interest in real estate, bilateral contracts that can't be performed within a year of formation, contracts for sale of goods for a price of $500 or more, Admin promises to be personally liable for debt of an estate, contract where marriage is the consideration
Term
What is an assignment?
Definition
Transfer of a right under a contract
Term
What is an obligor?
Definition
Person who owes duty to perform under a contract
Term
What is an obligee?
Definition
Person who the duty of performance is owed to
Term
When does an assignment occur?
Definition
When the obligee transfers his right to receive obligor's performance to a third party
Term
What is an assignee?
Definition
Original obligee when an assignment occurs
Term
What is delegation of duties?
Definition
When an obligor indicates his intent to appoint another person to perorm for him
Term
Does delegation of duty extinguish duty owed by obligor?
Definition
No
Term
What is a promisor?
Definition
person who is making the promise that benefits the third party
Term
What is a promisee?
Definition
Person who obtains the promise that benefits the third party
Term
When can a third party cancel or modify?
Definition
If third party knows assets to the contract- if already assented, rights have vested and the contract can't be canceled or modified w/out their consent
Term
Three parts of product liability
Definition
1. Negligence, breach of warranty, strict liability
Term
What is anticipatory repudiation?
Definition
Breach of contract when promisor indicates before the time for his performanc ethat he is unwilling or unable to carry out contract, dishcarges the promisee from all futher obligation under the contract
Term
Excuse for non-performance?
Definition
Situations in which nonperformance is excused bc of factors that arise after the fomation of the contract-person whose performance is made impossible is discharged from further obligation under the contract
Term
Excuses for non-performance? (4)
Definition
Impossibility, supervening illegality, destruction of subject matter of the contract, impracticability
Term
Other reasons for discharge? (3)
Definition
Discharge by mutual agreement, accord and satisfaction, discharge by statute of limitations
Term
Discharge: Accord and satisfaction
Definition
Agreement where promisor acccepts some performance different than originally agreed upon and promisor performs the accord, parties discharged
Term
What are remedies?
Definition
Contract remedies focus on the economic loss caused by breach of contract, not on moral obligation
Term
Types of contract remedies (3)
Definition
Legal remedies (money damages), Equitable remedies, Restitution
Term
What is injunction? (Equitable remedy)
Definition
Court order requiring a person to do something or odering a person to refrain from doing something
Term
What are equitable remedies?
Definition
Cases when money damages alone are not adequate to fully compensate party's injuries.
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