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CPCU 530 - Chapter 2
Definitions
25
Law
Professional
12/01/2007

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Term
Contract
Definition
a legally enforceable promise
Term
Promisor
Definition
the party to a contract making a promise
Term
Promisee
Definition
the party to a contract to whom a promise is made
Term
Third-party beneficiary
Definition
a person who is not a party to a contract but who benefits from it and has a legal right to enforce the contract if it is breached by either of the contracting parties
Term
Breach of contract
Definition
the failure of a party to a contract, without legal excuse, to perform all or part of the contract
Term
Privity of contract
Definition
the connection or relationship between parties to a contract because they have mutual interests.
Term
Agreement
Definition
one party’s offer and another party’s acceptance of that offer
Term
Capacity to contract
Definition
a legal qualification that determines one’s ability to enter into an enforceable contract
Term
Consideration
Definition
something of value or bargained for an exchanged by the parties to a contract
Term
Bilateral contract
Definition
a contract in which each party promises a performance
Term
Unilateral contract
Definition
a contract in which only one party makes a promise for or undertakes the requested performance
Term
Executed contract
Definition
a contract that has been completely performed by both parties
Term
Executory contract
Definition
a contract that has not been completely performed by one or both of the parties
Term
Express contract
Definition
a contract that contains both the terms and parties’ intentions, either in writing or orally
Term
Implied-in-fact contract
Definition
an obligation that is not an actual contract but that is imposed by law because of the parties’ conduct or some special relationship between them or because one of them would otherwise by unjustly enriched
Term
Voidable contract
Definition
a contract that one of the parties can reject (avoid) based on some circumstance surrounding its execution
Term
Void contract
Definition
an agreement that, despite the parties’ intentions, never reaches contract status and is therefore not legally enforceable or binding
Term
Offer
Definition
a promise that requires some action by the intended recipient to make an agreement
Term
Counteroffer
Definition
a proposal an offeree makes to an offerer that varies in some material way from the original offer, resulting in rejection of the original offer and constituting a new offer
Term
Option contract
Definition
an agreement to keep an offer open for a stated period, supported by consideration
Term
Acceptance
Definition
the second step of an agreement; occurring when an offeree agrees to a proposal or does what the offerer proposed
Term
Forbearance
Definition
the act of giving up or the promise to give up a legal right
Term
Substantial performance
Definition
the performance of the primary, necessary terms of an agreement
Term
Competent party
Definition
a party to a contract who has the basic or minimal ability to do something and the mental ability to understand problems and make decisions
Term
Restitution
Definition
the act of making an injured party whole again
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