Contracts Flashcards
What is a Contract?
Agreement with specific terms between two or more persons or entities in which there is a promise to do something in return for a valuable benefit known as consideration.
What are the ways to form a contract?
Express
Implied
Quasi-contract
What are the six elements to a contract?
Offer Acceptance Consideration Mutuality of Obligations Competency and Capacity (in certain circumstances) Written Instrument
What is an Express Contract?
Contract formed by specific words, either oral or written.
What is an Implied Contract?
Agreement created by the actions of the parties but is not written or spoken
Example - taking pet to the vet, it is implied that the vet will examine and treat the pet in exchange for the payment of a fee but there is no oral/written agreement
What is a Quasi-Contract?
Binding obligation that’s imposed by the Courts to avoid injustice or unjust enrichment; occurs in situations where there’s an obligation under a contract, although the elements of a contract have not been fulfilled
Example: order and pre-pay for a pizza to be delivered but it’s delivered to a different house and they eat the pizza - the pizzeria could be court ordered to reimburse for the amount paid for the pizza
What is an Offer, Offeror, Offeree, and Essential Terms of an Offer?
Offer = promise to act or refrain from acting in exchange for a return promise to do the same; an objective expression of a promise
Offeror = party to the agreement that makes the offer
Offeree = party to the agreement who either accepts or rejects the offer
Essential Terms of an Offer = identity of the offeree and subject matter, the price to be paid and the time of payment, delivery or performance, the quality involved, and the nature of the work to be performed
What is Acceptance of an Offer?
Express agreement to its terms
What is a Unilateral Contract?
Offer that may only be accepted by the performance of or the non-performance of an act
What is a Bilateral Contract?
An offer that may only be accepted by a return promise of performance
What is Consideration?
Something of value that each person brings to the table to induct the other to enter into an agreement
Not always money - may be a promise to perform an act that one is not legally required to perform or a promise to refrain from an act that one is legally entitled to do
What is Legal Detriment?
Detriment is an essential element of consideration.
Any loss or harm to a person or property; relinquishment of a legal right, benefit, or something of value.
To incur detriment means to promise to either refrain from doing something that one has a legal right to do or do something that one isn’t under any legal obligation to do.
What is Mutuality of Obligations?
A “meeting of the minds”, requires that every party to the contract agrees to the specific terms of the contract
Occurs when one party makes an offer and the other party accepts that offer
What is Legal Capacity?
Having the legal capacity to be held liable for the promises and performances that person has agreed to undertake - a minor, someone who’s mentally incapacitated or someone who’s intoxicated lack the capacity to enter into a contract
What are Void and Voidable Contracts?
Void Contract = requires one of the parties to the contract to perform an act that is impossible or illegal, considered void because they’re too unfair or infringe on a person’s rights, cannot be enforced by either party, law treats void contracts as if they’ve never been formed
Voidable Contract = valid agreements but one or both of the parties to the contract can void the contract at any time (contract entered into when one party was a minor, one party was tricked/forced into entering it, or one party was incapacitated [drunk, insane, or delusional])
What is a Third-Party Contract and Third-Party Beneficiary?
Third-Party Contract: when two parties enter into a contract for the benefit of another party
Third-Party Beneficiary: party benefitting from the third-party contract, may have the right to sue on a contract despite not having originally been an active party to the contract
Example: life insurance policy taken out under one person’s name which is intended to benefit their spouse/family upon their passing
What is Delegation, Assignment, and Novation in Third-Party Contracts?
Delegation = one party to a contract arranges to have a third-party performs the party’s contractual obligations
Assignment = one party to the contract assigns or transfers their rights in the contract to another party (party to whom the rights are transferred is the assignee and the party who is assigning their rights is the assignor)
Novation = one party is transferring all of their rights under the terms of a contract to another party - novation contracts must be signed by all original parties and the third-party taking the place of one of the parties. The original contract is then extinguished, the withdrawing party’s obligations and rights are discharged under the terms of the original contract
What are Creditor, Donee, and Incidental Third-Party Beneficiaries?
Creditor = non-party to a contract who receives benefits when a promise is made to satisfy legal duty
Donee = non-party to the contract who benefits from a promise that’s made for the purpose of making a gift to the donee
Incidental = incidentally benefits from the terms of a contract between other parties and is not the intended beneficiary (ex. grandchildren may benefit from parent receiving or inheriting a gift)
What is the Statute of Frauds and what types of contracts does it apply to?
Statute of Frauds = requires certain contracts to be in writing and signed by all the parties to be enforceable
M = Marriage (promises made in consideration of marriage - prenup agreement) Y = Year (contracts that can't be performed within one year) L = Land (sale or transfer of land unless partial performance has occurred) E = Estate (pay debts of estate using personal funds) G = Guaranty (collateral, guaranty the debt of another) S = Sale of Goods (valued at $500+)
What is a Breach of Contract?
Party fails to perform its obligations on a contract
What is a Material Breach?
Failure of a party to uphold their end of a contract in a way that renders the contract seemingly pointless
What is a Minor Breach?
Aka partial breach, less severe than material breach, gives harmed party right to sue for damages but doesn’t excuse them from further performance
What are Contract Defenses?
Available for defendants sued for breach of contract:
- Absence of the six elements of a contract
- Unconscionability
- Mistake
- Fraud
- Undue Influence
- Duress
- Misrepresentation
What is Unconscionable as a contract defense?
Contracts so offensive that it offends the conscience of all reasonable people, goes against public policy
Includes unfair terms, hidden language in unrelated provisions, small font, or provisions added to the contract after it has been signed
What is a Mistake in Value contract defense?
When parties make assumptions concerning the value of the contract’s subject matter
What is Fraud contract defense, Fraud in the Inducement, and Fraud in the Factum?
Fraud = deliberate misrepresentation of material fact made by one party to another with knowledge of the falseness and for the purpose of inducing the other person to act and upon which the other person relied with resulting injury or damage.
Fraud in the Inducement = fraud exists with regard to the entire contract; person is deceived into signing the contract due to fraudulent circumstances
Fraud in the Factum = fraud exists as to a fact or description contained in the contract
What is Undue Influence contract defense?
When one party to a contract is able to influence the decisions of another party and takes advantage of another party through a position of trust; always involves two parties and one of the parties to the contract must be in a superior position over the other party
What is Duress contract defense?
A coercive threat of sufficient gravity that induces the other party to assent to an agreement to which they would not have assented otherwise; blackmail, violence, and threats may all constitute duress
