Contracts

Question 1

Formation

Answer 1

what is required to make a contract that the court will enforce?

Question 2

5 elements of Formation

Answer 2

1. Offer
2. Acceptance
3. Consideration
4. Capacity
5. Legality

Question 3

Offer

Answer 3

there has to be evidence that:
- offeror had a present intent to contract when they made the offer
- the terms of a deal had some specificity or definiteness; AND
- the offeror communicated the offer to the offeree

Question 4

Are Ads Considered Offers?

Answer 4

Not considered offers, just invitations to deal unless you make it specific (first 10 people to show up on black friday get a TV)

Question 5

How long does an offer stay open?

Answer 5

an offer terminates when:
1. the terms of the offer say the offer would terminate (you must accept by noon on sept 30)
2. a reasonable times expires
3. the offeror revokes the offer BEFORE the offeree accepts it
- not when the offeror said they would hold the offer open for a longer period of time
- unilateral offer - the one party is not obliged to do anything but if they do accept the offer party is obliged to follow through on the offer (punch cards)
4. an offeree rejects the offer

Question 6

What does it mean to “accept” an offer?

Answer 6

1. offeree had a present intent to contract
2. offeree accepted on the terms proposed by the offeror; AND
3. offeree communication acceptance to the offeror

Question 7

General Rules of Acceptance

Answer 7

• the offer can state how and when acceptance must be made
• if the offer does not say how and when, then the offer can be accepted at any reasonable time by any reasonable means

Question 8

When can silence be a way to communicate acceptance?

Answer 8

1. offeree can agree that they will accept by silence (if you don’t hear from me by next week…)
2. parties with prior dealings or trade practices have established it
3. an offeree who accepts work done by offeror, knowing what offeror expects in return is generally held to have accepted

Question 9

Consideration

Answer 9

law does not enforce “gratuitous” promises (something for nothing), so each side must get and give something, can be either an act or a promise (or a promise not to act)

Question 10

When does consideration most often come up?

Answer 10

1. Past Consideration - a promise to do something the promisor has already done
2. Preexisting Obligation - a promise to do something the promisor was already obligated to do
3. Illusory Promises - a promise that doesn’t actually bind the promisor to do anything
4. Promise to make a gift

Question 11

Capacity

Answer 11

have the ability to enter in a contract

Question 12

In what situations might a person lack capacity to enter in a contract?

Answer 12

• intoxication
• insanity (mental incapacity)
• infancy (minors)

Question 13

Categories of Contracts

Answer 13

Express - agreement terms have been stated directly by the parties either in oral or written words
Implied-In-Fact - agreement is implied by surrounding environment
Bilateral - a promise for a promise
Unilateral - offeror promises to pay only after the completion of a task by the offeree

Question 14

Infancy : General Rule

Answer 14

if minor disaffirms, even if contract was already executed, parties must return to each other any consideration that was exchanged, can also disaffirm for a reasonable period of time even after becoming an adult

Question 15

Infancy: Exception

Answer 15

a minor can be bound to a contract for necessities (food, clothes, shelter)

Question 16

Insanity: Test

Answer 16

Does the person have sufficient mental capacity to understand the nature and effect of the contract?

Question 17

Intoxication

Answer 17

grounds for disaffirmance only when it is so extreme that the person is unable to understand the nature of the business at hand, and in some cases the other party needs to know of the intoxication

Question 18

Legality

Answer 18

• if it wasn’t a feasible contract from the beginning (contract to commit murder), - agreements that restrain trade…courts will refuse to enforce contracts if doing so would work a violation of public policy (can’t limit prices of market location)

Question 19

To be enforceable, a non-compete agreement must:

Answer 19

1. serve a legitimate business purpose
2. be reasonable in time, geographic area, and scope
3. not impose an undue hardship

Question 20

Defenses to Formation

Answer 20

1. Misrepresentation or Fraud
2. Mistake
3. Duress or Undue Influences
4. Unconscionability

Question 21

FRAUD - contract is voidable and harmed party may seek damages (including punitive) only if all 4 of the following are true:

Answer 21

1. one party made a misrepresentation
2. the party making the representation intended to deceive the other party
3. the complaining party justifiably relied on the misrepresentation
4. the complaining party suffered harm from that reliance

Question 22

Misrepresentation

Answer 22

1. one party made an innocent misrepresentation
2. the misrepresentation was material to the deal
3. the complaining party justifiably relied on the misrepresentation
4. the complaining party suffered harm from the reliance

Question 23

Mistake

Answer 23

both parties share a misunderstanding:
1. relates to a basic assumption on which the contract was made (mistake of fact; not of value)
2. has a material effect on the agreed-upon exchange
3. both parties make a mistake

Question 24

Unilateral Mistake

Answer 24

one party misunderstands a basic party of the deal, usually cannot get out of contract unless duress or fraud

Question 25

Duress

Answer 25

wrongful coercion that indues a person to enter or modify a contract:
1. contract was induced by an improper threat AND
2. victim has no reasonable alternative but to enter into contract

Question 26

Undue Influence

Answer 26

unfair persuasion affecting a person in a vulnerable position preyed upon by someone in a position of trust (elder abuse):
1. relationship between parties is one of trust or one which the person exercising persuasion dominates AND
2. the persuasion is unfair (they wouldn’t have entered in the contract)(deprive them from talking to other people)

Question 27

Unconscionability

Answer 27

Needs to show BOTH:
1. absence of meaningful choice AND
2. terms so unreasonably advantageous to one party that they “shock the conscience” of the court

Question 28

Contract fo Adhesion

Answer 28

for contract presented on a take it or leave it basis (no negotiation) person who signs may not know or understand what they are signing

Question 29

Discharged contract

Answer 29

a party is discharged from the contract “free of further obligations” when she has either done the task OR breached

Question 30

Breach

Answer 30

a party to fails to do what they were contracted to

Question 31

Remedy for Breach

Answer 31

when one party has breached, the other may ask for a remedy required breaching party to may damages or perform the contract

Question 32

Compensatory Damages

Answer 32

give them the benefit of the deal they made, paying back the value that they would have had “benefit of the bargain”

Question 33

Substantial performance

Answer 33

can’t expect perfect performance, only substantial is required

Question 34

Material Breach

Answer 34

deprives the injured party of the benefits that they reasonably expected from the contract, non-breaching party:
- discharged from further obligations
- may cancel contract AND
- sue for damages for the total breach

Question 35

Non-Material (minor violation)

Answer 35

non-breaching party can:
- sue only for damages specifically caused by the minor breach
- cannot cancel the contract
- can only withhold performance until breach is remedied

Question 36

Can you ever be excused from performing a contract without paying damages?

Answer 36

yes, if a condition for your performance is not met (didn’t get approval from landlord), impossibility, or a waiver/release

Question 37

Interpretation - what if a term in contract is not clear?

Answer 37

1. court will give the term its usual meaning within that industry
2. court will interpret vague terms in form contracts against the party that drafted the contract
3. handwritten terms control over > typed terms, which control over > pre-printed terms