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Business Law > Exam 2 > Flashcards

Exam 2 Flashcards

Contract and Sales Contracts

1
Q

Define a Contract

A

A legally enforceable promise (or set thereof) made in exchange for a valuable benefit.

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2
Q

What distinguishes Contracts from promises?

A

Magic sauce. = consideration

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3
Q

What does valid, unenforceable, and voidable contract mean?

A
  1. Valid = meets legal req. and enforceable
  2. Unenforceable = can meet legal req. but unenforceable due to specific reason
  3. Voidable = one, or more, parties have the right to terminate
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4
Q

What’s an express vs. implied Contract?

A
  1. Expressed = expressed terms (written/oral)
  2. Implied = non-stated terms
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5
Q

What is a Parol Contract

A

Any contract not in writing

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6
Q

What is an Option Contract?

A

A separate contract to hold an offer open for a period of time.

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7
Q

What are right and duties?

A
  1. Rights = entitled benefits
  2. Duties = what is required to give.
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8
Q

What are the elements of a valid Contract?

A
  1. Offer
  2. Acceptance
  3. Consideration
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9
Q

Define an Offer

A

Manifestation of a willingness to enter into a contract if the other agrees to its terms.

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10
Q

What does definitive mean?

A

Offer must state all pertinent terms

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11
Q

What is important about Communication in offers?

A

Offers must be communicated to the actual parties.

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12
Q

How long do Offers stay open?

A
  1. A reasonable period of time
  2. Explicit offer period within the contract
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13
Q

For acceptance, what is the “Mirror Image” rule?

A

Acceptance must mirror the offer. Cannot add terms in acceptance.

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14
Q

How does the “mailbox rule” work?

A

Acceptance is noticed when it is sent.

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15
Q

What is an exception to the “mailbox rule”?

A

If the contract terms specify otherwise. (ex. Acceptance must be received by [ ] before [ ])

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16
Q

When can silence constitute acceptance?

A

Only if it is reasonable, such as through Course of Dealing.

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17
Q

Define Consideration

A

Legal value, bargained for and given in exchange for an act or promise

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18
Q

What is Legal Value?

A

Doing something you had no prior duty to do (or not to do).

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19
Q

What are pre-existing duties?

A
  1. Promise to not commit crimes
  2. Promises to not pay public officials to do public duties
  3. Pre-existing contractual duties
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20
Q

What is important about Past Consideration?

A

It is not consideration

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21
Q

What is a Quasi Contract?

A

Designed to avoid injustice. One party must have furnished a tangible item/service to the other party with the expectation/implication of payment to be given. The other party accepted it but made no effort to pay for it.

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22
Q

What is Promissory Estoppel?

A

A promise without consideration that is enforceable because the other party reasonably relied on the promise to their detriment.

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23
Q

How could a Contract be rendered unenforceable?

A
  1. Capacity
  2. Misrepresentation
  3. Fraud
  4. Duress
  5. Undue Influence
  6. Illegality
  7. Against public policy
  8. Statute of Frauds
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24
Q

What does “sui juris” mean?

A

Means “of one’s own right” or “of age and of mind”

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25
Q

What happen when a minor enters a contract?

A

Contract is voidable only by the minor

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26
Q

How long does a minor have to disaffirm?

A

A reasonable period of time after turning 18.

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27
Q

What if a minor misrepresents their age?

A

They are estopped from voiding the Contract.

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28
Q

What is the Court process to determine capacity?

A

Guardianship

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29
Q

Is a Court process required to invalidate a contract?

A

No, Guardianship is just one way.

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30
Q

What happens when the party is incapacitated?

A

Contract is voidable

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31
Q

What happens when the party is intoxicated?

A

Modern rule = responsible for contract

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32
Q

What happens when a party misrepresents a fact and the other party relies on the facts in entering into the contract?

A

Contract is voidable

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33
Q

What are material vs. immaterial facts?

A

Material = essential to the deal
Immaterial = not significant

34
Q

What is “Puffery”?

A

“Sales talk,” more opinion than fact.

35
Q

Difference between misrepresentation and Fraud?

A

Fraud requires “scienter.” The intent to deceive.

36
Q

What does “caveat emptor” mean?

A

“Buyer beware.” The buyer has a duty to inspect the goods.

37
Q

What is a Latent Defect?

A

Defect that could not be discovered by initial inspection and was known by the seller.

38
Q

What is a classic example of Duress?

A

“Gun to the head”

39
Q

Modern rule concerning Duress?

A

Does not have to be physical. If not physical, harm must be significant.

40
Q

What is Duress?

A

Threatening to pursue criminal action

41
Q

What is Undue Influence?

A

One party holds authority/trust over another and exerts it over the other party. An inappropriate pressure that forces an uninformed decision by the weaker party.

42
Q

When is a contract considered illegal?

A

If it calls for behavior violating a tort or statute

43
Q

What if only part of the contract is illegal?

A

Courts may divide the contract to enforce the legal parts, unless the illegal parts taint the whole contract.

44
Q

What about obscure laws or regulations?

A

There is an exception if both parties were unaware (did not know) of the illegality. Given a chance to correct the illegality to make it enforceable.

45
Q

What is the Statute of Frauds?

A

Contracts that must be in writing.

46
Q

What kinds of Contracts must be in writing?

A
  1. Diseased persons
  2. Guarantees of debts
  3. Sale of Land
  4. Bilateral contract that cannot be completed in 1 year.
  5. Sale of Goods greater than $500.
47
Q

What must Contracts under the Statute of Frauds include?

A
  1. Essential terms
  2. Signature by the party for whom enforcement is sought
48
Q

What is the Parol Evidence rule?

A

When parties create and integrated, written, and signed contract, parol evidence is not admissible. Courts look only at contract.

49
Q

How do Assignments work?

A

Separate contract that substitutes a third-party to the current party that is the obligee.

50
Q

What kind of Contracts may be Assigned?

A

All contracts unless:

  1. It is expressly prohibited in the contract
  2. The assignment would change the deal
  3. The assignment would increase the burden
51
Q

Who are Third-Party beneficiaries?

A

Parties that benefit from a contract but are not parties to the contract itself.

52
Q

When are Third-Party beneficiaries able to enforce their rights under a contract?

A
  1. Rights have vested
  2. The rights are more than mere incidental rights
53
Q

What is Strict Performance and when does it apply?

A

Strict performance is when performance is explicitly quantifiable. Applies when it is clear to tell when performance is done.

54
Q

What is Substantial Performance and when does it apply?

A

When performance is not explicitly quantifiable. Applies when asked “Did the party reasonably perform?” (ex. blades of grass)

55
Q

What does “discharge” of obligations under a contract mean?

A

There are no more duties to perform/no more promises.

56
Q

When is a party discharged?

A
  1. Upon performance
  2. By agreement
  3. Statute of Limitations
57
Q

What are the Statute of Limitations applicable to contracts under Georgia law?

A
  1. 4 years (parol)
  2. 6 years (in writing, no seal)
  3. 20 years (in writing, seal)
58
Q

Describe the Remedies in Contract law

A
  1. Compensatory - make whole as if contract had been completed. Standard goal.
  2. Consequential - foreseeable consequences of contract breach. Must be foreseeable to complete.
  3. Punitive (very rare) - Not typically recoverable unless an intervening tort had been committed.
  4. Liquidated - damages agreed to at the time of contract or breach.
59
Q

What is meant by “mitigate damages”?

A

The harmed party has a duty to reduce damages incurred. Cannot just “take it.”

60
Q

What does UCC stand for?

A

Universal Commercial Code

61
Q

Which Article of the UCC applies to the sales of goods?

A

Article 2.

62
Q

Define “goods”?

A

Tangible, personal property

63
Q

What are Merchants under the UCC?

A
  1. Regularly deals with a type of good
  2. Proports special knowledge of a good
  3. Employs someone with either [1] or [2]
64
Q

What does “Good Faith” mean in a sales contract?

A

Seller is honest in fact.

65
Q

What does “Course of Dealing” mean?

A

If a contract does not provide clear terms, look to prior history of dealings.

66
Q

What is the effect of Course of Dealing?

A

To fill in the gaps of unclear terms.

67
Q

What does “Customs of Trade” mean?

A

Practices that apply to a specific trade.

68
Q

What is the effect of Customs of Trade?

A

Fills in the gaps for interpretation.

69
Q

When can a sales contract be altered by a party’s Failure to Object?

A

After some reasonable time of sustained partial performance that has not been objected to.

70
Q

Can a Waiver (Failure to Object) be revoked?

A

Yes, with a reasonable notice and if the other party has not come to rely on the waiver.

71
Q

How do Assignments differ in sales contracts?

A

May be assigned unless:
1. Contract prohibits assignment
2. Assignment changes material of contract

72
Q

If Sales Contract does not specify, where is a seller required to deliver the sold goods?

A
  1. Seller’s place of business
  2. Where goods are located
73
Q

How do buyers accept goods?

A

After a reasonable time to inspect the goods, the buyer can accept conforming goods or reject non-conforming goods.

74
Q

What right does buyer have to inspect goods?

A

A reasonable time for inspection

75
Q

Define Commercial Unit of goods

A

Goods sold as a group.

76
Q

Can a buyer reject a portion of a Commercial Unit?

A

No, the goods are treated as a unit.

77
Q

When can a buyer revoke Acceptance?

A

In the case of a Latent Defect

78
Q

What are the seller’s rights to cure rejected goods?

A

Can re-ship conforming goods within original deadline

79
Q

What are the possible remedies for Sellers when a Buyer breaches contract?

A
  1. Cancel
  2. Resell
  3. Recover lost profits
  4. Recover purchase price
  5. Reclaim
80
Q

What are the possible remedies for Buyers when a Seller breaches contract?

A
  1. Cancel
  2. Cover
  3. Recover Price Difference
  4. Recover Value Difference
  5. Specific Performance’
  6. Consequential Damages
81
Q

What are the types of implied Warranties?

A
  1. Implied Warranty of Merchantability - product will work for its implied purpose.
  2. Implied Warranty of Fitness for a Particular Purpose - product will work for a specific additional purpose beyond standard intended purpose (ex. heater with additional cooling function).
  3. Implies Warranty of Title - seller has right to transfer ownership when goods purchased and good title for buyer.
82
Q

What is an “unconscionable” sales contract?

A

A contract so severely one-sided it is deemed unenforceable under the law. The contract “shocks the conscience.”

Business Law (4 decks)

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