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Legal Business 1 > Ch 8 > Flashcards

Ch 8 Flashcards

0
Q

Contract law enables private agreements to be…

A

Legally enforceable

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1
Q

Contract

A

Legally enforceable promise or exchange of promises

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2
Q

Confidentiality agreements

A

Employees sign contract and promise not to disclose

Company’s marketing plans, customer lists, discoveries, etc.

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3
Q

Uniform Commercial Code (UCC)

A

Important state based legislation impacting contract law

Covers the sale of goods

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4
Q

UCC relates to contracts involving goods, and what governs most other contracts?

A

Common law

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5
Q

Bilateral contracts

A

Involve promise for promise (mutual) exchange

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6
Q

Unilateral contracts

A

Agreement with only 1 promise and only 1 party is committed
To perform

Exist when promise is made to motivate an action

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7
Q

Express contract

A

Arise from interactions where parties discuss promised
Terms of their agreement

Ex. Negotiated purchase of land for construction of
manufacturing plant

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8
Q

Implied-in-fact contracts

A

Arise from conduct of parties rather than from words

Ex. Asking an accountant for professional advice implies
Promise to pay going rate for advice, even though you
Don’t make express promise to pay

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9
Q

Implied in law contract AKA quasi contract

A

1 party unjustly enriched at expense of another, law may
Imply duty on 1st party to pay 2nd even though there is
No contract

Ex. Debtor over pays creditor $5000, they can sue creditor
On quasi contract to get back the money

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10
Q

Enforceable contract

A

When courts uphold validity of promises of contract

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11
Q

Unenforceable contract

A

Nonperforming party has justifiable reason for noncompliance

With promise

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12
Q

Valid contract

A

Agreement is enforceable because all essential requirements

Are present

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13
Q

Void contract

A

Appears to be in agreement but lacks essential requirement
For validity and enforceability

Ex. Collecting money on illegal gambling

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14
Q

Voidable contract

A

Agreement when at least one party has right to withdraw

From promise made without legal liability

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15
Q

Executed contract

A

Parties have performed their promises

Ex. Paying for groceries with money

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16
Q

Executory contract

A

Parties have not yet performed their agreement

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17
Q

What are the 5 essential elements for forming a valid contract?

A 
1 offer
2 acceptance
3 consideration
4 capacity
5 lawful purpose
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18
Q

Offer to contract

A

Contains specific promise and specific demand

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19
Q

Definite terms: contracts

A

Under common law of contracts, contractual terms must

Be definite and specific

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20
Q

3 examples of indefiniteness

A

Advertisements, catalogs, web pages with price quotes

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21
Q

Under the UCC, contracts for the sale of goods can…

What does this not apply to?

A

Leave open nonquantity terms to be decided at future time
(can leave open price for future date)

This doesn’t apply to real estate or services

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22
Q

4 instances when an offer is terminated?

A

1 too much time ellapses
2 oferee’s rejection
3 offerees counter offer
4 revocation (offeror takes back offer)

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23
Q

Acceptance

A

Offeree’s makes the required promise

Necessary to create valid enforceable contract

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24
Q

Mirror image rule, required by standard contract law

A

For acceptance to create binding contract, acceptance

Must mirror offer (match exactly)

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25
Q

Merchants

A

People who deal in business of goods

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26
Q

Mailbox rule AKA deposited acceptance rule

A

Acceptance of contract becomes binding when deposited

with postal service

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27
Q

Consideration

A

All promises aren’t enforceable though legal action, there
Must be incentive for person’s promise or it’s nonbinding

Consideration is mechanism for evaluating existence of
Incentive

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28
Q

Consideration: bilateral contract

A

Promises each party makes to each other are the

consideration

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29
Q

Consideration: unilateral contract

A

Performance when there is no obligation to do so

30
Q

Important aspect of consideration

A

It must be bargained for

31
Q

Promises to make gifts…

A

Are not binding because no bargained for consideration

Supports the promise

32
Q

Accord of satisfaction

A

Compromising payment between parties, where one after

Receiving the payment will not sue the other

33
Q

Preexisting obligation

A

If you have contract person to repair your house for $20000
And halfway through he insists on another $5000 to complete
The job and you agree. But only pay him $20k when he finishes
He will lose I court if he sues you

Unless he does more than you previously agreed to do

34
Q

Preexisting obligation: sale of goods contract

A

Does not apply to Sale of goods contract

Binding modifications can be made

35
Q

Firm offer

A

Exists when merchant offers goods promises in writing
That offer will not be revoked for period not exceeding 3
Months

36
Q

Option

A

Promise to keep offer open for certain time period

By the oferee’s consideration

37
Q

Doctrine of promissory estoppel

A

Promisee justifiably relies on promisor’s promise to his
Economic injury

Ex. Employer promises not to fire employee without justifiable cause

38
Q

Capacity, define. 3 classes of persons who lack capacity to be bound by contractual promises

A

Refers to person’s ability to be bound by contract

1 minors
2 intoxicated persons
3 mentally incompetent persons

39
Q

What 5 contractual promises can minors be legally bound by?

A

Necessaries of life: food, clothing, shelter, medical care,

Education (in some states)

40
Q

Lawful purpose

A

Courts don’t deal with illegal contracts (killing, tort with
standards of behavior violated)

41
Q

Contracts that restrain trade

A

Often illegal if they monopolize companies and fix prices

Btw competitors

42
Q

Covenants not to compete

A

Important in protecting employers from having employees
They train leave them and compete against them

Also protect buyer from business from seller setting up
Competing business

43
Q

6 common voidable contracts

A 
1 fraud
2 misrepresentation
3 duress
4 undue influence
5 mutual mistake
6 unilateral mistake
44
Q

Fraud

A

Involves intentional misstatement of important fact that

Induces one to rely justifiably on his injury

45
Q

Misrepresentation

A

Misstatement without intent to mislead

46
Q

Duress

A

Force or threat

47
Q

Undue influence

A

One is taken advantage of unfairly through contract by

Party who misuses position of relationship or legal confidence

48
Q

Mutual mistake

A

Voluntarily agree to contract without understanding important
Facts in it from both parties involved

49
Q

Rescission

A

Test of materiality whether parties would have contracted if

They’d been aware of the mistake

50
Q

Unilateral mistake

A

Only one of the parties to contract is wrong about material

Fact

51
Q

Oral contracts

A

Generally valid unless they involve larger sums of money

52
Q

Statute of frauds

A

Law requiring certain contracts be in writing

Designed to prevent potential deception or fraud from oral
Contracts

53
Q

Contracts for sale of Interest in land, covers contracts for 4 things

A

1 Covers contract to sell land
2 mortgages
3 mining rights
4 easements

54
Q

Easements, define, give example

A

Rights to use another’s land

Ex. Cross it with electric power wires

55
Q

Collateral promise

A

Secondary Or conditional promise

56
Q

Collateral promise

A

Business shareholder promises to repay loan of corporation
If and only when the corporation is having trouble making
Payments

Written contract

57
Q

If it is possible or unlikely to perform a contract within 1 year
The statute of frauds allows…

A

An oral contract involving that performance to be enforceable

58
Q

Sale of goods $500 or more

A

Must be in writing or have written evidence of transaction

59
Q

3 Exceptions to written contracts in the statute of frauds?

A

1 part performance

2 rules involving goods

3 judicial admissions

60
Q

Part performance AKA promissory estoppel

A

Creates exception to requirement that sales of interests in
land must be in writing

When buyer makes valuable improvements to land and paid
Part of purchase price, oral contract to sell is enforceable

61
Q

4 for sale of good contracts that can be oral

A

1 $500 goods manufactured specifically for buyer
2 where payment made and accepted
3 party admits in court contract was made
4 sued merchant receives written contract and doesn’t
Reject w/in 10 days

62
Q

Judicial admissions

A

Sued party admits Oral contract exists in court

63
Q

Third party beneficiaries

A

Original parties to contract may intend for agreement to

Benefit a 3rd party

64
Q

When can a 3rd party sue

A

Sue if parties in contract intended to benefit that person

65
Q

Donee beneficiary

A

When performance under contract is meant as gift to third

Party, that person is donee beneficiary

66
Q

Incidental beneficiary

A

Someone who unintentionally benefits from contract

Has no rights under that contract

67
Q

Creditor beneficiary

A

Someone who’s owed money from a person contracted to

pay them

68
Q

Law of assignment

A

Transfer (generally a sale) of rights under a contract

69
Q

Assignor

Assignee

A

1 of the original contracting parties assigns rights and/or

duties to third party (assignee)

70
Q

Obliger

Obligee

A

Obliger = contracts to buy

Obligee = in contract sells to buyer

71
Q

Contracts that can’t be assigned

A

Assignment that increases burden of performance to Obligor

Can’t be assigned

72
Q

Novation, ex.

A

3 or more party contract where original contracting parties
Agree to relieve Obligor from liability by substituting an
Assignee in place of this party

Ex. You and your friend have contract to pay rent with landlord, your friend moves out and stops paying rent, novation is agreeing with landlor that the liability of the rent goes to the friend

Legal Business 1 (25 decks)

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