Business Law Flashcards
Define the UCC.
Uniform law (portions only) passed in all states except Louisiana that provides uniform treatment for contracts that involve the sale of goods.
Give examples of service contracts.
Employment contracts, plumbing contracts, painting contracts, real estate commission contracts
List items that would be considered goods under the UCC.
Food, crops and timber harvested by the seller, cars, boats, iPads, clothing
Explain why determining the source of law that governs a contract is important.
Common law and the UCC have different results when contract issues arise. You need to find out which source of law to follow by examining the subject matter of the contract.
What happens when a contract involves both goods and services?
We look at what is most important to the parties. A burglar alarm is a good, but a burglar alarm installed is a service.
What is a bilateral contract?
A promise in exchange for a promise.
What is a unilateral contract?
A promise in exchange for an act.
What is an executed contract?
A contract that is fully performed by both sides.
What constitutes an executory contract?
A contract not fully performed by both sides.
Define “void contract.”
A contract that violates the law or lacks an element necessary for a court to enforce the agreement (e.g., a contract entered into by a party who has been declared incompetent).
Define “voidable contract.”
A valid contract in which a party has the option to avoid liability.
Define “unenforceable contract.”
A valid contract that cannot be enforced due to a legal defense.
List the enforceability classifications of contracts.
Valid
Void
Voidable
Unenforceable
List the classifications of contracts in terms of degree of performance completion.
Executed
Executory
Define “quasi-contract.”
A contract imposed by law, even when no contract was formed, to prevent unjust enrichment.
List the sources of contract law and the items to which they apply.
Common law: Real estate and services
Uniform Commercial Code: Goods
List the requirements of an offer.
Present intent to contract
Definite terms
Communication of offer
How is present intent (objective intent) measured?
It is measured by a reasonable person’s interpretation of the circumstances.
When are advertisements considered offers?
Advertisements are generally not offers unless they only invite acceptance.
When are preliminary negotiations considered offers?
Preliminary negotiations are generally not offers unless such negotiations include price lists, solicitation of bids, and auctions with reserve.
List the ways an offer can be terminated by the act of the parties to the offer.
Revocation
Rejection
Counteroffer
Describe the general rule of revocation.
An offer can be revoked at any time before acceptance unless the offer is irrevocable.
List the three types of irrevocable offers.
Options
Sales of goods firm offers
Offers irrevocable by estoppel
List the requirements of a firm offer for the sales of goods.
Offeror is a merchant.
Offeror is an authenticated record.
Assures offer will remain open for a stated period of time (without consideration not to exceed three months, regardless).
Define “option contract.”
An option contract is a distinct contract in which the offeree gives consideration to keep the offer open.
When is a revocation by the offeror effective?
When the offeree knows of or receives the revocation
When is the revocation of a public offer effective?
It is effective if made in the same medium as the offer.
List the ways in which an offer can be terminated by operation of law.
Lapse of time
Death or insanity of either party (unless the offer is irrevocable)
Destruction of the specific subject matter of the contract
Intervening illegality
When does the acceptance of a unilateral offer occur?
It takes place upon completion of the act required by the offeror.
What conditions must exist for the acceptance of a bilateral offer to take place?
Acceptance must be unequivocal and communicated to the offeror.
Describe an expressly authorized or stipulated means of communication.
A means of communicating acceptance that is expressly stipulated in the offer
When is an acceptance of an offer effective?
If sent by authorized medium: effective when delivered to the medium
If sent by unauthorized medium: effective when received by offeror, provided that the offer is still open
Can silence be considered a form of acceptance to an offer?
Generally it is not acceptance unless the offeree’s actions indicate an attempt to accept or the offeree has the duty to reject.
List the elements of a contract.
Offer and acceptance consideration
Capacity of the parties
Legality
Writing (when required)
Describe the requirements of an offer.
Objective intent to contract
Under common law: subject matter, price, payment terms, time for performance, and so on
Under the Uniform Commercial Code (UCC): subject matter and quantity if more than one
UCC will supply the remaining terms if not in the offer
Describe the mirror-image rule regarding acceptance of an offer.
Acceptance must be absolute, unequivocal, and unconditional. In common law, if the acceptance is not a mirror image of the offer’s terms, it is a rejection and counteroffer.
What happens under common law if there are additional terms in an acceptance?
The acceptance is a counteroffer and a rejection.
What happens under Uniform Commercial Code (UCC) law if there are additional terms in acceptance and the parties are nonmerchants?
There is a contract, but without the additional terms.
What happens under Uniform Commercial Code (UCC) law if there are additional terms in acceptance and the parties are merchants?
There is a contract with the additional terms unless those terms are material, are objected to, or if the offer was specifically limited to its terms.
What are the elements of a consideration?
There must be a bargained-for exchange between the parties. (If a party intends to make a gift, he or she is not bargaining.)
What is bargained for must have legal value.
How does an individual incur legal detriment?
An individual can incur legal detriment by (1) doing or promising to do something that he or she had no prior legal duty to do or (2) refraining from or promising to refrain from doing something that he or she had no prior legal duty to refrain from doing (i.e., by forbearance).
Define “preexisting duty.”
A promise to do what one is already legally obligated to do without consideration.
List the exceptions to a preexisting duty.
Rescission and new contract
Unforeseen hardship
Sale of goods: modification of contract
List the types of contracts with uncertainty of total performance.
Requirements contracts
Output contracts
Describe the requirement for an output contract to be with consideration.
The contract is based on established production or ability to produce by the seller, and the seller must sell its production to the buyer.
What are the requirements for consideration in a contract?
Each party to the contract has a benefit and detriment. The promises (detriment) are induced by the benefits and the benefits are induced by the promises (detriment). Bargained-for exchange. Consideration must actually change hands.
Define “accord and satisfaction.”
Agreement between two parties to settle an unliquidated debt (obligation is acknowledged, but the amount is unclear)(accord); satisfaction is payment of that amount; payment discharges all obligations; is not effective for discharging a liquidated debt, such as an installment loan.
What promises are enforceable without consideration?
Good-faith modification under the Uniform Commercial Code (UCC)
Charitable subscriptions (promissory estoppels on pledge to make a gift)
Promises barred by the statute of limitations.
What is required under the Uniform Commercial Code (UCC) for modification of a contract?
The parties agree to the modification (although they are not required to do so; it is their choice), but additional consideration is not required.
Explain the difference between a liquidated and an unliquidated debt.
Liquidated debt: One in which the amount due is agreed upon
Unliquidated debt: One in which the parties acknowledge a debt but disagree as to the amount that is due
Describe the general rule about contracts that involve an interest in real property.
To be enforceable, Any contract involving an interest in realty must be in writing or have written evidence thereof, or an applicable exception.
Describe the exception to the written requirement for contracts involving an interest in realty.
If a performance is such that the parties cannot be returned to the status quo, the exception is applicable.
Describe the one-year rule under the statute of frauds.
Any contract objectively impossible to perform within one year from the date of contract formation (date of acceptance) without breaching the terms, must be in writing or have written evidence of it to be enforceable.
Describe a situation in which the special-ordered goods exception would apply.
A condition in which the seller has substantially begun performance or has made an irrevocable commitment to do so before the buyer cancels the contract.
Describe the Uniform Commercial Code (UCC) performance exception to the requirement of a record.
If the buyer takes possession or makes a payment accepted by the seller, the statute of frauds is removed at least for the part possessed or paid for. If the seller accepts payment for the goods, at least for the amount reflected in that payment.
Against whom are ambiguities construed?
Against the party who drafted the contract
Explain the parol evidence rule.
A fully integrated contract clearly written cannot be contradicted, varied, or altered by evidence of the parties’ prior negotiations, agreements, or contemporaneous oral agreements.
