CH 12 - Contract Formation

Question 1

Sources of contract law?

Answer 1

The COMMON LAW governs all contracts EXCEPT when it has been modified or replaced by a STATUTORY LAW.
*The FUNCTION of contract law is to assure that the PROMISES parties make in a private agreement will be enforceable.

Question 2

What is a promise?

Answer 2

A person’s declaration that he WILL perform or WILL refrain from performing some present or future act.
*The promiser is the party making the promise, while the promisee is the person to whom the promise is made.

Question 3

“A promise or a set of promises for the breach of which the law gives a remedy, or the performance of which the law in some way recognizes as a duty.” What is this called?

Answer 3

Contract.
*An agreement formed by two or more parties who agree to perform or refrain from performing some act now or in the future.

Question 4

Every contract involves at least two parties…

Answer 4

The OFFEROR is the party making the offer to form a contract. The OFFEREE is the party to whom the offer is made.

Question 5

If the offeree can accept an offer simply by PROMISING to perform, the contract is a…

Answer 5

Bilateral contract.
*It is an exchange of a promise by the offeror for a promise by the offeree.
*Most common type of contract.
*Contract is formed at the exchange of the promises, NOT at later performance.
(For example: A offers to mow B’s lawn for $10. A accepts, B mows A’s lawn on Friday. The contract was made when the offer was accepted, the performance happened on Friday.

Question 6

If the offer is PHRASED so that the offeree can accept ONLY the actual performance (not a promise to perform), the contract is a…

Answer 6

Unilateral contract.
*It is an exchange of a promise by the offeror for actual performance by the offeree.

Question 7

Jerry places an advertisement offering to pay $500 for the return of his missing dog. Is Jerry asking for your PROMISE to return his dog? Are you obligated to search for his dog? Do you get the $500 if you search for the dog but do not find and return it?

Answer 7

No, no, and no.
Only the actual return of the dog forms a unilateral contract.

Question 8

The terms of the agreement (whether oral or written) are explicitly stated. This is a _______ contract.

Answer 8

Express contract

Question 9

The parties’ CONDUCT, create, and define the terms of the contract. This is an _______ contract.

Answer 9

Implied contract.
*A contract can also be a mixture of an express and an implied contract–with some express terms and some implied terms.

Question 10

Implied contracts are typically FORMED when:

Answer 10

1. The plaintiff furnished some goods or services;
2. The plaintiff expected to be paid and the defendant knew or should have known that payment was expected; and
3. Defendant had a chance to reject the goods or services and did not.

Question 11

Abel is at a hot dog stand and simply holds up two fingers. He receives two hot dogs. He does not pay.

Answer 11

Abel entered into an implied contract.
*Hotdog owner furnished goods and expected to be paid. Abel took possession of the hotdogs.

Question 12

FICTIONAL contracts that the courts impose on the parties “AS IF” the parties had entered into an actual contract.

Answer 12

QUASI contracts (or contracts implied in law)
*Quasi contracts are imposed by the courts to avoid the UNJUST ENRICHMENT of one party at the expense of the other.

Question 13

During a Texas hard freeze a few winters ago, your pipes break, flooding your home. Without any words or conduct on your part, a plumber repairs the leak, saving you thousands of dollars of repairs. You do not pay the customary fee because you say there was no contract.

Answer 13

Court may create one.
*Court may create Quasi. contract to prevent an injustice. When a contract already exists, Quasi contract cannot be applied.

Question 14

When an actual contract already exists that covers the matter in controversy, can the doctrine of quasi contract be used?

Answer 14

Generally no.

Question 15

An ________ contract is one that has been fully performed by both (or all) of the parties.

Answer 15

EXECUTED

Question 16

An ________ contract is one that has not been fully performed by one of more parties.

Answer 16

EXECUTORY

Question 17

A contract with an agreement, consideration, contractual capacity, form, and legality (later).

Answer 17

Valid

Question 18

A VALID contract that can be (but does not have to be) legally avoided, canceled, or annulled by one of the parties.

Answer 18

Voidable.

Question 19

An otherwise valid contract that may be rendered unenforceable by statute or other LAW (e.g. state statute says that a particular contract must be in writing to be enforceable).

Answer 19

Unenforceable.

Question 20

A contract with no legal or binding effect.

Answer 20

Void.

Question 21

Requirements of a Valid Contract:

Answer 21

*AGREEMENT (offer and acceptance)
*CONSIDERATION (legally sufficient and bargained-for)
*CONTRACTUAL CAPACITY (all parties must be competent)
*LEGAL (purpose of contract must be legal at time of execution)

Question 22

An agreement consists of an _____ and an _________.

Answer 22

OFFER and ACCEPTANCE.
*Parties must agree on the terms of the contract and manifest to each other their mutual assent (agreement) to the contract.
*Once an agreement is reached, if the other elements of a contract are present, a valid contract is formed.

Question 23

An _____ is a promise to do OR refrain from doing some specified action in the future.

Answer 23

OFFER

Question 24

The one making the offer is called the _______; the party receiving it is the _______/

Answer 24

OFFEROR and OFFEREE

Question 25

What are the requirements of an offer?

Answer 25

*Offeror must have a SERIOUS INTENTION to be bound by the offer; *The offer's terms must be REASONABLY CERTAIN or DEFINITE; and *The offer must be COMMUNICATED to and received by the offeree.