CH 7 - Contracts

Question 1

___ is a response by the person receiving the offer that indicates willingness to enter into the agreement proposed in the offer

Answer 1

Acceptance

Question 2

An ___ is formed when the creditor accepts the debtor’s offer to settle the dispute for an amount less than the creditor claims is due

Answer 2

Accord

Question 3

An ___ is an agreement to accept performance that is different from what is called for in the contract.

Answer 3

accord and satisfaction

Question 4

An ___ of a contract occurs when one party knows ahead of time (before performance is due) that the other party will breach the contract

Answer 4

anticipatory repudiation

Question 5

rejection of a proposal or idea.

Answer 5

repudiation

Question 6

A ___ is a promise given in exchange for another promise. One party agrees to do one thing, and the other party agrees to do something in return

Answer 6

Bilateral contract

Question 7

A violation of the terms of a contract

Answer 7

Breach of contract

Question 8

___ (no party is a minor or incompetent person unless that party ratifies contract)

In contracts between an adult and an infant, adults are bound but infants may escape contracts at their option (i.e. the contract is voidable). Infants may ratify a contract on reaching age of majority.

Answer 8

Capacity

Question 9

Damages that compensate for the economic loss caused by the breach of contract are ___

Answer 9

Compensatory damages

Question 10

The party’s duty to perform requires that each party perform for the other at the same time

Answer 10

Condition concurrent

Question 11

An event that must or must not occur before performance is due

Answer 11

Condition precedent

Question 12

The party has a duty to perform until a future event occurs that discharges the party

Answer 12

Condition subsequent

Question 13

in addition to damages that compensate for the breach itself, the plaintiff is entitled to ___ —that is, compensation for losses that occurred as a foreseeable result of the breach

Answer 13

consequential damages

Question 14

Each party must transfer something of legal value to the other

Answer 14

Consideration

Question 15

A ___ is a legally enforceable promise or set of promises. If the promise is broken, the person to whom the promise was made—the promisee—has certain legal rights against the person who made the promise—the promisor

Answer 15

contract

Question 16

An offer made in retort (answer) to another offer

Answer 16

Counteroffer

Question 17

A ___ is an agreement, generally part of an employment contract or a contract to sell a business, in which one party agrees to refrain from competing with the other party for a specific period of time and within a particular area

Answer 17

Covenant not to compete

Question 18

Promises to do or refrain from doing something

Answer 18

Covenants

Question 19

Procure substitute goods or services

Answer 19

Cover

Question 20

If the promisee entered into the contract to discharge a duty he or she owed to the third party, then the third party is a ___ and has the right to enforce the contract between the promisor and promisee

Answer 20

Creditor beneficiary

Question 21

When an offeree has changed his or her position because of justifiable reliance on the offer

Answer 21

Detrimental reliance

Question 22

When the contractual obligations have been satisfied or terminated in other words ___.

Answer 22

Discharged

Question 23

A ___ is created when the promisee does not owe an obligation to the third party, but rather wishes to confer a gift

Answer 23

Donee beneficiary

Question 24

A contract is voidable if one party was forced to enter into it through fear created by threats. Thus, inducing someone to sign a contract by physical threat, blackmail, or extortion is ___

Answer 24

Duress

Question 25

Under the ___, if an agent acts on behalf of another (the principal) in signing an agreement of the type that must, under the statute of frauds, be in writing, the authority of the agent to act on behalf of the principal must also be in writing

Answer 25

equal dignities rule

Question 26

A contract under which the parties have continuing obligations to perform

Answer 26

Executory (started and not yet finished) contract

Question 27

___ give the nonbreaching party the benefit of its bargain, putting the plaintiff in the cash position it would have been in if the contract had been fulfilled.

Answer 27

Expectation damages

Question 28

___ occurs when, because of a misrepresentation, or untrue statement of material fact, one party does not understand that he or she is entering into a contract or does not understand one or more essential terms of the contract

Answer 28

Fraud in the factum

Question 29

___, occurs when a party makes a false statement to persuade the other party to enter into an agreement

Answer 29

Fraud in the inducement

Question 30

___ occurs when performance is possible, but changed circumstances have made the contract useless to one or both of the parties

Answer 30

Frustration of purpose

Question 31

A ___ purports to relieve the owner of the facility of any liability, including liability for negligence that results in injuries to a person using the facility The user of a facility is sometimes asked to sign a ___, especially before embarking on a dangerous activity, such as skydiving or race car driving.

Answer 31

general release = is a document in which one person releases another from any claims or threats of lawsuits

Question 32

appear to be or do something, especially falsely.

Answer 32

purport

Question 33

Promise that imposes no obligation on the promisor

Answer 33

Illusory promise

Question 34

Every contract contains an___that imposes on each party a duty not to do anything that will deprive the other party of the benefits of the agreement

Answer 34

Implied covenant of good faith and fair dealing

Question 35

If for some unforeseen unpredictable reason, a contract is not possible to perform then there would be no entitlement to financial compensation for the hurt party. However, must fit extreme rules for what is impossible

Answer 35

Impossibility

Question 36

Closely related to impossibility is the concept of ___ , where performance is possible but commercially i___. As a rule, ___ is difficult to prove

Answer 36

Impracticality

Question 37

In addition to compensatory and consequential damages, a nonbreaching party may incur lesser, relatively minor damages known as ___

Answer 37

Incidental damages

Question 38

A court order forcing the promisor to perform the promise.

Answer 38

Injunction

Question 39

At some point in the negotiations, the parties will usually manifest an intention, either orally or in writing, to enter into a contract

Answer 39

Intent to be bound

Question 40

___ cannot be terminated by the offeror

Answer 40

Irrevocable offer

Question 41

The parties to a contract may include a clause that specifies the amount of money to be paid if one of them should later breach the agreement. Such ___ clauses are frequently used in real estate and construction contract

Answer 41

Liquidated damages

Question 42

An agreement between two companies to combine into a single entity

Answer 42

Merger agreement

Question 43

The traditional concept of contract formation requires that what the offeree accepts must be exactly the same as what the offeror has offered. If it is not, the ___ dictates that no contract has been formed

Answer 43

Mirror image rule

Question 44

Untrue statement of material fact

Answer 44

Misrepresentation

Question 45

Like a misunderstanding due to ambiguity, a ___ by both parties can make a contract voidable

Answer 45

mistake of fact

Question 46

A ___ occurs when the parties make an erroneous assessment about some aspect of what is bargained for

Answer 46

mistake of judgment

Question 47

Lessen the amount of damages that flow from a breach

Answer 47

Mitigate

Question 48

If both parties agree, they may also terminate the contract by ___ .___ is itself a type of contract and, as such, requires a valid offer, acceptance, and consideration

Answer 48

Mutual rescission (the revocation, cancellation, or repeal of a law, order, or agreement.)

Question 49

The corollary of consideration in the case of bilateral contracts is the concept of ___. To be enforceable, a bilateral contract must limit the behavior of both parties in some fashion. If one party has full freedom of action, there is no contract

Answer 49

Mutuality of obligation

Question 50

corollary

Answer 50

a proposition that follows from (and is often appended to) one already proved

Question 51

One technique is ___, by which a new party is substituted for one of the original parties, and a new contract is written (with the consent of all original and new parties) to effect the desired change

Answer 51

Novation

Question 52

An ___ is a manifestation of willingness to enter into a bargain that justifies another person in understanding that his or her assent will conclude the bargain

Answer 52

offer

Question 53

Intended recipient

Answer 53

Offeree

Question 54

___ arises from an inequality of bargaining power that results in no real negotiation and an absence of meaningful choice for one party to the contract

Answer 54

Oppression

Question 55

An ___ is created when an offeror agrees to hold an offer open for a certain amount of time in exchange for some consideration from the other party

Answer 55

option contract

Question 56

Agreement to purchase all of a particular producer's production (exclusive contract)

Answer 56

Output contract

Question 57

Under the ___ , when there is an unambiguous written contract that the parties intended would encompass their entire agreement, __ l (that is, oral) __ of prior or contemporaneous statements is inadmissible in court and cannot be used to interpret, vary, or add to the terms of the written contract

Answer 57

parol evidence rule

Question 58

___ to authorize a person, called an attorney in-fact (who need not be a lawyer), to sign documents on their behalf

Answer 58

Power of attorney

Question 59

Liability imposed on a party for losses caused to the other party during negotiations that fail to ripen into a binding contract

Answer 59

Precontractual liability

Question 60

An agreement entered into before marriage that sets forth the manner in which the parties’ assets will be distributed and the support to which each party will be entitled in the event of divorce.

Answer 60

Prenuptial agreement

Question 61

A ___ can maintain an action on a promise made to him

Answer 61

Promisee

Question 62

The primary exception to the rule that only promises supported by consideration will be enforced is the doctrine of ___. ___l (sometimes referred to as detrimental reliance or unjust enrichment) applies only if the injured party can prove that (1) there was a promise on which the promisee justifiably relied, (2) the reliance was foreseeable, and (3) injustice would result if the court provided no relief to the promisee

Answer 62

Promissory estoppel

Question 63

___ occurs when one party makes a promise without any intention of carrying it out. This is a misrepresentation of intent, rather than a misrepresentation of fact

Answer 63

Promissory fraud

Question 64

occurs when a salesperson “gives voice to ‘the exaggerations reasonably to be expected of a seller as to the degree of quality of his product, the truth or falsity of which cannot be precisely determined.’

Answer 64

Puffing

Question 65

A court will order restitution under the doctrine of ___ if one party has received a benefit for which it has not paid the other party, even though there was no contract between the parties. restitution (the restoration of something lost or stolen to its proper owner.)

Answer 65

Quantum meruit is a Latin phrase meaning "what one has earned". In the context of contract law, it means something along the lines of "reasonable value of services".

Question 66

To ___ is to (subsequently agree to be bound by) contracts after they reach majority or gain competency

Answer 66

Ratify

Question 67

___ compensate the nonbreaching party for any expenditures it made in reliance on the contract

Answer 67

Reliance damages

Question 68

Mergers and acquisitions are usually highly negotiated transactions that are governed by detailed acquisition agreements containing ___ . Statements about the entity being sold and the buyer

Answer 68

Representations and warranties

Question 69

Occurs when a seller agrees to supply the needs of a buyer (exclusive contract) A contract under which the buyer agrees to buy all of a specified commodity the buyer needs from the seller and the seller agrees to provide that amount.

Answer 69

Requirements contract

Question 70

Whereas reliance damages look at what the plaintiff has lost, ___ looks at what the other party has gained from the transaction. The usual measure of ___ is the amount it would cost the recipient of the benefit to buy that benefit elsewhere.

Answer 70

Restitution= the restoration of something lost or stolen to its proper owner.

Question 71

To take back – to cancel

Answer 71

Revoke

Question 72

___ is the discharge (To liberate or free) of the debt.

Answer 72

Satisfaction

Question 73

According to the ___, the government generally cannot be held liable for breach of contract due to legislative or executive acts

Answer 73

Sovereign acts doctrine

Question 74

Instead of awarding monetary damages, a court may order the breaching party to complete the contract as promised, a remedy known as

Answer 74

Specific performance

Question 75

Although most oral contracts are enforceable, many states have a statute, called the ___, that requires certain types of contracts to be evidenced by some form of written communication

Answer 75

Statute of frauds

Question 76

___ arises when the terms of the contract are hidden in a densely printed form drafted by the party seeking to enforce these terms

Answer 76

Surprise

Question 77

A person who is not a party to a contract can sometimes still enforce it, this person would be a third party to the contract.

Answer 77

Third party beneficiary

Question 78

A contract term is ___ if it is so oppressive or fundamentally unfair as to “shock the conscience” of the court

Answer 78

Unconscionable

Question 79

Under the related doctrine of ___, a court may invalidate an agreement if one party exercised improper persuasion on the other, making genuine assent impossible

Answer 79

undue influence

Question 80

the expression of approval or agreement.

Answer 80

assent

Question 81

A promise given in exchange for an act

Answer 81

Unilateral contract

Question 82

Synonym for Promissory estoppel

Answer 82

Unjust enrichment

Question 83

Sometimes a statute will expressly make certain types of contracts illegal. For example, ___ limit the interest rate on loans and usually provide that any loan agreement in violation of the statute is unenforceable

Answer 83

Usury statutes

Question 84

Contract has no legal effect, null

Answer 84

void

Question 85

Capable of being void, IE if someone is mentally incapable of entering a contract

Answer 85

Voidable