Chapter 10 notes

Question 1

A declaration by a person that binds the person to do or not to do a certain act.

Answer 1

Promise

Question 2

A person who makes a promise.

Answer 2

Promisor

Question 3

A person to whom a promise is made.

Answer 3

Promisee

Question 4

• Uniform commercial code (UCC) or administrative agencies
• Common Law

Answer 4

Sources of Contract Law

Question 5

Governs contracts for the sale and lease of goods.

Answer 5

Uniform Commercial Code (UCC)

Question 6

Governs contracts relating to services, real estate, employment and insurance.

Answer 6

Common Law

Question 7

Provide stability and predictibility for both buyers and sellers in the marketplace by assuring the parties to these private agreements that the promises they make will be enforceable.

• Avoid potential disputes
• Ensure compliance with a promise
• Ensures an innocent party some form of relief.

Answer 7

Function of Contracts

Question 8

Many promises are kept because the parties involved feel a ____ obligation to keep a promise or because keeping a promise is in their mutual interest.

Answer 8

Moral

Question 9

By supplying procedures for enforcing private agreements, contract law provides an essential condition for the existence of a ___ ____.

• Without this, businesspersons would rely only on good faith of others
• Duty and good faith are usually sufficient to obtain compliance with a promise
• These elements may not be enough when things change in the promise.

Answer 9

Market Economy

Question 10

An agreement that can be enforced in court formed by 2 or more parties who agree to perform to refrain from performing some act now or in the future.

A set of promises constituting an agreement between parties, giving each legal duty to the other and the right to seek a remedy for breach of the promises or duties.

Answer 10

Contract

Question 11

The view that contracting parties shall only be bound by terms that can be objectively inferred from promises made.

• A party’s intention to enter a contract is judged by outward, objective facts as interpreted by a reasonable person, rather than by a party’s secret, subjective intentions.
• Helps determine if a contract has been formed.

Answer 11

Objective Theory of Contracts

Question 12

1. What the party said when entering into the contract
2. How the party acted or appeared
3. The circumstances surrounding the transaction.

Answer 12

Inclusions of Objective Facts

Question 13

1. Agreement
2. Consideration
3. Contractual capacity
4. Legality

Answer 13

Requirements for a Valid Contract

Question 14

Includes an offer and an acceptance. One party must offer to enter into a legal agreement, and another party must accept the terms of the offer.

Answer 14

Agreement

Question 15

Any promises made by the parties must be supported by legally sufficient and bargained-for consideration. (Something of value received or promised to convince a person to make a deal).

Answer 15

Consideration

Question 16

Both parties entering into a contract must have the contractual capacity to do so. The law must recognize them as possessing characteristics that qualify them as competent parties.

Answer 16

Contractual Capacity

Question 17

The contract’s prupose must be to accomplish some goal that is legal and not against public policy.

Answer 17

Legality

Question 18

• Voluntary consent
• Form
• These requirements are typically raised as defenses to the enforceabiliy of an otherwise valid contract.

Answer 18

A Contract may be Unenforceable if These Requirements are not met

Question 19

The consent of both parties must be voluntary. For instance, if the contract was formed as a result of fraud, mistake, or duress (coercion), the contract may not be enforceable.

Answer 19

Voluntary Consent

Question 20

The contract must be in whatever form the law reqires. Some contracts must be in writing to be enforceable.

Answer 20

Form

Question 21

The person who makes an offer.

Answer 21

Offeror

Question 22

The person to whom an offer is made.

Answer 22

Offeree

Question 23

Contracts may be categorized based on legal distinctions as to their formation, performance, and enforceability.

Answer 23

Types of Contracts

Question 24

• Bilateral
• Unilateral
• Formal
• Informal
• Express
• Implied
• Executed
• Executory
• Valid
• Voidable
• Unforseeable
• Void
• Quasi

Answer 24

Types of Contracts

Question 25

A type of contract that arises when a promise is given in exchange for a return promise. * "A promise for a promise" * The offeree can accept simply by promising to perform * Comes into existence at the moment the promises are exchanged.

Answer 25

Bilateral Contract

Question 26

A type of contract that results when an offer can be accepted only by the offeree's performance. * "A promise for an act" * Formed not at the moment the promises are exchanged but rather when the contract is performed. * Revokable until accepted- today once the performance has been substantially undertaken, the offeror cannot revoke the offer.

Answer 26

Unilateral Contract

Question 27

An agreement that by law requires a specific form for its validity. * Negotiable instruments- checks, drafts, promissory notes, and certificates of deposit. * Letters of credit

Answer 27

Formal Contracts

Question 28

A contract in which the terms of the agreement are stated in words, oral or written. * No special form is required (except for certain typs of contracts that must be in writing). * Usually based on substance rather than form. * Includes all other contracts

Answer 28

Informal Contract

Question 29

A contract in which the terms of the agreement are stated in words, oral or written. * Signed lease = express written contract * Classmate accepts offer to sell textbook= express oral contract

Answer 29

Express Contract

Question 30

A contract formed in whole or in part from the conduct of the parties. * Based on conduct of the parties, rather than their words.

Answer 30

Implied Contract (Implied-in-fact Contract)

Question 31

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

Answer 31

Requirements for an Implied Contract

Question 32

A contract may contain some express terms, while others are implied.

Answer 32

Mixed Contracts with Express and Implied Terms

Question 33

A contract that has been fully performed by both parties.

Answer 33

Executed Contract

Question 34

A contract that has not yet been fully performed. * If one party performs but the other has not is said to be this on one side, and executed on the other, but is still classified as this.

Answer 34

Executory Contract

Question 35

A contract that results when the elements necessary for contract formation (agreement, consideration, capacity, and legality) are present.

Answer 35

Valid Contract

Question 36

A contract that may be legally avoided at the option f one or both of the parties. * A party having the option can either elect to avoid any duty to perform or ratify (make valid) the contract. * Contracts made by minors * Contracts entered into under fraudulent conditions * Contrats entered into under legally defined duress or undue influence

Answer 36

Voidable Contract

Question 37

A valid contract rendered unforceable by some statute or law. * Party failed to satisfy a legal requirement

Answer 37

Unenforceable Contract

Question 38

A contract having no legal force or binding effect. * None of the parties have legal obligations * Mentally incompetent people * Purpose of the contract is illegal

Answer 38

Void Contract

Question 39

An obligation or contract imposed by law (a court), in the absence of an agreement, to prevent the unjust enrichment of one party. * Can arise from any agreement, express or implied * Equitable * Plaintiff can recover in quantum meruit

Answer 39

Quasi Contracts (Contracts Implied in Law)

Question 40

Based on the theory that individuals should not be allowed to profit or enrich themselves inequitably at the expense of others.

Answer 40

Unjust Enrichment

Question 41

A Latin phrase meaning "as much as he or she deserves." The expression describes the extent of compensation owned under a quasi contract.

Answer 41

Quantum Meruit

Question 42

* In some situations, the party who obtains a benefit is not liable for its fair value. * A party who has conferred a benefit on someone else unnecessiarly or as a result of misconduct or negligence cannot invoke the doctrine of quasi contract. (not considered "unjust.") * Even when it can be shown that a party received some benefit, it is not necessiarly sufficient to prove unjust enrichment.

Answer 42

Limitations on Quasi-Contractual Recovery

Question 43

This doctrine generally cannot be used when an actual contract covers the area in controversy. * A remedy already exists if a party is unjustly enriched because the other fails to perform. * The nonbreaching party can sue the breaching party for breach of contract.

Answer 43

Quasi-Contract

Question 44

Technical legal terminology traditionally used in contracts.

Answer 44

Legalese

Question 45

Regulates writing and eliminates legalese. * All federal agencies required to use plain language * Extended to agency rulemaking * Consumer contracts- contracts made primarily for personal, family, or household purposes. * Court documents

Answer 45

Plain Language Laws

Question 46

When a contract is clear and unequivocal, a court will enforce it according to its obvious terms. * Must be determined from the face of the instrument- from the written document alone. * The words- and their plain, ordinary meanings- determine the intent of the parties at the time they entered into contract. * A court is bound to give effect to the contract according to this intent.

Answer 46

Plain Meaning Rule

Question 47

1. When the intent of the parties cannot be determined from its language. 2. When it lacks a provision on a disputed issue. 3. When a term is susceptible to more than one interpretation. 4. When there is uncertainty about a provision.

Answer 47

A Court will Consider a Contract to be Unclear, or Ambiguous, in These Situations.

Question 48

Any evidence not contained in the contract itself, which may include the testimony of the parties, additional agreements or communications, or other information relevant to determining the parties' intent. * When the contract is clear and unambiguous, a court normally cannot consider evidence outside the contract.

Answer 48

Extrinsic Evidence

Question 49

* Insofar as possible, a reasonable, lawful, and effective meaning will be given to all of a contract's terms. * A contract will be interpreted as a whole. Individual, specific caluses will be considered subordinate to a contract's general intent. All writings that are part of the same transaction will be interpreted together. * Terms that were the subject of separate negotiation will be given greater consideration than standardized terms and terms that were not negotiated seprately. * A word will be given its ordinary, commonly accepted meaning, and a technical word or term will be given its technical meaning, unless the parties clearly intended something else. * Specific and exact wording will be given greater consideration than general language. * Written or typewritten terms prevail over preprinted terms. * Because a contract should be drafted in clear and unambiguous language, a part that uses ambiguous expressions is held responsible for the ambiguties. Thus, when the language has more that one meaning, it will be interpreted against the party that drafted the contract. * Evidence of trade usage, prior dealing, and course of performance may be admitted to classify the meaning of an ambiguously worded contract.

Answer 49

Rules the Courts Use (Interpreting)

Question 50

In situations in which trade useage, prior dealing, and course of performance come into play, the courts observe certain priorities in interpreting contracts. * Express terms are given the most weight. (Terms expressly stated in the contract). Followed by course of performance, course of dealing, and custom and useage of trade- in that order.

Answer 50

Express Terms Usually Given Most Weight