Chapter 11

Question 1

Contract Law

Answer 1

formation of and keeping promises

Question 2

Sources of Contract Law

Answer 2

Common law governs except when modified/replaced by statutory law (UCC) or by admin agency regulations

Common law governs real estate, employment, insurance.

Question 3

Functions of Contract Law

Answer 3

Designed to provide stability, certainty and predictability for both buyers and sellers

Used to avoid disputes in businesses

Question 4

Definition of a Contract

Answer 4

Promise to 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

Agreement that can be enforced in court

Question 5

Objective Theory of a Contract

Answer 5

what a party said when entering into the contract

how a party acted or appeared

the circumstances surrounding the transaction.

Question 6

Requirements of a Valid Contract

Answer 6

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

Question 7

Agreement

Answer 7

offer and acceptance

Question 8

Consideration

Answer 8

• supported by legally sufficient/bargained-for consideration (of value received or promised to convince a person to make a deal).

Question 9

Contractual Capacity

Answer 9

Both parties entering into the contract must have the contractual capacity to do so

Question 10

Legality

Answer 10

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

Question 11

Enforceability of a Contract

Answer 11

1. Voluntary Consent
2. Form (must be what law requires and most be in writing)

Question 12

Bilateral Contract

Answer 12

type of contract that arises when a promise is given in exchange for a promise.

Question 13

Unilateral Contract

Answer 13

type of contract that arises when a promise is given in exchange for a promise. (contests, lotteries, prizes)

Question 14

Revocation of Offers for Unilateral Contracts

Answer 14

once performance has been substantially undertaken, the offeror cannot revoke the offer

Question 15

Formal

Answer 15

contract that by law requires a specific form, such as being executed under seal, to be valid

Question 16

Informal

Answer 16

contract that does not require a specified form or formality in order to be valid

Question 17

Types of Formal Contract

Answer 17

Negotiable instruments (checks, promissory notes, etc)

Letter of credit (international sales)

Bill of landing (document evidencing receipt of or title of goods)

Question 18

Express

Answer 18

contract in which the terms of the agreement are fully and explicitly stated in words, oral or written

Question 19

Implied

Answer 19

contract formed in whole or in part from the conduct of the parties (as opposed to an express contract).

Question 20

Executed in Contract

Answer 20

a contract that has been completely performed by both parties.

Question 21

Executory in Contract

Answer 21

contract that has not yet been fully performed.

Question 22

Valid Contract

Answer 22

1. Agreement (offer and acceptance)
2. Supported by legally sufficient consideration
3. Made by parties who have the legal capacity to enter into contract
4. Legal purpose

Question 23

Voidable Contract

Answer 23

a valid contract but one that can be avoided at the option of one or both parties

Also can ratify i.e. make valid

Question 24

Unenforceable Contract (Void)

Answer 24

cannot be enforce because of certain legal defenses against it.

Void contract = no contract at all

Question 25

Quasi-Contracts

Answer 25

contracts implied in law (not actual contracts), fictional contracts “as if”

Equitable rather than legal, imposed to avoid unjust enrichment of one party

Question 26

Limitations on Quasi-Contracts

Answer 26

Quasi-contracts exist to prevent unjust enrichment

The party obtaining the enrichment is not held liable in some situations.

Question 27

Plain Meaning Rule

Answer 27

meaning of the terms must be determined from the face of the instrument—from the written document alone. A court is bound to give effect to the contract according to this intent.

Question 28

Extrinsic Evidence

Answer 28

evidence that relates to a contract but is not contained within the document itself, including the testimony of the parties, the testimony of witnesses, and additional agreements and communications.