Chapter 12, Formation of traditional and E-Contracts

Question 1

How is intent of contract determined? (3 ways)

Answer 1

Objective theory

• What was said when entering into contract
• How the party acted
• The circumstances surrounding the transaction

Question 2

What are the 4 requirements of a legal contract?

Answer 2

Agreement - offer & acceptance

Consideration - something of value is received or promised

Contractual Capacity - Must be competent parties

Legality - purpose of contract must accomplish goal not against public policy

Question 3

Meeting of the minds

Answer 3

When 2 parties objectively look like they want to enter into a legal obligation

Question 4

3 Elements of an offer

Answer 4

intention -offeror must have intention to become bound by the offer

definite -The terms of the offer must be reasonably certain, or definite, so that the parties and the court can ascertain the terms of the contract.

communication-The offer must be communicated to the offeree.

Question 5

Type of contract that involves holding an offer open for X amount of time in return for payment

Answer 5

An option contract

-Can’t be revoked

Question 6

These 2 types of contracts are not covered by article 2

Answer 6

Real-estate and services contracts

Question 7

Acceptance of an offer must be Unequivocal (and communicated)

Answer 7

the mirror image rule

Question 8

Definiteness of an offer includes 4 terms

Answer 8

Identification of parties

The identification of the object or subject matter

The consideration to be paid

The time of payment, delivery, or performance

Question 9

The Mailbox rule

Answer 9

Under this rule, if the authorized mode of communication is the mail, then an acceptance becomes valid when it is dispatched (placed in the control of the U.S. Postal Service)—not when it is received by the offeror

Question 10

Consideration

Answer 10

the value given in return for a promise or a performance. The consideration, which must be present to make the contract legally binding, must be something of legally sufficient value and must be bargained for.

Question 11

In consideration, there 3 elements of a “legally sufficient value

Answer 11

A bargain for someone to do something

A PROMISE to do something that one has no prior legal duty to do.

Forbearance - The act of refraining from exercising a legal right

Question 12

The preexisting duty rule

Answer 12

If a party is already bound by contract to perform a certain duty, that duty cannot serve as consideration for a second contract.

Question 13

Implied in fact contracts

Answer 13

Determine what parties are agreeing to by conduct

Question 14

3 Types of Contractual incapacity

Answer 14

Minority

intoxication

insanity

Question 15

3 options incapacitated parties can do

Answer 15

1) Disaffirm (void) the contract prior to achieving capacity

2) Disaffirm the contract for a reasonable time after achieving capacity
Affirm (ratify) the contract after achieving capacity

3) Affirm (ratify) the contract after achieving capacity

Question 16

Promissory Estoppel

Answer 16

A doctrine that applies when a promisor makes a clear and definite promise on which the promisee justifiably relies. Such a promise is binding if justice will be better served by the enforcement of the promise.

Question 17

Implied-in-Law Contracts (Quasi-Contract)

Answer 17

Defendant receives benefit at plaintiffs expense with circumstances that would make it unjust for defendant not to pay

Question 18

Only incapacitated parties can void a contract

Answer 18

word up

Question 19

The transfer of contractual rights to a third party is known as

Answer 19

assignment of rights

Question 20

The transfer of contractual duties to a third party is known as a.

Answer 20

delegation of duties

Unique personal services cant be delegated

Question 21

2 types of third party beneficiaries

Answer 21

Intended - made for the benefit of 3rd party..CAN SUE

incidental - CANT SUE

Question 22

Statute of Frauds

Answer 22

A state statute under which certain types of contracts must be in writing to be enforceable.

Question 23

When a stronger party dictates terms, take it or leave it, the contract is known as an _____ contract

Answer 23

Adhesion

Question 24

Rescission and Restitution

Answer 24

an action to cancel a contract and return the parties to the positions they occupied prior to the transaction.

Question 25

Bilateral Mistakes allow the contract to be rescinded by either party. Unilateral Mistakes are enforceable unless:

Answer 25

Other party knew mistake was made Mistake was made inadvertently and without gross negligence

Question 26

fraudulent misrepresentation consists of the following elements

Answer 26

1. misrepresentation of a material fact 2. with knowledge of falsity 3. an intent to deceive 4. justifiable reliance 5. damage

Question 27

____ _____ arises from relationships in which one party can greatly influence another party, thus overcoming that party’s free will.

Answer 27

Undue influence

Question 28

Discharge by performance includes

Answer 28

Complete - No breach, contract discharged Substantial - duty to perform continues, party can recover damages material breach - no further duty to perform, party can sue immediately for breach Personal Satisfaction

Question 29

Discharge by agreement includes

Answer 29

Rescission - Cancellation of contract Novation - alterations to agreement, substitution of parties settlement agreement - Involved parties who agree to settle dispute, once performed, both parties discharged accord and satisfaction -the parties agree to accept performance that is different from the performance originally promised.

Question 30

Discharge by Operation of Law

Answer 30

These circumstances include material alteration of the contract, the running of the statute of limitations, bankruptcy, and the impossibility or impracticability of performance

Question 31

Material Alteration of the Contract

Answer 31

Changes to contract without consent, innocent party can seek discharge

Question 32

discharge in bankruptcy

Answer 32

The release of a debtor from all debts that are provable, except those specifically excepted from discharge by statute.

Question 33

Impossibility

Answer 33

No fault, both parties relieved of duty to perform

Question 34

commercial impracticability

Answer 34

a seller may be excused from performing a contract when (1) a contingency occurs, (2) the contingency’s occurrence makes performance impracticable (3) the nonoccurrence of the contingency was a basic assumption on which the contract was made. Commercial impracticability usually involves an event that increases the cost or difficulty of performance.

Question 35

frustration of purpose

Answer 35

frustration of purpose typically involves an event that decreases the value of what a party receives under the contract.

Question 36

Types of Damages from breach of contract

Answer 36

Compensatory (to cover direct losses and costs). Consequential (to cover indirect and foreseeable losses).

Question 37

Mitigation of damages

Answer 37

The non breaching party has an obligation to reduce severity of damages

Question 38

liquidated damages - only enforceable if they are not construed as a penelty

Answer 38

An amount, stipulated in the contract, that the parties to a contract believe to be a reasonable estimation of the damages that will occur in the event of a breach.

Question 39

The equitable remedy of Reformation

Answer 39

Reformation allows a court to rewrite the contract to reflect the parties’ true intentions. Appropriate for mutual mistakes of fact

Question 40

Consideration modification under the UCC

Answer 40

A modification of a contract for the sale or lease of goods does not require consideration as long as it is made in good faith.

Question 41

Firm Offers under the UCC

Answer 41

1. Applies to sale of goods 2. Applies if the seller is a merchant 3. Applies if the offer to hold open is in writing 4. Held open for 3 months

Question 42

Types of Statute of Frauds

Answer 42

1. contracts involving interests in land - ownership interest in land 2. contracts that by their terms cannot be performed within one year - one year from when they're entered into 3. collateral or secondary promises - Personal representative who agrees to pay debts of decedent 4. promises made in consideration of marriage - Prenuptial agreement sale of goods for $500 or more - services do not apply