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Flashcards in Contracts Deck (34):


A contract generally must be supported by valid consideration. Valid consideration
will be present if there is a bargained for exchange of something of legal value. If the act promised has
already been performed, the bargain element fails. Thus, it is said that past consideration is no



Advertisements are generally not offers, but invitations to negotiate. Anadvertisement is an offer only if it is a promise to perform a very specific act conditioned upon
acceptance. If Harris' ad had stated that Harris would sell 10 specifically identified cars for a specified
price during the sale, Harris' advertisement would be an offer. Harris' actual advertisement is too vague
to be an offer


mailbox rule

Generally, under the mailbox rule, acceptance is effective when sent. However, an
offeror may opt out of the mailbox rule by stating that the acceptance must be received by a certain date
to be effective. Fine's offer here required receipt by April 4. Moss' acceptance was received after the
April 4th deadline



In order to form a contract, there must be at least an offer, an acceptance, and
consideration. Card's communication is an offer. The stereo and the $250 would be the consideration for
the contract here. But, Card will not be bound until Bend accepts the offer.


revoke offer

Peters' offer was already revoked. To be effective, an acceptance must be received before the offer is terminated. An offer may be terminated by the offeror at any time unless the offeree gave consideration to keep the offer open. Mason gave no consideration to keep the offer here open;thus Peters could revoke. An offer is considered to be revoked if the offeree obtains information from areliable source that the subject matter of the offer has been sold. Here, Mason received the informationof the sale before he attempted to accept. Therefore, his attempted acceptance came too late and was



To be sufficient to be an offer, the communication must create a reasonable
expectation in the offeree that the offeror intends to make a contract. Given the circumstances (a laptop
for $1; not at a sale, etc.) it would be unreasonable to assume that Jen was serious.


Promise to keep offer open

Generally, a promise to keep an offer open for a specified time is unenforceable unless it is made in writing by a merchant (i.e., a merchant's firm offer) or consideration supports the promise, in which case, an option contract is formed. Here, Bob gave his promise to not purchase
another computer in exchange for Jen's promise to keep the promise open. Bob was not legally obligated
to forgo purchasing another computer, and giving up the right to do so is valid consideration. Thus, the
parties created an option contract to keep the offer open.


Unilateral contract

Choice "C" is correct. Karen and Judi formed a unilateral contract. A unilateral contract is formed when a
promise is made in exchange for an act. Here, Judi promised to pay Karen $50 if Karen had a
professional groomer style the dog's hair. Karen accepted the offer by having a professional groomer cut
her dog's hair. Karen's performance of the requested act not only was an acceptance, but it also was
valid consideration to support Judi's promise. Consideration need not have monetary value to the
promisor; a detriment to the promisee is sufficient. Here, Karen did not have to have the dog's hair cut by
a professional groomer. Thus, her doing so was a detriment and constituted consideration sufficient to
support Judi's promise


Mailbox rule

Under common law, if the offer does not state that acceptance is effective upon receipt and does not
specify the means of acceptance, the offeree may invoke the "mailbox rule" and make the acceptance
effective upon dispatch by using any reasonable means of acceptance. Both regular mail and e-mail
transmission appear to be reasonable means of acceptance. Here, the offer did not state that the
acceptance had to be received within 10 days, but rather only that the offer was open for 10 days.
Neither did the offer specify any method for accepting. Thus, the mailbox rule applies and the
acceptances are effective upon dispatch; it is irrelevant that they were received on the eleventh day.



Consideration to be binding must be "legally sufficient." Some of the more common
examples of consideration include money, a promise, acting, not acting, etc.



In a common law contract situation, such as the contract for the sale of real
property here, a communication will be effective as an acceptance only if it assents to each and every
term of the offer (the mirror image rule). If a communication includes a term different from one in the offer, it constitutes a rejection of the offer and a counteroffer, which the original offeror may accept or
reject. Summers offered to sell the home to Fox for $150,000 and Fox agreed to buy it for $145,000.
Thus, Fox's communication is a counteroffer and a rejection of Summers' offer. Summers did nothing to
accept Fox's counteroffer, thus no contract was formed.


Contract modification

Under the common law of contracts a contract modification is treated like a
separate contract and requires consideration


Late acceptance

deemed a counter offer


adjudicated mentally incompentant

Contracts entered into by one who has been adjudicated mentally incompetent are
void rather than voidable


novation and substitued contract

. In a novation, the agreement is unchanged but one of the original parties is released and a new party is substituted into their place. In a substituted contract, the original parties are both released from the original agreement but are both bound by a new agreement.


Consequential damages

Consequential damages are recoverable for breach of contract only to the extent they are foreseeable. And in every case, a nonbreaching party has a duty to mitigate damages-a duty to make reasonable efforts to cut down on losses resulting from the breach. Failure to do so will preclude the party from collecting damages that might have been avoided.


Parol evidence

The parol evidence rule prohibits introduction of prior written statements to vary the terms of a fully integrated contract, but it does not bar the introduction of subsequent oral or written



Prevention of performance results in a discharge for breach of the implied duty of
cooperation. A party to a contract will also be discharged through an accord and satisfaction.



Illegality of the services to be performed always results in a discharge of duties.
This assumes that the services were legal at the time the contract was formed. If the services had been
illegal at the time of attempted formation, there would be no contract.


Statue of limitations

The statute of limitations for breach of contract usually begins to run on the occurrence of the breach



A minor has a reasonable time after reaching the age of majority to disaffirmcontracts. One day after reaching majority is within a reasonable time, and so Egan could disaffirm.. A minor may disaffirm even if the subject matter of the contract has been
destroyed; the minor's only duty is to return whatever is left.


slight breach

Contracts governed by the common law, especially construction contracts, do not
allow rescission for minor breaches, but limit the nonbreaching party to recovery of damages.


Liquidated damages

A liquidated damages clause is enforceable if at the time of contracting it appears that the amount of damages in case of breach would be difficult to assess and the amount is a reasonable approximation of damages and not a penalty.



The common law defense of fraud requires a showing of intent to deceive. Fraud in the inducement (as opposed to fraud in the execution) merely means that the victim was deceived as to
the reason for the transaction.



Fraud requires misrepresentation of a material fact. Ordinarily, opinions or statements of value do not constitute misrepresentations of material facts unless made by experts.
Appraised value would constitute a misrepresentation of a material fact because it was made by an



. A rescission "undoes" a contract and restores the parties to the positions they would have been in if no contract were made.
In a novation, the original parties enter into a new contract that releases at least one of the original parties and substitutes at least one new party. All involved parties must agree.
since a release simply discharges a party. It does not restore the party to their
original position.
A revocation refers to the withdrawal of an offer. A contract may not be revoked.



When a contract for the sale of real property is breached, the nonbreaching party can either recover compensatory damages (damages that compensate for the breach) or obtain specific performance (forced performance)



Duress occurs when a person overcomes the will of another through wrongful force
or threats of imminent force. Economic duress generally is not recognized as a defense to contract, and
even where it is, it is usually required that the party taking advantage of the other party's poor financial
condition must have caused the poor condition.


Specific performance

Specific performance is a court order to perform under the terms of a contract. Generally, it is available only in contracts for unique or rare property. A patent, by definition, is unique. Therefore, specific performance would be available to enforce a contract for the sale of a patent.


Statute of frauds

The Statute of Frauds does not actually require an agreement to be signed by any
party; instead, it requires written proof of the material terms of the agreement to be evidenced by a
writing signed by the party being sued.


Statue of fraud

Contracts which by their terms cannot be performed within a year are within the
common law Statute of Frauds. The fact that a contract may be performed within a year does not bring
the contract within the Statute of Frauds. A contract to perform weekly landscaping services for the next
three years must be in writing. A contract to plant three trees within the next two years is not within the
statute of frauds


Void vs voidable

Choice "C" is correct. Duress through physical harm or the threat of physical harm renders a contract
void rather than merely voidable.
Choice "A" is incorrect. Mutual mistake renders a contract voidable by either party, rather than void.
Choice "B" is incorrect. Use of undue influence renders a contract voidable at the option of the party
Choice "D" is incorrect. Duress through improper threats is too broad to be correct. If the improper
threats regard social or economic disadvantage, the contract is merely voidable. If the threats involve
physical violence, then the contract is void.


Void vs voidable

Choice "B" is correct. If a person is defrauded into entering into a contract because its terms or the
surrounding circumstances are not as represented (that is, fraud in the inducement), the contract is
merely voidable.
Choice "A" is incorrect. Fraud in the execution (that is, the party did not know that he was signing a
contract) renders a contract void.
Choice "C" is incorrect. Physical coercion (or the threat of physical coercion) is a type of duress that
renders a contract void rather than voidable.
Choice "D" is incorrect. Entering into a contract with a person who is without capacity and has a guardian
appointed (that is, after a court has declared the person incompetent) renders the contract void.



Duress is threatening speech or action that actually overcomes a person's free will
and makes his or her apparent consent invalid. Thus, duress focuses on whether the wrongdoer's actions
actually affected the other party.