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Flashcards in Contracts Deck (33):
2

What must a contract contain?

Offer
Acceptance
Consideration (something of value)
Proper form (oral or written)
Legal subject matter
Two or more competent parties

3

What forms may acceptance of a contract take?

Can be written or oral

Must be in the form/method required by offeror

Must be mirror image - i.e. no changes in terms

4

Who can accept an offer?

Must be accepted by intended party (offeree)

Acceptance can only be made by a party who knows an offer has been made and has all of the facts - AKA a meeting of the minds

They must intend to accept

5

What happens if an offeree accepts a contract but puts added stipulations?

It is not acceptance; but instead becomes a counter-offer and the original offeror is now the offeree

6

When is an offeror bound by a contract?

When they RECEIVE the acceptance.

If the offeree rejects; then accepts - whatever gets to the offeror first is what is binding.

7

What will void an offer?

If offeror dies or becomes insane before acceptance; offer is void.

Contract is binding if acceptance occurs before death/insanity.

8

What actions or circumstances will revoke a contract?

Offeror revokes and offeree receives revocation

Offeree finds out prior to acceptance that offeror has sold the item

In the case of an Option; offeror cannot revoke until the time of the option has elapsed

Initial rejection by offeree doesn't void the option.

9

What is a Requirements Contract? How are they limited?

These are contracts where someone becomes the “exclusive” provider of something in exchange for consideration

Companies can’t get locked in to one and then have market conditions force them to sell something at what has become an unreasonable price

10

What is an Option?

Some amount of consideration (like money) is put forth by offeror to keep the offer open for a
stated period of time

11

What is a Requirements Contract? How are they limited?

These are contracts where someone becomes the “exclusive” provider of something in exchange for
consideration

Companies can’t get locked in to one and then have market conditions force them to sell something at
what has become an unreasonable price

12

What can make a contract VOID?

Fraud in the execution

Formed under extreme duress - extreme

Illegal

13

What is the result of a clerical error in a contract?

The contract is unenforceable.

Example: Person signs a contract to pay $500.00 to have
their lawn re-seeded but due to clerical error; it actually reads $5,000.00

14

What can make a contract VOIDABLE?

Fraud in the inducement

Party not competent to contract

Formed under SIMPLE duress

Undue influence

15

What makes a contract subject to the Statute of Frauds?

o $500+ Sale of Goods (must state quantity - UCC)

o Involves the purchase of real estate

o Cannot be completed within one year - from date when contract was MADE, not when performance is to begin

o Co-signing and guaranteeing the debt of another

o Executor's promise to be liable for debt of an estate (like a surety)

o Contracts where Marriage is the consideration

16

Contracts under the Statute of Frauds must be in what form to be valid?

They must be in writing.

17

What is the parol evidence rule?

Prevents one party to a written contract from coming in after the fact and claiming that a certain
conversation took place that conflicts with what is agreed upon in the written contract

It also prevents using an oral argument to read into the meaning of what is written on paper

If it's on paper; it trumps what was agreed-upon orally prior to the written contract

Note: does not negate oral agreements made AFTER the contract or disallow oral words from clarifying ambiguous contract language.

18

What are the requirements for the assignment of a contract?

Contracts are assignable to a third party beneficiary; but must be done so in good faith

Obligations may be assignable- Assignor is still liable

Assignor may be released from liability if other party grants a novation

19

What is the doctrine of Accord and satisfaction?

Accord and satisfaction is an agreement wherein a party with an existing duty or performance under a contract promises to do something other than perform the duty originally promised in the contract

Basically, parties agree to change a contract by substituting the performance:

1. Accord is the agreement to change performance (usually pay a lesser amount)

2. Satisfaction is satisfactory completion of the accord - no discharge until satisfaction

20

What is the doctrine of Anticipatory Repudiation?

The doctrine of anticipatory repudiation allows a party to either sue at once or wait until after performance is due when the other party indicates that they will not perform

21

What is the doctrine of Substantial performance?

The doctrine of substantial performance would allow for a contract obligation to be discharged even though the performance tendered was not in complete conformity with the terms of the agreement

This involves an unintentional, but minor breach - The breaching party may still recover but SUBTRACT the damages for the minor breach

22

When can contracts be discharged by law?

Party under contract is bankrupt

Party under contract dies or is incapacitated

Party cannot physically complete the contract (i.e. They are in prison so can't finish building your house)

23

What are effective methods of ratifying a contract entered into by a minor?

The following are effective methods for a minor to ratify a contract

1. Expressly ratifying the contract AFTER reaching the age of majority

2. Failing to disaffirm the contract within a reasonable time after reaching the age of majority

3. Ratifying the contract by implication after reaching the age of majority

NOTE: Ratification of a contract PRIOR to reaching majority age is NOT effective

24

What are the 4 types of contracts that cannot be assigned or delegated?

The 4 types of contracts that CANNOT be assigned or delegated are:

1. Personal service contracts calling for special skill

2. If it (contract) would materially increase risk or alter performance

3. If prohibited by contract or law

a. Exception: A person can assign right to receive money even if prohibited by the contract

4. Can't assign Insurance contracts

25

When is evidence admissible under the Parol Evidence Rule?

Recall that the Parol Evidence Rule states that evidence (oral or written) contradicting written contract is inadmissible in court. In order for it to be admissible in court, the evidence must have occurred PRIOR to or contemporaneous (at the same time) with the writing/discussion of the contract.

However, the following types of evidence can ALWAYS be introduced and is admissible under the parol evidence rule:

1. Evidence of fraud or illegality

2. Evidence that took place After the writing (after contract was signed)

3. Evidence of mistakes

4. Evidence to explain the writing or clear up ambiguities

26

What are the things that a plaintiff has to prove if they want to sue for Fraud (actual fraud)?

The plaintiff would have to prove the following:

1. Must prove Material Misrepresentation of fact or a deliberate concealment (must be fact, opinions don't count unless given by experts)

2. Must prove Scienter - an intent to deceive

3. Must prove Reasonable Reliance - the plaintiff (victim) must justifiably rely on misrepresentation

4. Must have Intent to rely

5. Must have Damages

27

What are the things that a plaintiff has to prove if they want to sue for Constructive Fraud (Gross Negligence)?

The plaintiff would have to prove the same things as in actual fraud, but they don't have to prove Scienter. Instead, they have to prove reckless disregard for the truth

1. Must prove Material Misrepresentation of fact or a deliberate concealment (must be fact, opinions don't count unless given by experts)

2. Must prove Reckless disregard for the truth - making a statement without knowing if it's true or false

3. Must prove Reasonable Reliance - the plaintiff (victim) must justifiably rely on misrepresentation

4. Must have Intent to rely

5. Must have Damages

28

What are the elements of Innocent Misrepresentation?

Innocent misrepresentation has 4 elements of fraud, but no Scienter or Reckless disregard for the truth

The injured party can only resind (get out of contract) and cannot sue for money damages

1. Must have Material Misrepresentation of fact

2. Must have Reasonable Reliance

3. Must have Intent to rely

4. Must have Damages

29

What does "assuming a mortgage mean"?

Assuming a mortgage means that a buyer purchases land that is already encumbered by a mortgage

1. Buyer agrees to take over mortgage and the buyer is liable for the mortgage

2. Seller (original mortgagor) is still liable for the mortgage

30

What is "specific performance" and what are the restrictions?

Specific performance is a type of contract remedy.

1. Party sues for a court order that other side specifically perform

2. Can ONLY be used with unique property and NEVER with personal service contracts

3. A party does not usually receive specific performance & compensatory damages (can't sue someone for both specific performance AND compensatory damages)

31

What does "buying subject to a mortgage mean"?

Buying subject to a mortgage means that a buyer purchases land encumbered by a mortgage

1. Buyer DOESN'T agree to take over the mortgage and is NOT liable

2. Seller (original mortgagor) is the ONLY one liable for the mortgage

3. Buyer runs the risk of foreclosure if the seller doesn't pay

32

Do modifications of contracts require new consideration under UCC?

Under UCC, a contract for sale of goods may be modified orally or in writing WITHOUT consideration IF in good faith

Example: S agrees to sell P 300 pairs of socks for $1.00 each. Due to rapid price increases in S's costs, he asks if he will modify the price to $1.20 each. P agrees.

The contract as modified is enforceable because it is covered under the UCC and does NOT need new consideration on both sides

33

Do modifications of contracts require new consideration under common law?

Under common law, modifications of contracts require new consideration on BOTH sides

For example: If two parties contract for the sale of land (common law applies) at an agreed upon price and sign a contract; then the seller later says that he wants more money. If the buyer signs a new contract and agrees to the higher price; the contract is valid ONLY for the original agreed upon price because even though the buyer gave more consideration by paying the additional amount; the seller didn't

So the buyer can go sue the seller for the additional amount that they paid because no new consideration was given by the seller

Note: Compare this with the UCC - which has a different rule regarding modifying a contract with consideration

34

What kind of mistakes will generally make a contract unenforceable and allow it to be rescinded?

Mutual mistake (i.e. by both parties) about existence, identity or important characteristics of subject matter in contract makes contract VOIDABLE by either party

A mutual mistake in fact will make a contract voidable

Also exists when BOTH parties reasonably attach different meanings to word or phrase

Also called bilateral mistake

Note: Mistake about value of subject matter is NOT grounds for voiding contract

Note: Unilateral mistake generally does NOT allow party to void contract; major exception is for mistakes in computations for bids