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Business Law I > Quiz 3 > Flashcards

Quiz 3 Flashcards

1
Q

Offer

A

An act or statement that proposes definite terms and permits the other party to create a contract by accepting those terms

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2
Q

Offeror

A

Person who makes the offer

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3
Q

Offeree

A

Person to whom an offer is made

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4
Q

Statements That Usually Do Not Amount to Offers…

A
  • An invitation to bargain
  • Price quote
  • Letters of Intent
  • Advertisements
  • Auction (just a request for an offer)
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5
Q

Letter of Intent

A

A letter that summarizes negotiating progress
(They merely state what the parties are considering, not what they have actually agreed to. But note that it is possible for a letter of intent to bind the parties if its language indicates that the parties intended to be bound.)

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6
Q

Consumer Protection Statute

A

Laws protecting consumers from fraud

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7
Q

Definiteness

A

It is not enough that the offeror indicates that she intends to enter into an agreement. The terms of the offer must also be definite. If they are vague, then even if the offeree agrees to the deal, a court does not have enough information to enforce it and there is no contract.

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8
Q

Gap-filler provisions

A

UCC rules for applying missing terms
- open price
- Output and requirements provisions

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9
Q

Open price

A

if the parties do not settle on a price, the Code establishes that the goods will be sold for a reasonable price, this will usually be the market value or a price established by a neutral expert or agency

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10
Q

Output contract

A

Obligates the seller to sell all of his output to the buyer, who agrees to accept it, 100% to one person

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11
Q

Requirements contract

A

Obligates a buyer to obtain all of his needed goods from the seller, agrees to purchase

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12
Q

Termination of Offers

A
  • revocation (revoked before accepted)
  • temporarily irrevocable
  • option contract period
  • firm offer (UCC only)
  • rejection
  • expiration
  • operation of law
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13
Q

Temporarily Irrevocable

A

When the offeror “takes it back”, revoke, before the offeree accepts
(Some offers can be revoked, at least for a time, oftentimes people and businesses need time to evaluate offers, much like searching around for a car)

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14
Q

Option contract

A

With an option contract, an interested purchaser buys the right to have the offer held open. The offeror may not revoke an offer during the option period.

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15
Q

Firm Offer (UCC contracts only)

A

The UCC has changed the law on the sale of goods. If a promise made in writing is signed by a merchant, and if it agrees to hold open an offer for a stated period, then an offer may not be revoked. The open period may not exceed three months.

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16
Q

Termination by Rejection

A

If an offeree rejects an offer, the rejection immediately terminates the offer.

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17
Q

Counteroffer

A

A different proposal made in response to an original offer
Also a rejection

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18
Q

Termination by Expiration

A

When an offer specifies a time limit for acceptance, that period is binding.
If the offer specifies no time limit, the offeree has a reasonable period in which to accept. (this varies on the type of offer, previous dealings, etc.)

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19
Q

Termination by Operation of Law

A

If an offeror dies or becomes mentally incapacitated, the offer terminates automatically and immediately.
Destruction of the subject matter terminates the offer.

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20
Q

Acceptance

A

When there is a valid offer outstanding, it remains effective until it is terminated or accepted. An offeree accepts by saying or doing something that a reasonable person would understand to mean that he definitely wants to take the offer.
The offeree must say or do something to accept.

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21
Q

Mirror image rule (Common law)

A

Requires that acceptance be on precisely the same terms as the offer

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22
Q

UCC and the Battle of Forms

A

Additional or Different Terms (from those in the offer)

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23
Q

Additional terms

A

Those that bring up new issues

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24
Q

Different terms

A

Those that contradict terms in an offer (The majority of states hold that different (contradictory) terms cancel each other out)

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25
Q

Acceptance online - types of shrinkwrap agreements

A
  • clickwrap
  • browsewraps
  • hybridwrap
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26
Q

Clickwrap agreements

A

Display the proposed terms on screen and require users to accept them by clicking an “I agree” button (courts say this is binding)

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27
Q

Browsewrap agreements

A

A type of online contract in which websites seek consent by placing a hyperlink on the Web page. Users can gain access to the terms of the agreement through this link, but they are not required to click on it.

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28
Q

Hybridwrap contracts/agreements

A

combine elements of clickwraps and browsewraps and have three distinguishing features. First, the terms of the agreement are not visible, but rather accessible through a hyperlink. Second, adjacent to the hyperlinked terms is a click-to-consent button, usually labeled “continue” or “place your order” Third, hybridwraps include a notice informing the user that, by clicking the button, the user is agreeing to the terms of the hyperlinked agreement.

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29
Q

Method and Manner of Acceptance

A

If an offer demands acceptance in a particular method or manner, the offeree must follow those requirements. If the offer does not specify a type of acceptance, the offeree may accept in any reasonable manner and method.

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29
Q

Time of Acceptance

A

An acceptance is generally effective upon dispatch, meaning the moment it is communicated and out of the offeree’s control.
Once an email or text has been sent, it is assumed to have been received by the intended recipient—whether or not they are opened or read.
(The Mailbox Rule)

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30
Q

The Mailbox Rule

A

Acceptance is generally affective upon dispatch, meaning the moment it is communicated and out of the offeree’s control
Once an email or text has been sent, it is assumed to have been received by the intended recipient - whether or not they are opened or read
(Terminations usually are not effective until received. With email and texts, communications are deemed to be received the moment that they are sent.)

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31
Q

Consideration

A

The inducement, price, or promise that causes a person to enter into a contract and forms the basis for the parties’ exchange
(If one side gets all the benefit and the other side gets nothing, then an agreement lacks consideration and is not an enforceable contract. Consideration is proof that the parties intended to be bound to their promises.)

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32
Q

Two basic elements of consideration

A
  • value
  • bargained-for exchange
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33
Q

Value

A

Consideration requires legal benefit to the promisor or legal detriment to the promisee. Legal benefit means receiving something of measurable value. That thing can be money, groceries, insurance, a promise not to sue, or anything else of value to the promisee.

34
Q

Bargained-for exchange

A

When something is sought by the promisor and given by the promisee in exchange for their promises
The parties must bargain for the consideration
Courts do not analyze the economic terms of an exchange to determine whether consideration was adequate

35
Q

Examples of value

A
  • act
  • forbearance
  • promise to act or forbear
36
Q

Act

A

Any action that a party was not legally required to take in the first place

37
Q

Forbearance

A

Refraining from doing something that one has a legal right to do - the opposite of an act

38
Q

Promise to Act or Forbear

A

A promise to do (or not do) something in the future counts as consideration. When evaluating whether consideration exists, the promise to mow someone’s lawn next week is the equivalent of actually doing the yardwork.

39
Q

What consideration is not…
(Courts have created three exceptions to the basic rule of consideration)

A
  • illusory promise
  • preexisting duty
  • past consideration
40
Q

Illusory promise

A

Not consideration, not committing like a promise, subjective
(He said he would buy the bicycle if he liked it, keeping for himself the power to get out of the agreement for any reason at all. He is not committing himself to do anything, and the law considers his promise illusory—that is, not really a promise at all. An illusory promise is not consideration.)

41
Q

Exception to consideration:

A

Requirements and Output Contracts under the UCC (Section 2-306 expressly allows output and requirements contracts in the sale of goods)
Additional work
Modification
Unforeseen circumstances
Parties agree in advance
Promissory Estoppel

42
Q

Preexisting Duty

A

If someone provides a service that she is already obligated to do, that act does not count as consideration.

43
Q

Rescind

A

to cancel

44
Q

Past Consideration

A

A completed act cannot be the basis for consideration.
(valid consideration when the parties agree that it will be in advance)

45
Q

Promissory Estoppel

A

a theory courts use to enforce promises that are not contracts, it applies when a defendant makes a promise, which the plaintiff reasonably relied on, and enforcing that promise is the only way to avoid injustice

46
Q

What is the settlement of debt dependent on?

A

whether it was liquidated or unliquidated

47
Q

Liquidated Debt

A

A debt in which there is no dispute about the amount owed
If the creditor agrees to take less than the full amount as full payment, her agreement is not binding

48
Q

Exception to settlement of debt

A

Different Performance -
If the debtor offers a different performance to settle the liquidated debt, and the creditor agrees to take it as full settlement, the agreement is binding.

49
Q

Unliquidated Debt

A

Accord and Satisfaction
1. it the parties dispute whether any money is owed or
2. the parties agree that some money is owed but dispute how much.
Such a compromise will be enforced if:
- The debt is unliquidated,
- The parties agree that the creditor will accept as full payment a sum less than she has claimed, and
- The debtor pays the amount agreed upon

50
Q

Accord and Satisfaction

A

A completed agreement to settle a debt for less than the sum claimed

51
Q

The (UCC) Code creates two exceptions for accord and satisfaction cases involving checks

A

The first exception concerns “organizations,” which typically are businesses. The general rule of §3-311 is potentially calamitous to them because a company that receives thousands of checks every day is unlikely to inspect all notations.
The second exception allows a way out to most creditors who have inadvertently created an accord and satisfaction. If, within 90 days of cashing a “full payment” check, the creditor offers repayment of the same amount to the debtor, there is no accord and satisfaction.

52
Q

Agreements Not to Compete

A

In a non-compete agreement, an employee promises not to work for a competitor for some time after leaving the company.
It used to be that these covenants were rare and reserved for top officers, but they have now become commonplace throughout many organizations. In many cases, an employer proposes this agreement after the employee is already on board.

53
Q

Moral consideration

A

Some promises should not be broken. No one wants to live in a society where donors to charity go back on their word or promises to widows and orphans are ignored. These are commitments whose obligation is moral, not necessarily legal, in nature. Under some circumstances, courts will uphold agreements with “moral consideration.”

54
Q

Adequacy

A

The courts examine whether consideration exists, but will seldom inquire if it was enough consideration or a smart financial deal. This is the “peppercorn rule.”

55
Q

“Full Payment” Notations

A

In most states, payment by a check that has a “full payment” notation will create an accord and satisfaction unless the creditor is an organization that has notified the debtor that full payment offers must go to a certain officer.

56
Q

A contract that is illegal is

A

void and unenforceable

57
Q

Criminal Statutes

A

To discourage people from making illegal deals, courts will not ratify them - Courts will not enforce bargains that involve criminal activity

58
Q

Gambling

A

A gambling contract is illegal unless it is a type of wagering specifically authorized by state statute.

59
Q

Insurance

A

Anyone taking out a policy on the life of another must have an insurable interest in that person.

60
Q

Contracts That Violate a Statute

A

criminal activity, gambling, insurance, and usury

61
Q

Licensing Statutes

A

When a licensing requirement is designed to protect the public, any contract made by an unlicensed worker is unenforceable.
When a licensing requirement is designed merely to raise revenue, a contract made by an unlicensed person is generally enforceable.

62
Q

Usury

A

Usury laws prohibit charging excess interest on loans.

63
Q

Contracts That Violate Public Policy

A

A judge may declare a contract void even if it does not violate a statute. Contracts that promote immorality or illegality are unenforceable. One court refused to enforce a contract for the sale of a company because its main business was the manufacture of illegal drug paraphernalia. It reasoned that such a contract would have a negative impact on society. This section examines cases in which a public policy prohibits certain contracts.

64
Q

Restraint of Trade: Non-compete Agreements

A

Recall that a non-compete agreement is a contract in which one party agrees not to compete with another in a stated type of business.
To be valid, an agreement not to compete must be part of a larger agreement.
Sale of a business - When a non-compete agreement is ancillary to the sale of a business, it is enforceable if reasonable in time, geographic area, and scope of activity

65
Q

Employments non-compete agreements are enforceable only if they meet all of the following standards:

A
  • They are reasonably necessary for the protection of the employer
  • They provide a reasonable time limit
  • They have a reasonable geographic limit
  • They are not harsh or oppressive to the employee
  • They are not contrary to public policy
66
Q

Exculpatory Clauses

A

unenforceable when it attempts to exclude an intentional tort or gross negligence
unenforceable when the affected activity is in the public interest, such as medical care, public transportation, or some essential service
unenforceable when the parties have greatly unequal bargaining power
unenforceable unless the clause is clearly written and readily visible
Very common in bailment cases

67
Q

Bailment

A

Giving possession and control of personal property to another person

68
Q

Bailor

A

One who creates a bailment by delivering goods to another

69
Q

Bailee

A

A person who rightfully possesses goods belonging to another

70
Q

Unconscionable Contracts

A

one that a court refuses to enforce because of fundamental unfairness
(Even if a contract does not violate any specific statute or public policy, it may still be void if it “shocks the conscience” of the court.
Historically, a contract was considered unconscionable if it was “such as no man in his senses and not under delusion would make on the one hand, and as no honest and fair man would accept on the other.”)

71
Q

Procedural unconscionability

A

One party uses its superior power to force a contract on the weaker party

72
Q

Plaintiffs claiming unconscionability must prove two elements:

A

procedural and substantive unconscionability

73
Q

Substantive unconscionability

A

A contract with extremely one-sided and unfair terms

74
Q

The UCC: Unconscionability and Sales Law

A

With the creation of the Uniform Commercial Code (UCC), the law of unconscionability got a boost. The Code explicitly adopts unconscionability as a reason to reject a contract. Although the Code directly applies only to the sale of goods, its unconscionability section has proven to be influential in other cases as well, and courts today are more receptive than they were 100 years ago to a contract defense of fundamental unfairness.

75
Q

Why is it not enough to bargain effectively and obtain a contract that gives you exactly what you want?

A

must also be sure that the contract is legal

76
Q

Wagering

A

A purely speculative contract—whether for gambling or insurance—is likely to be unenforceable

77
Q

Examples of gap-filler provisions

A

Open price
Output contract &
Requirements contract
(Output and requirements contracts are by definition incomplete, since the exact quantity of the goods is unspecified. The Code requires that, in carrying out such contracts, both parties act in good faith. Neither party may suddenly demand a quantity of goods (or offer a quantity of goods) that is disproportionate to their past dealings or their reasonable estimates.)

78
Q

Shrinkwrap contracts

A

When the terms are too lengthy and complicated to print, so the box includes a notice that the more detailed terms are inside, acceptance occurs

79
Q

Method

A

Whether acceptance is done in person or by mail, telephone, email, text, or fax

80
Q

Manner

A

Whether the offeree accepts by promising, by making a down payment, by performing, and so forth

81
Q

Meeting of the minds

A

The parties can form a contract only if they have a meeting of the minds which requires that they understand each other and show that they intend to reach an agreement

82
Q

Online wrap agreements overview

A

Clickwrap agreements are generally enforceable, but browsewraps are only enforceable when websites prove that the user knew about the terms. Hybridwraps are enforceable if the notice is conspicuous and near the click-to-consent button.

Business Law I (6 decks)

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