Business 201 - Contracts
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Created by:
mikelakehouse on February 25, 2012
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89 terms
Terms | Definitions |
|---|---|
 Contracts | Legally binding exchange of rights and obligations between two or more competent parties. |
| Offer | The idea that the contract is based around. |
| Offeree | The person who has the power to say yes to the contract. |
| Offeror | The person who proffers the agreement. |
| Acceptance | Shows you have accepted the terms of the agreement. |
| Consideration | Obligation to fulfill the legal entailments of the agreement. |
| Bilateral | An exchange of promises in an agreement. |
| Unilateral | A promise exchanged for an act. |
| Valid | Legally binding contract. |
| Voidable | One or both of the parties in the agreement are capable of cancelling the contract. |
| Unenforceable | The courts will NOT be used to enforce the contract. |
| Void | No contract exists because one or more of the elements are missing. |
| Express | All the key terms are defined verbally or in writing. |
| Implied | Key terms exist but are implied from the facts. |
| Executed | The parties' obligations have been fulfilled. |
| Executory | One or more of the parties have yet to fulfill their obligations. |
| Formal | (Uncommon) Witnesses or notary stamps are required as record of the contract. |
| Informal | (Common) Do not need documentation to validate the contract. |
| Quasi-Contract | When a contract should have been formed, wasn't, and someone unjustly profited from it. |
| Promissory Estoppel | Reasonably expecting that a promise will be fulfilled and the promisee suffers and economic loss due to reliance on the promise of the agreement (detrimental reliance). |
| Elements of an offer | Must be a serious and objective manifestation of intention to be binding, must have reasonably certain and definite terms, and it must be communicated to the offeree (offeree must know of it). |
| Advertisements | Generally not considered offers unless the ad is very specific about what and when the offeree can get it. Then it becomes an offer. |
| Auctions | - With reserve: is the minimum price at which the item must be sold, once that price is reached, there is no more reserve. - Without reserve: agree to sell to the highest bidder. |
| Termination by its own terms | The contract specifically states when the agreement will end. |
| Termination by lapse of time | It is reasonable to assume that after a certain period of time that the agreement has ended. |
| Termination by revocation | The offeror notifies the offeree that the agreement will end. The offeree can sometimes extend the contract length by paying off the offeror. |
| Actual Notice | Revocation by notifying the offeree via letter or in person. |
| Constructive Notice | Revocation by notifying the offeree via newspaper or another form of public record which must be legally sufficient notice. |
| Counter Offer | When an offeree make amends to the agreement, it is considered an implied rejection. |
| Miscellaneous Termination | The offer is terminated if it becomes illegal to make that offer, the subject matter of the agreement is destroyed through neither fault of the party, or the offeror dies or becomes disabled. |
| Voluntary acceptance | When the offeree intentionally (without being deceived) says yes to the agreement. |
| Mirror image | What is offered and what is accepted by the offeree must match up. |
| Communication of acceptance | Only the offeree has the power to accept. |
| Acceptance through silence | Silence does not constitute acceptance EXCEPT when silence + offeree agrees silence constitutes acceptance, silence + existing relationship (implied acceptance), or silence + industry/trade standards. |
| Specific method of acceptance | When the offeror desires a particular type of response for acceptance, only acceptance given in that manner will qualify as acceptance. |
| No specific or suggested method | Any REASONABLE form of acceptance will do. |
| Contradictory Responses | Whichever form of response is received first, acceptance or rejection. |
| Way to Avoid the Mailbox Rule | Offeror puts in the agreement that the contract will not be valid until the acceptance is received. |
| The Consideration (most important) | Something of legal value bargained for or given in exchange for a promise of an act. |
| Value | Promising to do something you did NOT have to, doing something you did NOT have to, promising to refrain from doing something that you had a legal right to do, or refraining from doing something that you had a legal right to do. |
| Illusory Promises | Not actually promising to do anything because you allow yourself a way out of the contract. |
| Preexisting Duty Rule | You cannot use a promise that you are already promising to do or doing as grounds for a contract. |
| Minors (contracts) | Can enter into contracts and can disaffirm at any time, but they must give notice of their disaffirmance. If they fail to disaffirm before they're 18 and a reasonable amount of time has passed then the contract is valid. |
| Rules regarding Disaffirmance (for minors) | Minors must restore whatever they agreed to do and they may return it in any condition. |
| Misrepresentation of Age (for minors) | They may either be made to pay reparations or lose their right to disaffirm. If it's something that they need to survive then they can enter a contract but they will need to pay for the benefits. |
| Mental Capacity | Ability to understand makes a contract valid, unable to understand AND act reasonably makes the contract voidable by the offeree and if the offeree is adjudicated (declared) to be incapacitated, the contract is void. |
| Intoxication | If the offeree can understand then the contract is valid, but if the offeree is intoxicated so they cannot understand or act reasonably and the offeror knows about it then the contract is voidable by the offeree. |
| Mistake | An untrue belief about a past or existing fact. |
| Bilateral/Mutual Mistake | Both parties are guilty for making the mistake, but the injured party does not bear the risk of the mistake. |
| Unilateral Mistake | One party makes the mistake, but to show they did they must show that the other party (non-mistaken party) had reason to know of the mistake. |
| Misrepresentation | A lie, an erroneous belief about a past or existing event. |
| Intentional Misrepresentation | Fraud or purposely lying. To disprove the lie, proof must be shown against it. |
| Negligent Misrepresentation | Making a statement when it is not clear whether or not it is true or false. |
| Nondisclosure | Keeping the truth partially secret, but once you agree to disclose, you must FULLY disclose the truth. |
| Things that qualify as nondisclosure. | Failing to correct a mistake once you know of it, or failing to correct a true statement that becomes false. |
| Concealment | Actively hiding the truth from another party. |
| Opinions | Cannot be the bias of a misrepresentation unless another party will rely upon that opinion. |
| Duress | A party is imposing threats or force to coerce a party to enter into a contract. |
| Undue Influence | Dominant party subtly manipulates or persuades a subservient party into a contract. |
| Unenforceable practices | Wagering, Blue Laws, and usury. |
| Covenants not to compete | Agreement to not go into the same business as a rival. |
| Covenants (provisions) | Must be part of another valid contract, reasonable in duration and reasonable in coverage (cannot apply to an entire State). |
| Employment Covenant (provisions) | The agreement must serve a legitimate business purpose and cannot induce undue hardship on the employees. |
| Releases | One party may try and remove themselves from any tort liabilities that may occur. Does not apply to gross negligence or intentional torts. |
| Unconscionability | Gross unfairness in a contract. |
| Unconscionability: Substantive | The language of the contract itself is written in a one-sided way where one party takes all the risk and the other receives all the reward. |
| Unconscionability: Procedural | Shocking unfairness in the entering of a contract. |
| Unconscionability: Adhesion | No opportunity to negotiate because the incentive is too high. |
| Statute of Frauds | Requires that certain bilateral executory agreements be drawn up in writing in order for them to be enforceable. |
| Statute of Frauds (coverage) | (MYLEGS) - Marriage - Year: An agreement where a promise is exchanged for an act to be performed a year or more in the future. - Land: a contract involving ANY interest in land must be in writing. - Estate: The promise by a personal representative to pay off the decedent's debt with their own money must be in writing. - Goods: Any purchase of $500 or more must be in writing. Receipts will do. - Secondary: Guarantor, someone who will provide repayment if the primary borrower defaults. |
| Conditions | Potential future events that impact the duty to perform under the contract. |
| Conditions: Precedent | Requires one party to fulfill their obligation(s) before the other party. |
| Conditions: Concurrent | The duties trigger each other (fulfillment at the same time). |
| Conditions: Subsequent | Possible future events bring closure to a previous agreement. |
| Performance: Complete/Strict | Adhering to all of the legal obligations of the contract. |
| Performance: Substantial | Lacking in performance and because of this the contract is subject to cancellation by one party. |
| Performance: Material Breach | A rupture in the contract so severe that it defeats the purpose of the contract. |
| Performance: Anticipatory Breach | Party 1 Informs the other party that they (party 1) are going to breach the contract. |
| Mutual Agreement to Discharge | Both parties agree that they want out of the contract. |
| Accord and Satisfaction | Different performance between the parties than was originally agreed upon. Satisfaction is the performance of the accord. |
| Waiver | A party that fails to uphold a provision of the contract can lose their right to hold that contract and be discharged from it. |
| Alteration | One of the parties in a written agreement alters a provision of the contract without the other party's consent or knowledge. The victim is discharged from the contract. |
| Bankruptcy | All prior contracts are voided and after fulfilling the final provisions of that contract. |
| Expiration of the Statute of Limitations | Failing to file the lawsuit within the reasonable time period, the other party is discharged from the contract by law. |
| Impossibility of Performance | If it becomes objectively impossible to perform a duty, then the contract is voided. |
| Frustration of Purpose | Still able to perform but the benefit that was achieved under the contract is no longer possible. |
| Gratuitous | Given without receiving any return value |
| Usury | The practice of lending money at an exorbitant interest rate. |
| Blue Laws | Prevents the purchase of specific goods on certain days. |
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