Contracts

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Restatement Definition

a promise or set of promises for the breach of which the law gives a remedy or the performance of which the law in some way recognizes a duty

Practical Definition

A set of legally enforceable promises

Agreement

Offer and Acceptance

Consideration

Bargained-For exchange

Contractual Capacity

Legally ability to enter a binding contract

Legal Object

Contract must have lawful purpose or subject

Lack of genuine assent

Offeror has secured acceptance of offeree thorugh improper means

Lack of proper form

Statute of frauds requires contract to be in writing

Sources of Contract Law

State common law- derived from english common law
Uniform Commercial Code

Bilateral Contract

a promise made by one party in exchange for the promise of another party; a promise for a promise

Unilateral Contract

Promise in exchange for a performance. (one-sided promise)

Express Contract

Based on written or spoken words

Implied Contract

Based on conduct/actions of parties

Quasi Contract

contract implied by law to prevent unjust enrichment and unjust detriment

Valid Contract

All elements of contract formation satisfied

Void Contract

Illegal purpose, illegal subject matter, improper form

Voidable Contract

One or both parties can withdraw from contract

Executed Contract

All terms of contract fully performed

Executory Contract

Some duties under contract not performed by one/ both parties

Formal Contract

Must meet special form requirements

Informal Contract

No formalities required in making a simple contract`

Element of valid offer 1

manifestation of offerors intent to be bound

Elements of valid offer 2

Definite and certain terms such as subject matter, price, quantity, quality, and parties

Elements of valid offer 3

Communication of offer to offeree, or offeree's agent

Auctions with reserve

seller merely expresses intent to recieve offers

Auction without reserve

Seller must accept highest bid

Five ways to terminate offer

1. Revocation by offeror before acceptance
2. Rejection by offeree
3. Death or incapacity of offeror
4. Destruction of subject matter or subsequent illegality of subject matter
5. Lapse of time/ failure of conditions specified in offer

Acceptance

Manifestation of offeree's intent to be bound by terms of offer and resulting contract

Mailbox Rule

acceptance becomes effective on dispatch (when sent by mail), revocation becomes effective only when received by offeree

Consideration

Something of value, given in exchange for something else of value, that is the product of a mutually bargained for exchange

Benefit to promisor

Ex. Employee promised to stay in job until project is complete

Detriment to promisee

Ex. Pro NFL player promised to not ride a motorcycle

Promise to do something

Ex. Promise to clean the house

Promise to refrain from doing something

Ex. Promise to not drink alcohol during finals

Consideration Rule # 1

For a promise to be legally enforced by the courts, there generally must be consideration

Promissory Estoppel

One party makes a promise knowing other will rely on it, other party relies on promise, only way to avoid injustice is to enforce the promise

Consideration Rule #2

Courts rarely consider the adequacy of consideration

Consideration Rule #3

Illusory promise does not constitute consideration

Illusory Promise

Party appears to commit to something, but does really has not committed at all

Consideration Rule #4

Past consideration does not constitute consideration for purposes of present contract

Consideration Rule #5

Promise to do something you are already legally obligated to do is not valid consideration

Pre-Existing Duty role

1. Performance of a duty you are obligated to do under the law is not good consideration
2. Performance of an existing contractual duty is not good consideration

Requirement Contract

Under which 1 party agree to purchase its entire requirement of specific goods or services exclusively from another party for a specific period of time. No consideration

Output Contract

a contract in which you promise to deliver your entire output to the other party who promises to accept it

Liquidated Debt

the parties agree that the debt exists and on the amount of the debt

Unliquidated Debt

the amount the debt is not certain and under debate by the parties

Contractual Capacity

Mental ability to understand rights and obligations established by contract, with the presumptive ability to understand how to comply with terms of agreement

Capacity General Rule

Natural persons over the age of 18 are presumed to have full legal capacity

Limited Capacity to Contracts

1. Minors
2. Mentally incapacitated persons
3. Intoxicated Persons

Contractual Power of Avoidance(Disaffirmance)

Minor's right, until a reasonable time after reaching age of majority, to disaffirm, or avoid, their contracts, Designed to discourage entering contracts with minors

Contract for necessaries

contracts that supply minors with basic necessities of life

Ratification

Acceptance of terms of contract after reaching age of majority

Express Ratification

Takes place when the individual, on reaching age of Majority, states orally or in writing that he or she intends to be bound by the contract.

Implied Ratification

Takes place when minor, reaching majority, evidences and intent to abide by the contract.

Parental Liability of Minors

Not liable for contracts or torts committed by their minor children

Legality of contracts

Contracts must have a legal exchange as its subject matter and must be able to be performed legally. Otherwise the bargain is illegal

Legal Assent

Voluntary, willing promise to transact. Acceptance

Unilateral Mistake

Mistake made by 1 party

Bilateral Mistake

Mistake made by both parties

Misrepresentation

Untruthful Assertion of material fact

Negligent Misrepresentation

Negligent, untruthful assertion of material fact by contracting party

Innocent Misrepresentation

Party making false assertion believes it to be true

Fraudulent Misrepresentation

Intentional, untruthful assertion of material fact by contracting party

Undue Influence

Persuasive efforts of dominant party, who uses special relationship to unduly persuade the other party

Duress

One party threatens other with wrongful act unless assent given

Unconscionability

One party has so much bargaining power that he effectively dictates terms of contract, resulting in other party lacks free will

Statute of Frauds

Rule of state law requiring certain types of contract to be in writing in order to be enforceable

Parole Evidence Rule

oral statements cannot be used to change or contradict the terms of a clearly written contract

Obligor

Contractual party who owes duty to other party in privity of contract

Obligee

Contractual party owed duty from other party in privity of contract

Privity of contract

Relationship between parties to a contract, allowing them to sue each other but preventing a third party to do so

Assignment

transfer of rights under a contract to a third party

Assignor

Party to contract who transfers his right to a third party

Assignee

Party who recieves transfer of rights to a contract

Delegation

Transfer of duty under a contract to a third party

Intended Beneficiary

A third party for whose benefit a contract is formed. An intended beneficiary can sue the promisor if such a contract is breached.

Promisor

Party who made to promise that benefits third party

Promisee

Party who owes something to promisor in exchange for promise

Creditor Beneficiary

Third party who benefits from contract in which promissor agrees to pay promisee's debt

Donee Beneficiary

Third party who benefits from contract in which promisor agrees to give a gift to third party

Vesting

Maturing of rights, such that a party can legally acts on the rights

Incidental Beneficiary

A third-party beneficiary who has not contractual rights but benefits from a contract even though that is not the intent of the parties to the contract. Cannot sue

Discharge by Material breach

Party unjustifiably fails to substantially perform his contractual obligations

Anticipatory Repudiation

Party decides, before actual time of performance, not to complete contract obligations. Anticipatory breach

Mutual Recission

Both parties agree to discharge each other from their mutual obligations

Substituted Contract

Parties agree to substitute new contract in place of original

Accord and satisfaction

Used when one party wishes to substitute a different performance to his original contractual duty

Compensatory Damages

Designed to put plantiff in position he would have been in had contract been performed

Consequential Damages

Forseeable damages outside the actual contract, result from the breach. Breaching party must have known of the special circumstances.

Punitive Damages

Designed to punish defendant and deter him and others from engaging in similar behavior in the future

Nominal Damages

Small award intended to signify that plantiff wronged by defendant

Liquidated Damages

Damages for breach of contract specified in contract itself

Duty to mitigate damages

Obligation on non-breaching party (plaintiff) to use reasonable efforts to minimize damage resulting from defendant's breach of contract.

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