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Chapters 7, 8, 9, 10, 11, 12, 13


In contract law, the one making the promise


In contract law, the person to whom the promise is made

Formal Contract

Contracts that require a special form or method of creation

Executed Contract

A contract that has been fully performed on both sides

Four elements for contract formation

1. an agreement
2. supported by legally sufficient consideration
3. for a legal purpose
4. made by parties who have the legal capacity to enter into the contract

A voidable contract

A valid contract that can be avoided at the option of one or both of the parties.

Unenforceable Contract

One that cannot be enforced because of certain legal defenses against it.

Void Contract

No contract at all

Quasi contracts

Contracts implied in law

Requirements of a Contract

1. Intention
2. Definiteness
3. Communication
4. Acceptance

Mailbox Rule

Acceptance becomes valid when it is dispatched (when it is put into the mail).


The refraining from an action that one has a legal right to undertake


The value given in return for a promise


The unmaking of a contract

Accord and Satisfaction

A debtor offers to pay, and a creditor accepts, a lesser amount than the creditor originally claimed was owed.

A release

A contract in which one party forfeits the right to pursue a legal claim against the other party

Covenant Not to Sue

The parties simply substitute a contractual obligation for some other type of legal action based on a valid claim.


When a child's parent or guardian relinquishes the legal right to exercise control over the child.

Contractual Capacity

The legal ability to enter into a contractual relationship.


The legal avoidance, or setting aside, of a contractual obligation.


The act of accepting and giving legal force to an obligation that previously was not enforceable.

Blue Laws

"Sunday" laws prohibit the formation or performance of certain contracts on a Sunday

Contracts in Restraint of Trade

Anticompetitive agreements

Covenants Not to Compete

Promises not to compete are often contained as anccillary (secondar, or subordinate) clauses in contracts concerning the sale of an ongoing business

Procedural Unconscionablility

Relates to factors bearing on a party's lack of knowledge or understanding of the contract terms

Adhesion Contracts

One written exclusively by one party( thee dominant party, usually the seller or creditor) and presented to the other on a take it or leave it basis

Substantive Unconscionability

Characterizes those contacts, or portions of contracts, that are oppressive or overly harsh

Exculpatory Clauses

Clauses that release a party from liability in the event of monetary or physical injury (no matter who is at fault)

Blue Sky Laws

State laws that regulate the offering and sale of securities for the protetion of the public and state statutes regulating the sale of insurance

Severable (divisible) contract

Consists of distinct parts that can be performed separately, with separate consideration for each part

Unilateral Mistake

Made by only one of the contracting parties

Bilateral (Mutual) Mistake

Made by both parties

Material Fact

A fact important to the subject matter


Guilty Knowledge

Fraud Involves three elements

1. A misrepresentation of a material fact must occur
2. There must be an intent to deceive
3. The innocent party must justifiably rely on the misrepresentation


Forcing a party to enter into a contract because of the fear created by threats

Statute of Frauds

A statute which stipulates what types of contracts must be in writing or be evidenced by a record

The One-Year Rule

Contracts that cannot, by their own terms, be performed within one year from the day after the contract is formed must be in writing to be enforceable

Collateral Promise (Secondary Promise)

is one that is ancillary (subsidiary) to the principal transaction

Prenuptial Agreement

Agreement made before a marriage that define each partner's ownership rights in the other partner's property

Privity of Contract

Establishes the basic principle that third parties have no rights in contracts to which they are not parties.

Third Party Beneficiary Contract

Exceptions to the rule must be made when justice cannot be served by adherence to a rule of law


The party assigning the rights to a third party


The party receiving the rights


The transfer of contract rights to a third person


The person to whom a duty or obligation is owed


The person who is obligated to perform the duty

Intended Beneficiary

The third party has legal rights and can sue the promisor

Incidental Beneficiaries

Cannot enforce a contract to which he or she is not a party


A possible future event, the occurence or nonoccurrence of which will trigger the obligation under a contract

Conditions Precedent

A condition that must be fulfilled before a party's promise becomes absolute

Condition Subsequent

When a condition operates to terminate a party's absolute promise to perform

Concurrent Conditions

When each party's absolute duty to perform is conditioned on the other party's duty to perform

Complete Performance

When a party performs exactly as agreed

Substantial Performance

A party who in good faith performs substantially all of the terms of a contract

Breach of Contract

Nonperformance of a contractual duty

Material Breach of Contract

When performance is not at least substantial

Anticipatory Repudiation of a Contract

Before either party to a ontract has a duty to perform, one of the parties may refuse to perform his contractual obligations

Discharge by Rescission

For mutual rescission to take place, the parties must make another contract

Discharge by Novation

The process of novation substitutes a third party for one of the original parties

The requirements of a novation

1. The existence of a previous, valid obligation
2. Agreement by all of the parties to a new contract
3. The extinguishing of the old obligation (discharge of the prior party)
4. A new, valid contract

Discharge by Accord and Satisfaction

The parties agree to accept performance different from the performance originally promised.


An executory contract (one that has not yet been performed) to perform some act to satifsfy an existing contractual duty that is not yet discharged

Contract Alteration

The law allows an innocent party to be discharged when one party has materially altered a written contract without their knowledge or consent

Statutes of Limitations

Limit the period during which a party can sue on a particular cause of action


A proceeding in bankruptcy attempts to allocate the debtor's assets to the creditors in a fair and equitable fashion

Impossibility of Performance

After a contract has been made, performance may become impossible in an objective sense.

Grounds for discharge by impossiblilty of performance

1. When a party whose personal perfomance is essential to the completion of the contract dies or becomes incapacitated prior to performance
2. When the specific subject matter of the contract is destroyed.
3. When a change in the law renders performance illegal.

Commercial Impracticability

Courts may excuse parties from their performance obligations when the performance becomes much more difficult or expensive

Frustration of Purpose

In principle, a contract will be discharged if supervening circumstances make it impossilbe to attain the purpose both parties had in mind when making the contract

Damages (Types)

1. Compensatory (to cover direct losses and costs)
2. Consequential (to cover indirect and foreseeable losses)
3. Punitive (to punish and deter wrongdoing)
4. Nominal (to recognize wrongdoing when no monetary loss is shown)


Is an equitable remedy used when the parties have imperfectly expressed their agreement in writing

Requirements of Quasi Contract

1. The party conferred a benefit on the other party.
2. The party conferred the benefit with the reasonable expectation.
3. The party did not act as a voluteer in conferring the benefit.
4. The party receiving the benefit would be unjustly enriched by retaining the benefit without paying for it.

Online Agreements Should Include

1. A clause that clearly indicates what constitures the buyer's agreement to the terms of the offer, such as a box containing the word "I accept" that the buyer can lik on to indicate acceptance.
2. A provision specifying how payment for the goods (including any applicable taxes) must be made.
3. A statement of the seller's refund and return policies.
4. Disclaimers of liability for certain uses of the goods. For example, an online seller of business forms may add a disclaimer that the seller does not accept responsibility for the buyer's reliance on the forms rather than on an
5. A provision specifying the remedies available to the buyer if the goods are found to be defective or if the contract is otherwise breached. Any limitation of remedies should be clearly spelled out.
6. A statement indicating how the seller will use the information gathered about the buyer.
7. Provisions relating to dispute settlement, such as an arbitration clause, a choice-of-law clause, or a forum-selection clause

Forum-Selection Clause

Indicates the forum, or location, for the resolution of any dispute arising under the contract

Click-On Agreements

Also referred to as "click-on license or click-wrap agreement

Shrink-Wrap Agreement

An agreement whose terms are expressed inside a box in which the goods are packaged

Browse-Wrap Terms

Do not require an internet use to assent tot he terms before, say, downloading or using certain software.


an electronic sound, symbol, or process attached to or logically associated with a record and executed or adopted by a person with the intent to sign the record

Partnering Agreement

A seller and a buyer who frequently do business with each other agree in advance on the terms and conditions that will apply to all transactions subsequently conducted electronically


The Uniform Electronic Transactions Act, adopted at least in part, by forty-eight states. The UETA declares that a signature may not be denied legal effect or enforceability solely because it is in electronic form.

The E-SIGN Act of 2002

refers explicitly to the UETA and provides that if a state has enacted the uniform version of the UETA, it is not preempted by the E-SIGN Act


In electronic transactions, attribution refers to the procedures that may be used to ensure that the person sending an electronic record is the same person whose
e-signature accompanies the record.


If existing state law requires a document to be notarized, the UETA provides that this requirement is satiffied by the electronic signature of a notary public or other person authorized to verify signatures.

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