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LGS200 Test 3
Terms in this set (69)
What are the 4 essential elements of a valid contract?
agreement, consideration, capacity, legal purpose
valid offer and acceptance
incentive, reason why someone would enter into a contract
legal ability to form a binding contract, cannot be under age, intoxicated, or mentally incompetent
Define Legal Purpose
A contract must have a legal purpose to have a valid contract, can't enter a contract to kill someone
Contracts under the U.C.C (Uniform Commercial Code)
Covers contracts for the sale of goods in a commercial setting. Sales contracts for the sale of goods costing $500 or more must be in writing.
Lease contracts involving payments of $1000 or more must be in writing
What is a bilateral contract?
a promise for a promise. I promise to pay you $50 if you promise to mow my yard
What is a unilateral contract?
a promise for a specific act, and you are bound by performing. I promise to pay you $50 to mow my yard, but not until it is done
What are the two types of contracts?
bilateral and unilateral
What are the elements of a valid offer?
must be definite, must have serious intent, must be communicated
What are the different ways to terminate an offer?
rejection, revocation by offeror, lapse of time, or counter offer
What is a rejection?
express words or conduct by the offeree that rejects the offer
What is a revocation?
withdrawal from an offer by the offeror that terminates the offer
What are the conditions of an acceptance of a contract?
must be unequivocal (very strong and clear), must follow mailbox rule or fax machine rule, offer can be withdrawn at any time before it is accepted, unless it contains a specific time limit
What is the mailbox rule?
a rule that states that an acceptance is effective when it is dispatched, even if it is lost in the mail
What is the fax machine rule?
Email offers are accepted when the return email has been received by the offeror, not when sent by the offeree (the one who accepted)
Some states provide that fax acceptances are effective when faxed, not when received
What is a counteroffer?
someone is trying to bargain, counteroffer terminates the original offer and is thought of a new offer
What is an offer of a reward?
Unilateral offer made to the general public that anyone can accept, finding a lost dog and a reward is given
What is the objective theory/test?
Would a reasonable person believe that a valid offer is on the table (serious intent).
A theory that says the intent to contract is judged by the reasonable person standard and not by the subjective intent of the parties
Lucy v. Zehmer
Zehmer writes a contract to sell land on a napkin, when Lucy tries to enforce it, Zehmer says he was joking about selling his land
What is a contract implied in law? (quasi)
Preventing unjust enrichment at expense of another person. A court may award monetary damages to a plaintiff for providing work or services to a defendant even though no actual contract existed. Doctor finding an unconscious and sending bill later.
What is a contract implied in fact?
A contract in which agreement between parties has been inferred from their conduct. If you open a bag of chips in the store its implied you will pay for them.
consideration/bargained for exchange
What is the peppercorn rule?
A very small payment that is used to satisfy the consideration in the form of a contract
What is the capacity regarding minors?
Minors do not always have the maturity, experience or sophistication needed to enter into a contract with adults. They have to be over the age of majority in their state.
What is emancipation?
an exception to the capacity of minors if they are legally emancipated from their parents
What is an illegal contract?
A contract is illegal if consideration given for the contract or the object of the contract is illegal
What is an unconscionable contract?
A contract that courts refuse to enforce in part or at all because it is so oppressive or manifestly unfair as to be unjust. So unfair it should shock your conscious.
What is an exculpatory clause?
A contractual provision that relieves one (or both) of the parties to a contract form tort liability for ordinary negligence (a person jumping out of parachute). This allows someone to disclaim liability in advance in case someone gets hurt.
covenant not to compete (non-compete clause)
What is the statute of frauds?
requires that some contracts be written out to be enforceable
Which contracts must comply with the statute of frauds?
Marriage, Year, Land, Executor (Estate), Goods, Surety
What are the types of damages for breach of contract?
compensatory, liquidated, consequential
What are compensatory damages?
An award of money intended to compensate a non-breaching party for the loss of the bargain
What are liquidated damages?
Damages that parties to a contract agree in advance should be paid if the contract be breached
What are consequential damages?
Foreseeable damages that arise from circumstances outside a contract
Equitable remedies for breach of contract
What is an injunction?
A court order that prohibits a person from doing a certain act. Only when goods are rare or unique
What is a specific performance?
A remedy that orders the breaching party to perform the acts promised in the contract
What is mitigation of damages?
If a contract has been breached, the law places a duty on the innocent non-breaching party to make reasonable efforts to mitigate to resulting damages.
What is the reality of assent?
Has there really been a contract formed or did one/both parties mistake it
What is duress?
A situation in which a party threatens to do a wrongful act unless another party enters into a contract
What is fraud?
Can be intentional or innocent, can be commission (misrepresenting a fact) or omission (failing to disclose a fact when there is a duty to disclose)
What is undue influence?
A situation in which one person takes advantage of another person's mental, emotional, or physical weakness and unduly persuades that person to enter into a contract
What is a unilateral mistake?
a mistake in which only one party is mistaken about a material fact regarding the subject matter of a contract
What is a bilateral mistake?
a mistake in which both parties are mistaken about a material fact regarding the subject matter of a contract
What are mistakes of value?
A mistake that occurs if both parties know the onset of the contract but are mistaken as to its value
What are the elements of fraud?
Misrepresentation of material fact, Intent to deceive, Reliance on the misrepresentation, Injury to innocent party
What is a rescission of a contract?
when parties enter a second contract that terminates the first one
What is a novation?
Substitutes a new party for one of the original contract parties. The new substituted party is obligated to perform a contract and all three parties must agree to the substitution. The exiting party is relieved of liability on the contract
What is an anticipatory breach?
Someone tells you in advance that they are going to breach a contract, allows you to sue them early
What are executory contracts?
A contract that has not been fully performed by either or both sides, unfinished
When are third party rights acquired?
as assignees and as intended third party beneficiaries
What is an assignment?
The transfer of contractual right by an obligee to another party
What is an assignor?
An obligee who transfers a right
What is an assignee?
A party to whom a right has been transferred
What is a condition?
A qualification of a promise that becomes a covenant if it is met
What is a condition precedent?
Offer: I will purchase this antique car for $10,000 if it appraises for $10,000
Unless the car appraises for $10k, you are not obligated to perform
What is a condition subsequent?
Offer: You are hired to work at our company for the next 5 years, for a salary of $10,000 per month.
However, if for any reason you lose your drivers license, we are no longer obligated to keep you
Mary offers to sell John her plane ticket to Tahiti for $500. John says he has to think it over. Mary gives him 3 days. On day two, she sells it to Bob without letting John know. John sues her for breach of contract. Which of the following is true?
a. John wins because Mary did not notify him that she was revoking the offer.
b. John wins because Mary was required by law to leave the offer open for three days.
c. John loses because Mary can revoke at any time.
d. John loses because he had not yet accepted the offer when it was revoked.
John wins because Mary did not notify him that she was revoking the offer
Jerry sends Carolyn an offer by express mail. Carolyn receives it at 10 am on Tuesday. At 11 am on Tuesday, Carolyn drops the acceptance in the mail. Jerry does not receive the acceptance until Wednesday at 8 am. At what time does the law consider the acceptance to be effective?
a. at 10 am on Tuesday
b. At 11 am on Tuesday
c. at 8 am on Wednesday
d. at the time Jerry reads the acceptance.
at 11am on Tuesday
Which of the following would most likely be considered a valid offer?
a. Would you like to buy this?
b. I'd give $50 for a glass of cold water.
c. Special sale on DVD players today -- $200 each.
d. $75 reward for return of lost dog to Jane Adams, 350 Main St., Northport, Alabama.
$75 reward for return of lost dog to Jane Adams, 350 Main St., Northport, Alabama
A unilateral offer is a promise for a specific act. A unilateral offer may be accepted only by:
a. performance of the requested act
b. promising to perform the requested act
c. partial performance of the requested act
d. All the above.
performance of the requested act
Jay, an art collector, offers to buy a Rembrant original from Unique Gallery. Unique Gallery balks at the price, sending Jay a letter of rejection. That day the Gallery discovers that the Rembrant painting is not as highly valued as originally thought. Unique Gallery immediately telephones Jay to accept his offer prior to receiving the mailed rejection. Is there a contract?
a. Yes, since the acceptance was received before the rejection.
b. No, because the rejection was effective upon dispatch.
c. No, because the rejection terminated the offer.
d. Yes, because an acceptance is always effective no matter what.
Yes, since the acceptance was received before the rejection
Day 1: Mark sends Terry a letter offer to sell his aquarium to her for $150.
Day 2: Terry faxes Mark an acceptance.
Day 2: Mark receives Terry's fax.
Day 3: Mark calls Terry to revoke his offer.
Mark and Terry:
a. do not have a contract since Terry used the wrong means of acceptance
b. do not have a contract because Mark revoked his offer before Terry accepted properly.
c. have a contract as of the receipt of the fax.
d. have a contract as of when the fax was sent.
have a contract as of the receipt of the fax
Jane: "Ill pay you $50 if you will clean my house."
Joe: "Ill do it for $75."
Jane: "$65 and it's a deal.
Joe: "No way."
Which of the following is a true statement?
a. Jane is correct, there is a contract.
b. There is no contract
c. There is a contract to clean the house for $65.
d. There is a contract to clean the house for $75.
there is no contract
Scarlette: "I'll buy that armoire for $800."
Melanie: "It is not for sale."
Scarlette: "How about $1200."
Melanie: "I don't know, it's been in my family for 130 years."
Scarlette: "How about $1500?"
Melanie: "I'll think about it."
a. There is an option contract.
b. There is no contract.
c. There is a reliance case.
d. There is a quasi contract.
there is no contract
The Uniform Commercial Code governs which of the following types of contracts?
a. Real estate or land sales
b. Employment contracts
c. Goods that are rare or unique
d. Contracts for the sale of goods or sales contracts
e. All of the above.
contracts for the sale of goods or sale contracts
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