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Unit 2 Test (LAW)
Terms in this set (60)
A contract involving two promises and two performances.
A contract involving one promise followed by one performance, which then triggers a second performance from the offeror.
A contract that is created when the parties have knowingly and intentionally agreed on the promises and performances.
A contract in which the agreement is reached by the parties' actions rather than their words.
A classification that permits a contract to be enforceable in cases where no express or implied contract exists and one party suffers losses as a result of another party's unjust enrichment.
A contract in which each component of the contract is dependent on every other component.
A contract that can be broken up into independent parts, each part able to stand alone.
A contract that has the necessary elements and, thus, can be enforceable.
A contract that lacks one or more of the basic required elements of a contract or that has not been formed in conformance with the law from the outset of the agreement and, thus, cannot be enforced by either party.
A contract that one party may, at its option, either disaffirm or enforce.
A contract that meets the elements required by law for an otherwise binding agreement but is subject to a legal defense.
An equitable remedy whereby a court orders the breaching party to render the promised performance by ordering the party to take a specific action.
Available only when the subject matter of the contract is sufficiently unique so that damages are inadequate.
Real estate is one of the most common circumstances.
Relief granted in the form of either specific performance ("do it") or an injunction ("stop doing it") when monetary damages are insufficient due to the unique or irreversible consequence of the breach.
Damages that are meant to make the injured party whole again. In contract law, they are an attempt to place the nonbreaching party in the position he would have been in had the contract been executed as agreed. Also called direct or actual damages.
offeror vs. offeree
Offeror makes a valid offer to the offeree, who in turn must accept the offer in order for the parties to be bound by the agreement's terms.
Elements of a contract
mutual assent (offer and acceptance), consideration, capacity, and legality.
Statute of frauds
the law governing which contracts must be in writing in order to be enforceable.
the sale of land, cannot be performed in under one year, pay the debt of another, made in consideration of marriage, for the sale of goods of $500 or more and leases of $1000 or more
what are the five types of contracts the statute of frauds primarily applies to?
Statute of frauds (Common law)
Require several specific terms of a contract to be in writing.
quantity, the signature of the party against whom enforcement is sought, language that would allow a reasonable person to conclude that the parties intended to form a contract.
What are the requirements for the UCC's statute of frauds?
the mutual exchange of benefits and detriments.
Which Article of the UCC covers the sale of goods?
Merchant's firm offer
- Offer in writing between merchants to buy or sell goods
- Along with a promise without consideration to keep that offer for a stated amount of time or, if unstated, no longer than three months
Silence as Acceptance
- Exception if parties had previously agreed that silence acts as an acceptance
Parole evidence rule
- Interpretation rule
- Any writing intended by the parties to be the final expression of their agreement may not be contradicted by any oral or written agreements made prior to the writing
- Does not bar admission of the preliminary documents when they are being used to determine the meaning that the parties intended concerning a particular term in the contract.
Case: Lucy v. Zehmer
- Lucy was a farmer who knew A.H. Zehmer for 15-20 years
- Lucy offered to buy Zehmer's farm for $20,000
- Zehmer rejected the offer outright
- 7 years later, Lucy offered again, after meeting at a bar
- Lucy persuaded Zehmer to put in writing that he would sell Lucy the farm for $50,000
- Zehmer handwrote "I agree to sell the Ferguson Place to Lucy for $50,000 cash"
- Modification occurred and discussion ensued
- Lucy believed the contract to be real, Zehmer didn't
- Court ruled that Zehmer was bound by contract
- Objective standard in determining that a reasonable person would have construed Zehmer's actions and words as a serious intent to contract
- Actual mental intent is not required for the formation of a contract
the transfer of contractual rights to a third party
appointing another to perform their duties
third party beneficiary
when a person who is not a party to the contract at the time of formation because the parties to the contract intended to confer a benefit on that person.
third parties in a contract
The contract involves more than two parties, the law recognizes a special set of rules to govern a substitution.
An even that must occur before a contract obligation is triggered
o Expressed using language such as "on the condition that" or "provided that" or "provided that" or "unless"
An event that must occur before performance under a contract is due
o In a business context, prior to payment being due:
♣ Approval of merchandise
An event that occurs after the performance under the contract and discharges the parties' obligations
♣ Passing the bar exam
♣ CPA exam
♣ Meeting some other licensing requirement within one year of beginning employment with a company
o Often found in insurance contracts
events of discharge via mutual consent
Circumstance under which contracting parties may be discharged from their obligation although neither party has fully performed because they agree to cancel the contract
Accord and Satisfaction
One party agrees to render a substitute performance in the future, and the other party promises to accept that substitute performance in discharge of the existing performance obligation
Replaces the original contract when the two parties agree to different duties
♣ The new duties replace and dissolve the obligations of the original contract
Type of substitute agreement
♣ The duties of the contract are the same but a new, third party assumes the duties of an original party
events of discharge via operation of law
Termination of an offer by the occurrence of certain happenings or events
Excuses performance when an essential part of the contract has become impossible because a crucial, irreplaceable thing has been destroyed; a crucial person has died; a crucial means of performance no longer exists; or a crucial action has become illegal
Excuses performance when an extreme circumstance occurs or reveals itself that destroys the value of the performance to the party
♣ The circumstance was not the fault of either party and was not reasonably foreseeable
frustration of purpose
Excuses a party from performance if a state of things that was the basis for forming the contract no longer exists, by no fault of either party
Buyer agrees to buy whatever he needs from the seller
o During a set period
o Buyer may buy only from that one seller
o Quantity for the contract is what the buyer requires
Buyer agrees to buy all the goods that the seller produces for a set time and at a set price
o The seller may sell only to that one buyer
o Quantity for the contract is the seller's output
Allows for recovery of damages by the relying party if the promise actually relied on the promise and the promisee's reliance was reasonably forseeable to the promisor
Necessary for the formation of a valid contract
o Requirement that both parties have the power to contract
o Certain classes of persons have only limited powers to contract
Both the subject matter and performance of the contract must be legal
o Some terms violate public policy
Parties reach an agreement
o Meeting of the minds
legal requirement of agreement
Results from the offeror's making a valid offer and the offeree's accepting the terms of the offer and agreeing to be bound by its terms
o Parties must reach agreement on all of the essential terms of the agreement
o An offer that is too vague or indefinite cannot be the basis for an agreement
Risk of Loss
The risk of one party's having to bear the loss due to damage, destruction, or loss of goods bargained for under a sales contract
The seller is required to send the goods to the buyer via a carrier
♣ When the carrier receives the goods, the seller has fulfilled his duty and the buyer assumes title and bears the risk of loss
♣ The buyer may have recourse against the carrier, but not against the seller
The seller is required to deliver the goods to a chosen destination and not just to the carrier
♣ When the goods have been tendered at the destination, the seller has fulfilled his duty and the buyer takes title and risk of loss
an unconditional performance of the seller by delivering the purchased goods or otherwise making them available to the buyer
good faith performance
The duty to honestly adhere to the contract's common purpose
o Under this obligation, neither party can do anything to prevent the other party from enjoying the "fruits of the contract"
o Both parties must try to make the deal work as written
discharge of a contract
The removal of all legal obligations under the agreement
o Completion of a contract
Performance of the essential terms of the contract such that performance can be considered complete less damages for anything still unperformed
the justified refusal to accept nonconforming goods under a sales contract
♣ Must give the seller seasonable notification of the rejection in the case of nonconforming goods
♣ Enables the buyer to pursue additional remedies to prevent any further losses and/or recover losses incurred as a result of the breach
a nonbreaching buyer's right to purchase substitute goods on the open market after a delivery of nonconforming goods from the original seller and to sue for the difference
-Reject the entire shipment of goods within a reasonable time
-Accept the shipment of goods as is
-Accept any number of commercial units and reject the rest of the goods in a reasonable time
If seller fails to achieve perfect tender, the buyer has three options:
tender of delivery
seller's obligation under which, for delivery of goods, tender occurs when the seller produces goods conforming to the contract and provides adequate notice of their delivery to the buyer
Rule that requires the seller to deliver the goods exactly as the contract
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