legal environment and business ch 14-19

what is consideration?

a promise or performance that the promisor demands as the price of the promise

what is bargained for exchange

The idea that both parties are getting something that they’ve agreed to, usually something of value for something of value

what is benefit-detriment approach to consideration

the idea that defines consideration as a benefit received by the promisor or a disadvantage incurred by the promisee

are promises to make gifts enforceable under the law of contracts?

no because there is a lack of consideration

what is forbearance as consideration

refraining from doing an act that an individual has the legal right to do for the sense of forming a contract

what is an illusory promise?

a promise that does not impose any obligation on the promisor and is not binding

what is a cancellation provision of a contract?

a provision that allows a party to cancel an agreement under certain circumstances on giving notice by a certain date

what is a conditional promise?

a promise that the promisor must perform but only if a specified condition occurs, and when the condition occurs, it becomes binding

is a preexisting legal obligation consideration in a contract?

no because the individual is already legally required to do it anyway

when is a good-faith adjustment used in contracts?

to enforce a second promise to pay a contractor a higher amount for the performance of the original contract when there are extraordinary circumstances caused by unforeseeable difficulties, and when the additional amount promised the contractor is reasonable under the circumstances

under what circumstances would a part-payment check fully discharge a debt

when there is a good-faith dispute over the amount of the debt and the debtor tenders a check that states “paid in full” on it and references the transaction in dispute

what is a composition of creditors

a binding agreement among creditors that each shall accept a part payment as full payment in consideration of the other creditors doing the same

what is past consideration and is it part of an enforceable contract?

something that has been performed in the past and cannot be consideration for a promise made in the present; because it lacks consideration it is not enforceable

is a promise made based on moral obligation part of an enforceable contract?

no because they lack consideration

what are the exceptions for the laws of consideration?

charitable subscriptions, uniform commercial codes, and promissory estoppel

what are charitable subscriptions and why are they exceptions to the laws of consideration?

where individuals make pledges to finance the construction of buildings for charitable purposes; this is an exception because it lacks consideration

when are charitable subscriptions considered enforceable/binding?

when the donor knows that the charity would rely on the pledge

what does the uniform commercial code do?

abolishes the requirement of consideration

what does the uniform commercial code abolish the requirement of a consideration for?

a merchant’s written firm offer for goods stated to be irrevocable, a written discharge of claim for a alleged breach of a commercial contract, and an agreement to modify a contract for the sale of goods

what is the doctrine of promissory estoppel?

a doctrine that states that a promisor may be prevented from asserting that his or her promise is unenforceable because the promisee gave no consideration for the promise

what is the other name for the doctrine of promissory estoppel?

the doctrine of detrimental reliance

when is the doctrine of promissory estoppel applicable?

when the promisor makes a promise that lacks consideration, when the promisor intends/reasonably expects that the promisee will rely on the promise, when the promisee relies on the promise in some definite and substantial manner, and when enforcement of the promise is the only way to avoid injustice

when would an oral contract be valid

when the contract is for a service that can be performed within one year after the date of the agreement

what is the statute of frauds and how does it apply to contracts?

a statute that, in order to prevent fraud through the use of perjured testimony, requires that certain kinds of transactions be evidenced in writing or recorded in order to be binding or enforceable; it applies to contracts because certain contracts must be written to be binding

what contracts must be evidenced by writing?

contracts governing the sale of land, contracts relating to activities that will extend beyond one year, contracts involving the sale of goods above $500, promises to answer for a debit or default of another, promise by the executor of a decedent’s estate to pay a claim against the estate from personal funds, and promises made in consideration of marriage

how is the year computed for contracts that exceed the year limit to be completed?

the year starts from the day after the oral contract is made (the day it was made is excluded)

what is an at-will contract?

a contract for an indefinite period of time and can be terminated at any time and cannot be applied to the statute of frauds

what is a suretyship?

when an individual promises a creditor to pay the debt of someone else if they do not do so

what is a personal representative?

an administrator or executor who represents descendants under UPC

what is a executor?

a person named in a will to administer the estate of the descendent

what is an admittatur?

person appointed to wind up and settle the estate of a person who has died without a will

what is a decedent

a person whose estate is being administered

does the statute of frauds always require a complete written contract?

no it also allows a sufficient written memorandum of the oral contract signed by the person being sued for breach of contract; the exception of a part performance also exists

what must be included in a note or memorandum as written evidence of a contract?

signing and content

what constitutes a legal signature in a contract?

a symbol of a name or any symbol that is adopted by the party as a signature; it may consist of initials, figures, or a mark and it must be done in pen, pencil, typewriter, print, or stamp

is an electronic signature valid?

yes under the Uniform Electronic Transaction Act, except for on wills, trusts, and commercial law matters

what must be included on the note or memorandum in order for it to be sufficient?

all of the essential terms of the contract must be identified within the writing itself or in other writings to which it refers

does a note or memorandum have to only be one document?

no; it can be one writing or several papers or emails that are all linked to each other in some form

what is the effect of noncompliance?

the rule that if an action is brought to enforce a contract that does not comply with the statute of frauds, the defendant can raise the defense that the alleged contract is not enforceable because it is not evidenced by a writing

what is the recovery of value conferred in relation to noncompliance in a contract?

the rule that an individual who is prevented from enforcing a contract because of statute of frauds is entitled to recover from the other party the value of any services/property furnished, or money given under the contract in order to prevent injustice

who may raise the defense of noncompliance?

only a party to the oral contract may raise a defense because there is not a writing that satisfies the statute of frauds

what is the parol evidence rule?

rule that prohibits the introduction in evidence of oral or written statements made prior to or simultaneously with the execution of a complete, final, and unambiguous written contract, deed, or instrument in the absence of fraud, accident, or mistake

when does the parol evidence rule apply?

any agreement that is not contained within the written contract and is trying to be made part of it

when does the parol evidence rule NOT apply?

in ambiguity cases, fraud, duress, or mistake, and modification of contract,

what does abiguity refer to?

a contract that has more than one reasonable interpretation

what does fraud, duress, or mistake refer to in relation to the parol evidence rule?

parol evidence may be admitted to show that a provision was omitted as the result of fraud, duress, or mistake and to further show what the provision stated

what does modification of contract refer to in relation of parol evidence rule?

the parol evidence rule prohibits only the contradiction of a complete written contract, and does not prohibit proof that the contract was thereafter modified or terminated

what rules aid the construction and interpretation of contracts?

interpretation of the parties, whole contract, contradictory and ambiguous terms, implied terms, conduct and custom, and avoidance of harship

what is interpretation of the parties in relation to rules that aid the construction of contracts?

based on the meaning of words and incorporation by reference

what does meaning of the words refer to?

how words are interpreted in a contracts and if they are stated ambiguously or specifically

what is incorporation by reference?

contract consisting of both the original document and the detailed statement that is incorporated in it

what is a whole contract

every word of a contract is to be given effect is reasonably possible, and the contract is to be constructed as a whole

what does contradictory and ambiguous terms relate to

the nature of the writing, ambiguity, and strict construction against the drafting party

which is more important when referring to the nature of writing for contract disagreements

any hand written or typed part always has more power than a printed part

what is ambiguity

when the intent of the parties is uncertain and the contract is capable of more than one reasonable interpretation

what does strict construction against the drafting party mean

that an ambiguous contract is interpretated strictly against the party who drafted it

what are implied terms

terms that a court implies to cover a situation for which the parties failed to provide or to give the contract a construction or meaning that is reasonable

what is the implied covenant of good faith

the implied obligation that neither party shall do anything that will have the effect of destroying or injuring the right of the other party to recieve the fruits of the contract

how is the conduct of the parties used

by watching the conduct of the parties in carrying out the terms of a contract courts determine the parties’ intent

what are usages of trade

language and customs of an industry

how are custom and usage of trade used

the commercial activity to which the contract relates is used to interpret the terms of a contract

what is avoidance of hardship

when courts will interpret a vague contract in a way to avoid any forfeiture of a party’s interest

what is the definition of a breach

failure to act or perform in the manner called for in a contract

what is anticipatory breach

when the contract calls for performance, a party may make it clear before the time for performance arrives that the contract will not be performed

what is anticipatory repudiation

when a party expressly declares that performance will not be made when required

what is a waiver of breach

an affirmation of the contract which destroys any rights to rescind the contract and sue for damages

what is existence of waiver referring to

the rule that a party may declare that the breach of contract is waived

what is scope of waiver referring to

the waiver of a breach of contract extends only to the matter waived, and it does not show any intent to ignore other provisions of the contract

what is the antimodification clause

modern contracts commonly specify that the terms of a contract shall not be deemed modified by waiver as to any breaches

what is the reservation of rights

the assertion by a party to contract that even though a tendered performance is accepted, the right to damages for nonconformity to the contract is reserved

what is remedy

a term used when the court orders someone to do something

what are the remedies for the breach of contract

anticipatory repudiation, general and the measure of damages, monetary damages, recession, action for specific performance, action for injunction, and reformation of a contract by court

what may the aggrieved person do when an anticipatory repudiation of a contract occurs

nothing beyond stating that performance at the proper time will be required, regard the contract as having been definitely broken and bring lawsuit against the repudiating party without waiting to see whether there will be proper performance, and regard the repudiation as an offer to cancel the contract

what is specific performance

action brought to compel the adverse party to perform a contract on the idea that merely suing for damages for its breach will not be an adequate remedy

what is benefit of the bargain

the advantage that would be or have been gained under a contract if completed as agreed

what are compensatory damages

monetary value that compensates the injured party the damages incurred as a result of the breach of contract

what are nominal damages

a small sum of money that is given to injured parties that do not sustain an actual loss because of a breach of contract

what is punitive damages

damages in excess of actual loss, imposed for the purpose of punishing or making an example of the defendant

what are punitive damages also known as

exemplary damages

what are direct damages

loses that are caused by breach of a contract; also known as general damages

what are incidental damages

extra expenditures made by the injured party to rectify the breach or mitigate damages

what are consequential damages

damages that do not necessarily flow from the type of breach of contract involved but happen to do so in a particular case as a result of the injured party’s particular circumstances

what happens under the mitigation of damages

damages must not be permitted to increase if an increase can be prevented by reasonable efforts

what causes rescission to happen

when one party commits material breach of the contract, the other party may rescind the contract

what is an injunction

orders of a court of equity to refrain from doing or to do a specified act

what is reformation of contract by a court

when a written contract does not correctly state the agreement already made by the parties, either party may seek to have the court reform or correct the writing to state the agreement actually made

what are limitations of remedies

the contract may require both parties to submit any dispute to arbitration or another streamlined out of court dispute resolution procedure

what are liquidated damages

provision stipulating the amount of damages to be paid in the event of default or breach of contract

what is liquidated damages clause

specification of exact compensation in case of a breach of contract

what requirements must be made to validify a liquidated damages clause

the situation must be one in which it is difficult or impossible to determine the actual damages, and the amount of specified must not be excessive when compared with the probable damages that would be sustained

what is the effect of the liquidated damages clause

the injured party cannot collect more than the amount specified by the clause

what is the effect of invalid liquidated damages clauses

the effect is merely to erase the clause from the contract and the injured party may be proceed to recover damages for breach of the contract

what does the american rule state about attorney’s fees

each party is responsible for its own attorney’s fees in the absence of an express contractual or statutory provision to the contrary.

what is limitation of liability clauses

a contract may contain a provision stating that one of the parties shall not be liable for damages in case of breach

what is a exculpatory clause

provision in a contract stating that one of the parties is not liable for damages in case of breach; also called limitation of liability clause

what is content and construction

if a clause limits liability for damages caused only be negligent conduct, liability is neither excluded nor limited if the conduct alleged is found to be grossly negligent, willful, or wanton

what is validity of liability clauses

when the language of the contract and the intent of the parties are clearly exculpatory, the contract will be upheld

what are releases for liability clauses

release forms signed by participants in athletic and sporting events declaring that the sponsor, proprietor, or operators of the event shall not be liable injuries sustained by participants because of negligence are generally binding