Essential Contract Law Terms & Definitions for Exam 2

Role of Contract Law

- Provides a mechanism to deal with others

- Law of Contracts has evolved in commerce over the centuries

- The concept of freedom of contract means there are responsibilities to those who create binding relationships.

Contract Law

- Common Law

- Judge made law: stare decision

- Each state differs

- The uniformity about general contract principles that run throughout most states' laws

- Mostly found through court cases/court decision.

Promise

A person's declaration that something will or will not happen in the future.

Promisor

the person making the promise.

Promisee

The person to whom the promise is made.

Contract

An agreement between two or more competent parties for valuable consideration.

Offeror

the promise who makes an offer in an agreement.

Offeree

the person whom the offer is made.

Contract Elements

1. Offer: a proposal to enter into an agreement

2. Acceptance: is an agreement to the terms of the offer

3. Consideration: each party receives something of value in return.

Contractual Capacity

not in the right mind, (not usually an issue)

Legality

must agree to something that is legal to do.

Genuineness of Assent

there is not mistake or misunderstanding of the agreement.

Objective Theory of Contracts

the parties assets (whether the parties truly have an agreement) is judged not by the subjective intent of each party, but by the objective intent that a similarly situated reasonable person would understand the parties to have.

Objective Facts

1. A contract is not a contract simply because it is in writing. 2. Guarantees the party will get what was agreed.

3. Contract is not a contract because it is a promise.

Bilateral Contracts

A promise in exchange for a promise (2 promises)

- If promises are broken, there may be responsibility if losses are incurred.

Unilateral Contract

A promise in exchange for a performance. (1 promise is made)

- Once performance has been made, the other party's duty arises to fulfill his/her promise.

- Only accepted once performance is complete, once it is completed the offer is binding.

Express Contract

Direct statement by the parties of the promise made may be oral or written all important terms are expressly stated between the parties.

Implied Contract

actions and circumstances infer and define the terms of the contract may be words, conduct, gestures.

Executed Contract

fully completed

Executory Contract

something left to complete, not done yet

Valid Contract

Everything is valid

Void Contract

No legal value, completely unenforceable.

Voidable Contract

One of the parties is able to void the contract.

Quasi Contract

A fictional contract, created by a court, in the interest of fairness and justice, to prevent the unjust enrichment of one party at the expense of another.

Unjust Enrichment

One person's gain at the expense of another

Quantum Meruit

the value of services rendered (given)

Plain Meaning Rule

give every word its plain meaning

Requirements for a Valid Offer

1. Serious Intent

2. Reasonably Certain or Definite

3. Communicate

Serious Intent

the parties must intend to form a legally binding agreement.

Definiteness

who, what, how much and when

1. Identify the Parties

2. Identify the object or subject matter

3. Consideration

4. Time of payment, delivery, performance.

Communication

an offer must be communicated to the offeree, not to a 3rd party

Revocation

can be revoked anytime before an offer is accepted.

Option Contracts

first right to refusal, its an option with consideration (value)

Promissory Estoppel

A clear and definite promise, that is justifiable. The reliance is substantial and the best interest of justice is enforced.

Rejection

if the offer is rejected the offer is terminated.

Counteroffer

this terminates the original offer and wants something in addition.

Mirror Image Rule

Cannot vary the terms of the offer; any change in the terms is a rejection to the counteroffer.