Exam 2 Business Law

Contract

an agreement that is enforceable by a court of law or equity. A promise or set of promises for the breach of which the law gives a remedy or the performance of which the law in which some way recognizes a duty. meets certain additional legal criteria and is enforceable in a court of law

Legally enforceable contracts

(most contracts) a contract in which one party fails to perform as promised, the other party can use the court system to enforce the contract and recover damages or other remedy

Traditional contract law

contract law based on the common law

Electronic contract law (e-contract law)

contract law based on electronic contracts and electronic licenses

Offeror

the party who makes an offer to enter into a contract

Offeree

the party to whom an offer to enter into a contract is made

Agreement

the manifestation by two or more persons of the substance of a contract. a voluntary exchange of promises between two or more legally competent persons to do or refrain from doing an act. Requires mutual assent

Offer

the manifestation of willingness to enter into a bargain, so made as to justify another person in understanding that his assent to that began is invited and will conclude it

Acceptance

a manifestation of assent by the offeree to the terms of the offer in a manner invited or required by the offer as measured by the objective theory of contracts; a manifestation of assent required for a gift to be effective

Contractual capacity

the necessary capacity of parties to enter into the contract

Lawful object

an element of a contract that is met where the object of a contract is not illegal

Genuineness of assent

the requirement that a party's assent to a contract be genuine and not have been obtained by duress, undue influence, or fraud

Writing and form

the law requires that certain contracts be in writing (physical or electric) form

Common law of contracts

contract law developed primarily by state courts

Uniform Commercial Code (UCC)

a comprehensive statutory scheme that includes laws that cover aspects of commercial transactions. establishes Statutes of Fraud for contracts for the sale and lease of goods.

Article 2 of UCC

governs the creation and enforcement of contracts for sales of goods

Article 2A of UCC

governs the creation and enforcement of contracts for the lease of goods

Article 12 of UCC

governs the transactions involving types of digital assets such a virtual currencies and nonfungible tokens (NFTs)

Restatement of the Law of Contracts

a compilation of model contract law principles drafted by legal scholars.

Objective theory of contracts

a theory that says the intent to contract is judged by the reasonable person standard and not by the subjective intent of the parties

Bilateral contract

a contract entered into by a way of exchange of promise of the parties, "a promise for a promise" (ex. If you promise to paint my house by July 1, I will pay you $5,000)

Unilateral contract

a contract in which the offeror's offer can be accepted only by the performance for an act by the offeree, "a promise for an act" (ex. If you paint my house by July 1, I will pay you $5,000)

Incomplete/partial performance of contract

the offer cannot be revoked if the offeree has begun or has substantially completed performance

Formal contracts

a contract that requires a special form, words, or method of creation

Negotiable instruments

Special forms of contracts that require a special form and language for their creation and must meet certain requirements for transfer (ex. checks, drafts, notes, and certificates of deposit)

Letters of credit

A document that is used by a bank on behalf of the buyer who purchases goods from a seller that guarantees that the bank will pay the seller.

Recognizance

A formal contract in which parties acknowledges in court that they will pay a specified sum of money if certain event occurs

Contracts under seal

The type of contract where a seal (usually a wax seal) is attached.

Informal contracts

A contract that is not formal/does not require a special form or method of creation. Valid informal contracts are fully enforceable and may be sued upon if breached (ex. Leases, Sales contracts, service contracts, electronic contracts)

Valid contract

A contract that meets all the essential elements to establish a contract; a contract that is enforceable by at least one of the parties.

Void contract

A contract with no legal effect; a nullity (ex. Contract to commit a crime)

Voidable contract

A contract in which one or both parties have the option to void their contractual obligations.

Unenforceable contract

A contract in which the essential elements to create a valid contract are met but there is some legal defense to the enforcement of the contract

Executory contract

In bankruptcy law, a contract that has not been fully performed.

Executed contract

A contract that has been fully performed on both sides; a completed contract

Actual contract

A contract that is either express or implied-in-fact

Express contract

An agreement with clearly stated terms in written or oral form

Implied-in-Fact contract

A contract in which agreement between parties has been inferred from their conducts.

Implied-in-law contract

A contract implied by law to prevent unjust enrichment

Equity

A doctrine that permits judges to make decisions based on fairness, equality, moral rights, and natural law

Equity resorted

(1) An award of money damages 'at law' would not be the proper remedy or (2) fairness requires the application of equitable principles.

Electronic commerce

The sale of goods or services or licensing of intellectual property using the internet or other electronic technology (more than 17% of total sales in the US)

Smart contracts

A contract whose terms are written in code and stored on a blockchain. Self-execute the terms of the contract according to its programming

Mutual assent

(meeting of the minds) an assent by the partiers to perform current or future contractual duties

Effective offer criteria

(1) offeror must be objectively intended to be bound by the offer (2) the terms of the offer must be definite or reasonably certain (3) the offer must be communicated to the offeree

Definite offer criteria

(1) identification of the parties, (2) identification of the subject matter and quantity, (3) consideration to be paid, and (4) time of performance

Express terms

terms in offers and contracts that expressly identify the parties, the subject matter of the offer or contract, the consideration to be paid by the parties, and the time of performance, as well as the other terms of the offer and contract

Implied terms

a missing term that is not expressly stated in an offer or a contract that can reasonably be supplied by the courts if a reasonable term can be implied from other sources

Mirror image rule

a rule that states that for an acceptance of a contract to exist, the offeree must accept the terms as stated in the offer

Advertisement

an invitation to make an offer, or an actual offer

Invitation to make an offer

a general rule that states that an advertisement for the sale of goods, even at a specific price, is treated as an invitation to make an offer, and not an offer

Reward

an award given for performance of some service or attainment. To collect a reward, the offeree must (1) have knowledge of the reward offer prior to completing the requested act and (2) perform the requested act

Auction

a sale in which a seller of goods offers goods for sale through an auctioneer

Auction with reserve

an auction in which the seller retains the right to refuse the highest bid and withdraw the goods from sale. All auctions unless expressly stated otherwise

Auction without reserve

an auction in which the seller expressly gives up his or her rights to withdraw the goods from sale and must accept the highest bid

Termination of an offer by an act of the parties

the terminating of an offer from one party when they take action that indicates they are not interested in forming a contract under the terms of the offer

Rejection of an offer

Rejection of an offer by the offeree.

Counteroffer

A response by an offeree that contains terms and conditions different from or in addition to those of the offer. Terminates prior offer.

Revocation of an offer

An express statement of withdrawal of offer or the act of the offeror that is inconsistent with the offer (ex. Selling the goods to a different party).

Option contract

A contract that is created when an offeree pays an offer or compensation to keep an offer open for an agreed-upon period of time. An option contract prevents the offeror from revoking the offer during the option period.

Termination of an offer by operation of law

Including (1) the destruction of the subject matter, (2) the death or incompetency of the offeror or the offeree, (3) a supervening illegality, and (4) lapse of time of the offer.

Supervening illegality

The enactment of a statute, regulation, or court decision that makes the object of an offer illegal. This action terminates the offer.

Lapse of time

A state timer period after which an offer terminates. If no time state, the offer terminates after a reasonable time.

Unequivocal acceptance

An offeror's acceptance of an offer that is clear, unambiguous, and has only one possible meaning.

Equivocal response

An offeree's response to an offer that is not clear, is not ambiguous, or has more than one possible meaning. Does not create a contract.

Silence

Does not constitute acceptance.

Exceptions for silence constituting acceptance

(1) The offeree has indicated that silence means assent. (ex. If you don't hear from me by Friday send it), (2) The offeree has signed an agreement indicating continuing acceptance of delivery until further notification, (3) Prior dealings between the parties indicate that silence means acceptance.

Acceptance-upon-dispatch rule

(Mailbox or posting rule) A rule that states that an acceptance is effective when it is dispatched, even if it is lost in transmission.

Properly dispatched

An acceptance of an offer being properly addressed, packaged, and posted.

Authorized means of communication

A rule that states that an offeree must accept an offer by means expressly specified in the offer, or if there is no such requirement then by any means customary in similar transactions, usage of trade, or prior dealings between the parties.

Implied authorization

A means of communication for accepting an offer to enter into a contract that is inferred from what is customary in similar transactions, usage of trade, or prior dealings between the parties.

Express authorization

A means of communication for accepting an offer to enter into a contract that is specified in the offer (ex. Registered mail).

Smart contract

Digital contract whose terms are written in code and stored on a blockchain. Self-executing agreements based on the following logic: 'if/when x event happens, then execute y action.'

Consideration

Defined as something of legal value given in exchange for a promise (ex. Tangible payments or the performance of an act)

Elements of consideration

(1) something of legal value must be given and (2) there must be a bargained-for exchange.

Legal value

Support for a contract when either (1) the promisee suffers a legal detriment or (2) the promisor receives a legal benefit.

Bargained-for exchange

Exchange that parties engage in that leads to an enforceable contract.

Gift promise (gratuitous promise)

A promise that is unenforceable because it lacks consideration.

Illegal consideration

A promise to refrain from doing an illegal act. Such a promise will not support a contract.

Illusory promise (illusory contract)

A contract into which both parties enter but one or both of the parties can choose not to perform their contractual obligations. Thus, the contract lacks consideration.

Preexisting duty

Something a person is already under an obligation to do. A promise lacks consideration if a person promises to perform this term.

Past consideration

A prior act or performance. Do not support consideration for a new contract.

Output contract

A contract in which a seller agrees to sell all of its production to a single buyer. (1) Assures the seller of a purchaser for all its output and (2) assures the buyer of a source of supply for the goods it needs.

Requirements contract

A contract in which a buyer contracts to purchase all of its requirements for an item from one seller. (1) assures the buyer of a uniform source of supply and (2) provides the seller with reduced selling costs.

Best-efforts contract

A contract that constraints a clause that requires one or both of the parties to use their best efforts to achieve the objective of the contract.

Accord

An agreement whereby the parties agree to accept something different in satisfaction of the original contract.

Satisfaction

The performance of an accord.

Accord and satisfaction

Compromise, the settlement of a contract dispute.

Promissory estoppel

(Detrimental reliance) an equity doctrine that permits a court to order enforcement of a contract that lacks consideration.

Estops

A doctrine that prevents promisors from revoking their promise even though there is lack of consideration.

Doctrine of promissory estoppel application

(1) the promisor made a clear and ambiguous promise (2) the promisor should have reasonably expected that the promisee would rely and act on the promise (3) the promisee reasonably relied on the promise and acted or forbore a right of a definite and substantial nature (4) the promisee suffered injury due to reliance on the promise (5) injustice would be caused if the promise were not enforced and the only way to avoid the injustice by enforcing the promise.

Forbearance

Accepting an​ out-of-court settlement in exchange for dropping a lawsuit.

Minors

a person who has not reached the age of majority (18)

Age of majority

the legal age, as set by state law, for a person to have the capacity to enter into a contract. The most prevalent age is 18 for both men and women

Period of minority

the period below the statutory age of majority, as set by state law for a person to have the capacity to enter into contract

Infancy doctrine

a doctrine that allows minors to disaffirm (cancel) most contracts that they have entered into with adults

Voidable contract

under the infancy doctrine, minor has a choice of whether or not to enforce the contract

Disaffirm

the act of a minor rescind a contract under the infancy doctrine, may be accomplished orally, in writing, or by the minor's conduct

Duty of restoration

a duty of a minor who has disaffirmed a contract to return the goods or property he or she has received from the other party in the condition it is in at the time of disaffirmance

Duty of restitution

a duty of an adult when a minor has disaffirmed a contract to return any money, property, or other valuables received from the minor, or if the consideration has been sold or has depreciated in value, then pay the minor the cash equivalent; a minor owes a duty of restitution if the minor's intentional, reckless, or grossly negligent conduct caused the loss of value to the adult's property or if the minor misrepresented his or her age when entering into a contract