mgmt exam 2!!

Contract

Enforceable agreement between 2+ parties

Contract formation formula

[O+A]+C=K

What is C in the formula?

Consideration/purpose

O+A constitutes what?

Agreement

What does a contract need to be binding?

1. Understanding that a contract is being made

2. Understanding of what the contract is about

I hire a hitman. Is our contract binding?

No, it wasn't for a legal purpose

Express contract

Verbal or written agreement

Implied contract

The conduct between parties creates an understood contract

Valid contract

Contract has no issues and is completely enforceable

Void contract

Subject of the contract isn't legal so the contract is not binding

Voidable contract

1 or both parties can opt out for whatever reason

Quasi contract

Judge interprets a situation and creates a contract to prevent an unjust result

Offeror

Person making the offer

Offeree

Person who is receiving the offer

What's another word for offeror?

Promisor

What's another word for offeree?

Promisee

Privity of contract

The relationship that is formed between parties when they enter a contract

Stating an opinion demonstrates the desire to enter a contract. T/F

False

Preliminary negotiations about something do not constitute an offer. T/F

True

Jest

Offer made as a joke/not genuine acceptance

Insanity, infancy, and intoxication

Impairments limiting offeror's capacity to enter a contract

Capacity

Ability to form intent to enter a contract

Paid-for-option

Someone wants to accept an offer, but needs more time to obtain the money. So, they pay money for time to ensure that the offer is not made to anyone else.

If an offeree declines an offer initially, they still have the ability to later go back and agree to the offer. T/F

False. No means the offer is terminated

Acceptance

Unconditional agreement to the terms of an offer

Counter offer

No to initial offer, but new offer proposed.

Consideration

Purpose for entering a contract. Something must be exchanged

Illegal consideration

Purpose is for an illegal act, so there is no real consideration present and a contract cannot be formed.

Past consideration

Something that has been performed in the past and which, therefore, cannot be consideration for a promise made in the present

Charities owe you nothing after you give them money. T/F

True. There is no give & receive.

Detrimental Reliance/Promissory Estoppel

Prevents a party from backing out on a promise when another party relied on it to their loss or detriment.

Oral and written contracts are not equally enforceable. T/F

False. Both are equally enforceable

Statute of Frauds

A state statute under which certain types of contracts must be in writing to be enforceable.

What types of contracts fall under the statute of frauds?

Real estate contracts and contracts that term longer than one year

I am selling my house and receive offers of $450,000, $500,000, $475,000, and $4,550,000. This contract can/cannot be voided due to which issue?

Can be voided due to a mistake by the offeror. They added an extra zero to their offer by accident.

Contract fraud

One party intentionally deceives the other party to get them to enter a contract

Contract made under undue influence

One party uses their influence on another party to get them to enter a contract. (Non-threatening)

Contract made under duress

Party uses their influence to get someone to enter a contract (Threatening)

Contract assignment

The terms of a contract is transferred to another party after it was made.

Third-party beneficiary

One for whose benefit a promise is made in a contract but who is not a party to the contract.

3 ways to discharge from a contract

Performing the terms of the contract, filing bankruptcy, or breaching the terms of the contract

Are advertisements offers?

No

An offer can be terminated at any time prior to acceptance. T/F

True

Expiration of offer

Offer is available until a specific date or time

If you die, your offer is still valid. T/F

False. Your offer dies with you

Silence is considered acceptance. T/F

False. Silence is NOT acceptance.

Capacity impacts which two parts of the contract formula?

Offer and Acceptance [O+A]

Chapter 7 Bankruptcy

All parties debts are discharged. Applies to both people and businesses

Chapter 11 Bankruptcy

allows companies to reorganize and continue business operations while paying creditors a portion of their debts (businesses only)

Chapter 13 Bankruptcy

allows individuals to restructure and pay off all or a portion of their debts in a specified time frame (individuals only)

A contract can be voidable if a is written into the contract

Loophole/condition

Damages =

Money

Specific Performance Remedy

a court order compelling a party to perform in such a way as to meet the terms of the contract

injunction remedy

a court order that prohibits a person from doing a certain act

Rescission and Restitution

Rescission: Termination of contract

Restitution: return of any property transferred under contract

Are punitive damages available in breaches of contract?

NO!

Which amendment leads constitutional issues to arise in contract law?

13th amendment b/c it prohibits slave labor/involuntary servitude

compensatory damages

money intended to restore a plaintiff to the position he was in before the injury

mitigation of damages

nonbreaching party's legal duty to avoid or reduce damages caused by a breach of contract.

liquidated damages

clause in contract that parties agree to regarding the monetary amount that should be paid if the contract is breached

impossibility

Contract defense that excuses performance when there is no objective way to complete the contract.

uniform commercial code

the body of laws governing merchant transactions in the US.

merchant

someone who buys and sells goods

goods

whatever merchants are selling

how does the uniform commercial code change common law contracts?

UCC relaxes some rules in common law contracts (acceptance, breach, etc.)

Title, Risk of Loss, and Insurable Interest

Title: Ownership

Risk of Loss: Responsibility of covering damages (transferred when title is transferred)

Insurable Interest: financial interest that someone has in an asset that insurance is able to cover

Free on Board (FOB)

where in the supply chain that the title of a good is transferred

Examples of contract circumstances that are void because they're illegal

Gambling, someone does not have their license (business, service, etc.), usury (charging interest greater than the legal rate), and crimes