Formation of Traditional and E-Contracts

Vocabulary flashcards covering core concepts of business law regarding the formation of traditional and e-contracts, including sources of law, elements of valid contracts, classifications, consideration rules, and capacity.

Uniform Commercial Code (UCC)

A body of law that governs all contracts for the sale of goods and the lease of goods.

Common Law (Contracts)

The law governing contracts not covered by the UCC, including contracts for services, employment, and real estate.

Predominant Purpose Test

A legal test used when a contract involves both goods and services; if the primary purpose is the sale of goods, the UCC applies, whereas if the primary purpose is services, common law applies.

Contract

An agreement formed by two or more parties who agree to a promise or set of promises, for which the law provides a remedy if breached.

Objective Theory of Contracts

The principle that party intent to enter into a contract is judged by outward, objective facts (words spoken, actions taken, and surrounding circumstances) rather than secret, subjective intentions.

Statute of Frauds

A state statute requiring specific types of contracts—such as land transactions, contracts unperformable within one year, secondary debt promises, marriage-related promises, and UCC goods sales of $500 or more—to be in writing to be enforceable.

Offeror

The party making an offer in a contract transaction.

Offeree

The party to whom an offer is made.

Bilateral Contract

A contract created when the offeree accepts by making a promise of performance in return ("a promise for a promise").

Unilateral Contract

A contract created when the offeree accepts only by completing the requested performance ("a promise for an act").

Formal Contract

A contract that requires a specific form or method of creation to be legally enforceable.

Informal Contract

A contract that requires no special form or specified method of formation to be valid.

Express Contract

A contract in which the agreement terms are explicitly stated in words, either orally or in writing.

Implied Contract

A contract formed when the conduct of the parties creates and defines the terms of the agreement.

Classifications Based on Contract Formation

The classification of contracts according to how they are formed: Bilateral vs. Unilateral, Formal vs. Informal, and Express vs. Implied.

Executed Contract

A contract that has been fully performed by all involved parties.

Executory Contract

A contract that has not been fully performed by one or more parties.

Valid Contract

A contract containing all four necessary elements—agreement, consideration, contractual capacity, and legality—making it fully enforceable in court.

Unenforceable Contract

An otherwise valid contract rendered unenforceable by a specific legal rule or defense.

Voidable Contract

A valid contract that can be legally avoided, canceled, or annulled at the option of one of the parties.

Void Contract

An agreement that lacks one or more of the required contract elements, creating no legal obligations or binding effect.

Agreement

A essential component of a contract comprising an offer and an acceptance demonstrating mutual assent between parties.

Option Contract

An irrevocable contract under which the offeror agrees not to revoke an offer for a set period in exchange for consideration provided by the offeree.

Revocation

The withdrawal of an offer by the offeror through words or acts before acceptance, effective upon receipt by the offeree.

Rejection

An offeree's statement or conduct declining an offer, which terminates the offer upon receipt by the offeror.

Counteroffer

An offeree's rejection of the original offer combined with the simultaneous making of a new offer.

Mirror Image Rule

A common law rule requiring an offeree's acceptance to match the offeror's offer terms exactly; any variation terminates the offer and operates as a counteroffer.

Acceptance

A voluntary statement or conduct by the offeree indicating assent to the exact terms of an offer.

Prior Dealings Exception

An exception to the general rule that silence is not acceptance, applying when a history of prior dealings creates a duty for the offeree to speak or risk being bound by silence.

Consideration

The value given in return for a promise or performance, requiring legally sufficient value and a bargained-for exchange.

Forbearance

The act of refraining from exercising a legal right, which can serve as legally sufficient consideration.

Preexisting Duty

A rule stating that a promise to perform an obligation one already has a legal duty to perform lacks legally sufficient consideration.

Past Consideration

Promises made in exchange for actions or events that have already occurred, which fail as consideration due to a lack of bargained-for exchange.

Illusory Promise

A promise containing such uncertain terms that the promisor has not actually committed to do anything, rendering the promise unenforceable for lack of consideration.

Examples of Agreements That Lack Consideration

Three major categories of unenforceable promises that lack legally sufficient consideration: Preexisting Duty, Past Consideration, and Illusory Promises.

Rescission

The unmaking of a contract that restores the parties to the positions they occupied before entering into the contract.

Contractual Capacity

The legal capacity and ability of a person to enter into a binding contractual relationship.

Disaffirmance

The legal avoidance or setting aside of a contractual obligation, available to minors who express intent through words or conduct not to be bound.

Lucid Interval

A temporary period when a mentally ill person's intelligence, judgment, and will are restored, during which contracts executed by them may be valid.