LAW293 Exam 2 Review

Contract

Contract

a voluntary agreement (or exchange of promises) that can be enforced in court

Express Contract

an explicit contract negotiated orally or in writing

What Constitutes a Contractual Agreement?

An offer, its acceptance, and consideration constitute a contractual agreement

Offeror

gives an offer

Offeree

receives an offer

Void(able)

a contract could end up not enforced if it is void due to law or other factors

Valid

all the elements of a contract are there, and it will be enforced by or under a court of law

Bilateral Contract

an exchange of two promises, one by the offeror and one by the offeree

Unilateral Contract

one person (offeror) makes a promise, and one person (offeree) must perform, (promise versus expected conduct)

Quasi Contract (implied in law)

There is no contract, but it is implied that something must be done under fairness

Implied in Fact

We look at the conduct of a relationship and see if it has the elements of a contract under an objective standard

Executed (completed contract)

the contract has been fully performed

Executory

something relating to the contract remains to be done

Acceptance

the act of voluntarily agreeing, through words or conduct (must be unequivocal and it must be communicated to the offeror)

Rejection

the terms of an offer may be rejected by the offeree, in which the offer terminates

Counteroffer

the offeree’s rejection of the original offer, coupled with the original offeree’s new offer

Mirror Image Rule

an offeree’s acceptance must match the offeror’s offer exactly

Consideration

value given in return for a promise or someone's promise in a contractual agreement : a promise; or someone’s performance; or refraining (forbearance)

Illusory Promise

when the terms of a contract call for performance in such uncertain terms that the promisor has not definitely promised to do anything

Promissory Estoppel

when the promisor makes a clear and definite promise on which the promisee justifiably relies

Objective Theory of Contract

In evaluation, the Court must not consider the defendant’s subjective intent or the plaintiff’s subjective view of what was offered, but what an objective reasonable person would understand is conveyed

Contractual Capacity

Certain persons are generally not considered to have sufficient mental capacity to be bound by their contracts, such as minors, intoxicated persons, or the mentally incompetent

Disaffirmance

a contract can be disaffirmed at any time during minority or for a reasonable period after the minor becomes of age

Contracts for Necessaries

Contracts for food, clothing, and shelter may be disaffirmed by a minor, who becomes liable for the reasonable value of goods or services

Ratification

when a minor, on or after reaching majority (expressly or impliedly) indicates an intention to become bound by a contract made as a minor

Intoxicated Persons

If intoxicated, a contract CAN be voidable (or valid)

Mentally Incompetent Persons

contracts with mentally incompetent persons could be voidable, or void, or valid depending on the facts

Lucid Interval

when a person not previously declared mentally incompetent had the mental capacity to engage in a contract at the time it was formed, it can be valid

Illegal Purpose/Legality

If a contract is to do with something that is illegal or prohibited, it is void (as if it never existed at all)

Contracts in Restraint of Trade

contracts that tend to restrain trade and reduce competition for the provision of goods and services are generally unenforceable, and seen as contrary to public policy

Covenant Not to Compete

a contractual promise of one party to refrain from conducting business similar to that of another party for a certain period of time and within a specified geographical area (if the clauses are reasonable they will be enforced, if not they either won’t be enforced or will be changed)

Unconscionable Contracts

contracts that contain terms that are unconscionable (unfairly burden one party and unfairly benefit the other) and are void  for reasons of public policy

Procedural Unconscionability

when one party to the contract lacks/is deprived of any meaningful choice regarding the terms of the contract due to the inconspicuous print, unintelligible language, lack of opportunity to read the contract before signing, or lack of bargaining power

Substantive Unconscionability

when the contract contains terms that are overly harsh, depriving one party of the benefit of its bargain or of any meaningful remedy in the event of breach by the other party

Mistakes

an otherwise valid contract may be unenforceable if the parties have not genuinely agreed to its terms and there is lack of voluntary consent due to mistake, fraudulent misrepresentation, or the states of being under the influence or under duress

Unilateral Mistake

when only one party is mistaken, the contract will usually have to be performed UNLESS the other party knew or should have known of the mistake or the mistake is only one of math

Bilateral Mistake

when both parties are similarly mistaken, the contract can be cancelled by either party

Fraudulent Misrepresentation

when an innocent party is fraudulently induced to enter into a contract, there is a lack of voluntary consent (no genuine assent), they can cancel it if they can prove the elements of fraud

Undue Influence and Duress

a contract lacks voluntary consent and is unenforceable if undue influence or duress is present

Undue Influence

persuasion that is less than actual force but more than advice and that induces a person to act according to the will or purposes of the dominating party

Duress

compelling an innocent party to enter into a contract by threatening to harm him or another person, or his livelihood, if he does not agree to the contract

Statute of Frauds

Some contracts can be oral, but under this statute certain contracts (involving land, those which can’t be performed within a year, for sale of goods over $500) must be in writing

One-Year Rule

Contracts that cannot be performed within one year after the contract was formed must be in writing

Assignment

the transfer of all or part of one’s rights arising under a contract to another

Delegation

a transfer of one’s duties to a third party, where the obligor is still liable for his contract duties if the delegatee fails to perform

Discharge

the termination of a party’s obligations arising under a contract

Discharge by Performance

when both parties perform or tender performance of the acts they have promised, the contract terminates

Tender

an unconditional offer to perform an obligation by a person who is ready, willing, and able to do so

Substantial Performance

the obligated party performed in good faith, their performance differed minimally from promised, and the same benefits promised in the contract were substantially created

Breach of Contract

A party’s failure, without legal excuse, to substantially perform the contractual obligations

Material Breach of Contract

performance is not substantial, excuses the non-breaching party from its contractual obligations

Damages

A breach of contract entitles the non-breaching party to sue for monetary damages, including compensatory damages, consequential damages, punitive damages, and nominal damages

Compensatory Damages

damages that compensate the non-breaching party for the injuries or losses actually sustained as a result of the breach

Incidental Damages

expenses directly incurred because of a breach of contract

Consequential Damages

foreseeable damages that result from a party’s breach of contract but are caused by special circumstances beyond the contract itself

Punitive Damages

damages designed to punish a wrongdoer and to deter similar conduct in the future

Nominal Damages

a small monetary award granted to the non-breaching party when no actual damage was suffered

Mitigation of Damages

the requirement that a plaintiff do whatever is reasonable to minimize the damages caused by the defendant’s breach of contract

Specific Performance

requiring the breaching party to perform exactly as called for in the contract; usually ordered only if the monetary damages are inadequate and the subject matter of the contract is unique

Landscaping Case

the case in which a landscaping company works at the wrong address. The Jones’ were home and didn’t intervene in the work for their benefit. This is a quasi contract case, where the landscaping company wins and is owed something for their work under fairness.

Lola-Andy-Sailboat Case

the case in which Lola offers to buy Andy’s sailboat if he delivers it to their dock. Right before he arrives, she withdraws her offer. Lola wins the lawsuit. This is a unilateral contract case, in which Lola only promised to pay Andy if he got to the dock and her offer can be revoked any time before that. This is a classic case, that in which it was modern, the contract would be accepted if Andy substantially performed (past halfway to the dock).

Lucy v Zehmer Case

the case in which longtime friends Lucy and Zehmer write up an agreement for the sale of Zehmer’s farm for $50,000 while supposedly drunk. This is an intoxicated persons case, in which Lucy wins after an appeal because Zehmer’s conduct of writing up a contract does not indicate intoxication and its interference in their judgement (forced to sell the farm).

Gore v Flagstar Bank Case

the case in which James Gore seeks to obtain financing to redeem his property and meets with loan officer O’Connell. After exchanges of documents, an ordered appraisal, and a letter of approval, Gore agrees to a $5,000 property extension. O’Connell doesn’t approve the loan directly prior to the expiration of the extended redemption period. This is a Promissory Estoppel case, because Gore justifiably relied on an implied clear and definite promise. He wins in court.

Second Lola-Andy-Sailboat Case

the case in which Andy, selling his sailboat for $17,500, makes a typing mistake and offers it for $15,700. Lola accepts the offer and tenders a $15,700 check. This is a unilateral mistake case, in which Lola will get the sailboat for cheap. The exception to this is Lola knew or should have known it was a mistake

Motorcycle Case

the case in which Charlie buys an expensive motorcycle believing that it is a custom build. Both he and the seller think it’s an original design, but it turns out to be a fake. This is a bilateral mistake case, where Charlie would get their money back and return the bike. It is the responsibility of the seller to determine the point of fraud.

Hord Case

the case in which the plaintiff speaks at length with the ERIM manager when interviewing for a new job. The plaintiff gets printed material, specifically an operating summary of the fiscal year prior, and after discussion accepts their offer. Soon after beginning working, they are laid off, and they sue alleging they were misled on the financial soundness of the company based on the operating summary. This is a fraudulent misrepresentation case, where the plaintiff loses in the Supreme Court because there were no false statements made and the case is based on the plaintiff’s inference.

At Will Employee Case

the case in which an employee, prior to accepting the company’s offer, asks if they will soon be sold. They are assured it will not be, but it is, and the employee is soon fired by the company in new management. The employee relied on the assurance there wouldn’t be a sale and is now out of work due to this. This a fraudulent misrepresentation case mirroring the Hord Case, different because it was the result of an explicit answer. The employee wins $6,000,000.

Kitchen Farms Case

the case in which brothers William and Robert own the Kitchen Farms business. Robert owns the property adjacent to the farm property. The farm’s irrigation system crosses over into Robert’s property. After the brothers have a falling out, and William buys Robert’s share of the company, Robert revokes his promise (denies Kitchen Farms access to his property). Kitchen Farms sues and loses. This is a Statute of Frauds: Oral Real Estate Promise case, in which Robert’s prior promise is not binding because any contract involving interest in land must be in writing.

Junk Case

the case in which a store owner posted an ad listing all of the things one can get for $1. “If you arrive on Saturday at 9AM, you can get __ clothing for a $1.” A man comes in and tenders a $1 as the ad depicts, but isn’t given the clothes promised. Advertisements usually are not seen as contracts, but because it was so detailed, it was a unilateral contract which was accepted by the tendering of the dollar.

Complete Performance

perfect performance of requirements under the contract

Rescission (Discharge by Agreement)

to cancel or undo a contract

Material Alteration (Discharge by Operation of Law)

if one or more material terms of a contract are altered, an innocent party may be discharged from its contractual obligations

Novation (Discharge by Agreement)

substitution of a new contract for an old one, with the rights under the old one being terminated

Accord and Satisfaction (Discharge by Agreement)

settlement to discharge a pre-existing duty and accept an alternate performance (accord)

Dell Case

the case in which a man sued Dell, saying that having to click a hyperlink is procedurally unconscionable. This is an unconscionable contract case. The court said that if you buy a computer, you should know to click a hyperlink to learn arbitration rules. Ruled as NOT procedurally unconscionable

Cingular Case

the case in which within bills from AT&T there was an arbitration agreement people were likely to throw away or not read. This is an unconscionable contract case. The arbitration clause was also too one sided. The arbitration clause’s placement was ruled as procedurally unconscionable and its terms were substantively unconscionable. The Court of Appeals voided the entire clause.

Pepsi Case

the case in which a customer tries to obtain a Harrier Fighter Jet. This is an Objective Theory of Contract case. The objective reasonable person would NOT assume in viewing the commercial that one can actually attain a fighter jet by saving 7,000,000 Pepsi Points. The defendant’s advertisement was not an offer (as ads don’t constitute offers unless the ad is clear, definite, and explicit while leaving nothing open for negotiation). The defendant gets nothing.