ch. 13 - contracts in writing & 3rd party contracts

bus 207 - prof. wu

statute of frauds

Certain contracts must be in writing to be enforceable. Example: A house sale must be written down.

uniform commercial code (UCC)

Set of laws that govern commercial transactions, especially sale of goods. Example: Buying $5,000 worth of inventory is governed by the UCC.

prenuptial agreement

Contract made before marriage outlining property/financial rights. Example: “If we divorce, you keep your business.”

secondary promises

Promises to pay someone else’s debt if they don’t. Example: “If he doesn’t pay his rent, I will.”

collateral promises

Another term for secondary promises—backup promises to pay another person’s debt. Example: Co-signing a loan.

suretyship promises

Promises to be responsible for another person’s debt. Example: Parent co-signs child’s car loan.

primary obligations

Your own duty to pay/perform under a contract. Example: You promise to pay for your haircut.

secondary obligation

Your promise to pay only if someone else fails. Example: You cover your friend’s debt if they default.

main-purpose rule

If the guarantor’s main purpose is personal benefit, the promise doesn’t need to be in writing. Example: A business owner orally promises to pay supplier if employee can't — allowed because it benefits the owner.

equal dignities rule

If a contract must be in writing, the agent’s authority to sign it must also be in writing. Example: An agent selling a house needs written authority.

admission

Party admits in court that an oral contract existed. Example: “Yes, I agreed to buy the car for $10,000.”

partial performance

If part of the contract is completed, courts may enforce an oral agreement. Example: Buyer already moves into the house and pays part of the price.

promissory estoppel

Enforcing a promise to avoid injustice when someone relied on it. Example: You quit your job because a company promised to hire you.

parol evidence rule

If a written contract is final, earlier oral statements cannot contradict it. Example: You sign a contract for $500 — you can’t claim there was an oral promise for $400.

fully integrated agreement

Final, complete written contract—no outside terms allowed. Example: A signed lease with a merger clause.

merger clause

Clause stating the written contract is the entire agreement. Example: “This document contains the full agreement.”

privity of contract

Only parties to the contract can enforce it. Example: A stranger can’t sue on your phone plan contract.

obligors

People who must perform a duty (pay/do something). Example: You owe rent—you’re the obligor.

obligees

People to whom a duty is owed. Example: Your landlord is the obligee.

third parties

People affected by or benefiting from a contract without being the main parties. Example: A life insurance beneficiary.

assignment

Transfer of contract rights to another person. Example: You assign your right to get paid to a collection agency.

assignor

Person who transfers rights. Example: You assign your right to payment.

assignee

Person who receives rights. Example: The collection agency.

antiassignment clause

Contract term banning assignments. Example: Lease says “tenant may not assign rights.”

first-assignment-in-time rule

Whoever gets the assignment first has the legal right. Example: You assign your right to payment to A, then B — A wins.

english rule

Assignee who notifies the obligor first has priority. Example: A and B both get assignments, but B tells the buyer first — B wins.

delegation

Transfer of duties to someone else. Example: A contractor hires a subcontractor to do the work.

delegator

Person who transfers the duty. Example: Contractor who delegates plumbing work.

delegatee

Person who receives the duty. Example: The plumber hired to do the work.

third-party beneficiary contract

Contract made for the benefit of a third person. Example: Life insurance for your spouse.

intended beneficiary

Person the parties meant to benefit; they have rights. Example: Your spouse in a life insurance contract.

direct/primary/express beneficiary

Same as intended beneficiary—directly named to benefit. Example: “Payment goes to Maria.”

promisor

Person making the promise. Example: Insurance company promising to pay.

promisee

Person receiving the promise. Example: The person who buys the insurance plan.

creditor beneficiary

Third party who benefits because a debt is owed to them. Example: Contract says payment goes directly to someone you owe money to.

donee beneficiary

Third party who benefits as a gift. Example: Parent buys life insurance naming child as beneficiary.

vest

When a third party’s rights become legally enforceable. Example: A beneficiary’s rights vest once they are notified.

incidental beneficiary

Someone who benefits accidentally and has no legal rights. Example: Construction near a store increases foot traffic—but store can’t enforce contract.