BUL3310 Exam 2 Adkins concepts

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78 Terms

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contract

legally enforceable promise or set of promises

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why are contracts fundamental to business and a well functioning market economy?

they protect the expectations of parties who exchange value in commercial dealings

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what do businesses rely on to protect expectations and facilitate planning

contracts

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contracts are primarily governed by

state law

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what do courts refer to for guidance when governing contract law?

-Restatement (Second) of Contracts
-Uniform Commercial Code (UCC)

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what is the Restatement (Second) of Contracts?

legal guide that summarizes general contract law principles.

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What is the Uniform Commercial Code (UCC)?

governs contracts involving the sale of goods and ensures fairness in business transactions

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Freedom of Contract

individuals and businesses have the freedom to enter into contracts with terms they agree upon, without government interference—so long as the contract is legal and fair

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What kind of contracts does the Restatement (Second) of Contracts primarily apply to?

contracts not involving the sale of goods

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arm's length bargaining

both parties in a contract act independently and in their own self-interest, without pressure, coercion, or special relationships affecting the negotiation

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What is a limitation of freedom of contract

cannot violate ethics or public policy

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what notion is every contract premised on?

good faith

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why is good faith important in contract law

ensures that neither party deceives, manipulates, or unfairly takes advantage of the other.

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How does the Uniform Commerical Code (UCC) define good faith?

Honesty in fact and the observance of reasonable commercial standards of fair dealing

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Types of Contracts

Bilateral, Unilateral, Explicit, Implied

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bilateral contract

-Most common type of contract
-BOTH parties exchange promises

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unilateral contract

Only ONE party makes a promise

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explicit contract

terms clearly stated (written or oral)

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implied contracts


terms not explicity stated, but inferred by behavior

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example of a bilateral contract

Jane sells her car to Joe for $10,000

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example of a unilateral contract

reward for finding a lost dog

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example of explicit contract

You hire a plumber to fix a leak, and the plumber provides a quote. You agree, and the plumber performs the service.

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example of an implied contract

You get into a taxi, and the driver takes you to your destination.

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The Statute of Frauds

requires certain contracts to be in writing to be enforcable

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what kinds of contracts does Common Law require to be in writing?

MYLEGS

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what kind of contracts does the UCC require to be in writing?

-Sale of goods over $500
-Lease of goods over $1,000

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what is a valid contract

-has all required elements: Mutual Assent, Consideration, Legality of Purpose, Capacity
-be legally enforceable

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Mutual Assent

offer + acceptance = meeting of the minds

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an offer:

A promise to do (or not do) something in exchange for something else.

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requirements for a valid offer

-objective intent
-definiteness
-communication

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objective intent


The offeror must intend to create a binding agreement.

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Definiteness


The terms must be clear enough for a court to enforce.

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communication

The offer must be communicated to the offeree

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exceptions to an offer

-advertisements are not offers, just an invitation to make an offer
-if an advertisement is spcific and leaves nothing open for negotiation, it can be a valid unilateral offer.

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Termination of an offer by the parties

-revocation
-rejection
-counteroffer

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revocation

offeror withdraws the offer before acceptance.

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rejection

offeree refuses the offer

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counteroffer

offeree proposes new terms (which cancels the original offer)

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termination of an offer by law

-Lapse of time
-Death or incapacity of either party
-Destruction of subject matter
-Supervening illegality

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lapse of time

offer expires after a reasonable period

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supervening illegality

offer becomes illegal before acceptance.

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Destruction of subject matter

subject matter becomes destroyed and cannot fulfill

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acceptance

offeree's agreement to terms

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mailbox rule

acceptance is effective when sent (not when recieved)

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what does the mailbox rule protect the offeree from

last-minute revocation by the offeror

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mistakes in mutual assent

-mutual mistake
-unilateral mistake

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mutual mistake


If both parties are mistaken about a key fact, the contract may be canceled

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Unilateral Mistake

If only one party is mistaken, the contract is still enforceable.

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Consideration


something of value exchanged by both parties

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Forms of Consideration

-bargained for exchange
-forbearance
-nominal consideration

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bargained for exchange

promise in exchange for something else.

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forbearance

a promise not to do something

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nominal consideration

a symbolic amount to make an agreement binding

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agreements that lack consideration

preexisting duty
illusionary promise
past consideration
promissory estoppel

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preexisting duty


A promise to do something you are already legally obligated to do is not consideration.

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illusionary promises

A vague or optional promise is not legally binding.

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past consideration

A past action cannot be used as consideration for a new promise.

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Promissory Estoppel

Even if there is no consideration, a promise may be enforced if one party relied on it to their detriment.

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what is a void contract

A contract that lacks one or more required elements and is not in conformance with the law from the beginning.

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What is a voidable contract?

When one or more parties have the legal right to cancel under special circumstances

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What are some reasons a contract may be voidable?

-Minors
-Fraud
-Duress
-Undue Influence

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What is an unenforceable contract?

When one party asserts a legal defense to performing the contract

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an example of an unenforceable contract.

A verbal agreement to sell a house

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an example of a voidable contract

A 17-year-old buys a car under a contract

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an example of a void contract

A contract to sell illegal drugs

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legality of purpose

Contracts must be for a legal purpose—both the subject matter and performance of a contract must be lawful.

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types of illegality in contracts

-Barred by Statute
-violates Public Policy

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example of illegality barred by statute

a person without a medical license performing surgery

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what does it mean if a contract violates public policy?

goes against common sense or harms society

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when can an NDA be found unenforcable?

they suppress illegal activity or violate public interest

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when can a Non-compete agreement be illegal?

they are too broad in restricting a person's right to work

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General rule of enforceability

Contracts with an illegal purpose are void and cannot be enforced

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Executory (Unperformed) Contracts

If neither party has performed yet, the contract is void

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Partially Performed Contracts

-If the contract is partially valid and separable, courts may enforce the legal part.
-If not separable, courts may allow restitution

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capacity

a person's ability to understand and appreciate the terms of an agreement.

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If someone lacks capacity, their contract is _____.

voidable

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who lacks capacity?

-minors
-mentally incompetent persons
-intoxicated persons

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what is the general rule when it comes to contracts with minors?

Contracts with minors are voidable at the minor's option