Business Law Chapter 7

expectation of performance

a promise that others rely on

freedom of contract principle

recognizes promises in an agreement as legally binding

freedom of contract principle allows individuals to

regulate affairs by private agreements

freedom of contract has limitations to

prevent bargaining abuse and illegal agreements

promise

a commitment that something will or will not happen

promisor

the person making the promise

promisee

to whom the promise is made

contract

a promise that can have a remedy by law if breached OR has a performance that is recognized by law as a duty

award of dollar damages

type of remedy given for breach of contract

specific performance (type of remedy)

promisor is forced to actually perform breached promise

joint liability

each promisor undertakes the duty to render the same performance

severally liable

each party is liable along/individually

liability is several if

each copromisor promises a separate performance to be rendered respectively OR makes a separate promise that the same performance will be rendered

promisors can be jointly and severally liable if

promisors bind themselves as one party AND as separate parties

two requirements for a promise to be enforceable

an agreement and consideration

four categories of defects

lack of contractual capacity of one or both parties, lack of agreement due to factors, a contractual purpose that is illegal or contrary due to public policy, lack of proper formality when legal formalities are required

defects render contractual promises

unenforceable or voidable

unenforceable contract

has no remedy for a breach

a contract is unenforceable if

its performance is illegal on contrary to public or if it is not evidenced in writing

void promise

totally without legal effect or force. It is missing an agreement or consideration

voidable contract

one or more parties has the power to elect to avoid the legal relations created by the contract

disaffirmance

avoidance of a voidable contract

informal contract

has the basic elements of contract formation

formal contract

governed by special rules based on the type of formal contract

types of formal contracts

contracts under seal, recognizance, and negotiable contracts

contracts under seal

lacks consideration, enforced by special formalities

formalities of contract under seal

in writing, has a wax seal, delivered directly to the promisee

recognizance contracts

involves a promise in court to make certain payment unless specified events occur

negotiable contracts

pervasive and fundamental in business

types of negotiable contracts

negotiable instruments, documents of title, investment securities

unilateral contract

contains one promise for one of the parties

bilateral contract

at least two promises are exchanged, in which both parties are the promisor and the promisee

express contract

contract arising from written or oral language

implied in fact

contract inferred from conduct other than language

quasi-contract

implied in law, imposes a promise to pay the reasonable value of the benefit conferred

executed contract

contract that has been completed

executory contract

contract that has yet to be completed

a contract can be partially executed and/or partially executory at blank time

any

discharge

to extinguish or terminate a contractual obligation, typically after they’ve been fully performed

contractual obligations can be discharged before full performance if

if performance is impractical, there is a mutual agreement to rescind contract, the parties substitute or compromise contract, one party breaches the contract

what happens in the preliminary negotiation stage?

Parties discuss matters of the contract

what happens when binding contractual promises are created?

The law decides who is entitled to enforce the promise and who is required to perform the promise, and if third parties have any rights or obligations

what happens if a duty to perform is breached?

The party that breached the contract is liable to the other for a contract remedy

What are two sources of contract law?

The UCC Article 2 and common law

goods

all things which are movable at the time of identification to the contract for sale

merchant

a person who deals in good of the kind OR holds knowledge or skills particular to the business practices or goods involved in the transaction