Contracts Law Applied Practice Exam Concepts

Comprehensive vocabulary flashcards covering key contracts law principles, defenses, conditions, doctrines, and remedies derived from the 60 practice exam questions.

Preliminary Negotiation

Initial exploratory discussions or statements of vague future intent (such as a homeowner stating they might pay to remodel someday) that fall short of constituting a definite, binding offer.

Invitation to Bargain

A general advertisement or promotional statement (such as laptops starting at a set price without identifying specific inventory or promising to sell to every respondent) that invites negotiations rather than serving as an automatically binding offer.

Indefiniteness

A fatal lack of essential terms and specificity in an agreement—such as a promise to deliver 'a reasonable amount of furniture whenever convenient'—that makes the promise unenforceable.

UCC Firm-Offer Rule

A rule providing that a signed, written promise by a merchant giving assurance that an offer will be held open remains irrevocable for the stated period (or a reasonable time) up to a three-month limit, without requiring consideration.

Counteroffer

A response to an offer proposing different or altered terms (such as offering to sell a car for $\$8{,}500$ in response to an offer of $\$8{,}000$) which operates under common law as a rejection of the original offer.

Method and Deadline of Acceptance

The requirement that an offeree must strictly follow the specific communication mode and timeframe designated by an offer; failure to comply renders an attempted acceptance ineffective.

Additional Terms Between Merchants (UCC)

Under the majority UCC approach, minor, non-material terms included in an offeree's acceptance form between merchants that automatically become part of the contract unless an exception applies.

Reward Offer

A public notice promising payment to anyone who completes a specified act (such as finding and returning a lost dog), which forms a unilateral contract accepted by actual performance.

Revocation

The withdrawal of an offer by the offeror communicated to and received by the offeree prior to acceptance, effectively terminating the offer.

Option Contract

A binding agreement in which consideration (such as paying $\$100$) is given to hold an offer open for a specified duration, preventing the offeror from revoking it during that window.

Gratuitous Promise

A promise made voluntarily without receiving anything of legal value in return (such as promising money simply out of friendship), which lacks consideration and is generally unenforceable.

Illusory Promise

A statement disguised as a promise that commits the promisor to nothing and retains complete discretion over performance (such as 'We will hire you if we happen to need someone').

Past Consideration

An act or benefit completed prior to a subsequent promise of payment; under general contract law, it does not constitute valid consideration to support a new contract.

Preexisting Duty Rule

The common-law principle that performing or promising to perform an existing legal or contractual obligation does not constitute new consideration for a contract modification.

Unforeseen Circumstances Exception

An exception to the preexisting duty rule allowing renegotiated compensation when a party encounters unanticipated, substantial difficulties (such as unexpected road subsidence) during performance.

Promissory Estoppel

An equitable doctrine enforcing a serious promise lacking traditional consideration when the promisee reasonably relies on it, changes their position, and suffers a substantial loss.

Restitution for Benefits Conferred

An equitable remedy requiring a party to pay for benefits received and retained under circumstances where retaining them without payment would be unjust, even in the absence of an enforceable contract.

Minor's Incapacity (Voidable Contract)

The legal rule establishing that a contract for a non-necessity entered into by a person under legal age (such as a 17-year-old) is voidable at the minor's election.

Lack of Mental Capacity

A contract defense available when an individual enters an agreement while so impaired that the other party has reason to know they cannot understand the nature and consequences of the transaction.

Unconscionability

A defense against the enforcement of a contract or clause that is overwhelmingly one-sided, oppressive, or unfair, such as combining arbitrary eviction terms with an extraordinarily unfair rate.

Illegality

A fundamental defense rendering an agreement void and unenforceable because it requires the performance of an act prohibited by statute or public policy.

Duress

A defense negating mutual assent when a party is coerced into signing an agreement through unlawful threats or physical force.

Undue Influence

The unfair persuasion or overpowering of a vulnerable person's independent judgment by someone in a position of trust or confidence (such as a caregiver over an elderly person).

Mutual Mistake

An error shared by both contracting parties regarding a basic, material assumption on which the contract was made (such as both believing a replica painting is an original), permitting rescission.

Fraudulent Misrepresentation

A false statement of material fact made with knowledge of its falsity and intent to deceive, upon which the other party reasonably relies to their detriment.

Innocent Misrepresentation

A false statement of material fact made honestly without intent to deceive; justifiable reliance by the injured party allows rescission of the contract but generally does not support damages.

Statute of Frauds

A statutory requirement dictating that specific categories of agreements must be evidenced by a signed writing to be legally enforceable; oral contracts without an applicable exception may be unenforceable.

Statute of Frauds: Marriage Provision

A provision requiring contracts made in consideration of marriage, beyond mutual promises to marry, to be in writing to be legally enforceable.

Statute of Frauds: One-Year Provision

A provision requiring service contracts that cannot possibly be fully performed within one year from the date of agreement to be in writing.

Part Performance Exception (Land)

An exception to the Statute of Frauds allowing enforcement of an oral contract to transfer real property when the buyer takes possession and makes substantial improvements.

Guarantor/Surety Provision

A Statute of Frauds provision requiring a written agreement when a person collateral promises a creditor to pay the debt of another if that primary debtor defaults.

Specially Manufactured Goods Exception

A UCC Statute of Frauds exception enforcing an oral contract for goods uniquely custom-made for the buyer that cannot be resold to others in the ordinary course of business, once manufacturing has begun.

Judicial Admission Exception

An exception to the UCC Statute of Frauds that permits enforcement of an oral goods contract up to the quantity of goods admitted when the party against whom enforcement is sought admits the agreement in court.

Merchant Confirmation Memorandum

A written, signed confirmation of an oral agreement sent by one merchant to another that satisfies the Statute of Frauds against the recipient if they fail to object within the applicable statutory period.

Parol Evidence Rule

A substantive rule of law barring the introduction of prior or contemporaneous oral agreements that contradict or alter the terms of a complete, final integrated written contract.

Parol Evidence Ambiguity Exception

An exception allowing extrinsic evidence to be introduced to clarify the intended meaning of a term or phrase in a written contract that is reasonably susceptible to multiple interpretations.

Parol Evidence Modification Exception

The rule permitting evidence of mutual oral modifications agreed to and acted upon by parties subsequent to the execution of the original written agreement.

Condition Precedent

An event or state of affairs that must occur or be fulfilled (such as passing a designated inspection) before a contractual duty or payment obligation becomes active.

Condition Subsequent

A contractual provision specifying an event that, upon its occurrence, extinguishes or discharges an existing duty of performance.

Concurrent Conditions

Mutually dependent contractual conditions requiring both parties to tender their promised performances simultaneously.

Personal Satisfaction Condition

A subjective contract clause requiring that performance (such as a commissioned artwork) must meet the personal approval of the obligor before payment becomes due.

Waiver

The voluntary relinquishment of a known contractual right, demonstrated explicitly or implicitly by conduct (such as repeatedly accepting late rent payments without objection).

Accord and Satisfaction

A method of discharging a claim or debt whereby the parties agree to a substitute performance (the accord) and subsequent execution of that performance (the satisfaction) settles the debt.

Novation

A mutual agreement among all affected parties that substitutes a new party for an original contracting party, completely discharging the original party from liability.

Discharge by Operation of Law

The termination of contractual obligations by application of legal rules rather than party agreement, such as when the applicable statute of limitations expires.

Impossibility

A doctrine that excuses contract performance when an unforeseeable intervening event without party fault renders performance objectively impossible (such as the total destruction of a unique venue by fire).

Impracticability

A doctrine excusing performance when an extreme and unforeseen event (such as a new regulatory hurdle) makes performance excessively difficult, burdensome, and costly, though not literally impossible.

Frustration of Purpose

A doctrine excusing performance when an unforeseen supervening event completely destroys the central, mutually understood underlying purpose for entering into the contract.

Substantial Performance

A doctrine in which a party fulfills almost all contractual obligations with only minor, non-material variances, leaving the contract valid while deducting damages for the minor shortfall.

Material Breach

A substantial failure of performance that goes to the heart of the agreement and deprives the nonbreaching party of the main benefit of the bargain, excusing their reciprocal performance.

Anticipatory Repudiation

A clear, unequivocal statement or indication by an obligor before the time of performance has arrived announcing that they will not perform their contractual duties.

Tender of Performance

An unconditional offer by a party ready, willing, and able to perform their contractual obligations exactly as agreed, triggering the receiving party's reciprocal duty to accept.

Expectancy Compensatory Damages

Damages designed to put the injured party in the financial position they would have occupied had the contract been fully performed, giving them the full benefit of the bargain.

Consequential Damages

Special damages that do not flow directly from the breach itself but result as a foreseeable consequence of the breach (such as lost resale profits known to the seller at contracting).

Incidental Damages

Reasonable commercial expenses incurred by a nonbreaching party in directly handling, storing, transporting, or securing substitute performance following a breach.

Reliance Damages

An alternative damage measure compensating an injured party for expenses incurred and resources invested in preparing for or performing the contract, restoring them to their pre-contract position.

Liquidated Damages

A predetermined sum stipulated in a contract setting the reasonable compensation due in the event of a breach where actual losses would be difficult to estimate.

Nominal Damages

A trivial, token monetary sum awarded by a court to acknowledge a technical legal breach of contract when no actual financial or material injury has been established.

Mitigation of Damages

The rule requiring an injured party to take reasonable, timely steps to avoid unnecessary losses and minimize damages resulting from a breach, barring recovery for avoidable harm.

Specific Performance

An extraordinary equitable remedy ordering a breaching party to complete performance as promised, available when monetary damages are inadequate due to the unique nature of the subject matter.