Contract Law Study Guide

FML

Surety

A person who promises to pay the debt or to satisfy the obligation of another person (the principal)

Guarantor

A person who makes or gives a guaranty

Obligor

The person who owes an obligation to another; a promisor 

Leading object rule

The rule that a contract to guarantee the debt of another must be in writing does not apply if the promisor’s “leading object” or “main purpose” in giving the guaranty was to benefit himself or herself 

Probate

The judicial act or process whereby a will is adjudicated to be valid

Antenuptial

Written contracts executed prior to marriage which divide the parties’ real and personal property in the event of divorce

Principal

In an agency relationship, the person for whom the agent acts and from whom the agent receives his or her authority to act 

Agent

One of the parties to an agency relationship, specifically the one who acts for and represents the other party, who is known as the principal 

Strict construction doctrine

A narrow or literal construction of written material

Four corners doctrine

The face of a document or instrument; relates to the act of construing a document based upon the document alone, without recourse to extrinsic evidence 

Plain meanings

The rule that in interpreting a contract whose wording is unambiguous, the courts will follow the “generally accepted meaning” of the words used 

Custom

A practice that has acquired the force of law because it has been done that way for a long time

Parol evidence rule

Evidence of prior or contemporaneous oral rule that written contracts may not be varied, contradicted, or altered by any prior or contemporaneous oral declarations 

Merger clause

A clause that states all prior oral or written agreements are merged into the existing document; related to the parol evidence rule 

Integrated contract

A written contract that contains all the terms and conditions of the parties’ agreement and cannot be modified by parol evidence 

Condition precedent

A condition that must first occur for a contractual obligation to attach 

Performance

The doing of that which is required by a contract at the time, place, and in the manner stipulated in the contract—according to the terms of the contract 

Concurrent condition

Conditions that occur at the same time 

Closing

Completing a transaction, particularly a contract for the sale of real estatel 

Express condition

A condition that is stated

Implied condition

A condition that is inferred by the law from the acts of the parties 

Constructive

A condition that is implied by a court to avoid an injustice or unfairness 

Termination

A method of discharging or ending contractual obligations 

Discharge

Release from a contract either by agreement or carrying out the obligations 

Substantial performance

Less than full performance of a contract; performance with minor defects or deviations in performance 

Rescission

Cancelling

Release

The act of giving up or discharging a claim or right to the person against whom the claim exists or against whom the right is enforceable

Novation

The extinguishment of one obligation by another; a substituted contract that dissolves a previous contractual duty and creates a new one 

Accord and satisfaction

An agreement between two persons, one of whom has a cause of action against the other, in which the claimant accepts a compromise in full satisfaction of a claim 

Force majeure

A provision in a contract that excuses nonperformance because of the occurrence of an unforeseeable event, such as an act of God 

Impracticability

Excuses a party from an obligation in a contract that has become unrealistic because of unforeseen circumstances

Frustration of purpose

An event that may excuse nonperformance of a contract because it defeats or nullifies the objective of the parties under which they entered into the contract 

Anticipatory breach

The announced intention of a party to a contract that it does not intend to perform its obligations under the contract 

Waiver

The intentional relinquishment or renunciation of a right, claim, or privilege that a person has

Estoppel

A prohibition against denying the validity or significance of acts done in performance of a contract

Damages

The sum of money that may be recovered in the courts as financial reparation for an injury or wrong suffered as a result of breach of contract or a tortuous act 

Equitable relief

Relief other than money damages

Compensatory damages

Damages recoverable in a lawsuit for loss or injury suffered by the plaintiff as a result of the defendant’s conduct. Also called actual damages 

Consequential damages

Indirect losses; damages that do not result from the wrongful act itself, but from the result or the aftermath of the wrongful act 

Speculative damages

Damages that have yet to occur and whose occurrence is doubtful 

Punitive (or exemplary) damages

Damages that are awarded over and above compensatory damages because of the wanton, reckless, or malicious nature of the wrong done by the plaintiff 

Tort

A wrong involving a breach of duty and resulting in an injury to the person or property of another 

Treble damages

A form of punitive damages or exemplary damages authorized by statute in some circumstances if warranted by the severity of the violation or the seriousness of the wrong 

Nominal damages

Damages awarded to a plaintiff in a very small or merely symbolic amount 

Liquidated damages

Contractually agreed to damages of the parties in the event of a breach 

Mitigation of damages

A doctrine in the law which requires an injured party to avoid or lessen the consequences of the other party’s wrongful act 

Lessee 

The person receiving the right of possession of real property, or possession and use of personal property, under a lease. Also known as a tenant

Equitable remedy

Nonmonetary remedy awarded when a legal remedy is inadequate 

Specific performance

The equitable remedy of compelling performance of a contract where damages are an inadequate remedy 

Injunction

A court order that commands or prohibits some act or course of conduct; form of equitable relief

Temporary restraining order (TRO)

Relief that the court is empowered to grant, without notice to the opposing party and pending a hearing on the merits, upon a showing that failure to do so will result in “immediate and irreparable injury, loss or damage.” 

Ex parte 

Refers to an application made to the court by one party without notice to the other party

Preliminary injunction

An injunction granted prior to a full hearing on the merits. Its purpose is to preserve the status quo until the final hearing 

Permanent injunction

An injunction granted after a final hearing on the merits

Rescission

Where a contract is canceled, annulled, or abrogated by the parties, or one of them 

Reformation

An equitable remedy available to a party to a contract provided there is proof that the contract does not reflect the real agreement 

Restitution

Remedy 

Quantum meruit

“As much as he deserved”. A concept that focuses on the reasonable compensation that a party should receive based upon the benefits or services received by the other party

Reliance

Remedy to prevent unjust enrichment; quantum meruit 

Election of remedy

A requirement in the law that a party to a lawsuit must choose between different types of relief allowed by law on the same set of facts. The adoption of one has the effect of barring use of the others

Third-party beneficiary contract

A contract made for the benefit of a third person

Beneficiary

A person who receives a benefit from a contract. 2. A person who is entitled to the proceeds of a life insurance policy when the insured dies 

Intended beneficiary

Third party who will specifically benefit from a contract

Donee beneficiary

Third-party beneficiary to a contract. The benefit is in the form of a gift which may be revoked 

Creditor beneficiary

A creditor who is the beneficiary of a contract made between the debtor and a third person 

Incidental beneficiary

A person to whom the benefits of a contract between two other people accrue merely as a matter of happenstance. An incidental beneficiary may not sue to enforce such a contract 

Privity

An identity of interest between persons, so that the legal interest of one person is measured by the same legal right as the other

Assignment

A transfer of property, or a right in property, from one person to another. 2. A designation or appointment 

Delegation

The act of conferring authority upon, or transferring a duty, to another 

Assignor

A person who assigns a right 

Assignee

A person to whom a right is assigned 

Uniform Commercial Code (U.C.C.) 

A statute that regulates commercial transactions in all 50 states

CISG (United Nations Convention on Contracts for the International Sale of Goods)

International agreement governing international sales transactions 

Seller 

A person or entity who sells property it owns; a vendor

Buyer

A person or entity who makes a purchase 

Merchant

A person who regularly trades in a particular type of goods

Accommodation

An obligation undertaken, without consideration, on behalf of another person 

Firm offers

Under the Uniform Commercial Code, a merchant’s written offer to buy or sell goods that will be held open for a period of time without requiring consideration to be valid 

Usage of trade

Any practice or method of dealing having regularity of observance in a place, vocation, or trade as to justify an expectation that it will be observed with respect to the transaction in question 

Sale

A transfer of title to property for money or its equivalent from seller to buyer 

Goods

All personal property or movables, commodities, including futures and fungibles

Common Carrier

 A person or company engaged in the business of transporting persons or property from place to place, for compensation

Bailee

The person to whom property is entrusted in a bailment 

Bailor

The person who entrusts property to another in a bailment 

Chapter 12 Acrynoms

• F.O.B.: Free on board 

• F.A.S: Free alongside ship 

• C.I.F: Cost, insurance, and freight 

• C & F: Cost and freight 

Ex-ship

contract where goods are shipped by sea 

No arrival, no sale

A term in a contract for sale of goods; if the goods do not arrive at their destination, title does not pass to the buyer, and there is no liability for the purchase price 

Draft

An order in writing by one person on another (commonly a bank) to pay a specified sum of money to a third person on demand or at a stated future time 

letter of credit

A written promise, generally by a bank, that it will honor drafts made upon it by a specified customer so long as the conditions described in the letter are complied with 

Irrevocable

The act of not withdrawing; not revocable 

Revocable

The ability to cancel or withdraw 

Consignment

Transaction where buyer accepts goods conditioned upon a future sale 

5 types of Contracts that must be in writing to be enforceable

• Contracts that cannot be performed within a year after making

• Contracts  of a third party to pay the debt of another;

• Contracts made by an executor or administrator of an estate to pay the debts of the decedent’s estate

• Contracts in consideration of marriage

• Contracts for the transfer of real property

An informal contract must have:

• The identity of the parties

• Subject Matter

• Material terms

• The price

• The signatures of the parties

What are 2 things courts look at when interpreting writing

• Words

• Intentions of the parties

The most important rule for contract interpretation?

Parol Evidence Rule

Parol Evidence Rule

States that oral evidence cannot be used to modify or alter a written contract

Merger Clause

Gives presumption of a final contract

Other scenarios where oral evidence can be used

• Ambiguity

• Condition Precent

• Destruction of mutual assent

Conditions that may qualify performance

• Condition precedent

• Condition subsequent

• Concurrent Conditions