Studied by 7 people
Promise
A commitment or willingness to be bound to a contract obligation
Uniform Commercial Code (UCC)
The most successful attempt to have states adopt a uniform law Purpose is to simplify, clarify, and modernize the laws governing commercial transactions
Goods
Tangible (touchable), movable personal property
Bilateral Contract
Promise in exchange for a promise Involves promisor and promisee Usually made to a specific person Acceptance, then performance later Binding even when promise hasn't been fulfilled yet Ex) work order to paint house
Unilateral Contract
Promise in exchange for an action Made to the whole world Acceptance and performance happen at the same time Not binding until action has been done Ex) lost dog poster and reward
Express Contracts
A contract in which parties show their agreement in words
Implied-in-fact Contracts
A legally enforceable agreement inferred from the circumstances and conduct of the parties
Implied-in-law Contract
A quasi-contract; not a true contract Legal fiction that the courts use to prevent unjust enrichment and wrongdoing Courts permit the person who conferred a benefit to recover the reasonable value of that benefit Nonetheless, the elements of a true contract are not present
Quasi-contract
An implied-in-law contract; not a true contract Legal fiction that the courts use to prevent unjust enrichment and wrongdoing Courts permit the person who conferred a benefit to recover the reasonable value of that benefit Nonetheless, the elements of a true contract are not present
Enforceable Contract
A contract that can be enforced in court
Unenforceable Contract
A contract that cannot be enforced in court
Valid Contract
A contract that contains all of the proper elements of a contract
Void Contract
A contract that is empty, having no legal force; ineffectual, unenforceable Ex) drug sale, killer-for-hire
In Pari Delicto
The parties to an illegal contract are equally at fault
Voidable Contract
Capable of being declared a nullity, though otherwise valid Party taken advantage of can avoid contract; other party cannot
Executed Contract
A contract that is fully accomplished or performed, leaving nothing unfulfilled
Executory Contract
An agreement that is not completed Remains this state until the performance required in a contract is completed
Offer
A contractual communication that contains a specific promise and a specific demand Definite, present intent to be bound to a contract Initiates the process of making a contract
Indefiniteness
When the terms of an agreement are not sufficiently specific, the agreement does not rise to the level of a contract
Revocation
The contractual communication of withdrawing an offer Cannot be done upon completion of performance
Rejection
The refusal of an offer Terminates an offer Cannot be reversed
Counteroffer
An offer made in response to another's offer Acceptance must be for as it is Usually made in place of an acceptance Usually terminates an offer
Lapse of Time
When the offeree fails to accept by a deadline defined in the offer or after a reasonable period of time
Subject Matter Destruction
When the object of the contract is destroyed or legally eliminated
Offeror Death or Insanity
When the offeror no longer has the capacity to make the offer
Subject Matter Illegality
Offer is automatically revoked if illegal Also Subsequent Illegality
Acceptance
The contractual communication of agreeing to another's offer Creates a contract
Mirror Image Rule
The common law rule that the terms of an acceptance offer must mirror exactly the terms of the offer Any variation of terms would make the attempted acceptance a counteroffer
Mailbox Rule
The rule that an acceptance is effective once it is sent
Deposited Acceptance Rule
The contractual doctrine that a binding acceptance of an offer occurs when a mailed acceptance is irrevocably placed with the postal service
Consideration
Contracts must be two-sided to be enforceable
Accord and Satisfaction
Payment of money, or other thing of value, usually less than the amount demanded, in exchange for cancellation of a debt that is uncertain in amount
Firm Offer
An offer in signed writing by a merchant to buy or sell goods; it gives assurance that the offer will be held open for acceptance under the Uniform Commercial Code (UCC)
Option
A contractual arrangement under which one party has for a specified time the right to buy certain property from or sell certain property to the other party Essentially a contract to not revoke an offer
Promissory Estoppel
Court enforcement of an otherwise unbinding promise if injustice can be avoided only by enforcement of the promise Substitute for consideration
Capacity
Mental ability to make a rational decision that includes the ability to perceive and appreciate all relevant facts Required element of a contract
Covenants Not to Compete
An agreement in which one party agrees not to compete directly with the business of the other party; may be limited by geography or length of time
Fraud
A false representation of fact made with the intent to deceive another that is justifiably relied upon to the injury of that person
Misrepresentation
An untrue manifestation of fact by word or conduct; may be unintentional
Mutual Mistake
A situation in which parties to a contract reach a bargain on the basis of an incorrect assumption common to both parties
Rescission
A contractual remedy that cancels the agreement and returns the consideration exchanged to each party
Unilateral Mistake
Arises when only one of the parties to a contract is wrong about a material fact Not usually a basis for rescinding a contract
Duress
Being under threat of physical harm or illegal economic harm A recognized defense to any act that must be voluntary in order to create liability in the actor
Undue Influence
A defense to contract enforcement available when one is taken advantage of unfairly by a party who misuses a position of relationship or legal confidence
Leading Object Rule
An exception to the statute of frauds' writing requirement for collateral promises Occurs when the promisor's commitment is primarily intended to serve the promisor's own interests
Leyden v. American Accreditation Healthcare Commission (2015)
Enforcing implied-in-fact agreements is an important means of ensuring that two parties' intent to make binding promises is honored
Implied-in-fact agreements must contain the same elements as express contracts, including acceptance and consideration
Employers can weaken the presumption of an at-will employment relationship by making statements about employee rights and expectation in policies and manuals
Gottlieb & Co., Inc. v. Alps South Corporation (2007)
The court found that Gottlieb's term (consequential damages limitation) was included in the contract even though it appeared only on Gottlieb's forms and was not specifically discussed by the parties
Alps' failure to read Gottlieb's forms was irrelevant, according to the court. This is generally true as a contract law principle
If Alps foresaw the likelihood of certain outcomes, such as consequential damages from customer complaints, it should have addressed it with Gottlieb
Vassilkovska v. Woodfield Nissan, Inc. (2005)
Contracts require consideration for both promises. Care must be taken in limiting one's obligations, particularly if the result is no legal detriment at all
The amount of consideration is generally not an issue, but it must be more substantial than simply an acknowledgement or statement
Parol Evidence Rule
When a written contract exists, it is very strong evidence Excludes the introduction of evidence of prior written or oral agreements that may vary, contradict, alter, or supplement the present written agreement Exception example:
When the parties to an agreement do not intend for that agreement to be final and complete, then parol evidence is admissible
Duty of Performance
Legal obligation of a party to a contract
Discharge
Act that forgives further performance of a contractual obligation
Condition Precedent
Event that must occur before a duty of immediate performance of the promise arises Contracts often provide that one party must perform before there is a right to performance by the other party Ex) Completion of a job is needed for payment for that job. One contracting party's failure to perform this permits the other party to refuse to perform, cancel the contract, and sue for damages.
Condition Subsequent
A fact that will extinguish a duty to make compensation for breach of contract after the breach has occurred
Express Conditions
Conditions that are explicitly set out in a contract
Implied Conditions
Conditions to a contract that are implied by law rather than by contractual agreement
Concurrent Condition
Mutual condition under which each party's contractual performance is triggered by the other party's tendering (offering) performance
Delivery
The physical transfer of something In sale-of-goods transactions, transfer of goods from seller to buyer
Tender Performance
The offer by one contracting party to perform a promise; usually associated with the offer to pay for or to ship items under the contract
Complete Performance
A party performs all of its obligations under a contract
Material Breach
Materially deficient or nonexistent performance of one's obligations under a contract
Substantial Performance
Degree of performance recognizing that a contracting party has honestly attempted to perform but has fallen short Entitled to the price promised by the other less that party's damages
Impossibility of Performance
A defense to contractual nonperformance based on special circumstances that render the performance illegal, physically impossible, or so difficult as to violate every reasonable expectation the parties have regarding performance
Commercial Impracticability
A Uniform Commercial Code (UCC) defense to contractual nonperformance based on happenings that greatly increases the difficulty of performance and that violate the parties' reasonable commercial expectations
Waiver
An express or implied relinquishment of a right
Release
The relinquishment of a right or claim against another party
Compensatory Damages
Usually awarded in breach-of-contract cases to pay for a party's losses that are a direct and foreseeable result of the other party's breach The award for these damages is designed to place the non-breaching party in the same position as if the contract had been performed
Consequential Damages
The amount of money awarded in a breach-of-contract case to the non-breaching party to pay for the special damages that exceed the normal compensatory damages May be created by lost opportunities if the breaching party was aware of the special nature of this contract Can be unlimited Domino effect of damages
Punitive Damages
Monetary damages in excess of a compensatory award, usually granted only in intentional tort cases where defendant's conduct involved some element deserving punishment
Liquidated Damages
Simple compensation stated in contract
Mitigate
To lessen the consequences of Usually used to refer to the contractual duty to lessen damages following breach of contract
Equitable Remedy
A remedy fashioned by a court when money damages are not adequate (i.e., there is "no adequate remedy at law") Ex) Injunctions and rescission of a contract
Restitution
A contractual remedy involving one party returning to another the value previously received
Injunction
A court order directing a party to do or to refrain from doing some act
Specific Performance
Equitable remedy that requires defendants in certain circumstances to do what they have contracted to do
Third-party Beneficiaries
Persons who are recognized as having enforceable rights created for them by a contract to which they are not parties and for which they have given no consideration
Assignment
A transfer of contractual rights
Assignor
An original contracting party who assigns or transfers contractual rights to a third party
Assignee
A third party, who is not an original contracting party, to whom contractual rights are transferred May enforce the original contract
Delegate
A transfer of contractual duties
Delegator
An original contracting party who delegates or transfers contractual duties to a third party
Delegatee
A third party, who is not an original contracting party, to whom contractual duties are transferred Will perform under the original contract
Anti-assignment Clause
A contractual provision that prevents a party from assigning rights or delegating duties without the permission of the other party
Novation
The substitution of a new contract in place of an old one
St. Louis Produce Market v. Hughes (2013)
The failure of a condition precedent can excuse a party's performance, even if it is minor. Similarly, the existence of a minor condition subsequent can cut off a party's obligation to perform
Parties often use conditions to ensure that a transaction occurs under favorable and anticipated circumstances
Parties should carefully consider whether conditions are necessary and understand that they may, at times, provide hold-up power to one side
East Capitol View Community Development Corp. v. Robinson (2008)
Courts are reluctant to excuse performance due to impossibility or impracticability
The court specifically distinguishes between objective impossibility and personal impossibility. Only the former excuses performance
Contracting parties have the ability to allocate known risks in the contract. For that reason, impossibility must be an unexpected ocurrence
Oliver v. Ball (2016)
When a contract involves unique subject matter, courts may award specific performance because there is no amount of money that can make up for the failure of the contractual promise
Land is a common context for the award of specific performance because it is such a unique asset
Contract Law
Tension between freedom of contract and consumer/public protection
Elements of a Contract
Agreement (offer and acceptance), capacity and genuine assent, consideration, lawful purpose, lawful form
Leonard v. PepsiCo (2000)
Determined that the Harrier Fighter jet that was not on the catalog was NOT an offer
Lack of Capacity
One party is too young or mentally incompetent to form a contract
Lack of Genuine Assent
One party was tricked (fraud) or forced (duress)
Both parties were confused about essential part of contract (mutual mistake)
Lucy v. Zehmer (1954)
Zehmer's drunkenness when entering contract did not excuse him out of the contract
Johnson v. Harmon (1876)
"Both minds must meet in such a transaction; and if one is so weak, unsound, and diseased that the party is incapable of understanding... he is incompetent"
Exceptions for Contracts without Capacity
Contracts for necessaries, ratified contracts, emancipated minors, under certain state laws
Coogan's Law
CA Child Actor's Bill Exception of contracts without capacity
Sherwood v. Walker (1887)
Contract for selling of barren cow that wasn't actually barren was mistake of character Contract was void
Wood v. Boynton (1885)
Selling of valuable stone that turned out to be a diamond is mistake of value Since diamonds are valuable stones, contract was NOT void
Gratuitous Promise
Non-legally-binding promise
Nominal Consideration
Token amount identified in a written contract when parties either cannot or do not wish to state the amount precisely Ex) The Freemasons of Lodge St. George, Bermuda
Price of yearly rent is one peppercorn
Pre-existing Obligation
Can't use something you already are required to do as consideration UCC has exception for good-faith modifications to sales of goods
Note
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