BLAW Exam 2 book

contract

“a deal the law will enforce”

binding

A contract is a promise (or set of promises) that the law treats as _____

agreement, consideration, capacity, legal object

“is there a valid contract?” ACCL

agreement

ACCL: A (Offer + Acceptance)

1. One side proposes terms (offer), the other agrees to them (acceptance). 

consideration

ACCL: C (the trade / exchange)

Each side must give something up or promise something (money, work, time, giving up a right, etc.). 

Key idea: both sides have to be bound to something real. 

capacity

ACCL: C

the parties are legally able to contract 

Usually adults of sound mind, not extremely intoxicated, etc. 

legal object

ACCL: L

the deal’s purpose is legal 

If the contract is for something illegal or against public policy, it fails. 

genuine assent

Defenses (ways a contract might not be enforceable even if it looks valid) 

Defense type 1: No _____ _____ (no real “free agreement”) 

Even if it looks like a contract, it might not be enforceable if acceptance was obtained through: 

• fraud 

• duress (threats) 

• undue influence 

• misrepresentation 

improper form

Defenses (ways a contract might not be enforceable even if it looks valid)  

Defense type 2: _____ ____ (usually missing a required writing) 

Some agreements must be evidenced by a writing (Statute of Frauds—later chapter), or they can be valid but unenforceable. 

objective theory of contracts

Courts usually don’t care what you secretly meant. They care what you said/did. 

So courts ask: 
“What would a reasonable person think your words/actions meant?” 

That matters a lot for things like: 

• whether someone accepted 

• whether a website’s terms were noticeable 

• whether conduct implies a contract 

UCC, common law

____ Article 2 = contracts for the sale of goods 

• “Goods” = tangible, movable things (chairs, shoes, inventory, laptops) 

____ ____ = basically everything else 

• services, employment, leases of real estate, etc. 

UCC, common law

f it’s mostly about stuff being sold, think ___. 
If it’s mostly about work being done, think ____ ___. 

bilateral

bilateral vs unilateral contracts

promise for a promise 

• “I promise to pay you $1,000” + “You promise to paint my car.” 

• Contract forms as soon as promises are exchanged. 

unilateral

bilateral vs unilateral contracts

promise for an act 

• “I will pay $50 if you return my dog.” 

• Contract forms only when the act is completed (or at least begun, because the offer has to stay open for a reasonable time once performance starts). 

express

express vs implied contract

terms stated in words (written or spoken) 

• “You pay $X, I do Y.” 

implied-in-fact

express vs implied contract

created by conduct (actions) 

• You go to the dentist, they do the work, you didn’t discuss price—still implied you’ll pay. 

The typical checklist: 

1. Plaintiff provided goods/services 

2. Expected payment (and a reasonable person would expect to pay) 

3. Defendant had a chance to reject but didn’t 

Important: _______ contracts are “real” contracts—they still require agreement + consideration, just proven by behavior. 

quasi-contract

(implied-in-law) — NOT a real contract 

This is the “unjust enrichment” tool. 

Courts use it when: 

• someone got a benefit, 

• knew about it, 

• and it would be unfair to keep it without paying. 

Example: you watch workers repave your driveway and say nothing—court may make you pay fair value because you knowingly accepted the benefit. 

fairness remedy

Quasi-contract is a ____ _____, not an actual agreement. 

valid

Valid vs Void vs Voidable vs Unenforceable

meets all elements, enforceable.

void

Valid vs Void vs Voidable vs Unenforceable

Not a contract at all (illegal purpose or serious defect). 

• Example: contract to commit a crime. 

voidable

Valid vs Void vs Voidable vs Unenforceable

one party can choose to enforce it or cancel it. 

• Usually protects someone vulnerable (minor, fraud victim, duress victim, etc.). 

unenforceable

Valid vs Void vs Voidable vs Unenforceable

valid contract, but the court won’t enforce it because of some rule (like missing required writing, statute of limitations, etc.).

executed, executory

_____ = fully performed (done). 
_______ = still has duties left (ongoing). 

Most contracts start executory and become executed after performance. 

executory, executed

Most contracts start ____ and become ____ after performance. 

formal, informal

formal vs informal

____ special legal form required (rare in everyday life). 
Examples they list: 

• contracts under seal 

• recognizances (like bail bond) 

• letters of credit 

• negotiable instruments (checks, notes, CDs) 

_____ (simple) = everything else; no special form required. 
(“Simple” does not mean “small” — just means no special formalities.) 

plain-meaning rule

(“four corners”)

If the wording seems clear, courts read the words with their ordinary meaning and don’t use outside evidence. 

statute of frauds

rule that says 
some contracts must be in writing to be enforceable

It does NOT mean fraud happened. 
It just means certain contracts must be written. 

may

statute of frauds

If contracts are only oral → court (may/may not) refuse to enforce. 

evidence, prevents fake claims, forces seriousness

WHY the law requires writing (3 reasons) 

1. ____
   Writing proves the contract exists and what it says. 

2. ____ ____ ____
   Stops people from lying about oral agreements. 

3. _____ _____
   If something is important → put it in writing. 

MY LEGS

If a contract falls into one of these → must be in writing. 

marriage

MY LEGS: M

Promises tied to ____ other than just marrying 

• Prenups 

• “I’ll give you a house if you marry me” 

BUT: 
Mutual promise to marry = no writing required 

YEAR

MY LEGS: Y

(cannot be performed within 1 year) 

If contract cannot possibly be completed within 1 year → writing required. 

Key rule: 
It’s about possibility, not likelihood. 

Examples: 

• 2-year employment contract → writing required 

• Lifetime job → NO writing required (person could die tomorrow) 

• Construction project 2 years → may NOT need writing (could finish early) 
  If it’s possible to finish within 1 year → no writing needed. 

land

MY LEGS: L (real estate) 

Anything involving an interest in land must be written: 

• Selling land 

• Mortgages 

• Leases (usually long ones) 

• Transfer of property 

Why? Land = big deal → must be clear. 

executor

MY LEGS: E (estate debts) 

If executor promises to pay estate debt with their own money → must be written. 

If paying from estate funds → no writing required. 

goods

MY LEGS: G ($500+) 

Under UCC: 
Sale of goods $500 or more → writing required. 

BUT: 
Only quantity + signature needed (not full details). 

suretyship

MY LEGS: S (pay someone else’s debt) 

If you promise: 
“I’ll pay if he doesn’t” 

That is a secondary obligation → must be written. 

BUT exception: 
If main purpose is personal benefit → may NOT need writing 
(main-purpose rule) 

Example: 
Dad guarantees son’s loan so family business survives → may not need writing. 

who, subject, terms, signature, defendant

Writing must include: 

1. ___ the parties are 

2. ____ matter 

3. Essential ____

4. ________ (of person being sued) 

Only the ______ must sign. 

quantity

Special rule for goods (UCC) 

For sale of goods: 
ONLY required term = ____

That’s it. 

If writing says: 
“I’ll sell you 500 chairs – signed” 
That can be enough. 

admission, partial, promissory estoppel, UCC

Exceptions (when writing NOT required even if MY LEGS applies)  

1. _____ in court 

If person admits contract existed → enforceable 

2. ____ performance 

If contract already partly performed 
(court may enforce to avoid unfairness) 

3. ____ _____

If someone relied heavily on promise and it would be unfair not to enforce 

4. Special ____ exceptions 

• custom goods 

• merchants confirm deals 

• goods accepted/paid for 

parol evidence rule

Now assume: 
We DO have a written contract. 

Question becomes: 
Can someone bring in outside oral statements to change it? 

Basic rule: 

If contract is written and meant to be final → 
you cannot use prior or simultaneous oral statements to change it 

This is the ______ ________ _____

Think: 
Written contract = final version 
No “but we also said…” allowed 

later, clarifying, incomplete, fraud, trade usage

What parol evidence rule allows (EXCEPTIONS) 

Oral evidence IS allowed if: 

1. Agreement modified ___

After writing = allowed 

2. _____ ambiguity 

If wording unclear → can explain 

3. Contract _____ 

Missing key term → can fill gap 

4. Condition precedent 

Agreement depended on something happening first 

5. ___, duress, mistake 

To show contract invalid 

6. Typo 

To fix obvious error 

7. Prior dealings/____ ___ (UCC) 

To explain how parties usually operate 

contradicts, adds, meaning

What parol evidence rule blocks: 

You cannot introduce oral evidence that: 

• _____ written contract 

• ___ new terms 

• changes ______

IF it was said before or at same time as writing. 

integrated contract

If contract is intended as final and complete: 
→ called _____ _____

Then parol evidence mostly banned. 

merger clause

Many contracts include: 
_____ _____
“This is the complete and final agreement” 

That makes parol evidence even harder to use. 

offer, acceptance

A contract begins with agreement = ____ + _____

intent, definite, communication

To have a valid offer you need: 

1. Serious ___ to be bound 

2. ____ & certain terms 

3. _______ to the offeree 

If ANY of these missing → no valid offer → no contract. 

intent

3 elements of a valid offer

(seriousness) 

Courts use an objective standard 
→ What would a reasonable person think? 

NOT what the person secretly meant. 

Exam rule: 

If a reasonable person thinks it’s serious → it’s an offer 
Even if person says “I was joking” 

definite terms

3 elements of a valid offer

Offer must include clear material terms so court can enforce. 

Material terms usually: 

• Subject matter 

• Price 

• Quantity 

• Parties 

• Quality 

If terms too vague → no offer. 

communication

3 elements of a valid offer

Offer must be communicated to offeree. 

Only offeree can accept. 

If you overhear offer → you cannot accept. 

negotiations, ads, auctions

WHAT IS NOT AN OFFER? 

Preliminary ________

Just asking or discussing ≠ offer. 

Example: 
“Would you sell for $5,000?” 
→ NOT an offer (just inquiry) 

_____

Usually NOT offers 
They are invitations to make an offer. 

_____

Default rule: with reserve 

Auction WITH reserve 

Most common 
Seller can: 

• Reject bids 

• Cancel auction 
  Until hammer falls 

Auction WITHOUT reserve (absolute auction) 

Seller MUST accept highest bid 
Cannot withdraw once bidding starts 

revocation

 6 ways offers terminate

Offeror can revoke anytime before acceptance. 

Even if they said: 
“Open for 30 days” 

They can still revoke unless option contract exists. 

Exception: Option contract 

Offeree pays to keep offer open. 

Example: 
Pay $100 to hold house offer 30 days 
→ cannot revoke during that period 

rejection

 6 ways offers terminate

Offeree rejects → offer dead. 

Cannot change mind later unless new offer made. 

counteroffer

 6 ways offers terminate

______ = rejection + new offer. 

Example: 
Offer: $500 
Response: “I’ll pay $400” 
→ original offer dead 

Super important exam rule. 

death/incapacity

 6 ways offers terminate

If offeror dies or becomes incapacitated 
→ offer automatically ends 

illegality/destruction

 6 ways offers terminate

If subject becomes illegal or destroyed 
→ offer ends 

Example: 
Offer to sell boat 
Boat sinks → offer ends 

lapse of time

 6 ways offers terminate

If time stated → ends when time expires 
If no time → reasonable time 

Depends on product/situation. 

intent, exact terms, communication

Valid acceptance requires: 

1. ____ to accept 

2. Agree to _______

3. _____ to offeror 

bilateral

acceptance type: ___ contract

Promise for promise 
Accept by promising. 

unilateral

acceptance type: ___ contract

Promise for action 
Accept by performing. 

Example: 
$500 reward for lost dog 
Only accepted when dog returned 

mirror image rule

Acceptance must match offer EXACTLY. 

If terms change → counteroffer → no contract. 

Example: 
Offer: $5,000 
Accept: “Yes but remove confidentiality clause” 
→ counteroffer → original dead 

communication of method

Offeror can control method. 

If offer says: 
“Must accept by phone” 

Email = NOT valid acceptance. 

If no method specified: 
Any reasonable method works. 

mailbox rule

Acceptance effective when SENT 
Revocation effective when RECEIVED 

Example: 
You mail acceptance Monday 
Contract formed Monday 
Even if received Wednesday 

Does NOT apply to: 

• Phone 

• In person 

• Instant communication 

consideration

Even if you have an offer + acceptance 
there is NO contract without ______

consideration

something of value exchanged 

Both sides must give something. 

Can be: 

• Money 

• Promise 

• Action 

• Giving up a legal right 

bargained-for, bad deal

rules of consideration

RULE 1: Must be __________ exchange 

Each side must give something. 

If one side gives nothing → gift → not enforceable. 

RULE 2: Courts don’t care if it’s a ___ ___

Courts DO NOT evaluate fairness. 

If you overpay → too bad. 

As long as something of value exchanged → valid. 

Even: 
$1 for a house = valid consideration 
(if no fraud) 

promissory estoppel

Exception to consideration requirement 

Used when there’s NO consideration but promise should still be enforced. 

ilusory promise

Looks like a promise 
But actually commits to nothing. 

Not valid consideration. 

Example: 
“I’ll buy it if I feel like it” 

No real commitment → no contract. 

past consideration

____ ____ = no consideration 

If work already done 
Then promise made after 
→ not enforceable 

Example: 
Boss says: 
“You did great last year, I’ll give you stock” 

You already worked → no new consideration 
→ not enforceable 

preexisting duty rule

You cannot use something you already must do as consideration. 

Example: 

Contractor must finish pool by June 
Asks for extra $5k to finish 
You agree 

You don’t have to pay extra 
→ they already had duty to finish 

liquidated

__ debt

Amount owed is clear and undisputed. 

Example: 
You owe $3,000 credit card 

If creditor agrees to accept $2,000 
→ NOT binding 
They can still collect rest 

Why? 
You already owed full amount 
No new consideration 

unliquidated

_____ debt

Amount owed is disputed. 

Example: 
Contractor says you owe $9k 
You say $3k 

Dispute exists → unliquidated 

Now settlement for less CAN be binding. 

unliquidated, accept less, pays

How to settle disputed debt. 

3 requirements

1. Debt _____ (disputed) 

2. Creditor agrees to ___ ___

3. Debtor ____ agreed amount 

Once paid → debt gone. 

accord, satisfaction

____ = new agreement to pay less 
_______ = payment of that amount 

“paid in full” check rule

If debt disputed + check says “paid in full” 
and creditor cashes it 
→ usually creates accord & satisfaction 

BUT UCC exceptions: 
Businesses can: 

• Require special address for such checks 

• Return payment within 90 days 

capacity, legality

When is a contract NOT enforceable because of the person or situation? 

Two main topics: 

1. _____ → Does the person have legal ability to make a contract? 

2. ______ → Is the contract itself illegal or against public policy? 

If either is wrong → contract may be void or voidable. 

infancy, insane, intoxicated

3 I’s of incapacity

minor

MINORS

Contracts with minors are voidable by the ___

ONLY the ___ can cancel 
Not the adult 

Example: 
17-year-old buys car 
→ minor can cancel 
→ dealership cannot force them 

disaffirm, ratify

What does “voidable” mean? 

Minor can: 

• Cancel contract (_____) 
  OR 

• Keep it (____) 

Their choice. 

disaffirm

minors and contracts

(cancelling) 

Minor can cancel: 

• Before 18 

• Or shortly after turning 18 

Doesn’t need formal process 
Just words/actions showing cancellation. 

ratification

minors and contracts

(keeping contract) 

After turning 18: 
If they keep paying or using item 
→ contract becomes binding 

Cannot cancel later. 

necessaries

Minors still must pay for necessities 

_______= basic life needs: 

• Food 

• Clothing 

• Shelter 

• Medical care 

Why? 
So businesses will still sell essentials to minors. 

still

Minor lies about age? 

Usually ____ can cancel contract. 

But some states: 
If they lie → treated like adult 
Or must pay damages. 

valid

MENTALLY INCAPACITATED PERSONS 

Three possibilities: 

1. They understand contract → ____

Even if weird behavior. 

If they know: 
“I’m signing contract and must pay” 

voidable

MENTALLY INCAPACITATED PERSONS 

Three possibilities:

2. They don’t understand → _____

Can cancel if: 
Mental issue prevents understanding. 

Example: 
Thinks contract is autograph 
Not purchase agreement 

void

MENTALLY INCAPACITATED PERSONS 

Three possibilities: 

3. Adjudicated insane → ____

If court declared them insane 

• guardian appointed 

Any contract = automatically void. 

Guardian must sign instead. 

voidable

INTOXICATED PERSONS 

Contracts while drunk/high: 

Usually ____ IF: 

• Person too impaired to understand 
  AND 

• Other person knows it 

If just bad judgment: 
Contract still valid. 

valid, voidable

INTOXICATED PERSONS 

Example: 
Drunk but understands selling car → ___
So drunk they don’t understand → ______

void

VOID vs VOIDABLE

____ = never existed 

No contract at all. 

Example: 
Adjudicated insane 
Illegal contract 

voidable

VOID vs VOIDABLE

______ = real but cancelable 

One party can cancel. 

Example: 
Minor contract 
Drunk contract 
Mentally impaired contract 

void

LEGALITY (Is the contract itself illegal?) 

Even if both people agree 
Contract must be legal. 

Illegal contracts = ____

Courts won’t help enforce illegal stuff. 

crime, unlicensed, usury, gambling, sunday

COMMON ILLEGAL CONTRACTS 

1. ___ or tort 

Cannot contract to: 

• Sell drugs 

• Assault someone 

• Commit fraud 

Automatically void. 

2. ______ professionals 

If license required to protect public: 
No license → contract unenforceable 

Example: 
Unlicensed contractor builds house 
→ cannot sue for payment  

3. ____ (illegal interest rates) 

Charging illegal interest → illegal 

Outcome varies by state: 

• Some cancel interest 

• Some cancel whole loan 

4. _____ 

Illegal gambling contracts = void 
(Unless legal in state) 

5. _____/Sabbath laws 

Rare but possible: 
Some states restrict Sunday contracts. 

legal assent

A contract needs ______ _______
That means both people truly and voluntarily agreed. 

voidable

If assent is messed up → contract becomes ____

Why? 
Because there was no real “meeting of the minds.” 

mistake, misrepresentation, fraud, undue influence, duress

THE 5 THINGS THAT DESTROY LEGAL ASSENT 

1. ____ - both parties wrong about an important fact. 

2. _______ - false statement of fact that causes someone to enter contract.

3. ____ - Intentional lie

4. _____ _____ - unfair persuasion in a relationship of trust.

5. _____ -  forced agreement by threat.

If ANY of these occur → contract usually voidable 

mutual

legal assent - MISTAKE

Two types 

1. ____ mistake

Both parties wrong about key fact. 

If mistake involves material fact 
→ contract voidable 

Example: 
Both think painting is original 
Actually fake 
→ contract voidable 

Why? 
They agreed based on false assumption. 

unilateral

legla assent - MISTAKE

Two types 

2. ______ mistake 

Only ONE party mistaken. 

Usually: 
Contract still valid 

BUT voidable if: 

• other party knew about mistake 
  OR 

• mistake was obvious 

Example: 
Laptop listed for $50 instead of $5000 
Buyer knows it’s mistake 
→ seller can cancel 

innocent

3 TYPES OF MISREPRESENTATION - legal assent

1. _____ misrepresentation 

False statement 
Person believed it true 

Effect: 
Contract can be rescinded 
No damages 

negligent

3 TYPES OF MISREPRESENTATION - legal assent

2. _____ misrepresentation 

False statement 
Person SHOULD have known truth 

Effect: 
Contract voidable 

• damages possible 

fraudulent

3 TYPES OF MISREPRESENTATION - legal assent

3. _____ misrepresentation (MOST IMPORTANT) 

Intentional lie to induce contract. 

3 ELEMENTS (MEMORIZE) 

1. False statement of material fact 

2. Intent to deceive 

3. Justifiable reliance 

If all 3 → fraud 

Then victim can: 

• cancel contract 

• sue for damages 

undue influence

legal assent

____ _____ = unfair persuasion  in a relationship of trust. 

Occurs when: 
One person dominates another. 

Common relationships: 

• Doctor/patient 

• Lawyer/client 

• Caregiver/elderly 

• Parent/child