BLAW Test 2 Study Guide

Requirements for a valid contract

offer, acceptance, consideration, capacity, and legality

Bilateral contract

a promise in exchange for a promise.

Unilateral contract

the offeror wants a performance to form the contract, most common is an award.

Implied versus express contracts

express contracts are clearly set forth in either written or spoken words. Implied contracts arise from conduct of the parties

Void versus voidable contracts

a void contract is, in effect, not a contract at all. Voidable contracts is when one or both parties have the ability to either withdraw from or enforce.

Uniform Commercial Law

Article 2 governs the sale of goods.

Common Law

All other contracts that do not involve the sale of goods.

Executory

A contract in which not all of the terms have been fully performed

Advertisements as contracts

advertisements are invotations to negotiate due to lack of specific terms. however, an ad becomes binding if it is specific and definite, leaving nothing for negotiations.

Auction with reserve

seller is merely expressing an intent to recieve offers, may withdrawl item at any time

auction without reserve

seller is treated as making an offer to accept the highest bid, and has to accept highest bid

Option contract

an agreement whereby the offeree gives the offeror a piece of consideration in excahnge for the offeror’s agreement to hold the offer open for the specified period of time

ways to terminate an offer

rejection, death/incapacity of offeror, destruction of subject matter, laps of time, failure of condition

Mirror image rule

the principle that hold that the terms of acceptance must mirror the terms of the offer. if the terms of acceptance do not mirror the offer no contract is formed.

Mailbox rule

acceptance is valid when it is placed in the mailbox, whereas a revocation is only effective only when recieved by the offeree.

Consideration

what each party gets in exchange for their promise under a contract

Promissory estoppel

the legal enforcement of an otherwise unenforceable contract due to a party’s detrimental reliance on the contract

Adequacy of consideration

The court seldom considers adequacy of consideration. This rule means that the court does not weigh whether you made a good bargain. the exception is if it appears the sale of the assests was done to avoid payment to creditors the court may set aside each sale and sell the assetsto pay your creditors.

Illusory promise

not consideration. a situation in which a party appears to commit to something but really has not commited to anything.

Past consideration

not consideration

Preexisting duty (and exceptions: unforeseen circumstances, additional work, UCC)

a promise to do something that you are already obligated to do is not valid consideration.

1. performance of a duty you are obligated to to do under the law is not good consideration

2. performance of an exsisting contractual duty is not good consideration

Liquidated debt and partial payment

debt for which there is no dispute between the partied about the fact money is owed and the amount owed. a partial payment is not accepted because debtor is obligated to pay the full amount.

Unliquidated debt

debt for which the parties either dispute the fact that any money is owed or agree some money is owed but dispute the amount.

Accord and satisfaction

an agreement between contracting parties whereby one of the partied substitutes a different performance for their original duty under the contract.

Capacity of minors

minor have voidable contracts, minors have the right until a resonable time after reaching the age of majority to disaffirm the contract until a resonable time after reaching age of majority. No formalities are required to disaffirm the contract; the minor need only manifest an intention to rescind the contract, either by words or by actions. However, the minor must avoid the entire contract

exceptions to capacity of minors

most states will not allow a minor to disaffirm contracts for life insurance, health insurance, psychological counseling, the performance of duties related to stock and bond transfers and bank accounts, education loan contracts, child support contracts, marriage contracts, and contracts to enlist in the armed services. if a minor lies about their age they give up the right to disaffirm.

Ratification of voidable contract

ends the rights of a person to rescind a contract

Express ratification

occurs when after reaching the age of majority the person states either orally or in writing that intent to be bound by the contract entered as a minor

implied ratification

occurs when the former minor takes some action after reaching the age of majority that is consistent with an intent to ratify the contract

Capacity of mentally incapacitated persons

full - has mental problems but still understands the nature of the contract and obligations imposed by it

limited - mental problems prevents understanding of the nature and obligations of the transaction being entered into only has limited capacity to enter into a contract

no legal capacity - A person with mental deficiencies that result in an adjudication of insanity and an appointment of a guardian has no capacity to enter into contracts and any contract attempted is void

Capacity of intoxicated persons

contracts of an intoxicated person are voidable by the intoxicated person if the other party had reason to know that because of the intoxicated person’s condition, that person was unable to understand the nature and consequences of the transaction or was unable to act in a reasonable manner in relation to the transaction

Agreement to commit crime or tort

illegal and unenforceable

Licensing statutes and enforceability of contract

Designed to protect the public from unqualified practitioners. Contracts performed by an unlicensed party in these fields are often found invalid and unenforceable

Usury

the lending of money at an exorbitant unlawful rate of interest. expection for corporatioms.

Gambling

An agreement in which a party pays consideration (money placed during bets) for the chance, or opportunity, to obtain an amount of money or property.

Sabbath laws

Laws prohibiting the performance of certain activities on Sundays.

Covenant not to compete

An agreement not to compete against a party for a set period of time within a designated geographic area

Unconcsionability

contract or contract provision is so unfair that a court would be unreasonable if it enforced the contract.

Procedural unconscionability

Unconscionability that derives from the process of making a contract.

substantive unconscionability

Unconscionability that derives from one-sided, unjust, or overly harsh substance in a contract.

Adhesion contract

A contract created by a party to an agreement that is presented to the other party on a take-it-or-leave-it basis. Such contracts are legal but are sometimes rescinded on the grounds of unconscionability and the absence of one party’s free will to enter a contract.

Exculpatory clause

A statement in a contract that frees one party (usually the drafter of the agreement) from all liability arising out of performance of the contract, generally based on factors such as consumer ignorance or a great deal of unexplained fine print that serve to deprive the less powerful party of a meaningful choice.

In pari delicto

Severable versus indivisible contracts

Mistake

Unilateral mistake

Mutual mistake

Misrepresentation

Innocent misrepresentation

Scienter

Negligent misrepresentation

fraudulent misrepresentation

concealment

nondisclosure

undue influence

duress

Statute of frauds, and:

Contracts that cannot be performed in a year

Marriage

Prenuptial agreements

Guaranty of a debt of another

Executor of estate paying with own funds

Interest in land

UCC and $500 contract

Equal dignities rule

Exceptions to the statute of frauds

Admission

Partial performance

Promissory estoppel

Oral contracts between merchants and the UCC

Required elements for a writing to satisfy the statute of frauds

Parol evidence rule

Exceptions to the parol evidence rule (the 8 listed in the textbook)

Assignment

Obligor/oblige

Assignor/assignee

Rights that cannot be assigned (list of 4 in textbook)

Notice of assignment

First-in-time assignment rule

Delegation

Delegator/delagatee

Duties that cannot be delegated (list of 3 in textbook)

Third-party beneficiary contract

Intended and incidental beneficiaries

Creditor beneficiary

Done beneficiary

Vesting of rights